The receipts during the year from all sources, including loans and

balance in the Treasury at its commencement, were $901,125,674.86, and the

aggregate disbursements $895,796,630.65, leaving a balance on the 1st

of July, 1863, of $5,329,044.21. Of the receipts there were derived from

customs $69,059,642.40, from internal revenue $37,640,787.95, from direct

tax $1,485,103.61, from lands $167,617.17, from miscellaneous sources

$3,046,615.35, and from loans $776,682,361.57, making the aggregate

$901,125,674.86. Of the disbursements there were for the civil service

$23,253,922.08, for pensions and Indians $4,216,520.79, for interest on

public debt $24,729,846.51, for the War Department $599,298,600.83, for

the Navy Department $63,211,105.27, for payment of funded and temporary

debt $181,086,635.07, making the aggregate $895,796,630.65 and leaving the

balance of $5,329,044.21. But the payment of funded and temporary debt,

having been made from moneys borrowed during the year, must be regarded

as merely nominal payments and the moneys borrowed to make them as merely

nominal receipts, and their amount, $181,086,635.07, should therefore

be deducted both from receipts and disbursements. This being done there

remains as actual receipts $720,039,039.79 and the actual disbursements

$714,709,995.58, leaving the balance as already stated.

The actual receipts and disbursements for the first quarter and the

estimated receipts and disbursements for the remaining three-quarters of

the current fiscal year (1864) will be shown in detail by the report of

the Secretary of the Treasury, to which I invite your attention. It is

sufficient to say here that it is not believed that actual results will

exhibit a state of the finances less favorable to the country than the

estimates of that officer heretofore submitted while it is confidently

expected that at the close of the year both disbursements and debt will be

found very considerably less than has been anticipated.

The report of the Secretary of War is a document of great interest. It

consists of:

1. The military operations of the year, detailed in the report of the

General in Chief.

2. The organization of colored persons into the war service.

3. The exchange of prisoners, fully set forth in the letter of General

Hitchcock.

4. The operations under the act for enrolling and calling out the national

forces, detailed in the report of the Provost Marshal General.

5. The organization of the invalid corps, and

6. The operation of the several departments of the Quartermaster-General,

Commissary-General, Paymaster-General, Chief of Engineers, Chief of

Ordnance, and Surgeon-General.

It has appeared impossible to make a valuable summary of this report,

except such as would be too extended for this place, and hence I content

myself by asking your careful attention to the report itself.

The duties devolving on the naval branch of the service during the year

and throughout the whole of this unhappy contest have been discharged with

fidelity and eminent success. The extensive blockade has been constantly

increasing in efficiency as the Navy has expanded, yet on so long a line

it has so far been impossible to entirely suppress illicit trade. From

returns received at the Navy Department it appears that more than 1,000

vessels have been captured since the blockade was instituted? and that

the value of prizes already sent in for adjudication amounts to over

$13,000,000.

The naval force of the United States consists at this time of five hundred

and eighty-eight vessels completed and in the course of completion, and of

these seventy-five are ironclad or armored steamers. The events of the war

give an increased interest and importance to the Navy which will probably

extend beyond the war itself.

The armored vessels in our Navy completed and in service, or which are

under contract and approaching completion, are believed to exceed in

number those of any other power; but while these may be relied upon for

harbor defense and coast service, others of greater strength and capacity

will be necessary for cruising purposes and to maintain our rightful

position on the ocean.

The change that has taken place in naval vessels and naval warfare since

the introduction of steam as a motive power for ships of war demands

either a corresponding change in some of our existing navy yards or the

establishment of new ones for the construction and necessary repair of

modern naval vessels. No inconsiderable embarrassment, delay, and

public injury have been experienced from the want of such governmental

establishments. The necessity of such a navy-yard, so furnished, at some

suitable place upon the Atlantic seaboard has on repeated occasions been

brought to the attention of Congress by the Navy Department, and is

again presented in the report of the Secretary which accompanies this

communication. I think it my duty to invite your special attention to

this subject, and also to that of establishing a yard and depot for naval

purposes upon one of the Western rivers. A naval force has been created

on those interior waters, and under many disadvantages, within little more

than two years, exceeding in numbers the whole naval force of the country

at the commencement of the present Administration. Satisfactory and

important as have been the performances of the heroic men of the Navy at

this interesting period, they are scarcely more wonderful than the success

of our mechanics and artisans in the production of war vessels, which has

created a new form of naval power.

Our country has advantages superior to any other nation in our resources

of iron and timber, with inexhaustible quantities of fuel in the immediate

vicinity of both, and all available and in close proximity to navigable

waters. Without the advantage of public works, the resources of the nation

have been developed and its power displayed in the construction of a Navy

of such magnitude, which has at the very period of its creation rendered

signal service to the Union.

The increase of the number of seamen in the public service from 7,500

men in the spring of 1861 to about 34,000 at the present time has been

accomplished without special legislation or extraordinary bounties to

promote that increase. It has been found, however, that the operation of

the draft, with the high bounties paid for army recruits, is beginning

to affect injuriously the naval service, and will, if not corrected, be

likely to impair its efficiency by detaching seamen from their proper

vocation and inducing them to enter the Army. I therefore respectfully

suggest that Congress might aid both the army and naval services by

a definite provision on this subject which would at the same time be

equitable to the communities more especially interested.

I commend to your consideration the suggestions of the Secretary of the

Navy in regard to the policy of fostering and training seamen and also

the education of officers and engineers for the naval service. The Naval

Academy is rendering signal service in preparing midshipmen for the highly

responsible duties which in after life they will be required to perform.

In order that the country should not be deprived of the proper quota of

educated officers, for which legal provision has been made at the

naval school, the vacancies caused by the neglect or omission to make

nominations from the States in insurrection have been filled by the

Secretary of the Navy. The school is now more full and complete than

at any former period, and in every respect entitled to the favorable

consideration of Congress.

During the past fiscal year the financial condition of the Post-Office

Department has been one of increasing prosperity, and I am gratified in

being able to state that the actual postal revenue has nearly equaled the

entire expenditures, the latter amounting to $11,314,206.84 and the former

to $11,163,789.59, leaving a deficiency of but $150,417.25. In 1860,

the year immediately preceding the rebellion, the deficiency amounted to

$5,656,705.49, the postal receipts of that year being $2,645,722.19

less that those of 1863. The decrease since 1860 in the annual amount of

transportation has been only about twenty-five per cent, but the annual

expenditure on account of the same has been reduced thirty-five per cent.

It is manifest, therefore, that the Post-Office Department may become

self-sustaining in a few years, even with the restoration of the whole

service.

The international conference of postal delegates from the principal

countries of Europe and America, which was called at the suggestion of the

Postmaster-General, met at Paris on the 11th of May last and concluded

its deliberations on the 8th of June. The principles established by

the conference as best adapted to facilitate postal intercourse between

nations and as the basis of future postal conventions inaugurate a general

system of uniform international charges at reduced rates of postage, and

can not fail to produce beneficial results.

I refer you to the report of the Secretary of the Interior, which is

herewith laid before you, for useful and varied information in relation to

the public lands, Indian affairs, patents, pensions, and other matters of

public concern pertaining to his Department.

The quantity of land disposed of during the last and the first quarter of

the present fiscal years was 3,841,549 acres, of which 161,911 acres were

sold for cash, 1,456,514 acres were taken up under the homestead law, and

the residue disposed of under laws granting lands for military bounties,

for railroad and other purposes. It also appears that the sale of the

public lands is largely on the increase.

It has long been a cherished opinion of some of our wisest statesmen that

the people of the United States had a higher and more enduring interest in

the early settlement and substantial cultivation of the public lands than

in the amount of direct revenue to be derived from the sale of them. This

opinion has had a controlling influence in shaping legislation upon the

subject of our national domain. I may cite as evidence of this the liberal

measures adopted in reference to actual settlers; the grant to the States

of the overflowed lands within their limits, in order to their being

reclaimed and rendered fit for cultivation; the grants to railway

companies of alternate sections of land upon the contemplated lines of

their roads, which when completed will so largely multiply the facilities

for reaching our distant possessions. This policy has received its most

signal and beneficent illustration in the recent enactment granting

homesteads to actual settlers. Since the 1st day of January last the

before-mentioned quantity of 1,456,514 acres of land have been taken up

under its provisions. This fact and the amount of sales furnish gratifying

evidence of increasing settlement upon the public lands, notwithstanding

the great struggle in which the energies of the nation have been engaged,

and which has required so large a withdrawal of our citizens from their

accustomed pursuits. I cordially concur in the recommendation of the

Secretary of the Interior suggesting a modification of the act in favor

of those engaged in the military and naval service of the United States.

I doubt not that Congress will cheerfully adopt such measures as will,

without essentially changing the general features of the system, secure to

the greatest practicable extent its benefits to those who have left their

homes in the defense of the country in this arduous crisis.

I invite your attention to the views of the Secretary as to the propriety

of raising by appropriate legislation a revenue from the mineral lands of

the United States.

The measures provided at your last session for the removal of certain

Indian tribes have been carried into effect. Sundry treaties have been

negotiated, which will in due time be submitted for the constitutional

action of the Senate. They contain stipulations for extinguishing the

possessory rights of the Indians to large and valuable tracts of lands.

It is hoped that the effect of these treaties will result in the

establishment of permanent friendly relations with such of these tribes

as have been brought into frequent and bloody collision with our outlying

settlements and emigrants. Sound policy and our imperative duty to these

wards of the Government demand our anxious and constant attention to their

material well-being, to their progress in the arts of civilization, and,

above all, to that moral training which under the blessing of Divine

Providence will confer upon them the elevated and sanctifying influences,

the hopes and consolations, of the Christian faith.

I suggested in my last annual message the propriety of remodeling our

Indian system. Subsequent events have satisfied me of its necessity. The

details set forth in the report of the Secretary evince the urgent need

for immediate legislative action.

I commend the benevolent institutions established or patronized by the

Government in this District to your generous and fostering care.

The attention of Congress during the last session was engaged to some

extent with a proposition for enlarging the water communication between

the Mississippi River and the northeastern seaboard, which proposition,

however, failed for the time. Since then, upon a call of the greatest

respectability, a convention has been held at Chicago upon the same

subject, a summary of whose views is contained in a memorial addressed to

the President and Congress, and which I now have the honor to lay before

you. That this interest is one which ere long will force its own way I do

not entertain a doubt, while it is submitted entirely to your wisdom as to

what can be done now. Augmented interest is given to this subject by the

actual commencement of work upon the Pacific Railroad, under auspices

so favorable to rapid progress and completion. The enlarged navigation

becomes a palpable need to the great road.

I transmit the second annual report of the Commissioner of the Department

of Agriculture, asking your attention to the developments in that vital

interest of the nation.

When Congress assembled a year ago, the war had already lasted nearly

twenty months, and there had been many conflicts on both land and sea,

with varying results; the rebellion had been pressed back into reduced

limits; yet the tone of public feeling and opinion, at home and abroad,

was not satisfactory. With other signs, the popular elections then just

past indicated uneasiness among ourselves, while, amid much that was cold

and menacing, the kindest words coming from Europe were uttered in accents

of pity that we are too blind to surrender a hopeless cause. Our commerce

was suffering greatly by a few armed vessels built upon and furnished from

foreign shores, and we were threatened with such additions from the same

quarter as would sweep our trade from the sea and raise our blockade. We

had failed to elicit from European governments anything hopeful upon this

subject. The preliminary emancipation proclamation, issued in September,

was running its assigned period to the beginning of the new year. A month

later the final proclamation came, including the announcement that colored

men of suitable condition would be received into the war service. The

policy of emancipation and of employing black soldiers gave to the future

a new aspect, about which hope and fear and doubt contended in uncertain

conflict. According to our political system, as a matter of civil

administration, the General Government had no lawful power to effect

emancipation in any State, and for a long time it had been hoped that

the rebellion could be suppressed without resorting to it as a military

measure. It was all the while deemed possible that the necessity for it

might come, and that if it should the crisis of the contest would then be

presented. It came, and, as was anticipated, it was followed by dark and

doubtful days. Eleven months having now passed, we are permitted to take

another review. The rebel borders are pressed still farther back, and

by the complete opening of the Mississippi the country dominated by the

rebellion is divided into distinct parts, with no practical communication

between them. Tennessee and Arkansas have been substantially cleared of

insurgent control, and influential citizens in each, owners of slaves and

advocates of slavery at the beginning of the rebellion, now declare openly

for emancipation in their respective States. Of those States not included

in the emancipation proclamation, Maryland and Missouri, neither of which

three years ago would tolerate any restraint upon the extension of slavery

into new Territories, dispute now only as to the best mode of removing it

within their own limits.

Of those who were slaves at the beginning of the rebellion full 100,000

are now in the United States military service, about one-half of which

number actually bear arms in the ranks, thus giving the double advantage

of taking so much labor from the insurgent cause and supplying the places

which otherwise must be filled with so many white men. So far as tested,

it is difficult to say they are not as good soldiers as any. No servile

insurrection or tendency to violence or cruelty has marked the measures

of emancipation and arming the blacks. These measures have been much

discussed in foreign countries, and, contemporary with such discussion,

the tone of public sentiment there is much improved. At home the same

measures have been fully discussed, supported, criticized, and denounced,

and the annual elections following are highly encouraging to those whose

official duty it is to bear the country through this great trial. Thus we

have the new reckoning. The crisis which threatened to divide the friends

of the Union is past.

Looking now to the present and future, and with reference to a resumption

of the national authority within the States wherein that authority has

been suspended, I have thought fit to issue a proclamation, a copy of

which is herewith transmitted. On examination of this proclamation it

will appear, as is believed, that nothing will be attempted beyond what is

amply justified by the Constitution. True, the form of an oath is given,

but no man is coerced to take it. The man is promised a pardon only

in case he voluntarily takes the oath. The Constitution authorizes the

Executive to grant or withhold the pardon at his own absolute discretion,

and this includes the power to grant on terms, as is fully established by

judicial and other authorities.

It is also proffered that if in any of the States named a State government

shall be in the mode prescribed set up, such government shall be

recognized and guaranteed by the United States, and that under it the

State shall, on the constitutional conditions, be protected against

invasion and domestic violence. The constitutional obligation of the

United States to guarantee to every State in the Union a republican form

of government and to protect the State in the cases stated is explicit

and full. But why tender the benefits of this provision only to a State

government set up in this particular way? This section of the Constitution

contemplates a case wherein the element within a State favorable to

republican government in the Union may be too feeble for an opposite

and hostile element external to or even within the State, and such are

precisely the cases with which we are now dealing.

An attempt to guarantee and protect a revived State government,

constructed in whole or in preponderating part from the very element

against whose hostility and violence it is to be protected, is simply

absurd. There must be a test by which to separate the opposing elements,

so as to build only from the sound; and that test is a sufficiently

liberal one which accepts as sound whoever will make a sworn recantation

of his former unsoundness.

But if it be proper to require as a test of admission to the political

body an oath of allegiance to the Constitution of the United States and

to the Union under it, why also to the laws and proclamations in regard to

slavery? Those laws and proclamations were enacted and put forth for the

purpose of aiding in the suppression of the rebellion. To give them their

fullest effect there had to be a pledge for their maintenance. In my

judgment, they have aided and will further aid the cause for which they

were intended. To now abandon them would be not only to relinquish a lever

of power, but would also be a cruel and an astounding breach of faith. I

may add at this point that while I remain in my present position I shall

not attempt to retract or modify the emancipation proclamation, nor

shall I return to slavery any person who is free by the terms of that

proclamation or by any of the acts of Congress. For these and other

reasons it is thought best that support of these measures shall be

included in the oath, and it is believed the Executive may lawfully claim

it in return for pardon and restoration of forfeited rights, which he has

clear constitutional power to withhold altogether or grant upon the terms

which he shall deem wisest for the public interest. It should be observed

also that this part of the oath is subject to the modifying and abrogating

power of legislation and supreme judicial decision.

The proposed acquiescence of the National Executive in any reasonable

temporary State arrangement for the freed people is made with the view of

possibly modifying the confusion and destitution which must at best attend

all classes by a total revolution of labor throughout whole States. It

is hoped that the already deeply afflicted people in those States may be

somewhat more ready to give up the cause of their affliction if to this

extent this vital matter be left to themselves, while no power of the

National Executive to prevent an abuse is abridged by the proposition.

The suggestion in the proclamation as to maintaining the political

framework of the States on what is called reconstruction is made in the

hope that it may do good without danger of harm. It will save labor and

avoid great confusion.

But why any proclamation now upon this subject? This question is beset

with the conflicting views that the step might be delayed too long or be

taken too soon. In some States the elements for resumption seem ready for

action, but remain inactive apparently for want of a rallying point--a

plan of action. Why shall A adopt the plan of B rather than B that of

A? And if A and B should agree, how can they know but that the General

Government here will reject their plan? By the proclamation a plan is

presented which may be accepted by them as a rallying point, and which

they are assured in advance will not be rejected here. This may bring them

to act sooner than they otherwise would.

The objections to a premature presentation of a plan by the National

Executive consist in the danger of committals on points which could be

more safely left to further developments. Care has been taken to so shape

the document as to avoid embarrassments from this source. Saying that on

certain terms certain classes will be pardoned with rights restored, it is

not said that other classes or other terms will never be included. Saying

that reconstruction will be accepted if presented in a specified way, it

is not said it will never be accepted in any other way.

The movements by State action for emancipation in several of the States

not included in the emancipation proclamation are matters of profound

gratulation. And while I do not repeat in detail what I have heretofore

so earnestly urged upon this subject my general views and feelings remain

unchanged and I trust that Congress will omit no fair opportunity of

aiding these important steps to a great consummation.

In the midst of other cares, however important we must not lose sight

of the fact that the war power is still our main reliance. To that power

alone we look yet for a time to give confidence to the people in the

contested regions that the insurgent power will not again overrun them.

Until that confidence shall be established little can be done anywhere

what is called reconstruction. Hence our chiefest care must still be

directed to the Army and Navy who have thus far borne their harder part so

nobly and well; and it may be esteemed fortunate that giving the greatest

efficiency to these indispensable arms we do also honorably recognize the

gallant men, from commander to sentinel, who compose them, and to whom

more than to others the world must stand indebted for the home of freedom

disenthralled, regenerated, enlarged, and perpetuated.

A. LINCOLN.

MESSAGE TO CONGRESS. WASHINGTON D. C., December 8, 1863.

TO THE SENATE AND HOUSE OF REPRESENTATIVES:

In conformity to the law of July 16, 1862, I most cordially recommend

that Captain John Rogers United States Navy, receive a vote of thanks

from Congress for the eminent skill and gallantry exhibited by him in the

engagement with the rebel armed ironclad steamer Fingal, alias Atlanta,

whilst in command of the United States ironclad steamer Weehawken, which

led to her capture on the 17th June, 1863, and also for the zeal, bravery,

and general good conduct shown by this officer on many occasions.

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