PART IV.

THE WHITE HOUSE, December 21, 1911. To the Senate and House of

Representatives:

The financial condition of the Government, as shown at the close of the

last fiscal year, June 30, 1911, was very satisfactory. The ordinary

receipts into the general fund, excluding postal revenues, amounted to

$701,372,374.99, and the disbursements from the general fund for current

expenses and capital outlays, excluding postal and Panama Canal

disbursements, including the interest on the public debt, amounted to

$654,137,907-89, leaving a surplus Of $47,234,377.10.

The postal revenue receipts amounted to $237,879,823,60, while the payments

made for the postal service from the postal revenues amounted to

$237,660,705.48, which left a surplus of postal receipts over disbursements

Of $219,118.12, the first time in 27 years in which a surplus occurred.

The interest-bearing debt of the United States June 30, 1911, amounted to

$915,353,190. The debt on which interest had ceased amounted to

$1,879,830.26, and the debt bearing no interest, including greenbacks,

national bank notes to be redeemed, and fractional currency, amounted to

$386,751,917-43, or a total of interest and noninterest bearing debt

amounting to $1,303,984,937.69.

The actual disbursements, exclusive of those for the Panama Canal and for

the postal service for the year ending June 30, 1911, were $654,137,997.89.

The actual disbursements for the year ending June 30, 1910, exclusive of

the Panama Canal and the postal service disbursements, were

$659,705,391.08, making a decrease Of $5,567,393.19 in yearly expenditures

in the year 1911 under that of 1910. For the year ending June 30, 1912, the

estimated receipts, exclusive of the postal revenues, are $666,000,000,

while the total estimates, exclusive of those for the Panama Canal and the

postal expenditures payable from the postal revenues, amount to

$645,842,799.34. This is a decrease in the 1912 estimates from that of the

1911 estimates of $1,534,367-22.

For the year ending June 30, 1913, the estimated receipts, exclusive of the

postal revenues, are $667,000,000, while the total estimated

appropriations, exclusive of the Panama Canal and postal disbursements

payable from postal revenues, will amount to $637,920,803.35. This is a

decrease in the 1913 estimates from that of the 1912 estimates of

$7,921,995.99.

As to the postal revenues, the expansion of the business in that

department, the normal increase in the Post Office and the extension of the

service, will increase the outlay to the sum Of $260,938,463; but as the

department was self-sustaining this year the Postmaster General is assured

that next year the receipts will at least equal the expenditures, and

probably exceed them by more than the surplus of this year. It is fair and

equitable, therefore, in determining the economy with which the Government

has been run, to exclude the transactions of a department like the Post

Office Department, which relies for its support upon its receipts. In

calculations heretofore made for comparison of economy in each year, it has

been the proper custom only to include in the statement the deficit in the

Post Office Department which was paid out of the Treasury.

A calculation of the actual increase in the expenses of Government arising

from the increase in the population and the general expansion of

governmental functions, except those of the Post Office, for a number of

years shows a normal increase of about 4 per cent a year. By directing the

exercise of great care to keep down the expenses and the estimates we have

succeeded in reducing the total disbursements each year.

THE CREDIT OF THE UNITED STATES.

The credit of this Government was shown to be better than that of any other

Government by the sale of the Panama Canal 3 per cent bonds. These bonds

did not give their owners the privilege of using them as a basis for

bank-note circulation, nor was there any other privilege extended to them

which would affect their general market value. Their sale, therefore,

measured the credit of the Government. The premium which was realized upon

the bonds made the actual interest rate of the transaction 2.909 per cent.

EFFICIENCY AND ECONOMY IN THE TREASURY DEPARTMENT.

I In the Treasury Department the efficiency and economy work has been kept

steadily up. Provision is made for the elimination of 134 positions during

the coming year. Two hundred and sixty-seven statutory positions were

eliminated during the last year in the office of the Treasury in

Washington, and 141 positions in the year 1910, making an elimination Of

542 statutory positions since March 4, 1909; and this has been done without

the discharge of anybody, because the normal resignations and deaths have

been equal to the elimination of the places, a system of transfers having

taken care of the persons whose positions were dropped out. In the field

service if the department, too, 1,259 positions have been eliminated down

to the present time, making a total net reduction of all Treasury positions

to the number of 1,801. Meantime the efficiency of the work of the

department has increased.

MONETARY REFORM.

A matter of first importance that will come before Congress for action at

this session is monetary reform. The Congress has itself arranged an early

introduction of this great question through the report of its Monetary

Commission. This commission was appointed to recommend a solution of the

banking and currency problems so long confronting the Nation and to furnish

the facts and data necessary to enable the Congress to take action. The

commission was appointed when an impressive and urgent popular demand for

legislative relief suddenly arose out of the distressing situation of the

people caused by the deplorable panic of 1907. The Congress decided that

while it could not give immediately the relief required, it would provide a

commission to furnish the means for prompt action at a later date.

In order to do its work with thoroughness and precision this commission has

taken some time to make its report. The country is undoubtedly hoping for

as prompt action on the report as the convenience of the Congress can

permit. The recognition of the gross imperfections and marked inadequacy of

our banking and currency system even in our most quiet financial periods is

of long standing; and later there has matured a recognition of the fact

that our system is responsible for the extraordinary devastation, waste,

and business paralysis of our recurring periods of panic. Though the

members of the Monetary Commission have for a considerable time been

working in the open, and while large numbers of the people have been openly

working with them, and while the press has largely noted and discussed this

work as it has proceeded, so that the report of the commission promises to

represent a national movement, the details of the report are still being

considered. I can not, therefore, do much more at this time than commend

the immense importance of monetary reform, urge prompt consideration and

action when the commission's report is received, and express my

satisfaction that the plan to be proposed promises to embrace main features

that, having met the approval of a great preponderance of the practical and

professional opinion of the country, are likely to meet equal approval in

Congress.

It is exceedingly fortunate that the wise and undisputed policy of

maintaining unchanged the main features of our banking system rendered it

at once impossible to introduce a central bank; for a central bank would

certainly have been resisted, and a plan into which it could have been

introduced would probably have been defeated. But as a central bank could

not be a part of the only plan discussed or considered, that troublesome

question is eliminated. And ingenious and novel as the proposed National

Reserve Association appears, it simply is a logical outgrowth of what is

best in our present system, and is, in fact, the fulfillment of that

system.

Exactly how the management of that association should be organized is a

question still open. It seems to be desirable that the banks which would

own the association should in the main manage it, It will be an agency of

the banks to act for them, and they can be trusted better than anybody else

chiefly to conduct it. It is mainly bankers' work. But there must be some

form of Government supervision and ultimate control, and I favor a

reasonable representation of the Government in the management. I entertain

no fear of the introduction of politics or of any undesirable influences

from a properly measured Government representation.

I trust that all banks of the country possessing the requisite standards

will be placed upon a footing of perfect equality of opportunity. Both the

National system and the State system should be fairly recognized, leaving

them eventually to coalesce if that shall prove to be their tendency. But

such evolution can not develop impartially if the banks of one system are

given or permitted any advantages of opportunity over those of the other

system. And I trust also that the new legislation will carefully and

completely protect and assure the individuality and the independence of

each bank, to the end that any tendency there may ever be toward a

consolidation of the money or banking power of the Nation shall be

defeated.

It will always be possible, of course, to correct any features of the new

law which may in practice prove to be unwise; so that while this law is

sure to be enacted under conditions of unusual knowledge and authority, it

also will include, it is well to remember, the possibility of future

amendment.

With the present prospects of this long-awaited reform encouraging us, it

would be singularly unfortunate if this monetary question should by any

chance become a party issue. And I sincerely hope it will not. The

exceeding amount of consideration it has received from the people of the

Nation has been wholly nonpartisan; and the Congress set its nonpartisan

seal upon it when the Monetary Commission was appointed. In commending the

question to the favorable consideration of Congress, I speak for, and in

the spirit of, the great number of my fellow citizens who without any

thought of party or partisanship feel with remarkable earnestness that this

reform is necessary to the interests of all the people.

THE WAR DEPARTMENT.

There is now before Congress a Dill, the purpose of which is to increase

the efficiency and decrease the expense of the Army. It contains four

principal features: First, a consolidation of the General Staff with the

Adjutant General's and the Inspector General's Departments; second, a

consolidation of the Quartermaster's Department with the Subsistence and

the Pay Departments; third, the creation of an Army Service Corps; and

fourth, an extension of the enlistment period from three to five years.

With the establishment of an Army Service Corps, as proposed in the bill, I

am thoroughly in accord and am convinced that the establishment of such a

corps will result in a material economy and a very great increase of

efficiency in the Army. It has repeatedly been recommended by me and my

predecessors. I also believe that a consolidation of the Staff Corps can be

made with a resulting increase in efficiency and economy, but not along the

lines provided in the bill under consideration.

I am opposed to any plan the result of which would be to break up or

interfere with the essential principles of the detail system in the Staff

Corps established by the act of February 2, 1901, and I am opposed to any

plan the result of which would be to give to the officer selected as Chief

of Staff or to any other member of the General Staff Corps greater

permanency of office than he now has. Under the existing law neither the

Chief. of Staff nor any other member of the General Staff Corps can remain

in office for a period of more than four years, and there must be an

interval of two years between successive tours of duty.

The bill referred to provides that certain persons shall become permanent

members of the General Staff Corps, and that certain others are subject to

re-detail without an interval of two years. Such provision is fraught with

danger to the welfare of the Army, and would practically nullify the main

purpose of the law creating the [missing text].

In making the consolidations no reduction should be made in the total

number of officers of the Army, of whom there are now too few to perform

the duties imposed by law. I have in the past recommended an increase in

the number of officers by 600 in order to provide sufficient officers to

perform all classes of staff duty and to reduce the number of line officers

detached from their commands. Congress at the last session increased the

total number of officers by 200, but this is not enough. Promotion in the

line of the Army is too slow. Officers do not attain command rank at an age

early enough properly to exercise it. It would be a mistake further to

retard this already slow promotion by throwing back into the line of the

Arm a number of high-ranking officers to be absorbed as is provided in the

[missing text].

Another feature of the bill which I believe to be a mistake is the proposed

increase in the term of enlistment from three to five ears I believe it

would be better to enlist men for six years, release them at the end of

three years from active service, and put them in reserve for the remaining

three years. Reenlistments should be largely confined to the

noncommissioned officers and other enlisted men in the skilled grades. This

plan by the payment of a comparatively small compensation during the three

years of reserve, would keep a large body of men at the call of the

Government, trained and ready for [missing text].

The Army of the United States is in good condition. It showed itself able

to meet an emergency in the successful mobilization of an army division of

from 15,000 to 20,000 men, which took place along the border of Mexico

during the recent disturbances in that country. The marvelous freedom from

the ordinary camp diseases of typhoid fever and measles is referred to in

the report of the Secretary of War and shows such an effectiveness in the

sanitary regulations and treatment of the Medical Corps, and in the

discipline of the Army itself, as to invoke the highest commendation.

MEMORIAL AMPHITHEATER AT ARLINGTON.

I beg to renew my recommendation of last year that the Congress appropriate

for a memorial amphitheater at Arlington, Va., the funds required to

construct it upon the plans already approved.

THE PANAMA CANAL.

The very satisfactory progress made on the Panama Canal last year has

continued, and there is every reason to believe that the canal

will be completed as early as the 1st of July, 1913, unless something

unforeseen occurs. This is about 18 months before the time promised by the

engineers.

We are now near enough the completion of the canal to make it imperatively

necessary that legislation should be enacted to fix the method by which the

canal shall be maintained and controlled and the zone governed. The fact is

that to-day there is no statutory law by authority of which the President

is maintaining the government of the zone. Such authority was given in an

amendment to the Spooner Act, which expired by the terms of its own

limitation some years ago. Since that time the government has continued,

under the advice of the Attorney General that in the absence of action by

Congress, there is necessarily an implied authority on the part of the

Executive to maintain a government in a territory in which he has to see

that the laws are executed. The fact that we have been able thus to get

along during the important days of construction without legislation

expressly formulating the government of the zone, or delegating the

creation of it to the President, is not a reason for supposing that we may

continue the same kind of a government after the construction is finished.

The implied authority of the President to maintain a civil government in

the zone may be derived from the mandatory direction given him in the

original Spooner Act, by which he was commanded to build the canal; but

certainly, now that the canal is about to be completed and to be put under

a permanent management, there ought to be specific statutory authority for

its regulation and control and for the government of the zone, which we

hold for the chief and main purpose of operating the canal.

I fully concur with the Secretary of War that the problem is simply the

management of a great public work, and not the government of a local

republic; that every provision must be directed toward the successful

maintenance of the canal as an avenue of commerce, and that all provisions

for the government of those who live within the zone should be subordinate

to the main purpose.

The zone is 40 miles long and 10 miles wide. Now, it has a population Of

50,000 or 60,000, but as soon as the work of construction is completed, the

towns which make up this population will be deserted, and only

comparatively few natives will continue their residence there. The control

of them ought to approximate a military government. One judge and two

justices of the peace will be sufficient to attend to all the judicial and

litigated business there is. With a few fundamental laws of Congress, the

zone should be governed by the orders of the President, issued through the

War Department, as it is today. Provisions can be made for the guaranties

of life, liberty, and property, but beyond those, the government should be

that of a military reservation, managed in connection with this great

highway of trade.

FURNISHING SUPPLIES AND REPAIRS.

In my last annual message I discussed at length the reasons for the

Government's assuming the task of furnishing to all ships that use the

canal, whether our own naval vessels or others, the supplies of coal and

oil and other necessities with which they must be replenished either before

or after passing through the canal, together with the dock facilities and

repairs of every character. This it is thought wise to do through the

Government, because the Government must establish for itself, for its own

naval vessels, large depots and dry docks and warehouses, and these may

easily be enlarged so as to secure to the world public using the canal

reasonable prices and a certainty that there will be no discrimination

between those who wish to avail themselves of such facilities. TOLLS.

I renew my recommendation with respect to the tolls of the canal that

within limits, which shall seem wise to Congress, the power of fixing tolls

be given to the President. In order to arrive at a proper conclusion, there

must be some experimenting, and this can not be done if Congress does not

delegate the power to one who can act expeditiously.

POWER EXISTS TO RELIEVE AMERICAN SHIPPING.

I am very confident that the United States has the power to relieve from

the payment of tolls any part of our shipping that Congress deems wise. We

own the canal. It was our money that built it. We have the right to charge

tolls for its use. Those tolls must be the same to everyone; but when we

are dealing with our own ships, the practice of many Governments of

subsidizing their own merchant vessels is so well established in general

that a subsidy equal to the tolls, an equivalent remission of tolls, can

not be held to be a discrimination in the use of the canal. The practice in

the Suez Canal makes this clear. The experiment in tolls to be made by the

President would doubtless disclose how great a burden of tolls the

coastwise trade between the Atlantic and the Pacific coast could bear

without preventing its usefulness in competition with the transcontinental

railroads. One of the chief reasons for building the canal was to set up

this competition and to bring the two shores closer together as a practical

trade problem. It may be that the tolls will have to be wholly remitted. I

do not think this is the best principle, because I believe that the cost of

such a Government work as the Panama Canal ought to be imposed gradually

but certainly upon the trade which it creates and makes possible. So far as

we can, consistent with the development of the world's trade through the

canal, and the benefit which it was intended to secure to the east and west

coastwise trade, we ought to labor to secure from the canal tolls a

sufficient amount ultimately to meet the debt which we have assumed and to

pay the interest.

THE PHILIPPINE ISLANDS.

In respect to the Philippines, I urgently join in the recommendation of the

Secretary of War that the act of February 6, 1905, limiting the

indebtedness that may be incurred by the Philippine Government for the

construction of public works, be increased from $5,000,000 to $15,000,000.

The finances of that Government are in excellent condition. The maximum sum

mentioned is quite low as compared with the amount of indebtedness of other

governments with similar resources, and the success which has attended the

expenditure of the $5,000,000 in the useful improvements of the harbors and

other places in the Islands justifies and requires additional expenditures

for like purposes. NATURALIZATION.

I also join in the recommendation that the legislature of the Philippine

Islands be authorized to provide for the naturalization of Filipinos and

others who by the present law are treated as aliens, so as to enable them

to become citizens of the Philippine Islands.

FRIARS' LANDS.

Pending an investigation by Congress at its last session, through one of

its committees, into the disposition of the friars' lands, Secretary

Dickinson directed that the friars' lands should not be sold in excess of

the limits fixed for the public lands until Congress should pass upon the

subject or should have concluded its investigation. This order has been an

obstruction to the disposition of the lands, and I expect to direct the

Secretary of War to return to the practice under the opinion of the

Attorney General which will enable us to dispose of the lands much more

promptly, and to prepare a sinking fund with which to meet the $7,000,000

of bonds issued for the purchase of the lands. I have no doubt whatever

that the Attorney General's construction was a proper one, and that it is

in the interest of everyone that the land shall be promptly disposed of.

The danger of creating a monopoly of ownership in lands under the statutes

as construed is nothing. There are only two tracts of 60,000 acres each

unimproved and in remote Provinces that are likely to be disposed of in

bulk, and the rest of the lands are subject to the limitation that they

shall be first offered to the present tenants and lessors who hold them in

small tracts.

RIVERS AND HARBORS.

The estimates for the river and harbor improvements reach $32,000,000 for

the coming year. I wish to urge that whenever a project has been adopted by

Congress as one to be completed, the more money which can be economically

expended in its construction in each year, the greater the ultimate

economy. This has especial application to the improvement of the

Mississippi River and its large branches. It seems to me that an increase

in the amount of money now being annually expended in the improvement of

the Ohio River which has been formally adopted by Congress would be in the

interest of the public. A similar change ought to be made during the

present Congress, in the amount to be appropriated for the Missouri River.

The engineers say that the cost of the improvement of the Missouri River

from Kansas City to St. Louis, in order to secure 6 feet as a permanent

channel, will reach $20,000,000. There have been at least three

recommendations from the Chief of Engineers that if the improvement be

adopted, $2,000,000 should be expended upon it annually. This particular

improvement is especially entitled to the attention of Congress, because a

company has been organized in Kansas City, with a capital of $1,000,000,

which has built steamers and barges, and is actually using the river for

transportation in order to show what can be done in the way of affecting

rates between Kansas City and St. Louis, and in order to manifest their

good faith and confidence in respect of the improvement. I urgently

recommend that the appropriation for this improvement be increased from

$600,000, as recommended now in the completion of a contract, to $2,000,000

annually, so that the work may be done in 10 years.

WATERWAY FROM THE LAKES TO THE GULF.

The project for a navigable waterway from Lake Michigan to the mouth of the

Illinois River, and thence via the Mississippi to the Gulf of Mexico, is

one of national importance. In view of the work already accomplished by the

Sanitary District of Chicago, an agency of the State of Illinois, which has

constructed the most difficult and costly stretch of this waterway and made

it an asset of the Nation, and in view of the fact that the people of

Illinois have authorized the expenditure Of $20,000,000 to carry this

waterway 62 miles farther to Utica, I feel that it is fitting that this

work should be supplemented by the Government, and that the expenditures

recommended by the special board of engineers on the waterway from Utica to

the mouth of the Illinois River be made upon lines which while providing a

waterway for the Nation should otherwise benefit that State to the fullest

extent. I recommend that the term of service of said special board of

engineers be continued, and that it be empowered to reopen the question of

the treatment of the lower Illinois River, and to negotiate with a properly

constituted commission representing the State of Illinois, and to agree

upon a plan for the improvement of the lower Illinois River and upon the

extent to which the United States may properly cooperate with the State of

Illinois in securing the construction of a navigable waterway from Lockport

to the mouth of the Illinois River in conjunction with the development of

water power by that State between Lockport and Utica.

THE DEPARTMENT OF JUSTICE.

Removal of clerks of Federal courts.

The report of the Attorney General shows that he has subjected to close

examination the accounts of the clerks of the Federal courts; that he has

found a good many which disclose irregularities or dishonesty; but that he

has had considerable difficulty in securing an effective prosecution or

removal of the clerks thus derelict. I am certainly not unduly prejudiced

against the Federal courts, but the fact is that the long and confidential

relations which grow out of the tenure for life on the part of the judge

and the practical tenure for life on the part of the clerk are not

calculated to secure the strictness of dealing by the judge with the clerk

in respect to his fees and accounts which assures in the clerk's conduct a

freedom from overcharges and carelessness. The relationship between the

judge and the clerk makes it ungracious for members of the bar to complain

of the clerk or for department examiners to make charges against him to be

heard by the court, and an order of removal of a clerk and a judgment for

the recovery of fees are in some cases reluctantly entered by the judge.

For this reason I recommend an amendment to the law whereby the President

shall be given power to remove the clerks for cause. This provision need

not interfere with the right of the judge to appoint his clerk or to remove

him.

French spoliation awards.

In my last message, I recommended to Congress that it authorize the payment

of the findings or judgments of the Court of Claims in the matter of the

French spoliation cases. There has been no appropriation to pay these

judgments since 1905. The findings and awards were obtained after a very

bitter fight, the Government succeeding in about 75 per cent of the cases.

The amount of the awards ought, as a matter of good faith on the part of

the Government, to be paid.

EMPLOYERS' LIABILITY AND WORKMEN'S COMPENSATION COMMISSION.

The limitation of the liability of the master to his servant for personal

injuries to such as are occasioned by his fault has been abandoned in most

civilized countries and provision made whereby the employee injured in the

course of his employment is compensated for his loss of working ability

irrespective of negligence. The principle upon which such provision

proceeds is that accidental injuries to workmen in modern industry, with

its vast complexity and inherent dangers arising from complicated machinery

and the use of the great forces of steam and electricity, should be

regarded as risks of the industry and the loss borne in some equitable

proportion by those who for their own profit engage therein. In recognition

of this the last Congress authorized the appointment of a commission to

investigate the subject of employers' liability and workmen's compensation

and to report the result of their investigations, through the President, to

Congress. This commission was appointed and has been at work, holding

hearings, gathering data, and considering the subject, and it is expected

will be able to report by the first of the year, in accordance with the

provisions of the law. It is hoped and expected that the commission will

suggest legislation which will enable us to put in the place of the present

wasteful and sometimes unjust system of employers' liability a plan of

compensation which will afford some certain and definite relief to all

employees who are injured in the course of their employment in those

industries which are subject to the regulating power of Congress.

MEASURES TO PREVENT DELAY AND UNNECESSARY COST OF LITIGATION.

In promotion of the movement for the prevention of delay and unnecessary

cost, in litigation, I am glad to say that the Supreme Court has taken

steps to reform the present equity rules of the Federal courts, and that we

may in the near future expect a revision of them which will be a long step

in the right direction.

The American Bar Association has recommended to Congress several bills

expediting procedure, one of which has already passed the House

unanimously, February 6, 1911. This directs that no judgment should be set

aside or reversed, or new trial granted, unless it appears to the court,

after an examination of the entire cause, that the error complained of has

injuriously affected the substantial rights of the parties, and also

provides for the submission of issues of fact to a jury, reserving

questions of law for subsequent argument and decision. I hope this bill

will pass the Senate and become law, for it will simplify the procedure at

law.

Another bill 11 to amend chapter II of the judicial Code, in order to

avoid errors in pleading, was presented by the same association, and one.

enlarging the jurisdiction of the Supreme Court so as to permit that court

to examine, upon a writ of error, all cases in which any right or title is

claimed under the Constitution, or any statute or treaty of the United

States, whether the decision in the court below has been against the right

or title or in its favor. Both these measures are in the interest of

justice and should be passed.

POST OFFICE.

At the beginning of the present administration in 1909 the postal service

was in arrears to the extent Of $17,479,770.47. It was very much the

largest deficit on record. In the brief space of two years this has been

turned into a surplus Of $220,000, which has been accomplished without

curtailment of the postal facilities, as may be seen by the fact that there

have been established 3,744 new post offices; delivery by carrier has been

added to the service in 186 cities; 2,516 new rural routes have been

established, covering 60,000 miles; the force of postal employees has been

increased in these two years by more than 8,000, and their average annual

salary has had a substantial increase.

POSTAL-SAVINGS SYSTEM.

On January 3, 1911, postal-savings depositories were established

experimentally in 48 States and Territories. After three months' successful

operation the system was extended as rapidly as feasible to the 7,500 Post

offices of the first, second, and third classes constituting the

presidential grade. By the end of the year practically all of these will

have been designated and then the system will be extended to all

fourth-class post offices doing a money-order business.

In selecting post offices for depositories consideration was given to the

efficiency of the postmasters and only those offices where the ratings were

satisfactory to the department have been designated. Withholding

designation from postmasters with unsatisfactory ratings has had a salutary

effect on the service.

The deposits have kept pace with the extension of the system. Amounting to

only $60,652 at the end of the first month's operation in the experimental

offices, they increased to $679,310 by July, and now after 11 months of

operation have reached a total of $11,000,000. This sum is distributed

among 2,710 banks and protected tinder the law by bonds deposited with the

Treasurer of the United States.

Under the method adopted for the conduct of the system certificates are

issued as evidence of deposits, and accounts with depositors are kept by

the post offices instead of by the department. Compared with the practice

in other countries of entering deposits in pass books and keeping at the

central office a ledger account with each depositor, the use of the

certificate has resulted in great economy of administration.

The depositors thus far number approximately 150,000. They include 40

nationalities, native Americans largely predominating and English and

Italians coming next.

The first conversion of deposits into United States bonds bearing interest

at the rate of 2.5 per cent occurred on July 1, 1911, the amount of

deposits exchanged being $41,900, or a little more than 6 per cent of the

total outstanding certificates of deposit on June 30. Of this issue, bonds

to the value of $6,120 were in coupon form and $35,780 in registered form.

PARCEL POST.

Steps should be taken immediately for the establishment of a rural parcel

post. In the estimates of appropriations needed for the maintenance of the

postal service for the ensuing fiscal year an item of $150,000 has been

inserted to cover the preliminary expense of establishing a parcel post on

rural mail routes, as well as to cover an investigation having for its

object the final establishment of a general parcel post on all railway and

steamboat transportation routes. The department believes that after the

initial expenses of establishing the system are defrayed and the parcel

post is in full operation on the rural routes it will not only bring in

sufficient revenue to meet its cost, but also a surplus that can be

utilized in paying the expenses of a parcel post in the City Delivery

Service.

It is hoped that Congress will authorize the immediate establishment of a

limited parcel post on such rural routes as may be selected, providing for

the delivery along the routes of parcels not exceeding eleven pounds, which

is the weight limit for the international parcel post, or at the post

office from which such route emanates, or on another route emanating from

the same office. Such preliminary service will prepare the way for the more

thorough and comprehensive inquiry contemplated in asking for the

appropriation mentioned, enable the department to gain definite information

concerning the practical operation of a general system, and at the same

time extend the benefit of the service to a class of people who, above all

others, are specially in need of it.

The suggestion that we have a general parcel post has awakened great

opposition on the part of some who think that it will have the effect to

destroy the business of the country storekeeper. Instead of doing this, I

think the change will greatly increase business for the benefit of all. The

reduction in the cost of living it will bring about ought to make its

coming certain.

THE NAVY DEPARTMENT.

On the 2d of November last, I reviewed the fighting fleet of battleships

and other vessels assembled in New York Harbor, consisting of 24

battleships, 2 armored cruisers, 2 cruisers, 22 destroyers, 12 torpedo

boats, 8 submarines, and other attendant vessels, making 98 vessels of all

classes, of a tonnage Of 576,634 tons. Those who saw the fleet were struck

with its preparedness and with its high military efficiency. All Americans

should be proud of its personnel.

The fleet was deficient in the number of torpedo destroyers, in cruisers,

and in colliers, as well as in large battleship cruisers, which are now

becoming a very important feature of foreign navies, notably the British,

German, and Japanese.

The building plan for this year contemplates two battleships and two

colliers. This is because the other and smaller vessels can be built much

more rapidly in case of emergency than the battleships, and we certainly

ought to continue the policy of two battleships a year until after the

Panama Canal is finished and until in our first line and in our reserve

line we can number 40 available vessels of proper armament and size.

The reorganization of the Navy and the appointment of four aids to the

Secretary have continued to demonstrate their usefulness. It would be

difficult now to administer the affairs of the Navy without the expert

counsel and advice of these aids, and I renew the recommendation which I

made last year, that the aids be recognized by statute.

It is certain that the Navy, with its present size, should have admirals in

active command higher than rear admirals. The recognized grades in order

are: Admiral of the fleet, admiral, vice admiral, and rear admiral. Our

great battleship fleet is commanded by a rear admiral, with four other rear

admirals under his orders. This is not as it should be, and when questions

of precedence arise between our naval officers and those of European

navies, the American rear admiral, though in command of ten times the force

of a foreign vice admiral, must yield precedence to the latter. Such an

absurdity ought not to prevail, and it can be avoided by the creation of

two or three positions of flag rank above that of rear admiral.

I attended the opening of the new training school at North Chicago, Ill.,

and am glad to note the opportunity which this gives for drawing upon young

men of the country from the interior, from farms, stores, shops, and

offices, which insures a high average of intelligence and character among

them, and which they showed in the very wonderful improvement in discipline

and drill which only a few short weeks' presence at the naval station had

made.

I invite your attention to the consideration of the new system of detention

and of punishment for Army and Navy enlisted men which has obtained in

Great Britain, and which has made greatly for the better control of the.

men. We should adopt a similar system here.

Like the Treasury Department and the War Department, the Navy Department

has given much attention to economy in administration, and has cut down a

number of unnecessary expenses and reduced its estimates except for

construction and the increase that that involves.

I urge upon Congress the necessity for an immediate increase of 2,000 men

in the enlisted strength of the Navy, provided for in the estimates. Four

thousand more are now needed to man all the available vessels.

There are in the service to-day about 47,750 enlisted men of all ratings.

Careful computation shows that in April, 1912, 49,166 men will be required

for vessels in commission, and 3,000 apprentice seamen should be kept under

training at all times.

ABOLITION OF NAVY YARDS.

The Secretary of the Navy has recommended the abolition of certain of the

smaller and unnecessary navy yards, and in order to furnish a complete and

comprehensive report has referred the question of all navy yards to the

joint board of the Army and Navy. This board will shortly make its report

and the Secretary of the Navy advises me that his recommendations on the

subject will be presented early in the coming year. The measure of economy

contained in a proper handling of this subject is so great and so important

to the interests of the Nation that I shall present it to Congress as a

separate subject apart from my annual message. Concentration of the

necessary work for naval vessels in a few navy yards on each coast is a

vital necessity if proper economy in Government expenditures is to be

attained.

AMALGAMATION OF STAFF CORPS IN THE NAVY.

The Secretary of the Navy is striving to unify the various corps of the

Navy to the extent possible and thereby stimulate a Navy spirit as

distinguished from a corps spirit. In this he has my warm support.

All officers are to be naval officers first and specialists afterwards.

This means that officers will take up at least one specialty, such as

ordnance, construction, or engineering. This is practically what is done

now, only some of the specialists, like the pay officers and naval

constructors, are not of the line. It is proposed to make them all of the

line.

All combatant corps should obviously be of the line. This necessitates

amalgamating the pay officers and also those engaged in the technical work

of producing the finished ship. This is at present the case with the single

exception of the naval constructors, whom it is now proposed to amalgamate

with the line.

COUNCIL OF NATIONAL DEFENSE.

I urge again upon Congress the desirability of establishing the council of

national defense. The bill to establish this council was before Congress

last winter, and it is hoped that this legislation will pass during the

present session. The purpose of the council is to determine the general

policy of national defense and to recommend to Congress and to the

President such measures relating to it as it shall deem necessary and

expedient.

No such machinery is now provided by which the readiness of the Army and

Navy may be improved and the programs of military and naval requirements

shall be coordinated and properly scrutinized with a view of the

necessities of the whole Nation rather than of separate departments.

DEPARTMENTS OF AGRICULTURE AND COMMERCE AND LABOR.

For the consideration of matters which are pending or have been disposed of

in the Agricultural Department and in the Department of Commerce and Labor,

I refer to the very excellent reports of the Secretaries of those

departments. I shall not be able to submit to Congress until after the

Christmas holidays the question of conservation of our resources arising in

Alaska and the West and the question of the rate for second-class mail

matter in the Post Office Department.

COMMISSION ON EFFICIENCY AND ECONOMY.

The law does not require the submission of the reports of the Commission on

Economy and Efficiency until the 31st of December. I shall therefore not be

able to submit a report of the work of that commission until the assembling

of Congress after the holidays.

CIVIL RETIREMENT AND CONTRIBUTORY PENSION SYSTEM.

I have already advocated, in my last annual message, the adoption of a

civil-service retirement system, with a contributory feature to it so as to

reduce to a minimum the cost to the Government of the pensions to be paid.

After considerable reflection, I am very much opposed to a pension system

that involves no contribution from the employees. I think the experience of

other governments justifies this view; but the crying necessity for some

such contributory system, with possibly a preliminary governmental outlay,

in order to cover the initial cost and to set the system going at once

while the contributions are accumulating, is manifest on every side.

Nothing will so much promote the economy and efficiency of the Government

as such a system.

ELIMINATION OF ALL LOCAL OFFICES FROM POLITICS.

I wish to renew again my recommendation that all the local offices

throughout the country, including collectors of internal revenue,

collectors of customs, postmasters of all four classes, immigration

commissioners and marshals, should be by law covered into the classified

service, the necessity for confirmation by the Senate be removed, and the

President and the others, whose time is now taken up in distributing this

patronage under the custom that has prevailed since the beginning of the

Government in accordance with the recommendation of the Senators and

Congressmen of the majority party, should be relieved from this burden. I

am confident that such a change would greatly reduce the cost of

administering the Government, and that it would add greatly to its

efficiency. It would take away the power to use the patronage of the

Government for political purposes. When officers are recommended by

Senators and Congressmen from political motives and for political services

rendered, it is impossible to expect that while in office the appointees

will not regard their tenure as more or less dependent upon continued

political service for their patrons, and no regulations, however stiff or

rigid, will prevent this, because such regulations, in view of the method

and motive for selection, are plainly inconsistent and deemed hardly worthy

of respect.

***

State of the Union Address

William H. Taft

December 3, 1912

Jump to Part II | Part III

To the Senate and House of Representatives:

The foreign relations of the United States actually and potentially affect

the state of the Union to a degree not widely realized and hardly surpassed

by any other factor in the welfare of the whole Nation. The position of the

United States in the moral, intellectual, and material relations of the

family of nations should be a matter of vital interest to every patriotic

citizen. The national prosperity and power impose upon us duties which we

can not shirk if we are to be true to our ideals. The tremendous growth of

the export trade of the United States has already made that trade a very

real factor in the industrial and commercial prosperity of the country.

With the development of our industries the foreign commerce of the United

States must rapidly become a still more essential factor in its economic

welfare. Whether we have a farseeing and wise diplomacy and are not

recklessly plunged into unnecessary wars, and whether our foreign policies

are based upon an intelligent grasp of present-day world conditions and a

clear view of the potentialities of the future, or are governed by a

temporary and timid expediency or by narrow views befitting an infant

nation, are questions in the alternative consideration of which must

convince any thoughtful citizen that no department of national polity

offers greater opportunity for promoting the interests of the whole people

on the one hand, or greater chance on the other of permanent national

injury, than that which deals with the foreign relations of the United

States.

The fundamental foreign policies of the United States should be raised high

above the conflict of partisanship and wholly dissociated from differences

as to domestic policy. In its foreign affairs the United States should

present to the world a united front. The intellectual, financial, and

industrial interests of the country and the publicist, the wage earner, the

farmer, and citizen of whatever occupation must cooperate in a spirit of

high patriotism to promote that national solidarity which is indispensable

to national efficiency and to the attainment of national ideals.

The relations of the United States with all foreign powers remain upon a

sound basis of peace, harmony, and friendship. A greater insistence upon

justice to American citizens or interests wherever it may have been denied

and a stronger emphasis of the need of mutuality in commercial and other

relations have only served to strengthen our friendships with foreign

countries by placing those friendships upon a firm foundation of realities

as well as aspirations.

Before briefly reviewing the more important events of the last year in our

foreign relations, which it is my duty to do as charged with their conduct

and because diplomatic affairs are not of a nature to make it appropriate

that the Secretary of State make a formal annual report, I desire to touch

upon some of the essentials to the safe management of the foreign relations

of the United States and to endeavor, also, to define clearly certain

concrete policies which are the logical modern corollaries of the

undisputed and traditional fundamentals of the foreign policy of the United

States.

REORGANIZATION OF THE STATE DEPARTMENT

At the beginning of the present administration the United States, having

fully entered upon its position as a world power, with the responsibilities

thrust upon it by the results of the Spanish-American War, and already

engaged in laying the groundwork of a vast foreign trade upon which it

should one day become more and more dependent, found itself without the

machinery for giving thorough attention to, and taking effective action

upon, a mass of intricate business vital to American interests in every

country in the world.

The Department of State was an archaic and inadequate machine lacking most

of the attributes of the foreign office of any great modern power. With an

appropriation made upon my recommendation by the Congress on August 5,

1909, the Department of State was completely reorganized. There were

created Divisions of Latin American Affairs and of Far Eastern, Near

Eastern, and Western European Affairs. To these divisions were called from

the foreign service diplomatic and consular officers possessing experience

and knowledge gained by actual service in different parts of the world and

thus familiar with political and commercial conditions in the regions

concerned. The work was highly specialized. The result is that where

previously this Government from time to time would emphasize in its foreign

relations one or another policy, now American interests in every quarter of

the globe are being cultivated with equal assiduity. This principle of

politico-geographical division possesses also the good feature of making

possible rotation between the officers of the departmental, the diplomatic,

and the consular branches of the foreign service, and thus keeps the whole

diplomatic and consular establishments tinder the Department of State in

close touch and equally inspired with the aims and policy of the

Government. Through the newly created Division of Information the foreign

service is kept fully informed of what transpires from day to day in the

international relations of the country, and contemporary foreign comment

affecting American interests is promptly brought to the attention of the

department. The law offices of the department were greatly strengthened.

There were added foreign trade advisers to cooperate with the diplomatic and

consular bureaus and the politico-geographical divisions in the innumerable

matters where commercial diplomacy or consular work calls for such special

knowledge. The same officers, together with the rest of the new

organization, are able at all times to give to American citizens accurate

information as to conditions in foreign countries with which they have

business and likewise to cooperate more effectively with the Congress and

also with the other executive departments.

MERIT SYSTEM IN CONSULAR AND DIPLOMATIC CORPS

Expert knowledge and professional training must evidently be the essence of

this reorganization. Without a trained foreign service there would not be

men available for the work in the reorganized Department of State.

President Cleveland had taken the first step toward introducing the merit

system in the foreign service. That had been followed by the application of

the merit principle, with excellent results, to the entire consular branch.

Almost nothing, however, had been done in this direction with regard to the

Diplomatic Service. In this age of commercial diplomacy it was evidently of

the first importance to train an adequate personnel in that branch of the

service. Therefore, on November 26, 1909, by an Executive order I placed

the Diplomatic Service up to the grade of secretary of embassy, inclusive,

upon exactly the same strict nonpartisan basis of the merit system, rigid

examination for appointment and promotion only for efficiency, as had been

maintained without exception in the Consular Service.

STATISTICS AS TO MERIT AND NONPARTISAN CHARACTER OF APPOINTMENTS

How faithful to the merit system and how nonpartisan has been the conduct

of the Diplomatic and Consular Services in the last four years may be

judged from the following: Three ambassadors now serving held their present

rank at the beginning of my administration. Of the ten ambassadors whom I

have appointed, five were by promotion from the rank of minister. Nine

ministers now serving held their present rank at the beginning of my

administration. Of the thirty ministers whom I have appointed, eleven were

promoted from the lower grades of the foreign service or from the

Department of State. Of the nineteen missions in Latin America, where our

relations are close and our interest is great, fifteen chiefs of mission

are service men, three having entered the service during this

administration. Thirty-seven secretaries of embassy or legation who have

received their initial appointments after passing successfully the required

examination were chosen for ascertained fitness, without regard to

political affiliations. A dearth of candidates from Southern and Western

States has alone made it impossible thus far completely to equalize all the

States' representations in the foreign service. In the effort to equalize

the representation of the various States in the Consular Service I have

made sixteen of the twenty-nine new appointments as consul which have

occurred during my administration from the Southern States. This is 55 per

cent. Every other consular appointment made, including the promotion of

eleven young men from the consular assistant and student interpreter corps,

has been by promotion or transfer, based solely upon efficiency shown in

the service.

In order to assure to the business and other interests of the United States

a continuance of the resulting benefits of this reform, I earnestly renew

my previous recommendations of legislation making it permanent along some

such lines as those of the measure now Pending in Congress.

LARGER PROVISION FOR EMBASSIES AND LEGATIONS AND FOR OTHER EXPENSES OF OUR

FOREIGN REPRESENTATIVES RECOMMENDED

In connection with legislation for the amelioration of the foreign service,

I wish to invite attention to the advisability of placing the salary

appropriations upon a better basis. I believe that the best results would

be obtained by a moderate scale of salaries, with adequate funds for the

expense of proper representation, based in each case upon the scale and

cost of living at each post, controlled by a system of accounting, and

under the general direction of the Department of State.

In line with the object which I have sought of placing our foreign service

on a basis of permanency, I have at various times advocated provision by

Congress for the acquisition of Government-owned buildings for the

residence and offices of our diplomatic officers, so as to place them more

nearly on an equality with similar officers of other nations and to do away

with the discrimination which otherwise must necessarily be made, in some

cases, in favor of men having large private fortunes. The act of Congress

which I approved on February 17, 1911, was a right step in this direction.

The Secretary of State has already made the limited recommendations

permitted by the act for any one year, and it is my hope that the bill

introduced in the House of Representatives to carry out these

recommendations will be favorably acted on by the Congress during its

present session.

In some Latin-American countries the expense of government-owned legations

will be less than elsewhere, and it is certainly very urgent that in such

countries as some of the Republics of Central America and the Caribbean,

where it is peculiarly difficult to rent suitable quarters, the

representatives of the United States should be justly and adequately

provided with dignified and suitable official residences. Indeed, it is

high time that the dignity and power of this great Nation should be

fittingly signalized by proper buildings for the occupancy of the Nation's

representatives everywhere abroad.

DIPLOMACY A HAND MAID OF COMMERCIAL INTERCOURSE AND PEACE

The diplomacy of the present administration has sought to respond to modern

ideas of commercial intercourse. This policy has been characterized as

substituting dollars for bullets. It is one that appeals alike to

idealistic humanitarian sentiments, to the dictates of sound policy and

strategy, and to legitimate commercial aims. It I is an effort frankly

directed to the increase of American trade upon the axiomatic principle

that the Government of the United States shall extend all proper support to

every legitimate and beneficial American enterprise abroad. How great have

been the results of this diplomacy, coupled with the maximum and minimum

provision of the tariff law, will be seen by some consideration of the

wonderful increase in the export trade of the United States. Because

modern diplomacy is commercial, there has been a disposition in some

quarters to attribute to it none but materialistic aims. How strikingly

erroneous is such an impression may be seen from a study of the results by

which the diplomacy of the United States can be judged.

SUCCESSFUL EFFORTS IN PROMOTION OF PEACE

In the field of work toward the ideals of peace this Government negotiated,

but to my regret was unable to consummate, two arbitration treaties which

set the highest mark of the aspiration of nations toward the substitution

of arbitration and reason for war in the settlement of international

disputes. Through the efforts of American diplomacy several wars have been

prevented or ended. I refer to the successful tripartite mediation of the

Argentine Republic, Brazil, and the United States between Peru and Ecuador;

the bringing of the boundary dispute between Panama and Costa Rica to

peaceful arbitration; the staying of warlike preparations when Haiti and

the Dominican Republic were on the verge of hostilities; the stopping of a

war in Nicaragua; the halting of internecine strife in Honduras. The

Government of the United States was thanked for its influence toward the

restoration of amicable relations between the Argentine Republic and

Bolivia. The diplomacy of the United States is active in seeking to assuage

the remaining ill-feeling between this country and the Republic of

Colombia. In the recent civil war in China the United States successfully

joined with the other interested powers in urging an early cessation of

hostilities. An agreement has been reached between the Governments of Chile

and Peru whereby the celebrated Tacna-Arica dispute, which has so long

embittered international relations on the west coast of South America, has

at last been adjusted. Simultaneously came the news that the boundary

dispute between Peru and Ecuador had entered upon a stage of amicable

settlement. The position of the United States in reference to the

Tacna-Arica dispute between Chile and Peru has been one of nonintervention,

but one of friendly influence and pacific counsel throughout the period

during which the dispute in question has been the subject of interchange of

views between this Government and the two Governments immediately

concerned. In the general easing of international tension on the west coast

of South America the tripartite mediation, to which I have referred, has

been a most potent and beneficent factor.

CHINA

In China the policy of encouraging financial investment to enable that

country to help itself has had the result of giving new life and practical

application to the open-door policy. The consistent purpose of the present

administration has been to encourage the use of American capital in the

development of China by the promotion of those essential reforms to which

China is pledged by treaties with the United States and other powers. The

hypothecation to foreign bankers in connection with certain industrial

enterprises, such as the Hukuang railways, of the national revenues upon

which these reforms depended, led the Department of State early in the

administration to demand for American citizens participation in such

enterprises, in order that the United States might have equal rights and an

equal voice in all questions pertaining to the disposition of the public

revenues concerned. The same policy of promoting international accord among

the powers having similar treaty rights as ourselves in the matters of

reform, which could not be put into practical effect without the common

consent of all, was likewise adopted in the case of the loan desired by

China for the reform of its currency. The principle of international

cooperation in matters of common interest upon which our policy had already

been based in all of the above instances has admittedly been a great factor

in that concert of the powers which has been so happily conspicuous during

the perilous period of transition through which the great Chinese nation

has been passing.

CENTRAL AMERICA NEEDS OUR HELP IN DEBT ADJUSTMENT

In Central America the aim has been to help such countries as Nicaragua and

Honduras to help themselves. They are the immediate beneficiaries. The

national benefit to the United States is twofold. First, it is obvious

that the Monroe doctrine is more vital in the neighborhood of the Panama

Canal and the zone of the Caribbean than anywhere else. There, too, the

maintenance of that doctrine falls most heavily upon the United States. It

is therefore essential that the countries within that sphere shall be

removed from the jeopardy involved by heavy foreign debt and chaotic

national finances and from the ever-present danger of international

complications due to disorder at home. Hence the United States has been

glad to encourage and support American bankers who were willing to lend a

helping hand to the financial rehabilitation of such countries because this

financial rehabilitation and the protection of their customhouses from

being the prey of would be dictators would remove at one stroke the menace

of foreign creditors and the menace of revolutionary disorder.

The second advantage of the United States is one affecting chiefly all the

southern and Gulf ports and the business and industry of the South. The

Republics of Central America and the Caribbean possess great natural

wealth. They need only a measure of stability and the means of financial

regeneration to enter upon an era of peace and prosperity, bringing profit

and happiness to themselves and at the same time creating conditions sure

to lead to a flourishing interchange of trade with this country.

I wish to call your especial attention to the recent occurrences in

Nicaragua, for I believe the terrible events recorded there during the

revolution of the past summer-the useless loss of life, the devastation of

property, the bombardment of defenseless cities, the killing and wounding

of women and children, the torturing of noncombatants to exact

contributions, and the suffering of thousands of human beings-might have

been averted had the Department of State, through approval of the loan

convention by the Senate, been permitted to carry out its now

well-developed policy of encouraging the extending of financial aid to weak

Central American States with the primary objects of avoiding just such

revolutions by assisting those Republics to rehabilitate their finances, to

establish their currency on a stable basis, to remove the customhouses from

the danger of revolutions by arranging for their secure administration, and

to establish reliable banks.

During this last revolution in Nicaragua, the Government of that Republic

having admitted its inability to protect American life and property against

acts of sheer lawlessness on the part of the malcontents, and having

requested this Government to assume that office, it became necessary to

land over 2,000 marines and bluejackets in Nicaragua. Owing to their

presence the constituted Government of Nicaragua was free to devote its

attention wholly to its internal troubles, and was thus enabled to stamp

out the rebellion in a short space of time. When the Red Cross supplies

sent to Granada had been exhausted, 8,000 persons having been given food in

one day upon the arrival of the American forces, our men supplied other

unfortunate, needy Nicaraguans from their own haversacks. I wish to

congratulate the officers and men of the United States navy and Marine

Corps who took part in reestablishing order in Nicaragua upon their

splendid conduct, and to record with sorrow the death of seven American

marines and bluejackets. Since the reestablishment of peace and order,

elections have been held amid conditions of quiet and tranquility. Nearly

all the American marines have now been withdrawn. The country should soon

be on the road to recovery. The only apparent danger now threatening

Nicaragua arises from the shortage of funds. Although American bankers have

already rendered assistance, they may naturally be loath to advance a loan

adequate to set the country upon its feet without the support of some such

convention as that of June, 1911, upon which the Senate has not yet acted.

ENFORCEMENT OF NEUTRALITY LAWS

In the general effort to contribute to the enjoyment of peace by those

Republics which are near neighbors of the United States, the administration

has enforced the so-called neutrality statutes with a new vigor, and those

statutes were greatly strengthened in restricting the exportation of arms

and munitions by the joint resolution of last March. It is still a

regrettable fact that certain American ports are made the rendezvous of

professional revolutionists and others engaged in intrigue against the

peace of those Republics. It must be admitted that occasionally a

revolution in this region is justified as a real popular movement to throw

off the shackles of a vicious and tyrannical government. Such was the

Nicaraguan revolution against the Zelaya regime. A nation enjoying our

liberal institutions can not escape sympathy with a true popular movement,

and one so well justified. In very many cases, however, revolutions in the

Republics in question have no basis in principle, but are due merely to the

machinations of conscienceless and ambitious men, and have no effect but to

bring new suffering and fresh burdens to an already oppressed people. The

question whether the use of American ports as foci of revolutionary

intrigue can be best dealt with by a further amendment to the neutrality

statutes or whether it would be safer to deal with special cases by special

laws is one worthy of the careful consideration of the Congress.

VISIT OF SECRETARY KNOX TO CENTRAL AMERICA AND THE CARIBBEAN

Impressed with the particular importance of the relations between the

United States and the Republics of Central America and the Caribbean

region, which of necessity must become still more intimate by reason of the

mutual advantages which will be presented by the opening of the Panama

Canal, I directed the Secretary of State last February to visit these

Republics for the purpose of giving evidence of the sincere friendship and

good will which the Government and people of the United States bear toward

them. Ten Republics were visited. Everywhere he was received with a

cordiality of welcome and a generosity of hospitality such as to impress me

deeply and to merit our warmest thanks. The appreciation of the Governments

and people of the countries visited, which has been appropriately shown in

various ways, leaves me no doubt that his visit will conduce to that closer

union and better understanding between the United States and those

Republics which I have had it much at heart to promote.

OUR MEXICAN POLICY

For two years revolution and counter-revolution has distraught the

neighboring Republic of Mexico. Brigandage has involved a great deal of

depredation upon foreign interests. There have constantly recurred

questions of extreme delicacy. On several occasions very difficult

situations have arisen on our frontier. Throughout this trying period, the

policy of the United States has been one of patient nonintervention,

steadfast recognition of constituted authority in the neighboring nation,

and the exertion of every effort to care for American interests. I

profoundly hope that the Mexican nation may soon resume the path of order,

prosperity, and progress. To that nation in its sore troubles, the

sympathetic friendship of the United States has been demonstrated to a high

degree. There were in Mexico at the beginning of the revolution some thirty

or forty thousand American citizens engaged in enterprises contributing

greatly to the prosperity of that Republic and also benefiting the

important trade between the two countries. The investment of American

capital in Mexico has been estimated at $1,000,000,000. The responsibility

of endeavoring to safeguard those interests and the dangers inseparable

from propinquity to so turbulent a situation have been great, but I am

happy to have been able to adhere to the policy above outlined-a policy

which I hope may be soon justified by the complete success of the Mexican

people in regaining the blessings of peace and good order.

AGRICULTURAL CREDITS

A most important work, accomplished in the past year by the American

diplomatic officers in Europe, is the investigation of the agricultural

credit system in the European countries. Both as a means to afford relief

to the consumers of this country through a more thorough development of

agricultural resources and as a means of more sufficiently maintaining the

agricultural population, the project to establish credit facilities for the

farmers is a concern of vital importance to this Nation. No evidence of

prosperity among well-established farmers should blind us to the fact that

lack of capital is preventing a development of the Nation's agricultural

resources and an adequate increase of the land under cultivation; that

agricultural production is fast falling behind the increase in population;

and that, in fact, although these well-established farmers are maintained

in increasing prosperity because of the natural increase in population, we

are not developing the industry of agriculture. We are not breeding in

proportionate numbers a race of independent and independence-loving

landowners, for a lack of which no growth of cities can compensate. Our

farmers have been our mainstay in times of crisis, and in future it must

still largely be upon their stability and common sense that this democracy

must rely to conserve its principles of self-government.

The need of capital which American farmers feel to-day had been experienced

by the farmers of Europe, with their centuries-old farms, many years ago.

The problem had been successfully solved in the Old World and it was

evident that the farmers of this country might profit by a study of their

systems. I therefore ordered, through the Department of State, an

investigation to be made by the diplomatic officers in Europe, and I have

laid the results of this investigation before the governors of the various

States with the hope that they will be used to advantage in their

forthcoming meeting.

INCREASE OF FOREIGN TRADE

In my last annual message I said that the fiscal year ended June 30, 1911,

was noteworthy as marking the highest record of exports of American

products to foreign countries. The fiscal year 1912 shows that this rate of

advance has been maintained, the total domestic exports having a valuation

approximately Of $2,200,000,000, as compared with a fraction over

$2,000,000,000 the previous year. It is also significant that manufactured

and partly manufactured articles continue to be the chief commodities

forming the volume of our augmented exports, the demands of our own people

for consumption requiring that an increasing proportion of our abundant

agricultural products be kept at home. In the fiscal year 1911 the exports

of articles in the various stages of manufacture, not including foodstuffs

partly or wholly manufactured, amounted approximately to $907,500,000. In

the fiscal year 1912 the total was nearly $1,022,000,000, a gain Of

$114,000,000.

ADVANTAGE OF MAXIMUM AND MINIMUM TARIFF PROVISION

The importance which our manufactures have assumed in the commerce of the

world in competition with the manufactures of other countries again draws

attention to the duty of this Government to use its utmost endeavors to

secure impartial treatment for American products in all markets. Healthy

commercial rivalry in international intercourse is best assured by the

possession of proper means for protecting and promoting our foreign trade.

It is natural that competitive countries should view with some concern this

steady expansion of our commerce. If in some instance the measures taken by

them to meet it are not entirely equitable, a remedy should be found. In

former messages I have described the negotiations of the Department of

State with foreign Governments for the adjustment of the maximum and

minimum tariff as provided in section 2 of the tariff law of 1909. The

advantages secured by the adjustment of our trade relations under this law

have continued during the last year, and some additional cases of

discriminatory treatment of which we had reason to complain have been

removed. The Department of State has for the first time in the history of

this country obtained substantial most-favored-nation treatment from all

the countries of the world. There are, however, other instances which,

while apparently not constituting undue discrimination in the sense of

section 2, are nevertheless exceptions to the complete equity of tariff

treatment for American products that the Department of State consistently

has sought to obtain for American commerce abroad.

NECESSITY FOR SUPPLEMENTARY LEGISLATION

These developments confirm the opinion conveyed to you in my annual message

of 1911, that while the maximum and minimum provision of the tariff law of

1909 has been fully justified by the success achieved in removing

previously existing undue discriminations against American products, yet

experience has shown that this feature of the law should be amended in such

way as to provide a fully effective means of meeting the varying degrees of

discriminatory treatment of American commerce in foreign countries still

encountered, as well as to protect against injurious treatment on the part

of foreign Governments, through either legislative or administrative

measures, the financial interests abroad of American citizens whose

enterprises enlarge the market for American commodities.

I can not too strongly recommend to the Congress the passage of some such

enabling measure as the bill which was recommended by the Secretary of

State in his letter of December 13, 1911. The object of the proposed

legislation is, in brief, to enable the Executive to apply, as the case may

require, to any or all commodities, whether or not on the free list from a

country which discriminates against the United States, a graduated scale of

duties up to the maximum Of 25 per cent ad valorem provided in the present

law. Flat tariffs are out of date. Nations no longer accord equal tariff

treatment to all other nations irrespective of the treatment from them

received. Such a flexible power at the command of the Executive would

serve to moderate any unfavorable tendencies on the part of those countries

from which the importations into the United States are substantially

confined to articles on the free list as well as of the countries which

find a lucrative market in the United States for their products under

existing customs rates. It is very necessary that the American Government

should be equipped with weapons of negotiation adapted to modern economic

conditions, in order that we may at all times be in a position to gain not

only technically just but actually equitable treatment for our trade, and

also for American enterprise and vested interests abroad.

BUSINESS SECURED TO OUR COUNTRY BY DIRECT OFFICIAL EFFORT

As illustrating the commercial benefits of the Nation derived from the new

diplomacy and its effectiveness upon the material as well as the more ideal

side, it may be remarked that through direct official efforts alone there

have been obtained in the course of this administration, contracts from

foreign Governments involving an expenditure of $50,000,000 in the

factories of the United States. Consideration of this fact and some

reflection upon the necessary effects of a scientific tariff system and a

foreign service alert and equipped to cooperate with the business men of

America carry the conviction that the gratifying increase in the export

trade of this country is, in substantial amount, due to our improved

governmental methods of protecting and stimulating it. It is germane to

these observations to remark that in the two years that have elapsed since

the successful negotiation of our new treaty with Japan, which at the time

seemed to present so many practical difficulties, our export trade to that

country has increased at the rate of over $1,000,000 a month. Our exports

to Japan for the year ended June 30, 1910, were $21,959,310, while for the

year ended June 30, 1912, the exports were $53,478,046, a net increase in

the sale of American products of nearly 150 per cent.

SPECIAL CLAIMS ARBITRATION WITH GREAT BRITAIN

Under the special agreement entered into between the United States and

Great Britain on August 18, 1910, for the arbitration of outstanding

pecuniary claims, a schedule of claims and the terms of submission have

been agreed upon by the two Governments, and together with the special

agreement were approved by the Senate on July 19, 1911, but in accordance

with the terms of the agreement they did not go into effect until confirmed

by the two Governments by an exchange of notes, which was done on April 26

last. Negotiations, are still in progress for a supplemental schedule of

claims to be submitted to arbitration under this agreement, and meanwhile

the necessary preparations for the arbitration of the claims included in

the first schedule have been undertaken and are being carried on under the

authority of an appropriation made for that purpose at the last session of

Congress. It is anticipated that the two Governments will be prepared to

call upon the arbitration tribunal, established under this agreement, to

meet at Washington early next year to proceed with this arbitration.

FUR SEAL TREATY AND NEED FOR AMENDMENT OF OUR STATUTE

The act adopted at the last session of Congress to give effect to the

fur-seal convention Of July 7, 1911, between Great Britain, Japan, Russia,

and the United States provided for the suspension of all land killing of

seals on the Pribilof Islands for a period of five years, and an objection

has now been presented to this provision by the other parties in interest,

which raises the issue as to whether or not this prohibition of land

killing is inconsistent with the spirit, if not the letter, of the treaty

stipulations. The justification of establishing this close season depends,

under the terms of the convention, upon how far, if at all, it is necessary

for protecting and preserving the American fur-seal herd and for increasing

its number. This is a question requiring examination of the present

condition of the herd and the treatment which it needs in the light of

actual experience and scientific investigation. A careful examination of

the subject is now being made, and this Government will soon be in

possession of a considerable amount of new information about the American

seal herd, which has been secured during the past season and will be of

great value in determining this question; and if it should appear that

there is any uncertainty as to the real necessity for imposing a close

season at this time I shall take an early opportunity to address a special

message to Congress on this subject, in the belief that this Government

should yield on this point rather than give the slightest ground for the

charge that we have been in any way remiss in observing our treaty

obligations.

FINAL SETTLEMENT OF NORTH ATLANTIC FISHERIES DISPUTE

On the 20th of July last an agreement was concluded between the United

States and Great Britain adopting, with certain modifications, the rules

and method of procedure recommended in the award rendered by the North

Atlantic Coast Fisheries Arbitration Tribunal on September 7, 1910, for the

settlement hereafter, in accordance with the principles laid down in the

award, of questions arising with reference to the exercise of the American

fishing liberties under Article I of the treaty of October 20, 1818,

between the United States and Great Britain. This agreement received the

approval of the Senate on August I and was formally ratified by the two

Governments on November 15 last. The rules and a method of procedure

embodied in the award provided for determining by an impartial tribunal the

reasonableness of any new fishery regulations on the treaty coasts of

Newfoundland and Canada before such regulations could be enforced against

American fishermen exercising their treaty liberties on those coasts, and

also for determining the delimitation of bays on such coasts more than 10

miles wide, in accordance with the definition adopted by the tribunal of

the meaning of the word "bays" as used in the treaty. In the subsequent

negotiations between the two Governments, undertaken for the purpose of

giving practical effect to these rules and methods of procedure, it was

found that certain modifications therein were desirable from the point of

view of both Governments, and these negotiations have finally resulted in

the agreement above mentioned by which the award recommendations as

modified by mutual consent of the two Governments are finally adopted and

made effective, thus bringing this century-old controversy to a final

conclusion, which is equally beneficial and satisfactory to both

Governments.

IMPERIAL VALLEY AND MEXICO

In order to make possible the more effective performance of the work

necessary for the confinement in their present channel of the waters of the

lower Colorado River, and thus to protect the people of the Imperial

Valley, as well as in order to reach with the Government of Mexico an

understanding regarding the distribution of the waters of the Colorado

River, in which both Governments are much interested, negotiations are

going forward with a view to the establishment of a preliminary Colorado

River commission, which shall have the powers necessary to enable it to do

the needful work and with authority to study the question of the equitable

distribution of the waters. There is every reason to believe that an

understanding upon this point will be reached and that an agreement will be

signed in the near future.

CHAMIZAL DISPUTE

In the interest of the people and city of El Paso this Government has been

assiduous in its efforts to bring to an early settlement the long-standing

Chamizal dispute with Mexico. Much has been accomplished, and while the

final solution of the dispute is not immediate, the favorable attitude

lately assumed by the Mexican Government encourages the hope that this

troublesome question will be satisfactorily and definitively settled at an

early day.

INTERNATIONAL COMMISSION OF JURISTS

In pursuance of the convention of August 23, 1906, signed at the Third Pan

American Conference, held at Rio de Janeiro, the International Commission

of jurists met at that capital during the month of last June. At this

meeting 16 American Republics were represented, including the United

States, and comprehensive plans for the future work of the commission were

adopted. At the next meeting fixed for June, 1914, committees already

appointed are instructed to I report regarding topics assigned to them.

OPIUM CONFERENCE-UNFORTUNATE FAILURE OF OUR GOVERNMENT TO ENACT RECOMMENDED

LEGISLATION

In my message on foreign relations communicated to the two Houses of

Congress December 7, 1911, I called especial attention to the assembling of

the Opium Conference at The Hague, to the fact that that conference was to

review all pertinent municipal laws relating to the opium and allied evils,

and certainly all international rules regarding these evils, and to the

-fact that it seemed to me most essential that the Congress should take

immediate action on the anti-narcotic legislation before the Congress, to

which I had previously called attention by a special message.

The international convention adopted by the conference conforms almost

entirely to the principles contained in the proposed anti-narcotic

legislation which has been before the last two Congresses. It was most

unfortunate that this Government, having taken the initiative in the

international action which eventuated in the important international opium

convention, failed to do its share in the great work by neglecting to pass

the necessary legislation to correct the deplorable narcotic evils in the

United States as well as to redeem international pledges upon which it

entered by virtue of the above-mentioned convention. The Congress at its

present session should enact into law those bills now before it which have

been so carefully drawn up in collaboration between the Department of State

and the other executive departments, and which have behind them not only

the moral sentiment of the country, but the practical support of all the

legitimate trade interests likely to be affected. Since the international

convention was signed, adherence to it has been made by several European

States not represented at the conference at The Hague and also by seventeen

Latin-American Republics.

EUROPE AND THE NEAR EAST

The war between Italy and Turkey came to a close in October last by the

signature of a treaty of peace, subsequently to which the Ottoman Empire

renounced sovereignty over Cyrenaica and Tripolitania in favor of Italy.

During the past year the Near East has unfortunately been the theater of

constant hostilities. Almost simultaneously with the conclusion of peace

between Italy and Turkey and their arrival at an adjustment of the complex

questions at issue between them, war broke out between Turkey on the one

hand and Bulgaria, Greece, Montenegro, and Servia on the other. The United

States has happily been involved neither directly nor indirectly with the

causes or questions incident to any of these hostilities and has maintained

in regard to them an attitude of absolute neutrality and of complete

political disinterestedness. In the second war in which the Ottoman Empire

has been engaged the loss of life and the consequent distress on both sides

have been appalling, and the United States has found occasion, in the

interest of humanity, to carry out the charitable desires of the American

people, to extend a measure of relief to the sufferers on either side

through the impartial medium of the Red Cross. Beyond this the chief care

of the Government of the United States has been to make due provision for

the protection of its national resident in belligerent territory. In the

exercise of my duty in this matter I have dispatched to Turkish waters a

special-service squadron, consisting of two armored cruisers, in order that

this Government may if need be bear its part in such measures as it may be

necessary for the interested nations to adopt for the safeguarding of

foreign lives and property in the Ottoman Empire in the event that a

dangerous situation should develop. In the meanwhile the several interested

European powers have promised to extend to American citizens the benefit of

such precautionary or protective measures as they might adopt, in the same

manner in which it has been the practice of this Government to extend its

protection to all foreign residents in those countries of the Western

Hemisphere in which it has from time to time been the task of the United

States to act in the interest of peace and good order. The early appearance

of a large fleet of European warships in the Bosphorus apparently assured

the protection of foreigners in that quarter, where the presence of the

American stationnaire the U. S. S. Scorpion sufficed, tinder the

circumstances, to represent the United States. Our cruisers were thus left

free to act if need be along the Mediterranean coasts should any unexpected

contingency arise affecting the numerous American interests in the

neighborhood of Smyrna and Beirut.

SPITZBERGEN

The great preponderance of American material interests in the sub-arctic

island of Spitzbergen, which has always been regarded politically as "no

man's land," impels this Government to a continued and lively interest in

the international dispositions to be made for the political governance and

administration of that region. The conflict of certain claims of American

citizens and others is in a fair way to adjustment, while the settlement of

matters of administration, whether by international conference of the

interested powers or otherwise, continues to be the subject of exchange of

views between the Governments concerned.

LIBERIA

As a result of the efforts of this Government to place the Government of

Liberia in position to pay its outstanding indebtedness and to maintain a

stable and efficient government, negotiations for a loan of $1,700,000 have

been successfully concluded, and it is anticipated that the payment of the

old loan and the issuance of the bonds of the 1912 loan for the

rehabilitation of the finances of Liberia will follow at an early date,

when the new receivership will go into active operation. The new

receivership will consist of a general receiver of customs designated by

the Government of the United States and three receivers of customs

designated by the Governments of Germany, France, and Great Britain, which

countries have commercial interests in the Republic of Liberia.

In carrying out the understanding between the Government of Liberia and

that of the United States, and in fulfilling the terms of the agreement

between the former Government and the American bankers, three competent

ex-army officers are now effectively employed by the Liberian Government in

reorganizing the police force of the Republic, not only to keep in order

the native tribes in the hinterland but to serve as a necessary police

force along the frontier. It is hoped that these measures will assure not

only the continued existence but the prosperity and welfare of the Republic

of Liberia. Liberia possesses fertility of soil and natural resources,

which should insure to its people a reasonable prosperity. It was the duty

of the United States to assist the Republic of Liberia in accordance with

our historical interest and moral guardianship of a community founded by

American citizens, as it was also the duty of the American Government to

attempt to assure permanence to a country of much sentimental and perhaps

future real interest to a large body of our citizens.

MOROCCO

The legation at Tangier is now in charge of our consul general, who is

acting as charge d'affaires, as well as caring for our commercial interests

in that country. In view of the fact that many of the foreign powers are

now represented by charges d'affaires it has not been deemed necessary to

appoint at the present time a minister to fill a vacancy occurring in that

post.

THE FAR EAST

The political disturbances in China in the autumn and winter of 1911-12

resulted in the abdication of the Manchu rulers on February 12, followed by

the formation of a provisional republican government empowered to conduct

the affairs of the nation until a permanent government might be regularly

established. The natural sympathy of the American people with the

assumption of republican principles by the Chinese people was appropriately

expressed in a concurrent resolution of Congress on April 17, 1912. A

constituent assembly, composed of representatives duly chosen by the people

of China in the elections that are now being held, has been called to meet

in January next to adopt a permanent constitution and organize the

Government of the nascent Republic. During the formative constitutional

stage and pending definite action by the assembly, as expressive of the

popular will, and the hoped-for establishment of a stable republican form

of government, capable of fulfilling its international obligations, the

United States is, according to precedent, maintaining full and friendly de

facto relations with the provisional Government.

The new condition of affairs thus created has presented many serious and

complicated problems, both of internal rehabilitation and of international

relations, whose solution it was realized would necessarily require much

time and patience. From the beginning of the upheaval last autumn it was

felt by the United States, in common with the other powers having large

interests in China, that independent action by the foreign Governments in

their own individual interests would add further confusion to a situation

already complicated. A policy of international cooperation was accordingly

adopted in an understanding, reached early in the disturbances, to act

together for the protection of the lives and property of foreigners if

menaced, to maintain an attitude of strict impartiality as between the

contending factions, and to abstain from any endeavor to influence the

Chinese in their organization of a new form of government. In view of the

seriousness of the disturbances and their general character, the American

minister at Peking was instructed at his discretion to advise our nationals

in the affected districts to concentrate at such centers as were easily

accessible to foreign troops or men of war. Nineteen of our naval vessels

were stationed at various Chinese ports, and other measures were promptly

taken for the adequate protection of American interests.

It was further mutually agreed, in the hope of hastening an end to

hostilities, that none of the interested powers would approve the making of

loans by its nationals to either side. As soon, however, as a united

provisional Government of China was assured, the United States joined in a

favorable consideration of that Government's request for advances needed

for immediate administrative necessities and later for a loan to effect a

permanent national reorganization. The interested Governments had already,

by common consent, adopted, in respect to the purposes, expenditure, and

security of any loans to China made by their nationals, certain conditions

which were held to be essential, not only to secure reasonable protection

for the foreign investors, but also to safeguard and strengthen China's

credit by discouraging indiscriminate borrowing and by insuring the

application of the funds toward the establishment of the stable and

effective government necessary to China's welfare. In June last

representative banking groups of the United States, France, Germany, Great

Britain, Japan, and Russia formulated, with the general sanction of their

respective Governments, the guaranties that would be expected in relation

to the expenditure and security of the large reorganization loan desired by

China, which, however, have thus far proved unacceptable to the provisional

Government.

SPECIAL MISSION OF CONDOLENCE TO JAPAN

In August last I accredited the Secretary of State as special ambassador to

Japan, charged with the mission of bearing to the imperial family, the

Government, and the people of that Empire the sympathetic message of the

American Commonwealth oil the sad occasion of the death of His Majesty the

Emperor Mutsuhito, whose long and benevolent reign was the greater part of

Japan's modern history. The kindly reception everywhere accorded to

Secretary Knox showed that his mission was deeply appreciated by the

Japanese nation and emphasized strongly the friendly relations that have

for so many years existed between the two peoples.

SOUTH AMERICA

Our relations with the Argentine Republic are most friendly and cordial.

So, also, are our relations with Brazil, whose Government has accepted the

invitation of the United States to send two army officers to study at the

Coast Artillery School at Fort Monroe. The long-standing Alsop claim, which

had been the only hindrance to the healthy growth of the most friendly

relations between the United States and Chile, having been eliminated

through the submission of the question to His Britannic Majesty King George

V as "amiable compositeur," it is a cause of much gratification to me that

our relations with Chile are now established upon a firm basis of growing

friendship. The Chilean Government has placed an officer of the United

States Coast Artillery in charge of the Chilean Coast Artillery School, and

has shown appreciation of American methods by confiding to an American firm

important work for the Chilean coast defenses.

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