so at your present session, I can only repeat the suggestions and
recommendations which upon several occasions I have heretofore felt it to
be my duty to offer to Congress. The great primary and controlling interest
of the American people is union--union not only in the mere forms of
government, forms which may be broken, but union rounded in an attachment
of States and individuals for each other. This union in sentiment and
feeling can only be preserved by the adoption of that course of policy
which, neither giving exclusive benefits to some nor imposing unnecessary
burthens upon others, shall consult the interests of all by pursuing a
course of moderation and thereby seeking to harmonize public opinion, and
causing the people everywhere to feel and to know that the Government is
careful of the interests of all alike. Nor is there any subject in regard
to which moderation, connected with a wise discrimination, is more
necessary than in the imposition of duties on imports. Whether reference be
had to revenue, the primary object in the imposition of taxes, or to the
incidents which necessarily flow from their imposition, this is entirely
true. Extravagant duties defeat their end and object, not only by exciting
in the public mind an hostility to the manufacturing interests, but by
inducing a system of smuggling on an extensive scale and the practice of
every manner of fraud upon the revenue, which the utmost vigilance of
Government can not effectually suppress. An opposite course of policy would
be attended by results essentially different, of which every interest of
society, and none more than those of the manufacturer, would reap important
advantages. Among the most striking of its benefits would be that derived
from the general acquiescence of the country in its support and the
consequent permanency and stability which would be given to all the
operations of industry. It can not be too often repeated that no system of
legislation can be wise which is fluctuating and uncertain. No interest can
thrive under it. The prudent capitalist will never adventure his capital in
manufacturing establishments, or in any other leading pursuit of life, if
there exists a state of uncertainty as to whether the Government will
repeal to-morrow what it has enacted to-day. Fitful profits, however high,
if threatened with a ruinous reduction by a vacillating policy on the part
of Government, will scarcely tempt him to trust the money which he has
acquired by a life of labor upon the uncertain adventure. I therefore, in
the spirit of conciliation, and influenced by no other desire than to
rescue the great interests of the country from the vortex of political
contention, and in the discharge of the high and solemn duties of the place
which I now occupy, recommend moderate duties, imposed with a wise
discrimination as to their several objects, as being not only most likely
to be durable, but most advantageous to every interest of society.
The report of the Secretary of the War Department exhibits a very full and
satisfactory account of the various and important interests committed to
the charge of that officer. It is particularly gratifying to find that the
expenditures for the military service are greatly reduced in amount--that a
strict system of economy has been introduced into the service and the
abuses of past years greatly reformed. The fortifications on our maritime
frontier have been prosecuted with much vigor, and at many points our
defenses are in a very considerable state of forwardness. The suggestions
in reference to the establishment of means of communication with our
territories on the Pacific and to the surveys so essential to a knowledge
of the resources of the intermediate country are entitled to the most
favorable consideration. While I would propose nothing inconsistent with
friendly negotiations to settle the extent of our claims in that region,
yet a prudent forecast points out the necessity of such measures as may
enable us to maintain our rights. The arrangements made for preserving our
neutral relations on the boundary between us and Texas and keeping in check
the Indians in that quarter will be maintained so long as circumstances may
require. For several years angry contentions have grown out of the
disposition directed by law to be made of the mineral lands held by the
Government in several of the States. The Government is constituted the
landlord, and the Citizens of the States wherein lie the lands are its
tenants. The relation is an unwise one, and it would be much more conducive
of the public interest that a sale of the lands should be made than that
they should remain in their present condition. The supply of the ore would
be more abundantly and certainly furnished when to be drawn from the
enterprise and the industry of the proprietor than under the present
system.
The recommendations of the Secretary in regard to the improvements of the
Western waters and certain prominent harbors on the Lakes merit, and I
doubt not will receive, your serious attention. The great importance of
these subjects to the prosperity of the extensive region referred to and
the security of the whole country in time of war can not escape
observation. The losses of life and property which annually occur in the
navigation of the Mississippi alone because of the dangerous obstructions
in the river make a loud demand upon Congress for the adoption of efficient
measures for their removal.
The report of the Secretary of the Navy will bring you acquainted with that
important branch of the public defenses. Considering the already vast and
daily increasing commerce of the country, apart from the exposure to
hostile inroad of an extended seaboard, all that relates to the Navy is
calculated to excite particular attention. Whatever tends to add to its
efficiency without entailing unnecessary charges upon the Treasury is well
worthy of your serious consideration. It will be seen that while an
appropriation exceeding by more than a million the appropriations of the
current year is asked by the Secretary, yet that in this sum is proposed to
be included $400,000 for the purchase of clothing, which when once expended
will be annually reimbursed by the sale of the clothes, and will thus
constitute a perpetual fund without any new appropriation to the same
object. To this may also be added $50,000 asked to cover the arrearages of
past years and $250,000 in order to maintain a competent squadron on the
coast of Africa; all of which when deducted will reduce the expenditures
nearly within the limits of those of the current year. While, however, the
expenditures will thus remain very nearly the same as of the antecedent
year, it is proposed to add greatly to the operations of the marine, and in
lieu of only 25 ships in commission and but little in the way of building,
to keep with the same expenditure 41 vessels afloat and to build 12 ships
of a small class.
A strict system of accountability is established and great pains are taken
to insure industry, fidelity, and economy in every department of duty.
Experiments have been instituted to test the quality of various materials,
particularly copper, iron, and coal, so as to prevent fraud and
imposition.
It will appear by the report of the Postmaster-General that the great point
which for several years has been so much desired has during the current
year been fully accomplished. The expenditures of the Department for
current service have been brought within its income without lessening its
general usefulness. There has been an increase of revenue equal to $166,000
for the year 1842 over that of 1841, without, as it is believed, any
addition having been made to the number of letters and newspapers
transmitted through the mails. The post-office laws have been honestly
administered, and fidelity has been observed in accounting for and paying
over by the subordinates of the Department the moneys which have been
received. For the details of the service I refer you to the report.
I flatter myself that the exhibition thus made of the condition of the
public administration will serve to convince you that every proper
attention has been paid to the interests of the country by those who have
been called to the heads of the different Departments. The reduction in the
annual expenditures of the Government already accomplished furnishes a sure
evidence that economy in the application of the public moneys is regarded
as a paramount duty.
At peace with all the world, the personal liberty of the citizen sacredly
maintained and his rights secured under political institutions deriving all
their authority from the direct sanction of the people, with a soil fertile
almost beyond example and a country blessed with every diversity of climate
and production, what remains to be done in order to advance the happiness
and prosperity of such a people? Under ordinary circumstances this inquiry
could readily be answered. The best that probably could be done for a
people inhabiting such a country would be to fortify their peace and
security in the prosecution of their various pursuits by guarding them
against invasion from without and violence from within. The rest for the
greater part might be left to their own energy and enterprise. The chief
embarrassments which at the moment exhibit themselves have arisen from
overaction, and the most difficult task which remains to be accomplished is
that of correcting and overcoming its effects. Between the years 1833 and
1838 additions were made to bank capital and bank issues, in the form of
notes designed for circulation, to an extent enormously great. The question
seemed to be not how the best currency could be provided, but in what
manner the greatest amount of bank paper could be put in circulation. Thus
a vast amount of what was called money--since for the time being it
answered the purposes of money--was thrown upon the country, an overissue
which was attended, as a necessary consequence, by an extravagant increase
of the prices of all articles of property, the spread of a speculative
mania all over the country, and has finally ended in a general indebtedness
on the part of States and individuals, the prostration of public and
private credit, a depreciation in the market value of real and personal
estate, and has left large districts of country almost entirely without any
circulating medium. In view of the fact that in 1830 the whole bank-note
circulation within the United States amounted to but $61,323,898, according
to the Treasury statements, and that an addition had been made thereto of
the enormous sum of $88,000,000 in seven years (the circulation on the 1st
of January, 1837, being stated at $149,185,890), aided by the great
facilities afforded in obtaining loans from European capitalists, who were
seized with the same speculative mania which prevailed in the United
States, and the large importations of funds from abroad--the result of
stock sales and loans--no one can be surprised at the apparent but
unsubstantial state of prosperity which everywhere prevailed over the land;
and as little cause of surprise should be felt at the present prostration
of everything and the ruin which has befallen so many of our
fellow-citizens in the sudden withdrawal from circulation of so large an
amount of bank issues since 1837--exceeding, as is believed, the amount
added to the paper currency for a similar period antecedent to 1837--it
ceases to be a matter of astonishment that such extensive shipwreck should
have been made of private fortunes or that difficulties should exist in
meeting their engagements on the part of the debtor States; apart from
which, if there be taken into account the immense losses sustained in the
dishonor of numerous banks, it is less a matter of surprise that insolvency
should have visited many of our fellow-citizens than that so many should
have escaped the blighting influences of the times.
In the solemn conviction of these truths and with an ardent desire to meet
the pressing necessities of the country, I felt it to be my duty to cause
to be submitted to you at the commencement of your last session the plan of
an exchequer, the whole power and duty of maintaining which in purity and
vigor was to be exercised by the representatives of the people and the
States, and therefore virtually by the people themselves. It was proposed
to place it under the control and direction of a Treasury board to consist
of three commissioners, whose duty it should be to see that the law of its
creation was faithfully executed and that the great end of supplying a
paper medium of exchange at all times convertible into gold and silver
should be attained. The board thus constituted was given as much permanency
as could be imparted to it without endangering the proper share of
responsibility which should attach to all public agents. In order to insure
all the advantages of a well-matured experience, the commissioners were to
hold their offices for the respective periods of two, four, and six years,
thereby securing at all times in the management of the exchequer the
services of two men of experience; and to place them in a condition to
exercise perfect independence of mind and action it was provided that their
removal should only take place for actual incapacity or infidelity to the
trust, and to be followed by the President with an exposition of the causes
of such removal, should it occur. It was proposed to establish subordinate
boards in each of the States, under the same restrictions and limitations
of the power of removal, which, with the central board, should receive,
safely keep, and disburse the public moneys. And in order to furnish a
sound paper medium of exchange the exchequer should retain of the revenues
of the Government a sum not to exceed $5,000,000 in specie, to be set apart
as required by its operations, and to pay the public creditor at his own
option either in specie or Treasury notes of denominations not less than $5
nor exceeding $100, which notes should be redeemed at the several places of
issue, and to be receivable at all times and everywhere in payment of
Government dues, with a restraint upon such issue of bills that the same
should not exceed the maximum of $15,000,000. In order to guard against all
the hazards incident to fluctuations in trade, the Secretary of the
Treasury was invested with authority to issue $5,000,000 of Government
stock, should the same at any time be regarded as necessary in order to
place beyond hazard the prompt redemption of the bills which might be
thrown into circulation; thus in fact making the issue of $15,000,000 of
exchequer bills rest substantially on $10,000,000, and keeping in
circulation never more than one and one-half dollars for every dollar in
specie. When to this it is added that the bills are not only everywhere
receivable in Government dues, but that the Government itself would be
bound for their ultimate redemption, no rational doubt can exist that the
paper which the exchequer would furnish would readily enter into general
circulation and be maintained at all times at or above par with gold and
silver, thereby realizing the great want of the age and fulfilling the
wishes of the people. In order to reimburse the Government the expenses of
the plan, it was proposed to invest the exchequer with the limited
authority to deal in bills of exchange (unless prohibited by the State in
which an agency might be situated) having only thirty days to run and
resting on a fair and bona fide basis. The legislative will on this point
might be so plainly announced as to avoid all pretext for partiality or
favoritism. It was furthermore proposed to invest this Treasury agent with
authority to receive on deposit to a limited amount the specie funds of
individuals and to grant certificates therefor to be redeemed on
presentation, under the idea, which is believed to be well founded, that
such certificates would come in aid of the exchequer bills in supplying a
safe and ample paper circulation. Or if in place of the contemplated
dealings in exchange the exchequer should be authorized not only to
exchange its bills for actual deposits of specie, but, for specie or its
equivalent, to sell drafts, charging therefor a small but reasonable
premium, I can not doubt but that the benefits of the law would be speedily
manifested in the revival of the credit, trade, and business of the whole
country. Entertaining this opinion, it becomes my duty to urge its adoption
upon Congress by reference to the strongest considerations of the public
interests, with such alterations in its details as Congress may in its
wisdom see fit to make.
I am well aware that this proposed alteration and amendment of the laws
establishing the Treasury Department has encountered various objections,
and that among others it has been proclaimed a Government bank of fearful
and dangerous import. It is proposed to confer upon it no extraordinary
power. It purports to do no more than pay the debts of the Government with
the redeemable paper of the Government, in which respect it accomplishes
precisely what the Treasury does daily at this time in issuing to the
public creditors the Treasury notes which under law it is authorized to
issue. It has no resemblance to an ordinary bank, as it furnishes no
profits to private stockholders and lends no capital to individuals. If it
be objected to as a Government bank and the objection be available, then
should all the laws in relation to the Treasury be repealed and the
capacity of the Government to collect what is due to it or pay what it owes
be abrogated.
This is the chief purpose of the proposed exchequer, and surely if in the
accomplishment of a purpose so essential it affords a sound circulating
medium to the country and facilities to trade it should be regarded as no
slight recommendation of it to public consideration. Properly guarded by
the provisions of law, it can run into no dangerous evil, nor can any abuse
arise under it but such as the Legislature itself will be answerable for if
it be tolerated, since it is but the creature of the law and is susceptible
at all times of modification, amendment, or repeal at the pleasure of
Congress. I know that it has been objected that the system would be liable
to be abused by the Legislature, by whom alone it could be abused, in the
party conflicts of the day; that such abuse would manifest itself in a
change of the law which would authorize an excessive issue of paper for the
purpose of inflating prices and winning popular favor. To that it may be
answered that the ascription of such a motive to Congress is altogether
gratuitous and inadmissible. The theory of our institutions would lead us
to a different conclusion. But a perfect security against a proceeding so
reckless would be found to exist in the very nature of things. The
political party which should be so blind to the true interests of the
country as to resort to such an expedient would inevitably meet with final
overthrow in the fact that the moment the paper ceased to be convertible
into specie or otherwise promptly redeemed it would become worthless, and
would in the end dishonor the Government, involve the people in ruin and
such political party in hopeless disgrace. At the same time, such a view
involves the utter impossibility of furnishing any currency other than that
of the precious metals; for if the Government itself can not forego the
temptation of excessive paper issues what reliance can be placed in
corporations upon whom the temptations of individual aggrandizement would
most strongly operate? The people would have to blame none but themselves
for any injury that might arise from a course so reckless, since their
agents would be the wrongdoers and they the passive spectators.
There can be but three kinds of public currency--first, gold and silver;
second, the paper of State institutions; or, third, a representative of the
precious metals provided by the General Government or under its authority.
The subtreasury system rejected the last in any form, and as it was
believed that no reliance could be placed on the issues of local
institutions for the purposes of general circulation it necessarily and
unavoidably adopted specie as the exclusive currency for its own use; and
this must ever be the case unless one of the other kinds be used. The
choice in the present state of public sentiment lies between an exclusive
specie currency on the one hand and Government issues of some kind on the
other. That these issues can not be made by a chartered institution is
supposed to be conclusively settled. They must be made, then, directly by
Government agents. For several years past they have been thus made in the
form of Treasury notes, and have answered a valuable purpose. Their
usefulness has been limited by their being transient and temporary; their
ceasing to bear interest at given periods necessarily causes their speedy
return and thus restricts their range of circulation, and being used only
in the disbursements of Government they can not reach those points where
they are most required. By rendering their use permanent, to the moderate
extent already mentioned, by offering no inducement for their return and by
exchanging them for coin and other values, they will constitute to a
certain extent the general currency so much needed to maintain the internal
trade of the country. And this is the exchequer plan so far as it may
operate in furnishing a currency.
I can not forego the occasion to urge its importance to the credit of the
Government in a financial point of view. The great necessity of resorting
to every proper and becoming expedient in order to place the Treasury on a
footing of the highest respectability is entirely obvious. The credit of
the Government may be regarded as the very soul of the Government itself--a
principle of vitality without which all its movements are languid and all
its operations embarrassed. In this spirit the Executive felt itself bound
by the most imperative sense of duty to submit to Congress at its last
session the propriety of making a specific pledge of the land fund as the
basis for the negotiation of the loans authorized to be contracted. I then
thought that such an application of the public domain would without doubt
have placed at the command of the Government ample funds to relieve the
Treasury from the temporary embarrassments under which it labored. American
credit has suffered a considerable shock in Europe from the large
indebtedness of the States and the temporary inability of some of them to
meet the interest on their debts. The utter and disastrous prostration of
the United States Bank of Pennsylvania had contributed largely to increase
the sentiment of distrust by reason of the loss and ruin sustained by the
holders of its stock, a large portion of whom were foreigners and many of
whom were alike ignorant of our political organization and of our actual
responsibilities.
It was the anxious desire of the Executive that in the effort to negotiate
the loan abroad the American negotiator might be able to point the money
lender to the fund mortgaged for the redemption of the principal and
interest of any loan he might contract, and thereby vindicate the
Government from all suspicion of bad faith or inability to meet its
engagements. Congress differed from the Executive in this view of the
subject. It became, nevertheless, the duty of the Executive to resort to
every expedient in its power to do so.