Fellow-Citizens of the Senate and House of Representatives:

To express gratitude to God in the name of the people for the
preservation of the United States is my first duty in addressing you.
Our thoughts next revert to the death of the late President by an act
of parricidal treason. The grief of the nation is still fresh. It finds
some solace in the consideration that he lived to enjoy the highest
proof of its confidence by entering on the renewed term of the Chief
Magistracy to which he had been elected; that he brought the civil war
substantially to a close; that his loss was deplored in all parts of
the Union, and that foreign nations have rendered justice to his
memory. His removal cast upon me a heavier weight of cares than ever
devolved upon any one of his predecessors. To fulfill my trust I need
the support and confidence of all who are associated with me in the
various departments of Government and the support and confidence of the
people. There is but one way in which I can hope to gain their
necessary aid. It is to state with frankness the principles which guide
my conduct, and their application to the present state of affairs, well
aware that the efficiency of my labors will in a great measure depend
on your and their undivided approbation.

The Union of the United States of America was intended by its authors
to last as long as the States themselves shall last. "The Union shall
be perpetual" are the words of the Confederation. "To form a more
perfect Union," by an ordinance of the people of the United States, is
the declared purpose of the Constitution. The hand of Divine Providence
was never more plainly visible in the affairs of men than in the
framing and the adopting of that instrument. It is beyond comparison
the greatest event in American history, and, indeed, is it not of all
events in modern times the most pregnant with consequences for every
people of the earth? The members of the Convention which prepared it
brought to their work the experience of the Confederation, of their
several States, and of other republican governments, old and new; but
they needed and they obtained a wisdom superior to experience. And when
for its validity it required the approval of a people that occupied a
large part of a continent and acted separately in many distinct
conventions, what is more wonderful than that, after earnest contention
and long discussion, all feelings and all opinions were ultimately
drawn in one way to its support? The Constitution to which life was
thus imparted contains within itself ample resources for its own
preservation. It has power to enforce the laws, punish treason, and
insure domestic tranquillity. In case of the usurpation of the
government of a State by one man or an oligarchy, it becomes a duty of
the United States to make good the guaranty to that State of a
republican form of government, and so to maintain the homogeneousness
of all. Does the lapse of time reveal defects? A simple mode of
amendment is provided in the Constitution itself, so that its
conditions can always be made to conform to the requirements of
advancing civilization. No room is allowed even for the thought of a
possibility of its coming to an end. And these powers of
self-preservation have always been asserted in their complete integrity
by every patriotic Chief Magistrate by Jefferson and Jackson not less
than by Washington and Madison. The parting advice of the Father of his
Country, while yet President, to the people of the United States was
that the free Constitution, which was the work of their hands, might be
sacredly maintained; and the inaugural words of President Jefferson
held up "the preservation of the General Government in its whole
constitutional vigor as the sheet anchor of our peace at home and
safety abroad." The Constitution is the work of "the people of the
United States," and it should be as indestructible as the people.

It is not strange that the framers of the Constitution, which had no
model in the past, should not have fully comprehended the excellence of
their own work. Fresh from a struggle against arbitrary power, many
patriots suffered from harassing fears of an absorption of the State
governments by the General Government, and many from a dread that the
States would break away from their orbits. But the very greatness of
our country should allay the apprehension of encroachments by the
General Government. The subjects that come unquestionably within its
jurisdiction are so numerous that it must ever naturally refuse to be
embarrassed by questions that lie beyond it. Were it otherwise the
Executive would sink beneath the burden, the channels of justice would
be choked, legislation would be obstructed by excess, so that there is
a greater temptation to exercise some of the functions of the General
Government through the States than to trespass on their rightful
sphere. The "absolute acquiescence in the decisions of the majority"
was at the beginning of the century enforced by Jefferson as "the vital
principle of republics;" and the events of the last four years have
established, we will hope forever, that there lies no appeal to force.

The maintenance of the Union brings with it "the support of the State
governments in all their rights," but it is not one of the rights of
any State government to renounce its own place in the Union or to
nullify the laws of the Union. The largest liberty is to be maintained
in the discussion of the acts of the Federal Government, but there is
no appeal from its laws except to the various branches of that
Government itself, or to the people, who grant to the members of the
legislative and of the executive departments no tenure but a limited
one, and in that manner always retain the powers of redress.

"The sovereignty of the States" is the language of the Confederacy, and
not the language of the Constitution. The latter contains the emphatic
words--This Constitution and the laws of the United States which shall
be made in pursuance thereof, and all treaties made or which shall be
made under the authority of the United States, shall be the supreme law
of the land, and the judges in every State shall be bound thereby,
anything in the constitution or laws of any State to the contrary
notwithstanding. Certainly the Government of the United States is a
limited government, and so is every State government a limited
government. With us this idea of limitation spreads through every form
of administration--general, State, and municipal--and rests on the
great distinguishing principle of the recognition of the rights of man.
The ancient republics absorbed the individual in the state--prescribed
his religion and controlled his activity. The American system rests on
the assertion of the equal right of every man to life, liberty, and the
pursuit of happiness, to freedom of conscience, to the culture and
exercise of all his faculties. As a consequence the State government is
limited--as to the General Government in the interest of union, as to
the individual citizen in the interest of freedom.

States, with proper limitations of power, are essential to the
existence of the Constitution of the United States. At the very
commencement, when we assumed a place among the powers of the earth,
the Declaration of Independence was adopted by States; so also were the
Articles of Confederation: and when "the people of the United States"
ordained and established the Constitution it was the assent of the
States, one by one, which gave it vitality. In the event, too, of any
amendment to the Constitution, the proposition of Congress needs the
confirmation of States. Without States one great branch of the
legislative government would be wanting. And if we look beyond the
letter of the Constitution to the character of our country, its
capacity for comprehending within its jurisdiction a vast continental
empire is due to the system of States. The best security for the
perpetual existence of the States is the "supreme authority" of the
Constitution of the United States. The perpetuity of the Constitution
brings with it the perpetuity of the States; their mutual relation
makes us what we are, and in our political system their connection is
indissoluble. The whole can not exist without the parts, nor the parts
without the whole. So long as the Constitution of the United States
endures, the States will endure. The destruction of the one is the
destruction of the other; the preservation of the one is the
preservation of the other.

I have thus explained my views of the mutual relations of the
Constitution and the States, because they unfold the principles on
which I have sought to solve the momentous questions and overcome the
appalling difficulties that met me at the very commencement of my
Administration. It has been my steadfast object to escape from the sway
of momentary passions and to derive a healing policy from the
fundamental and unchanging principles of the Constitution.

I found the States suffering from the effects of a civil war.
Resistance to the General Government appeared to have exhausted itself.
The United States had recovered possession of their forts and arsenals,
and their armies were in the occupation of every State which had
attempted to secede. Whether the territory within the limits of those
States should be held as conquered territory, under military authority
emanating from the President as the head of the Army, was the first
question that presented itself for decision.

Now military governments, established for an indefinite period, would
have offered no security for the early suppression of discontent, would
have divided the people into the vanquishers and the vanquished, and
would have envenomed hatred rather than have restored affection. Once
established, no precise limit to their continuance was conceivable.
They would have occasioned an incalculable and exhausting expense.
Peaceful emigration to and from that portion of the country is one of
the best means that can be thought of for the restoration of harmony,
and that emigration would have been prevented; for what emigrant from
abroad, what industrious citizen at home, would place himself willingly
under military rule? The chief persons who would have followed in the
train of the Army would have been dependents on the General Government
or men who expected profit from the miseries of their erring
fellow-citizens. The powers of patronage and rule which would have been
exercised under the President, over a vast and populous and naturally
wealthy region are greater than, unless under extreme necessity, I
should be willing to intrust to any one man. They are such as, for
myself, I could never, unless on occasions of great emergency, consent
to exercise. The willful use of such powers, if continued through a
period of years, would have endangered the purity of the general
administration and the liberties of the States which remained loyal.

Besides, the policy of military rule over a conquered territory would
have implied that the States whose inhabitants may have taken part in
the rebellion had by the act of those inhabitants ceased to exist. But
the true theory is that all pretended acts of secession were from the
beginning null and void. The States can not commit treason nor screen
the individual citizens who may have committed treason any more than
they can make valid treaties or engage in lawful commerce with any
foreign power. The States attempting to secede placed themselves in a
condition where their vitality was impaired, but not extinguished;
their functions suspended, but not destroyed.

But if any State neglects or refuses to perform its offices there is
the more need that the General Government should maintain all its
authority and as soon as practicable resume the exercise of all its
functions. On this principle I have acted, and have gradually and
quietly, and by almost imperceptible steps, sought to restore the
rightful energy of the General Government and of the States. To that
end provisional governors have been appointed for the States,
conventions called, governors elected, legislatures assembled, and
Senators and Representatives chosen to the Congress of the United
States. At the same time the courts of the United States, as far as
could be done, have been reopened, so that the laws of the United
States may be enforced through their agency. The blockade has been
removed and the custom-houses reestablished in ports of entry, so that
the revenue of the United States may be collected. The Post-Office
Department renews its ceaseless activity, and the General Government is
thereby enabled to communicate promptly with its officers and agents.
The courts bring security to persons and property; the opening of the
ports invites the restoration of industry and commerce; the post-office
renews the facilities of social intercourse and of business. And is it
not happy for us all that the restoration of each one of these
functions of the General Government brings with it a blessing to the
States over which they are extended? Is it not a sure promise of
harmony and renewed attachment to the Union that after all that has
happened the return of the General Government is known only as a
beneficence?

I know very well that this policy is attended with some risk; that for
its success it requires at least the acquiescence of the States which
it concerns; that it implies an invitation to those States, by renewing
their allegiance to the United States, to resume their functions as
States of the Union. But it is a risk that must be taken. In the choice
of difficulties it is the smallest risk; and to diminish and if
possible to remove all danger, I have felt it incumbent on me to assert
one other power of the General Government--the power of pardon. As no
State can throw a defense over the crime of treason, the power of
pardon is exclusively vested in the executive government of the United
States. In exercising that power I have taken every precaution to
connect it with the clearest recognition of the binding force of the
laws of the United States and an unqualified acknowledgment of the
great social change of condition in regard to slavery which has grown
out of the war.

The next step which I have taken to restore the constitutional
relations of the States has been an invitation to them to participate
in the high office of amending the Constitution. Every patriot must
wish for a general amnesty at the earliest epoch consistent with public
safety. For this great end there is need of a concurrence of all
opinions and the spirit of mutual conciliation. All parties in the late
terrible conflict must work together in harmony. It is not too much to
ask, in the name of the whole people, that on the one side the plan of
restoration shall proceed in conformity with a willingness to cast the
disorders of the past into oblivion, and that on the other the evidence
of sincerity in the future maintenance of the Union shall be put beyond
any doubt by the ratification of the proposed amendment to the
Constitution, which provides for the abolition of slavery forever
within the limits of our country. So long as the adoption of this
amendment is delayed, so long will doubt and jealousy and uncertainty
prevail. This is the measure which will efface the sad memory of the
past; this is the measure which will most certainly call population and
capital and security to those parts of the Union that need them most.
Indeed, it is not too much to ask of the States which are now resuming
their places in the family of the Union to give this pledge of
perpetual loyalty and peace. Until it is done the past, however much we
may desire it, will not be forgotten, The adoption of the amendment
reunites us beyond all power of disruption; it heals the wound that is
still imperfectly closed: it removes slavery, the element which has so
long perplexed and divided the country; it makes of us once more a
united people, renewed and strengthened, bound more than ever to mutual
affection and support.

The amendment to the Constitution being adopted, it would remain for
the States whose powers have been so long in abeyance to resume their
places in the two branches of the National Legislature, and thereby
complete the work of restoration. Here it is for you, fellow-citizens
of the Senate, and for you, fellow-citizens of the House of
Representatives, to judge, each of you for yourselves, of the
elections, returns, and qualifications of your own members.

The full assertion of the powers of the General Government requires the
holding of circuit courts of the United States within the districts
where their authority has been interrupted. In the present posture of
our public affairs strong objections have been urged to holding those
courts in any of the States where the rebellion has existed; and it was
ascertained by inquiry, that the circuit court of the United States
would not be held within the district of Virginia during the autumn or
early winter, nor until Congress should have "an opportunity to
consider and act on the whole subject." To your deliberations the
restoration of this branch of the civil authority of the United States
is therefore necessarily referred, with the hope that early provision
will be made for the resumption of all its functions. It is manifest
that treason, most flagrant in character, has been committed. Persons
who are charged with its commission should have fair and impartial
trials in the highest civil tribunals of the country, in order that the
Constitution and the laws may be fully vindicated, the truth dearly
established and affirmed that treason is a crime, that traitors should
be punished and the offense made infamous, and, at the same time, that
the question may be judicially settled, finally and forever, that no
State of its own will has the right to renounce its place in the Union.

The relations of the General Government toward the 4,000,000
inhabitants whom the war has called into freedom have engaged my most
serious consideration. On the propriety of attempting to make the
freedmen electors by the proclamation of the Executive I took for my
counsel the Constitution itself, the interpretations of that instrument
by its authors and their contemporaries, and recent legislation by
Congress. When, at the first movement toward independence, the Congress
of the United States instructed the several States to institute
governments of their own, they left each State to decide for itself the
conditions for the enjoyment of the elective franchise. During the
period of the Confederacy there continued to exist a very great
diversity in the qualifications of electors in the several States, and
even within a State a distinction of qualifications prevailed with
regard to the officers who were to be chosen. The Constitution of the
United States recognizes these diversities when it enjoins that in the
choice of members of the House of Representatives of the United States
"the electors in each State shall have the qualifications requisite for
electors of the most numerous branch of the State legislature." After
the formation of the Constitution it remained, as before, the uniform
usage for each State to enlarge the body of its electors according to
its own judgment, and under this system one State after another has
proceeded to increase the number of its electors, until now universal
suffrage, or something very near it, is the general rule. So fixed was
this reservation of power in the habits of the people and so
unquestioned has been the interpretation of the Constitution that
during the civil war the late President never harbored the
purpose--certainly never avowed the purpose--of disregarding it; and in
the acts of Congress during that period nothing can be found which,
during the continuance of hostilities much less after their close,
would have sanctioned any departure by the Executive from a policy
which has so uniformly obtained. Moreover, a concession of the elective
franchise to the freedmen by act of the President of the United States
must have been extended to all colored men, wherever found, and so must
have established a change of suffrage in the Northern, Middle, and
Western States, not less than in the Southern and Southwestern. Such an
act would have created a new class of voters, and would have been an
assumption of power by the President which nothing in the Constitution
or laws of the United States would have warranted.

On the other hand, every danger of conflict is avoided when the
settlement of the question is referred to the several States. They can,
each for itself, decide on the measure, and whether it is to be adopted
at once and absolutely or introduced gradually and with conditions. In
my judgment the freedmen, if they show patience and manly virtues, will
sooner obtain a participation in the elective franchise through the
States than through the General Government, even if it had power to
intervene. When the tumult of emotions that have been raised by the
suddenness of the social change shall have subsided, it may prove that
they will receive the kindest usage from some of those on whom they
have heretofore most closely depended.

But while I have no doubt that now, after the close of the war, it is
not competent for the General Government to extend the elective
franchise in the several States, it is equally clear that good faith
requires the security of the freedmen in their liberty and their
property, their right to labor, and their right to claim the just
return of their labor. I can not too strongly urge a dispassionate
treatment of this subject, which should be carefully kept aloof from
all party strife. We must equally avoid hasty assumptions of any
natural impossibility for the two races to live side by side in a state
of mutual benefit and good will. The experiment involves us in no
inconsistency; let us, then, go on and make that experiment in good
faith, and not be too easily disheartened. The country is in need of
labor, and the freedmen are in need of employment, culture, and
protection. While their right of voluntary migration and expatriation
is not to be questioned, I would not advise their forced removal and
colonization. Let us rather encourage them to honorable and useful
industry, where it may be beneficial to themselves and to the country;
and, instead of hasty anticipations of the certainty of failure, let
there be nothing wanting to the fair trial of the experiment. The
change in their condition is the substitution of labor by contract for
the status of slavery. The freedman can not fairly be accused of
unwillingness to work so long as a doubt remains about his freedom of
choice in his pursuits and the certainty of his recovering his
stipulated wages. In this the interests of the employer and the
employed coincide. The employer desires in his workmen spirit and
alacrity, and these can be permanently secured in no other way. And if
the one ought to be able to enforce the contract, so ought the other.
The public interest will be best promoted if the several States will
provide adequate protection and remedies for the freedmen. Until this
is in some way accomplished there is no chance for the advantageous use
of their labor, and the blame of ill success will not rest on them.

I know that sincere philanthropy is earnest for the immediate
realization of its remotest aims; but time is always an element in
reform. It is one of the greatest acts on record to have brought
4,000,000 people into freedom. The career of free industry must be
fairly opened to them, and then their future prosperity and condition
must, after all, rest mainly on themselves. If they fail, and so perish
away, let us be careful that the failure shall not be attributable to
any denial of justice. In all that relates to the destiny of the
freedmen we need not be too anxious to read the future; many incidents
which, from a speculative point of view, might raise alarm will quietly
settle themselves. Now that slavery is at an end, or near its end, the
greatness of its evil in the point of view of public economy becomes
more and more apparent. Slavery was essentially a monopoly of labor,
and as such locked the States where it prevailed against the incoming
of free industry. Where labor was the property of the capitalist, the
white man was excluded from employment, or had but the second best
chance of finding it; and the foreign emigrant turned away from the
region where his condition would be so precarious. With the destruction
of the monopoly free labor will hasten from all pans of the civilized
world to assist in developing various and immeasurable resources which
have hitherto lain dormant. The eight or nine States nearest the Gulf
of Mexico have a soil of exuberant fertility, a climate friendly to
long life, and can sustain a denser population than is found as yet in
any part of our country. And the future influx of population to them
will be mainly from the North or from the most cultivated nations in
Europe. From the sufferings that have attended them during our late
struggle let us look away to the future, which is sure to be laden for
them with greater prosperity than has ever before been known. The
removal of the monopoly of slave labor is a pledge that those regions
will be peopled by a numerous and enterprising population, which will
vie with any in the Union in compactness, inventive genius, wealth, and
industry.

Our Government springs from and was made for the people--not the people
for the Government. To them it owes allegiance; from them it must
derive its courage, strength, and wisdom. But while the Government is
thus bound to defer to the people, from whom it derives its existence,
it should, from the very consideration of its origin, be strong in its
power of resistance to the establishment of inequalities. Monopolies,
perpetuities, and class legislation are contrary to the genius of free
government, and ought not to be allowed. Here there is no room for
favored classes or monopolies; the principle of our Government is that
of equal laws and freedom of industry. Wherever monopoly attains a
foothold, it is sure to be a source of danger, discord, and trouble. We
shall but fulfill our duties as legislators by according "equal and
exact justice to all men," special privileges to none. The Government
is subordinate to the people; but, as the agent and representative of
the people, it must be held superior to monopolies, which in themselves
ought never to be granted, and which, where they exist, must be
subordinate and yield to the Government.

The Constitution confers on Congress the right to regulate commerce
among the several States. It is of the first necessity, for the
maintenance of the Union, that that commerce should be free and
unobstructed. No State can be justified in any device to tax the
transit of travel and commerce between States. The position of many
States is such that if they were allowed to take advantage of it for
purposes of local revenue the commerce between States might be
injuriously burdened, or even virtually prohibited. It is best, while
the country is still young and while the tendency to dangerous
monopolies of this kind is still feeble, to use the power of Congress
so as to prevent any selfish impediment to the free circulation of men
and merchandise. A tax on travel and merchandise in their transit
constitutes one of the worst forms of monopoly, and the evil is
increased if coupled with a denial of the choice of route. When the
vast extent of our country is considered, it is plain that every
obstacle to the free circulation of commerce between the States ought
to be sternly guarded against by appropriate legislation within the
limits of the Constitution.

The report of the Secretary of the Interior explains the condition of
the public lands, the transactions of the Patent Office and the Pension
Bureau, the management of our Indian affairs, the progress made in the
construction of the Pacific Railroad, and furnishes information in
reference to matters of local interest in the District of Columbia. It
also presents evidence of the successful operation of the homestead
act, under the provisions of which 1,160,533 acres of the public lands
were entered during the last fiscal year--more than one-fourth of the
whole number of acres sold or otherwise disposed of during that period.
It is estimated that the receipts derived from this source are
sufficient to cover the expenses incident to the survey and disposal of
the lands entered under this act, and that payments in cash to the
extent of from 40 to 50 per cent will be made by settlers who may thus
at any time acquire title before the expiration of the period at which
it would otherwise vest. The homestead policy was established only
after long and earnest resistance; experience proves its wisdom. The
lands in the hands of industrious settlers, whose labor creates wealth
and contributes to the public resources, are worth more to the United
States than if they had been reserved as a solitude for future
purchasers.

The lamentable events of the last four years and the sacrifices made by
the gallant men of our Army and Navy have swelled the records of the
Pension Bureau to an unprecedented extent. On the 30th day of June last
the total number of pensioners was 85,986, requiring for their annual
pay, exclusive of expenses, the sum of $8,023,445. The number of
applications that have been allowed since that date will require a
large increase of this amount for the next fiscal year. The means for
the payment of the stipends due under existing laws to our disabled
soldiers and sailors and to the families of such as have perished in
the service of the country will no doubt be cheerfully and promptly
granted. A grateful people will not hesitate to sanction any measures
having for their object the relief of soldiers mutilated and families
made fatherless in the efforts to preserve our national existence.

The report of the Postmaster-General presents an encouraging exhibit of
the operations of the Post-Office Department during the year. The
revenues of the past year, from the loyal States alone, exceeded the
maximum annual receipts from all the States previous to the rebellion
in the sum of $6,038,091; and the annual average increase of revenue
during the last four years, compared with the revenues of the four
years immediately preceding the rebellion, was $3,533,845. The revenues
of the last fiscal year amounted to $14,556,158 and the expenditures to
$13,694,728, leaving a surplus of receipts over expenditures of
$861,430. Progress has been made in restoring the postal service in the
Southern States. The views presented by the Postmaster-General against
the policy of granting subsidies to the ocean mail steamship lines upon
established routes and in favor of continuing the present system, which
limits the compensation for ocean service to the postage earnings, are
recommended to the careful consideration of Congress.

It appears from the report of the Secretary of the Navy that while at
the commencement of the present year there were in commission 530
vessels of all classes and descriptions, armed with 3,000 guns and
manned by 51,000 men, the number of vessels at present in commission is
117, with 830 guns and 12,128 men. By this prompt reduction of the
naval forces the expenses of the Government have been largely
diminished, and a number of vessels purchased for naval purposes from
the merchant marine have been returned to the peaceful pursuits of
commerce. Since the suppression of active hostilities our foreign
squadrons have been reestablished, and consist of vessels much more
efficient than those employed on similar service previous to the
rebellion. The suggestion for the enlargement of the navy-yards, and
especially for the establishment of one in fresh water for ironclad
vessels, is deserving of consideration, as is also the recommendation
for a different location and more ample grounds for the Naval Academy.

In the report of the Secretary of War a general summary is given of the
military campaigns of 1864 and 1865, ending in the suppression of armed
resistance to the national authority in the insurgent States. The
operations of the general administrative bureaus of the War Department
during the past year are detailed and an estimate made of the
appropriations that will be required for military purposes in the
fiscal year commencing the 1st day of July, 1866. The national military
force on the 1st of May, 1865, numbered 1,000,516 men. It is proposed
to reduce the military establishment to a peace footing, comprehending
50,000 troops of all arms, organized so as to admit of an enlargement
by filling up the ranks to 82,600 if the circumstances of the country
should require an augmentation of the Army. The volunteer force has
already been reduced by the discharge from service of over 800,000
troops, and the Department is proceeding rapidly in the work of further
reduction. The war estimates are reduced from $516,240,131 to
$33,814,461, which amount, in the opinion of the Department, is
adequate for a peace establishment. The measures of retrenchment in
each bureau and branch of the service exhibit a diligent economy worthy
of commendation. Reference is also made in the report to the necessity
of providing for a uniform militia system and to the propriety of
making suitable provision for wounded and disabled officers and
soldiers.

The revenue system of the country is a subject of vital interest to its
honor and prosperity, and should command the earnest consideration of
Congress. The Secretary of the Treasury will lay before you a full and
detailed report of the receipts and disbursements of the last fiscal
year, of the first quarter of the present fiscal year, of the probable
receipts and expenditures for the other three quarters, and the
estimates for the year following the 30th of June, 1866. I might
content myself with a reference to that report, in which you will find
all the information required for your deliberations and decision, but
the paramount importance of the subject so presses itself on my own
mind that I can not but lay before you my views of the measures which
are required for the good character, and I might almost say for the
existence, of this people. The life of a republic lies certainly in the
energy, virtue, and intelligence of its citizens; but it is equally
true that a good revenue system is the life of an organized government.
I meet you at a time when the nation has voluntarily burdened itself
with a debt unprecedented in our annals. Vast as is its amount, it
fades away into nothing when compared with the countless blessings that
will be conferred upon our country and upon man by the preservation of
the nation's life. Now, on the first occasion of the meeting of
Congress since the return of peace, it is of the utmost importance to
inaugurate a just policy, which shall at once be put in motion, and
which shall commend itself to those who come after us for its
continuance. We must aim at nothing less than the complete effacement
of the financial evils that necessarily followed a state of civil war.
We must endeavor to apply the earliest remedy to the deranged state of
the currency, and not shrink from devising a policy which, with-out
being oppressive to the people, shall immediately begin to effect a
reduction of the debt, and, if persisted in, discharge it fully within
a definitely fixed number of years.

It is our first duty to prepare in earnest for our recovery from the
ever-increasing evils of an irredeemable currency without a sudden
revulsion, and yet without untimely procrastination. For that end we
must each, in our respective positions, prepare the way. I hold it the
duty of the Executive to insist upon frugality in the expenditures, and
a sparing economy is itself a great national resource. Of the banks to
which authority has been given to issue notes secured by bonds of the
United States we may require the greatest moderation and prudence, and
the law must be rigidly enforced when its limits are exceeded. We may
each one of us counsel our active and enterprising countrymen to be
constantly on their guard, to liquidate debts contracted in a paper
currency, and by conducting business as nearly as possible on a system
of cash payments or short credits to hold themselves prepared to return
to the standard of gold and silver. To aid our fellow-citizens in the
prudent management of their monetary affairs, the duty devolves on us
to diminish by law the amount of paper money now in circulation. Five
years ago the bank-note circulation of the country amounted to not much
more than two hundred millions; now the circulation, bank and national,
exceeds seven hundred millions. The simple statement of the fact
recommends more strongly than any words of mine could do the necessity
of our restraining this expansion. The gradual reduction of the
currency is the only measure that can save the business of the country
from disastrous calamities, and this can be almost imperceptibly
accomplished by gradually funding the national circulation in
securities that may be made redeemable at the pleasure of the
Government.

Our debt is doubly secure--first in the actual wealth and still greater
undeveloped resources of the country, and next in the character of our
institutions. The most intelligent observers among political economists
have not failed to remark that the public debt of a country is safe in
proportion as its people are free; that the debt of a republic is the
safest of all. Our history confirms and establishes the theory, and is,
I firmly believe, destined to give it a still more signal illustration.
The secret of this superiority springs not merely from the fact that in
a republic the national obligations are distributed more widely through
countless numbers in all classes of society; it has its root in the
character of our laws. Here all men contribute to the public welfare
and bear their fair share of the public burdens. During the war, under
the impulses of patriotism, the men of the great body of the people,
without regard to their own comparative want of wealth, thronged to our
armies and filled our fleets of war, and held themselves ready to offer
their lives for the public good. Now, in their turn, the property and
income of the country should bear their just proportion of the burden
of taxation, while in our impost system, through means of which
increased vitality is incidentally imparted to all the industrial
interests of the nation, the duties should be so adjusted as to fall
most heavily on articles of luxury leaving the necessaries of life as
free from taxation as the absolute wants of the Government economically
administered will justify. No favored class should demand freedom from
assessment, and the taxes should be so distributed as not to fall
unduly on the poor, but rather on the accumulated wealth of the
country. We should look at the national debt just as it is--not as a
national blessing, but as a heavy burden on the industry of the
country, to be discharged without unnecessary delay.

It is estimated by the Secretary of the Treasury that the expenditures
for the fiscal year ending the 30th of June, 1866, will exceed the
receipts $112,194,947. It is gratifying, however, to state that it is
also estimated that the revenue for the year ending the 30th of June,
1867, will exceed the expenditures in the sum of $111,682,818. This
amount, or so much as may be deemed sufficient for the purpose, may be
applied to the reduction of the public debt, which on the 31st day of
October, 1865, was $2,740,854,750. Every reduction will diminish the
total amount of interest to be paid, and so enlarge the means of still
further reductions, until the whole shall be liquidated; and this, as
will be seen from the estimates of the Secretary of the Treasury, may
be accomplished by annual payments even within a period not exceeding
thirty years. I have faith that we shall do all this within a
reasonable time; that as we have amazed the world by the suppression of
a civil war which was thought to be beyond the control of any
government, so we shall equally show the superiority of our
institutions by the prompt and faithful discharge of our national
obligations.

The Department of Agriculture under its present direction is
accomplishing much in developing and utilizing the vast agricultural
capabilities of the country, and for information respecting the details
of its management reference is made to the annual report of the
Commissioner.

I have dwelt thus fully on our domestic affairs because of their
transcendent importance. Under any circumstances our great extent of
territory and variety of climate, producing almost everything that is
necessary for the wants and even the comforts of man, make us
singularly independent of the varying policy of foreign powers and
protect us against every temptation to "entangling alliances," while at
the present moment the reestablishment of harmony and the strength that
comes from harmony will be our best security against "nations who feel
power and forget right." For myself, it has been and it will be my
constant aim to promote peace and amity with all foreign nations and
powers, and I have every reason to believe that they all, without
exception, are animated by the same disposition. Our relations with the
Emperor of China, so recent in their origin, are most friendly. Our
commerce with his dominions is receiving new developments, and it is
very pleasing to find that the Government of that great Empire
manifests satisfaction with our policy and reposes just confidence in
the fairness which marks our intercourse. The unbroken harmony between
the United States and the Emperor of Russia is receiving a new support
from an enterprise designed to carry telegraphic lines across the
continent of Asia, through his dominions, and so to connect us with all
Europe by a new channel of intercourse. Our commerce with South America
is about to receive encouragement by a direct line of mail steamships
to the rising Empire of Brazil. The distinguished party of men of
science who have recently left our country to make a scientific
exploration of the natural history and rivers and mountain ranges of
that region have received from the Emperor that generous welcome which
was to have been expected from his constant friendship for the United
States and his well-known zeal in promoting the advancement of
knowledge. A hope is entertained that our commerce with the rich and
populous countries that border the Mediterranean Sea may be largely
increased. Nothing will be wanting on the part of this Government to
extend the protection of our flag over the enterprise of our
fellow-citizens. We receive from the powers in that region assurances
of good will; and it is worthy of note that a special envoy has brought
us messages of condolence on the death of our late Chief Magistrate
from the Bey of Tunis, whose rule includes the old dominions of
Carthage, on the African coast.

Our domestic contest, now happily ended, has left some traces in our
relations with one at least of the great maritime powers. The formal
accordance of belligerent rights to the insurgent States was
unprecedented, and has not been justified by the issue. But in the
systems of neutrality pursued by the powers which made that concession
there was a marked difference. The materials of war for the insurgent
States were furnished, in a great measure, from the workshops of Great
Britain, and British ships, manned by British subjects and prepared for
receiving British armaments, sallied from the ports of Great Britain to
make war on American commerce under the shelter of a commission from
the insurgent States. These ships, having once escaped from British
ports, ever afterwards entered them in every part of the world to
refit, and so to renew their depredations. The consequences of this
conduct were most disastrous to the States then in rebellion,
increasing their desolation and misery by the prolongation of our civil
contest. It had, moreover, the effect, to a great extent, to drive the
American flag from the sea, and to transfer much of our shipping and
our commerce to the very power whose subjects had created the necessity
for such a change. These events took place before I was called to the
administration of the Government. The sincere desire for peace by which
I am animated led me to approve the proposal, already made, to submit
the question which had thus arisen between the countries to
arbitration. These questions are of such moment that they must have
commanded the attention of the great powers, and are so interwoven with
the peace and interests of every one of them as to have insured an
impartial decision. I regret to inform you that Great Britain declined
the arbitrament, but, on the other hand, invited us to the formation of
a joint commission to settle mutual claims between the two countries,
from which those for the depredations before mentioned should be
excluded. The proposition, in that very unsatisfactory form, has been
declined.

The United States did not present the subject as an impeachment of the
good faith of a power which was professing the most friendly
dispositions, but as involving questions of public law of which the
settlement is essential to the peace of nations; and though pecuniary
reparation to their injured citizens would have followed incidentally
on a decision against Great Britain, such compensation was not their
primary object. They had a higher motive, and it was in the interests
of peace and justice to establish important principles of international
law. The correspondence will be placed before you. The ground on which
the British minister rests his justification is, substantially, that
the municipal law of a nation and the domestic interpretations of that
law are the measure of its duty as a neutral, and I feel bound to
declare my opinion before you and before the world that that
justification can not be sustained before the tribunal of nations. At
the same time; I do not advise to any present attempt at redress by
acts of legislation. For the future, friendship between the two
countries must rest on the basis of mutual justice.

From the moment of the establishment of our free Constitution the
civilized world has been convulsed by revolutions in the interests of
democracy or of monarchy, but through all those revolutions the United
States have wisely and firmly refused to become propagandists of
republicanism. It is the only government suited to our condition; but
we have never sought to impose it on others, and we have consistently
followed the advice of Washington to recommend it only by the careful
preservation and prudent use of the blessing. During all the
intervening period the policy of European powers and of the United
States has, on the whole, been harmonious. Twice, indeed, rumors of the
invasion of some parts of America in the interest of monarchy have
prevailed; twice my predecessors have had occasion to announce the
views of this nation in respect to such interference. On both occasions
the remonstrance of the United States was respected from a deep
conviction on the part of European Governments that the system of
noninterference and mutual abstinence from propagandism was the true
rule for the two hemispheres. Since those times we have advanced in
wealth and power, but we retain the same purpose to leave the nations
of Europe to choose their own dynasties and form their own systems of
government. This consistent moderation may justly demand a
corresponding moderation. We should regard it as a great calamity to
ourselves, to the cause of good government, and to the peace of the
world should any European power challenge the American people, as it
were, to the defense of republicanism against foreign interference. We
can not foresee and are unwilling to consider what opportunities might
present themselves, what combinations might offer to protect ourselves
against designs inimical to our form of government. The United States
desire to act in the future as they have ever acted heretofore; they
never will be driven from that course but by the aggression of European
powers, and we rely on the wisdom and justice of those powers to
respect the system of noninterference which has so long been sanctioned
by time, and which by its good results has approved itself to both
continents.

The correspondence between the United States and France in reference to
questions which have become subjects of discussion between the two
Governments will at a proper time be laid before Congress.

When, on the organization of our Government under the Constitution, the
President of the United States delivered his inaugural address to the
two Houses of Congress, he said to them, and through them to the
country and to mankind, that--The preservation of the sacred fire of
liberty and the destiny of the republican model of government are
justly considered, perhaps, as deeply, as finally, staked on the
experiment intrusted to the hands of the American people. And the House
of Representatives answered Washington by the voice of Madison: We
adore the Invisible Hand which has led the American people, through so
many difficulties, to cherish a conscious responsibility for the
destiny of republican liberty. More than seventy-six years have glided
away since these words were spoken; the United States have passed
through severer trials than were foreseen; and now, at this new epoch
in our existence as one nation, with our Union purified by sorrows and
strengthened by conflict and established by the virtue of the people,
the greatness of the occasion invites us once more to repeat with
solemnity the pledges of our fathers to hold ourselves answerable
before our fellow-men for the success of the republican form of
government. Experience has proved its sufficiency in peace and in war;
it has vindicated its authority through dangers and afflictions, and
sudden and terrible emergencies, which would have crushed any system
that had been less firmly fixed in the hearts of the people. At the
inauguration of Washington the foreign relations of the country were
few and its trade was repressed by hostile regulations; now all the
civilized nations of the globe welcome our commerce, and their
governments profess toward us amity. Then our country felt its way
hesitatingly along an untried path, with States so little bound
together by rapid means of communication as to be hardly known to one
another, and with historic traditions extending over very few years;
now intercourse between the States is swift and intimate; the
experience of centuries has been crowded into a few generations, and
has created an intense, indestructible nationality. Then our
jurisdiction did not reach beyond the inconvenient boundaries of the
territory which had achieved independence; now, through cessions of
lands, first colonized by Spain and France, the country has acquired a
more complex character, and has for its natural limits the chain of
lakes, the Gulf of Mexico, and on the east and the west the two great
oceans. Other nations were wasted by civil wars for ages before they
could establish for themselves the necessary degree of unity; the
latent conviction that our form of government is the best ever known to
the world has enabled us to emerge from civil war within four years
with a complete vindication of the constitutional authority of the
General Government and with our local liberties and State institutions
unimpaired.

The throngs of emigrants that crowd to our shores are witnesses of the
confidence of all peoples in our permanence. Here is the great land of
free labor, where industry is blessed with unexampled rewards and the
bread of the workingman is sweetened by the consciousness that the
cause of the country "is his own cause, his own safety, his own
dignity." Here everyone enjoys the free use of his faculties and the
choice of activity as a natural right. Here, under the combined
influence of a fruitful soil, genial climes, and happy institutions,
population has increased fifteen-fold within a century. Here, through
the easy development of boundless resources, wealth has increased with
twofold greater rapidity than numbers, so that we have become secure
against the financial vicissitudes of other countries and, alike in
business and in opinion, are self-centered and truly independent. Here
more and more care is given to provide education for everyone born on
our soil. Here religion, released from political connection with the
civil government, refuses to subserve the craft of statesmen, and
becomes in its independence the spiritual life of the people. Here
toleration is extended to every opinion, in the quiet certainty that
truth needs only a fair field to secure the victory. Here the human
mind goes forth unshackled in the pursuit of science, to collect stores
of knowledge and acquire an ever-increasing mastery over the forces of
nature. Here the national domain is offered and held in millions of
separate freeholds, so that our fellow-citizens, beyond the occupants
of any other part of the earth, constitute in reality a people. Here
exists the democratic form of government; and that form of government,
by the confession of European statesmen, "gives a power of which no
other form is capable, because it incorporates every man with the state
and arouses everything that belongs to the soul."

Where in past history does a parallel exist to the public happiness
which is within the reach of the people of the United States? Where in
any part of the globe can institutions be found so suited to their
habits or so entitled to their love as their own free Constitution?
Every one of them, then, in whatever part of the land he has his home,
must wish its perpetuity. Who of them will not now acknowledge, in the
words of Washington, that "every step by which the people of the United
States have advanced to the character of an independent nation seems to
have been distinguished by some token of providential agency"? Who will
not join with me in the prayer that the Invisible Hand which has led us
through the clouds that gloomed around our path will so guide us onward
to a perfect restoration of fraternal affection that we of this day may
be able to transmit our great inheritance of State governments in all
their rights, of the General Government in its whole constitutional
vigor, to our posterity, and they to theirs through countless
generations?