The receipts of the Government from all sources for the last fiscal year
were $333,738,204, and expenditures on all accounts $290,345,245, thus
showing an excess of receipts over expenditures of $43,392,959. But it is
not probable that this favorable exhibit will be shown for the present
fiscal year. Indeed, it is very doubtful whether, except with great economy
on the part of Congress in making appropriations and the same economy in
administering the various Departments of Government, the revenues will not
fall short of meeting actual expenses, including interest on the public
debt.
I commend to Congress such economy, and point out two sources where It
seems to me it might commence, to wit, in the appropriations for public
buildings in the many cities where work has not yet been commenced; in the
appropriations for river and harbor improvement in those localities where
the improvements are of but little benefit to general commerce, and for
fortifications.
There is a still more fruitful source of expenditure, which I will point
out later in this message. I refer to the easy method of manufacturing
claims for losses incurred in suppressing the late rebellion.
I would not be understood here as opposing the erection of good,
substantial, and even ornamental buildings by the Government wherever such
buildings are needed. In fact, I approve of the Government owning its own
buildings in all sections of the country, and hope the day is not far
distant when it will not only possess them, but will erect in the capital
suitable residences for all persons who now receive commutation for
quarters or rent at Government expense, and for the Cabinet, thus setting
an example to the States which may induce them to erect buildings for their
Senators. But I would have this work conducted at a time when the revenues
of the country would abundantly justify it.
The revenues have materially fallen off for the first five months of the
present fiscal year from what they were expected to produce, owing to the
general panic now prevailing, which commenced about the middle of September
last. The full effect of this disaster, if it should not prove a "blessing
in disguise," is yet to be demonstrated. In either event it is your duty to
heed the lesson and to provide by wise and well-considered legislation, as
far as it lies in your power, against its recurrence, and to take advantage
of all benefits that may have accrued.
My own judgment is that, however much individuals may have suffered, one
long step has been taken toward specie payments; that we can never have
permanent prosperity until a specie basis is reached: and that a specie
basis can not be reached and maintained until our exports, exclusive of
gold, pay for our imports, interest due abroad, and other specie
obligations, or so nearly so as to leave an appreciable accumulation of the
precious metals in the country from the products of our mines.
The development of the mines of precious metals during the past year and
the prospective development of them for years to come are gratifying in
their results. Could but one-half of the gold extracted from the mines be
retained at home, our advance toward specie payments would be rapid.
To increase our exports sufficient currency is required to keep all the
industries of the country employed. Without this national as well as
individual bankruptcy must ensue. Undue inflation, on the other hand, while
it might give temporary relief, would only lead to inflation of prices, the
impossibility of competing in our own markets for the products of home
skill and labor, and repeated renewals of present experiences. Elasticity
to our circulating medium, therefore, and just enough of it to transact the
legitimate business of the country and to keep all industries employed, is
what is most to be desired. The exact medium is specie, the recognized
medium of exchange the world over. That obtained, we shall have a currency
of an exact degree of elasticity. If there be too much of it for the
legitimate purposes of trade and commerce, it will flow out of the country.
If too little, the reverse will result. To hold what we have and to
appreciate our currency to that standard is the problem deserving of the
most serious consideration of Congress.
The experience of the present panic has proven that the currency of the
country, based, as it is, upon the credit of the country, is the best that
has ever been devised. Usually in times of such trials currency has become
worthless, or so much depreciated in value as to inflate the values of all
the necessaries of life as compared with the currency. Everyone holding it
has been anxious to dispose of it on any terms. Now we witness the reverse.
Holders of currency hoard it as they did gold in former experiences of a
like nature.
It is patent to the most casual observer that much more currency, or money,
is required to transact the legitimate trade of the country during the fall
and winter months, when the vast crops are being removed, than during the
balance of the year. With our present system the amount in the country
remains the same throughout the entire year, resulting in an accumulation
of all the surplus capital of the country in a few centers when not
employed in the moving of crops, tempted there by the offer of interest on
call loans. Interest being paid, this surplus capital must earn this
interest paid with a profit. Being subject to "call," it can not be loaned,
only in part at best, to the merchant or manufacturer for a fixed term.
Hence, no matter how much currency there might be in the country, it would
be absorbed, prices keeping pace with the volume, and panics, stringency,
and disasters would ever be recurring with the autumn. Elasticity in our
monetary system, therefore, is the object to be attained first, and next to
that, as far as possible, a prevention of the use of other people's money
in stock and other species of speculation. To prevent the latter it seems
to me that one great step would be taken by prohibiting the national banks
from paying interest on deposits, by requiring them to hold their reserves
in their own vaults, and by forcing them into resumption, though it would
only be in legal-tender notes. For this purpose I would suggest the
establishment of clearing houses for your consideration.
To secure the former many plans have been suggested, most, if not all, of
which look to me more like inflation on the one hand, or compelling the
Government, on the other, to pay interest, without corresponding benefits,
upon the surplus funds of the country during the seasons when otherwise
unemployed.
I submit for your consideration whether this difficulty might not be
overcome by authorizing the Secretary of the Treasury to issue at any time
to national banks of issue any amount of their own notes below a fixed
percentage of their issue (say 40 per cent), upon the banks' depositing
with the Treasurer of the United States an amount of Government bonds equal
to the amount of notes demanded, the banks to forfeit to the Government,
say, 4 per cent of the interest accruing on the bonds so pledged during the
time they remain with the Treasurer as security for the increased
circulation, the bonds so pledged to be redeemable by the banks at their
pleasure, either in whole or in part, by returning their own bills for
cancellation to an amount equal to the face of the bonds withdrawn. I would
further suggest for your consideration the propriety of authorizing
national banks to diminish their standing issue at pleasure, by returning
for cancellation their own bills and withdrawing so many United States
bonds as are pledged for the bills returned.
In view of the great actual contraction that has taken place in the
currency and the comparative contraction continuously going on, due to the
increase of population, increase of manufactories and all the industries, I
do not believe there is too much of it now for the dullest period of the
year. Indeed, if clearing houses should be established, thus forcing
redemption, it is a question for your consideration whether banking should
not be made free, retaining all the safeguards now required to secure bill
holders. In any modification of the present laws regulating national banks,
as a further step toward preparing for resumption of specie payments, I
invite your attention to a consideration of the propriety of exacting from
them the retention as a part of their reserve either the whole or a part of
the gold interest accruing upon the bonds pledged as security for their
issue. I have not reflected enough on the bearing this might have in
producing a scarcity of coin with which to pay duties on imports to give it
my positive recommendation. But your attention is invited to the subject.
During the last four years the currency has been contracted, directly, by
the withdrawal of 3 per cent certificates, compound-interest notes, and
"seven-thirty" bonds outstanding on the 4th of March, 1869, all of which
took the place of legal-tenders in the bank reserves to the extent of
$63,000,000.
During the same period there has been a much larger comparative contraction
of the currency. The population of the country has largely increased. More
than 25,000 miles of railroad have been built, requiring the active use of
capital to operate them. Millions of acres of land have been opened to
cultivation, requiring capital to move the products. Manufactories have
multiplied beyond all precedent in the same period of time, requiring
capital weekly for the payment of wages and for the purchase of material;
and probably the largest of all comparative contraction arises from the
organizing of free labor in the South. Now every laborer there receives his
wages, and, for want of savings banks, the greater part of such wages is
carried in the pocket or hoarded until required for use.
These suggestions are thrown out for your consideration, without any
recommendation that they shall be adopted literally, but hoping that the
best method may be arrived at to secure such an elasticity of the currency
as will keep employed all the industries of the country and prevent such an
inflation as will put off indefinitely the resumption of specie payments,
an object so devoutly to be wished for by all, and by none more earnestly
than the class of people most directly interested--those who "earn their
bread by the sweat of their brow." The decisions of Congress on this
subject will have the hearty support of the Executive.
In previous messages I have called attention to the decline in American
shipbuilding and recommended such legislation as would secure to us our
proportion of the carrying trade. Stimulated by high rates and abundance of
freight, the progress for the last year in shipbuilding has been very
satisfactory. There has been an increase of about 3 per cent in the amount
transported in American vessels over the amount of last year. With the
reduced cost of material which has taken place, it may reasonably be hoped
that this progress will be maintained, and even increased. However, as we
pay about $80,000,000 per annum to foreign vessels for the transportation
to a market of our surplus products, thus increasing the balance of trade
against us to this amount, the subject is one worthy of your serious
consideration.
"Cheap transportation" is a subject that has attracted the attention of
both producers and consumers for the past few years, and has contributed
to, if it has not been the direct cause of, the recent panic and
stringency.
As Congress, at its last session, appointed a special committee to
investigate this whole subject during the vacation and report at this
session, I have nothing to recommend until their report is read.
There is one work, however, of a national character, in which the greater
portion of the East and the West, the North and the South, are equally
interested, to which I will invite your attention.
The State of New York has a canal connecting Lake Erie with tide water on
the Hudson River. The State of Illinois has a similar work connecting Lake
Michigan with navigable water on the Illinois River, thus making water
communication inland between the East and the West and South. These great
artificial water courses are the property of the States through which they
pass, and pay toll to those States. Would it not be wise statesmanship to
pledge these States that if they will open these canals for the passage of
large vessels the General Government will look after and keep in navigable
condition the great public highways with which they connect, to wit, the
Overslaugh on the Hudson, the St. Clair Flats, and the Illinois and
Mississippi rivers? This would be a national work; one of great value to
the producers of the West and South in giving them cheap transportation for
their produce to the seaboard and a market, and to the consumers in the
East in giving them cheaper food, particularly of those articles of food
which do not find a foreign market, and the prices of which, therefore, are
not regulated by foreign demands. The advantages of such a work are too
obvious for argument. I submit the subject to you, therefore, without
further comment.
In attempting to regain our lost commerce and carrying trade I have
heretofore called attention to the States south of us offering a field
where much might be accomplished. To further this object I suggest that a
small appropriation be made, accompanied with authority for the Secretary
of the Navy to fit out a naval vessel to ascend the Amazon River to the
mouth of the Madeira; thence to explore that river and its tributaries into
Bolivia, and to report to Congress at its next session, or as soon as
practicable, the accessibility of the country by water, its resources, and
the population so reached. Such an exploration would cost but little; it
can do no harm, and may result in establishing a trade of value to both
nations.
In further connection with the Treasury Department I would recommend a
revision and codification of the tariff laws and the opening of more mints
for coining money, with authority to coin for such nations as may apply.