vided for during the previous fiscal year. The sum of $74,480,201.05 was applied to this fund, which left a deficit of $16,305,873.47. The increase of the revenues for 1881 over those of the previous year was $29,352,901.10. It is estimated that the receipts during the present fiscal year will reach $400,000,000, and the expenditures $270,000,000, leaving a surplus of $130,000,000 applicable to the sinking fund and the redemption of the public debt.

I approve the recommendation of the Secretary of the Treasury, that provision be made for the early retirement of silver certificates, and that the act requiring their issue be repealed. They were issued in pursuance of the policy of the government to maintain silver at or near the gold standard, and were accordingly made receivable for all customs, taxes, and public dues. About sixty-six millions of them are now outstanding. They form an unnecessary addition to the paper currency, a sufficient amount of which may be readily supplied by the national banks.

In accordance with the act of February 28, 1878, the Treasury Department has, monthly, caused at least two millions in value of silver bullion to be coined into standard silver dollars. One hundred and two millions of these dollars have been already coined, while only about thirty-four millions are in circulation.

For the reasons which he specifies, I concur in the Secretary's recommendation that the provision for coinage of a fixed amount each month be repealed, and that hereafter only so much be coined as shall be necessary to supply the demand.

The Secretary advises that the issue of gold certificates should not for the present be resumed, and suggests that the national banks may properly be forbidden by law to retire their currency except upon reasonable notice of their intention so to do. Such legislation would seem to be justified by the recent action of certain banks on the occasion referred to in the Secretary's report.

Of the fifteen millions of fractional currency still outstanding, only about eighty thousand has been redeemed the past year. The sugges tion that this amount may properly be dropped from future statements of the public debt seems worthy of approval.

So, also, does the suggestion of the Secretary as to the advisability of relieving the calendar of the United States courts in the southern district of New York, by the transfer to another tribunal of the numerous suits there pending against collectors.

The revenue from customs for the past fiscal year was $198,159,676.02, an increase of $11,637,611.42 over that of the year preceding. $138,098,562.39 of this amount was collected at the port of New York, leaving $50,251,113.63 as the amount collected at all the other ports of the country. Of this sum, $47,977,137.63 was collected on sugar, melado, and molasses; $27,285,624.78 on wool and its manufactures; $21,462,534.34 on iron and steel, and manufactures thereof; $19,038,665.81 on manufactures of silk;

$10,825,115.21 on manufactures of cotton; and $6,469,643.04 on wines and spirits; making a total revenue from these sources, of $133,058,720.81. The expenses of collection for the past year were $6,419,345.20, an increase over the preceding year of $387,410.04. Notwithstanding the increase in the revenue from customs over the preceding year, the gross value of the imports, including free goods, decreased over twenty-five millions of dollars. The most marked decrease was in the value of unmanufactured wool, $14,023,682, and in that of scrap and pig iron, $12,810,671. The value of imported sugar, on the other hand showed an increase of $7,457,474; of steel rails, $4,345,521; of barley, $2,154,204; and of steel in bars, ingots, &c., $1,620,046.

Contrasted with the imports during the last fiscal year, the exports were as follows:

Compared with the previous year, there was an increase of $66,738,688 in the value of exports of merchandise, and a decrease of $25,290,118 in the value of imports. The annual average of the excess of imports of merchandise over exports thereof, for ten years previous to June 30, 1873, was $104,706,922; but for the last six years there has been an excess of exports over imports of merchandise amounting to $1,180,668,105, an annual average of $196,778,017. The specie value of the exports of domestic merchandise was $376,616,473 in 1870, and $883,925,947 in 1881, an increase of $507,309,474, or 135 per cent. The value of imports was $435,958,408 in 1870, and $642,664,628 in 1881, an increase of $206,706,220, or 47 per cent.

During each year from 1862 to 1879, inclusive, the exports of specie exceeded the imports. The largest excess of such exports over imports was reached during the year 1864, when it amounted to $92,280,929. But during the year ended June 30, 1880, the imports of coin and bullion exceeded the exports by $75,891,391; and during the last fiscal year the excess of imports over exports was $91,168,650.

In the last annual report of the Secretary of the Treasury the attention of Congress was called to the fact that $469,651,050 in five per centum bonds and $203,573,750 in six per centum bonds would become redeemable during the year, and Congress was asked to authorize the refunding of these bonds at a lower rate of interest. The bill for such refunding having failed to become a law, the Secretary of the

Treasury, in April last, notified the holders of the $195,690,400 six per centum bonds then outstanding, that the bonds would be paid at par on the first day of July following, or that they might be "continued" at the pleasure of the government, to bear interest at the rate of three and one-half per centum per annum.

Under this notice $178,055,150 of the six per centum bonds were continued at the lower rate, and $17,635,250 were redeemed.

In the month of May a like notice was given respecting the redemption or continuance of the $439,841,350 of five per centum bonds then outstanding, and of these, $401,504,900 were continued at three and onehalf per centum per annum, and $38,336,450 redeemed.

The six per centum bonds of the loan of February 8, 1861, and of the Oregon war debt, amounting together to $14,125,800, having matured during the year, the Secretary of the Treasury gave notice of his intention to redeem the same, and such as have been presented have been paid from the surplus revenues. There have also been redeemed at par $16,179,100 of the three and one-half per centum "continued" bonds, making a total of bonds redeemed, or which have ceased to bear interest during the year, of $123,969,650.

The reduction of the annual interest on the public debt through these transactions is as follows:

By reduction of interest to three and one-half per cent.. $10, 473, 952 25 By redemption of bonds.....

Total.....

6,352, 340 00

16,826,292 25

The three and one-half per centum bonds, being payable at the pleasure of the government, are available for the investment of surplus revenue without the payment of premiums.

Unless these bonds can be funded at a much lower rate of interest than they now bear, I agree with the Secretary of the Treasury that no legislation respecting them is desirable.

It is a matter for congratulation that the business of the country has been so prosperous during the past year as to yield by taxation a large surplus of income to the government. If the revenue laws remain unchanged this surplus must, year by year, increase, on account of the reduction of the public debt and its burden of interest, and because of the rapid increase of our population. In 1860, just prior to the institution of our internal-revenue system, our population but slightly exceeded 30,000,000; by the census of 1880 it is now found to exceed 50,000,000. It is estimated that even if the annual receipts and expenditures should continue as at present the entire debt could be paid in ten years.

In view, however, of the heavy load of taxation which our people have already borne, we may well consider whether it is not the part of wisdom to reduce the revenues, even if we delay a little the payment of the debt.

It seems to me that the time has arrived when the people may justly demand some relief from their present onerous burden, and that by due economy in the various branches of the public service, this may readily be afforded.

I therefore concur with the Secretary in recommending the abolition of all internal-revenue taxes, except those upon tobacco in its various forms, and upon distilled spirits and fermented liquors; and except also the special tax upon the manufacturers of, and dealers in, such articles. The retention of the latter tax is desirable as affording the officers of the government a proper supervision of these articles for the prevention of fraud. I agree with the Secretary of the Treasury, that the law imposing a stamp tax upon matches, proprietary articles, playing cards, checks, and drafts, may with propriety be repealed, and the law also by which banks and bankers are assessed upon their capital and deposits. There seems to be a general sentiment in favor of this course.

In the present condition of our revenues the tax upon deposits is especially unjust. It was never imposed in this country until it was demanded by the necessities of war, and was never exacted, I believe, in any other country, even in its greatest exigencies. Banks are required to secure their circulation by pledging with the Treasurer of the United States bonds of the general government. The interest upon these bonds, which at the time when the tax was imposed was 6 per cent., is now, in most instances, 3 per cent. Besides, the entire circulation was originally limited by law and no increase was allowable. When the existing banks had practically a monopoly of the business, there was force in the suggestion, that for the franchise to the favored grantees the government might very properly exact a tax on circulation; but for years the system has been free, and the amount of circulation regulated by the public demand.

The retention of this tax has been suggested as a means of reimbursing the government for the expense of printing and furnishing the circulating notes. If the tax should be repealed it would certainly seem proper to require the national banks to pay the amount of such expense to the Comptroller of the Currency.

It is perhaps doubtful whether the immediate reduction of the rate of taxation upon liquors and tobacco is advisable, especially in view of the drain upon the Treasury which must attend the payment of arrears of pensions. A comparison, however, of the amount of taxes collected under the varying rates of taxation which have at different times prevailed, suggests the intimation that some reduction may soon be made without material diminution of the revenue.

The tariff laws also need revision; but, that a due regard may be paid to the conflicting interests of our citizens, important changes should be made with caution. If a careful revision cannot be made at this session, a commission such as was lately approved by the Senate and is now recommended by the Secretary of the Treasury would

doubtless lighten the labors of Congress whenever this subject shall be brought to its consideration.

The accompanying report of the Secretary of War will make known to you the operations of that department for the past year.

He suggests measures for promoting the efficiency of the Army without adding to the number of its officers, and recommends the legislation necessary to increase the number of enlisted men to thirty thousand, the maximum allowed by law.

This he deems necessary to maintain quietude on our ever-shifting frontier; to preserve peace and suppress disorder and marauding in new settlements; to protect settlers and their property against Indians, and Indians against the encroachments of intruders; and to enable peaceable immigrants to establish homes in the most remote parts of our country. The Army is now necessarily scattered over such a vast extent of territory that, whenever an outbreak occurs, reinforcements must be hurried from many quarters, over great distances, and always at heavy cost for transportation of men, horses, wagons, and supplies.

I concur in the recommendations of the Secretary for increasing the Army to the strength of thirty thousand enlisted men.

It appears by the Secretary's report that in the absence of disturb ances on the frontier the troops have been actively employed in collecting the Indians hitherto hostile, and locating them on their proper reservations; that Sitting Bull and his adherents are now prisoners at Fort Randall; that the Utes have been moved to their new reservation in Utah; that during the recent outbreak of the Apaches it was necessary to reinforce the garrisons in Arizona by troops withdrawn from New Mexico; and that some of the Apaches are now held prisoners for trial, while some have escaped, and the majority of the tribe are now on their reservation.

There is need of legislation to prevent intrusion upon the lands set apart for the Indians. A large military force, at great expense, is now required to patrol the boundary line between Kansas and the Indian Territory. The only punishment that can at present be inflicted is the forcible removal of the intruder and the imposition of a pecuniary fine, which, in most cases, it is impossible to collect. There should be a penalty by imprisonment in such cases.

The separate organization of the Signal Service is urged by the Secretary of War, and a full statement of the advantages of such permanent organization is presented in the report of the Chief Signal Officer. A detailed account of the useful work performed by the Signal Corps and the Weather Bureau, is also given in that report.

I ask attention to the statements of the Secretary of War regarding the requisitions frequently made by the Indian Bureau upon the Subsistence Department of the Army for the casual support of bands and tribes of Indians whose appropriations are exhausted. The War Department should not be left, by reason of inadequate provision for the Indian Bureau, to contribute for the maintenance of Indians.