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With the great American Empire of Brazil, our relations continue unchanged, as does our friendly intercourse with the other governments of South America — the Argentine Republic, and the republics of Uraguay, Chili, Peru and Bolivia. The dissolution of the Peru.Bolivian Confederation may occasion some temporary inconvenience to our citizens in that quarter, but the obligations on the new governments which have arisen out of that confederation, to observe its treaty stipulations, will no doubt be soon understood, and it is presumed that no indisposition will exist to fulfil those which it contracted with the United States.

The financial operations of the government during the present year have, I am happy to say, been very successful. The difficulties under which the treasury department has labored from known defects in the existing laws relative to the safe-keeping of the public moneys, aggravated by the suspension of specie payments by several of the banks holding public deposites, or indebted to public officers for notes received in payment of public dues, have been surmounted to a very gratifying extent. The large current expenditures have been punctually met, and the faith of the government in all its pecuniary concerns has been scrupulously maintained.

The nineteen millions of treasury notes authorized by the act of Congress of 1837, and the modifications thereof, with a view to the indulgence of merchants on their duty bonds, and of the deposite banks in the payment of public moneys held by them, have been so punctually redeemed as to leave less than the original ten millions outstanding at any one time, and the whole amount unredeemed now falls short of three millions. Of these the chief portion is not due till next year, and the whole would have been already extinguished could the treasury have realized the payments due to it from the banks. If those due from them during the next year, shall be punctually made, and if Congress shall keep the appropriations within the estimates, there is every reason to believe that all the outstanding treasury notes can be redeemed, and the ordinary expenses defrayed, without imposing on the people any additional burden, either of loans or increased taxes. To avoid this, and to keep the expenditures within reasonable bounds, is a duty, second only in importance to the preservation of our national character, and the protection of our citizens in their civil and political rights. The creation, in time of peace, of a debt likely to become permanent, is an evil for which there is no equivalent. The rapidity with which many of the states are apparently approaching to this condition, admonishes us of our own duties, in a manner too impressive to be disregarded. One, not the least important, is to keep the federal government always in a condition to discharge with ease and vigor its highest functions, should their exercise be required by any sudden conjuncture of public affairs, - a condition to which we are always exposed, and which may occur when least expected. To this end, it is indispensable that its finances should be untrammelled, and its resources, as far as practicable, unincumbered. No circumstance could present greater obstacles to the accomplishment of these vitally important objects, than the creation of an onerous national debt.

Our own experience, and also that of other nations, has demonstrated the unavoidable and fearful rapidity with which a public debt is increased, when the government has once surrendered itself to the ruinous practice of supplying its supposed necessities by new loans. The struggle, therefore, on our part, to be successful, must be made at the threshold. To make our efforts effective, severe economy is necessary. This is the surest provision for the

national welfare; and it is, at the same time, the best preservative of the principles on which our institutions rest. Simplicity and economy in the affairs of state have never failed to chasten and invigorate republican principles, while these have been as surely subverted by national prodigality

, under whatever specious pretext it may have been introduced or fostered.

These considerations cannot be lost upon a people who have never been inattentive to the effect of their policy upon the institutions they have created for themselves; but at the present moment their force is augmented by the necessity which a decreasing revenue must impose. The check lately given to importations of articles subject to duties, the derangements in the operations of internal trade, and especially the reduction gradually taking place in our tariff of duties, all tend materially to lessen our receipts; indeed, it is probable that the diminution resulting from the last cause alone, will not fall far short of five millions of dollars in the year 1842, as the final reduction of all duties to twenty per cent. then takes effect. The whole revenue then accruing from the custoins, and from the sales of public lands, if not more, will undoubtedly be wanted to defray the necessary expenses of the government under the most prudent administration of its affairs. These are circumstances that impose the necessity of rigid economy, and require its prompt and constant exercise. With the legislature rests the power and duty of so adjusting the public expenditure as to promote this end. By the provisions of the constitution, it is only in consequence of appropriations made by law, that money can be drawn from the treasury; no instance has occurred since the establishment of the government in which the executive

, though a component part of the legislative power, has interposed an objection to an appropriation bill on the sole ground of its extravagance.

His duty in this respect has been considered fulfilled by requesting such appropriations only as the public service may be reasonably expected to require. In the present earnest direction of the public mind toward this subject

, both the executive and the legislative have evidence of the strict responsibility to which they will be held; and while I am conscious of my own anxious efforts to perform with fidelity this portion of my public functions, it is a satisfaction to me to be able to count on a cordial co-operation from you.

At the time I entered upon my present duties, our ordinary disbursements --- without including those on account of the public debt, the postoffice, and the trust funds in charge of the government had been largely jncreased by appropriations for the removal of the Indians, for repelling Indian hostilities, and for other less urgent expenses which grew out of an overflowing treasury. Independent of the redemption of the public debt and trusts, the gross expenditures of seventeen and eighteen millions in 1834 and 1833, had, by these causes, swelled to twenty-nine millions in 1836, and the appropriations for 1837, made previously to the 4th of March, caused the expenditures to rise to the very large amount of thirty-three millions We were enabled during the year 1838, notwithstanding the continuance of our Indian embarrassments, somewhat to reduce this amount; and that for the present year, 1839, will not, in all probability, exceed twenty-six millions—or six millions less than it was last year. With a determination, so far as depends on me, to continue this reduction, I have directed the estimates for 1840 to be subjected to the severest scrutiny, and to be limited to the absolute requirements of the public service. They will be found less than the expenditures of 1839, by over five millions of dollars.

The precautionary measures which will be recommended by the secre

tary of the treasury, to protect faithfully the public credit under the fluctuations and contingencies to which our receipts and expenditures are exposed, and especially in a commercial crisis like the present, are commended to your early attention.

On a former occasion your attention was invited to various considerations in support of a preemption law in behalf of the seitlers on the public lands; and also of a law graduating the prices for such lands as had been long in the market unsold, in consequence of their inferior quality. The execution of the act which was passed on the first subject has been attended with the happiest consequences, in quieting titles, and securing improvements to the industrious; and it has also, to a very gratifying extent, been exempt from the frauds which were practised under previous preemption laws. It has, at the same time, as was anticipated, contributed liberally during the present year to the receipts of the treasury.

The passage of a graduation law, with the guards before recommended, would also, I am persuaded, add considerably to the revenue for several years, and prove in other respects just and beneficial.

Your early consideration of the subject is, therefore, once more earnestly requested.

The present condition of the defences of our principal sea ports and navy yards, as represented by the accoinpanying report of the secretary of war, calls for the early and serious attention of Congress; and, as connecting itself intimately with this subject, I cannot recommend too strongly to your consideration the plan submitted by that officer for the organization of the militia of the United States.

In conformity with the expressed wishes of Congress, an attempt was made in the spring to terminate the Florida war by negotiation. It is to be regretted that these humane intentions should have been frustrated, and that the effort to bring these unhappy difficulties to a satisfactory conclusion should have failed. But after entering into solemn engagements with the commanding-general, the Indians, without any provocation, recommenced their acts of treachery and murder. The renewal of hostilities in that territory renders it necessary that I should recommend to your favorable consideration the plan which will be submitted to you by the secretary of war, in order to enable that department to conduct them to a successful issue.

Having had an opportunity of personally inspecting a portion of the troops during the last summer, it gives me pleasure to bear testimony to the success of the effort to improve their discipline, by keeping them together in as large bodies as the nature of our service will permit. I recommend, therefore, that commodious and permanent barracks be constructed at the several posts designated by the secretary of war. Notwithstanding the high state of their discipline and excellent police, the evils resulting to the service from the deficiency of company officers, were very apparent, and I recommend that the staff officers be permanently separated from the line.

The navy has been usefully and honorably employed in protecting the rights and property of our citizens, wherever the condition of affairs seemed to require its presence. With the exception of one instance, where an outrage, accompanied by murder, was committed on a vessel of the United States while engaged in a lawful commerce, nothing is known to have occurred to impede or molest the enterprise, of our citizens on that element where it is so signally displayed. On learning this daring act of piracy, Commodore Reed proceeded immediately to the spot, and receiving no

satisfaction, either in the surrender of the murderers, or the restoration of the plundered property, inflicted severe and merited chastisement on the barbarians.

It will be seen by the report of the secretary of the navy respecting the disposition of our ships of war, that it has been deemed necessary to station a competent force on the coast of Africa, to prevent a fraudulent use of our flag by foreigners.

Recent experience has shown that the provisions in our existing laws which relate to the sale and transfer of American vessels while abroad, are extremely defective. Advantage has been taken of these defects to give to vessels wholly belonging to foreigners, and navigating the ocean, an apparent American ownership. This character has been so well simulated as to afford them comparative security in prosecuting the slave-trade, a traffic emphatically denounced in our statutes, regarded with abhorrence by our citizens, and of which the effectual suppression is nowhere more sincerely desired than in the United States. These circumstances make it proper to recommend to your early attention a careful revision of these laws, so that, without impeding the freedom and facilities of our navigation, or impairing an important branch of our industry connected with it, the integrity and honor of our flag may be carefully preserved. Information from our consul at Havana, showing the necessity of this, was communicated to a committee of the Senate, near the close of the last session, but too late, as it appeared, to be acted upon. It will be brought to your notice by the proper department, with additional communications from other sources.

The latest accounts from the exploring expedition, represent it as proceeding successfully in its objects, and promising results no less useful to trade and navigation than to science.

The extent of post roads covered by mail service on the first of July last was about one hundred and thirty-three thousand nine hundred and ninety nine miles, and the rate of annual transportation upon them thirty-four millions four hundred and ninety-six thousand eight hundred and seventy-eight miles. The number of post-offices on that day was twelve thousand seren hundred and eighty, and on the 30th ultimo, thirteen thousand and twentyeight.

The revenue of the post-office department for the year ending with the 30th June last, was four millions four hundred and seventy-six thousand six hundred and thirty-eight dollars,-exhibiting an increase over the preceding year of two hundred and forty-one thousand five hundred and sixty dollars. The engagements and liabilities of the department, for the same period, are four millions six hundred and twenty-four thousand one hundred and seventeen dollars.

The excess of liabilities over the revenue for the last two years has been met out of the surplus which had previously accumulated. The cash on hand on the 30th ultimo, was about two hundred and six thousand seven hundred and one dollars and ninety-five cents, and the current income of the department varies very little from the rate of current expenditures. Most of the service suspended last year has been restored, and most of the new routes established by the act of 7th July, 1838, have been set in opera. tion at an annual cost of one hundred and thirty-six thousand nine huddred and sixty-three dollars. Notwithstanding the pecuniary difficulties of the country, the revenue of the department appears to be increasing; and unless it shall be seriously checked by the recent suspension of payment by

so many of the banks, it will be able not only to retain the present mail service, but in a short time to extend it. It is gratifying to witness the promptitude and fidelity with which the agents of this department in general perform their public duties.

Some difficulties have arisen in relation to contracts for the transportation of the mails by railroad and steamboat companies. It appears that the maximum of compensation provided by Congress for the transportation of the mails upon railroads is not sufficient to induce some of the companies to convey them at such hours as are required for the accommodation of the public. It is one of the most important duties of the general government to provide and maintain for the people of the states, the best practicable mail establishment. To arrive at that end, it is indispensable that the postoffice department shall be enabled to control the hours at which the mails shall be carried over railroads, as it now does over all other roads. Should serious inconveniences arise from the inadequacy of the compensation now provided by law, or by unreasonable demands from any of the railroad companies, the subject is of such general importance as to require the prompt attention of Congress.

In relation to steamboat lines, the most efficient remedy is obvious, and has been suggested by the postmaster-general.

The war and navy departments already employ steamboats in their service, and although it is by no means desirable that the government should undertake the transportation of passengers or freight as a business, there can be no reasonable objection to running boats, temporarily, whenever it may be necessary to put down attempts at extortion, to be discontinued as soon as reasonable contracts can be obtained.

The suggestions of the postmaster-general relative to the inadequacy of the legal allowance to witnesses in cases of prosecutions for mail depreda-s tions, merit your serious consideration. The safety of the mails require that such prosecutions shall be efficient, and justice to the citizen, whose time is required to be given to the public, demands not only that his expenses shall be paid, but that he shall receive a reasonable compensation.

The reports from the war, navy, and post office departments will accompany this communication, and one from the treasury department will be presented to Congress in a few days.

For various details in respect to the matters in charge of these departments, I would refer you to those important documents, satisfied that you will find in them many valuable suggestions, which will be found well deserving the attention of the legislature.

From a report made in December of last year by the secretary of state, to the Senate, showing the trial docket of each of the circuit courts, and the number of miles each judge has to travel in the performance of his duties, a great inequality appears in the amount of labor assigned to each judge. The number of terms to be held in each of the courts composing the ninth circuit, the distances between the places at which they sit, and from thence to the seat of government, are represented to be such as to render it impossible for the judge of that circuit to perform, in a manner corresponding with the public exigencies, his term and circuit duties. A revision, therefore, of the present arrangement of the circuit seems to be called for, and is recommended to your notice.

I think it proper to call your attention to the power assumed by territorial legislatures to authorize the issue of bonds by corporate companies on

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