Speech Transcript:

Fellow Citizens of the Senate and House of Representatives:

Addressing to you the last annual message I shall ever present to the
Congress of the United States, it is a source of the most heartfelt
satisfaction to be able to congratulate you on the high state of
prosperity which our beloved country has attained. With no causes at
home or abroad to lessen the confidence with which we look to the
future for continuing proofs of the capacity of our free institutions
to produce all the fruits of good government,

the general condition of our affairs may well excite our national
pride.

I can not avoid congratulating you, and my country particularly, on
the success of the efforts made during my Administration by the
Executive and Legislature, in conformity with the sincere, constant,
and earnest desire of the people, to maintain peace and establish
cordial relations with all foreign powers. Our gratitude is due to
the Supreme Ruler of the Universe, and I invite you to unite with me
in offering to Him fervent supplications that His providential care
may ever be extended to those who follow us, enabling them to avoid
the dangers and the horrors of war consistently with a just and
indispensable regard to the rights and honor of our country. But
although the present state of our foreign affairs, standing, without
important change, as they did when you separated in July last, is
flattering in the extreme, I regret to say that many questions of an
interesting character, at issue with other powers, are yet
unadjusted. Amongst the most prominent of these is that of our NE
boundary. With an undiminished confidence in the sincere desire of
His Britannic Majesty's Government to adjust that question, I am not
yet in possession of the precise grounds upon which it proposes a
satisfactory adjustment.

With France our diplomatic relations have been resumed, and under
circumstances which attest the disposition of both Governments to
preserve a mutually beneficial intercourse and foster those amicable
feelings which are so strongly required by the true interests of the
two countries. With Russia, Austria, Prussia, Naples, Sweden, and
Denmark the best understanding exists, and our commercial intercourse
is gradually expanding itself with them. It is encouraged in all these
countries, except Naples, by their mutually advantageous and liberal
treaty stipulations with us.

The claims of our citizens on Portugal are admitted to be just, but
provision for the payment of them has been unfortunately delayed by
frequent political changes in that Kingdom.

The blessings of peace have not been secured by Spain. Our
connections with that country are on the best footing, with the
exception of the burdens still imposed upon our commerce with her
possessions out of Europe.

The claims of American citizens for losses sustained at the
bombardment of Antwerp have been presented to the Governments of
Holland and Belgium, and will be pressed, in due season, to
settlement.

With Brazil and all our neighbors of this continent we continue to
maintain relations of amity and concord, extending our commerce with
them as far as the resources of the people and the policy of their
Governments will permit. The just and long-standing claims of our
citizens upon some of them are yet sources of dissatisfaction and
complaint. No danger is apprehended, however, that they will not be
peacefully, although tardily, acknowledged and paid by all, unless
the irritating effect of her struggle with Texas should unfortunately
make our immediate neighbor, Mexico, an exception.

It is already known to you, by the correspondence between the two
Governments communicated at your last session, that our conduct in
relation to that struggle is regulated by the same principles that
governed us in the dispute between Spain and Mexico herself, and I
trust that it will be found on the most severe scrutiny that our acts
have strictly corresponded with our professions. That the inhabitants
of the United States should feel strong prepossessions for the one
party is not surprising. But this circumstance should of itself teach
us great caution, lest it lead us into the great error of suffering
public policy to be regulated by partially or prejudice; and there
are considerations connected with the possible result of this contest
between the two parties of so much delicacy and importance to the
United States that our character requires that we should neither
anticipate events nor attempt to control them.

The known desire of the Texans to become a part of our system,
although its gratification depends upon the reconcilement of various
and conflicting interests, necessarily a work of time and uncertain
in itself, is calculated to expose our conduct to misconstruction in
the eyes of the world. There are already those who, indifferent to
principle themselves and prone to suspect the want of it in others,
charge us with ambitious designs and insidious policy.

You will perceive by the accompanying documents that the
extraordinary mission from Mexico has been terminated on the sole
ground that the obligations of this Government to itself and to
Mexico, under treaty stipulations, have compelled me to trust a
discretionary authority to a high officer of our Army to advance into
territory claimed as part of Texas if necessary to protect our own or
the neighboring frontier from Indian depredation. In the opinion of
the Mexican functionary who has just left us, the honor of his
country will be wounded by American soldiers entering, with the most
amicable avowed purposes, upon ground from which the followers of his
Government have been expelled, and over which there is at present no
certainty of a serious effort on its part to re-establish its
dominion. The departure of this minister was the more singular as he
was apprised that the sufficiency of the causes assigned for the
advance of our troops by the commanding general had been seriously
doubted by me, and there was every reason to suppose that the troops
of the United States, their commander having had time to ascertain
the truth or falsehood of the information upon which they had been
marched to Nacogdoches, would be either there in perfect accordance
with the principles admitted to be just in his conference with the
Secretary of State by the Mexican minister himself, or were already
withdrawn in consequence of the impressive warnings their commanding
officer had received from the Department of War. It is hoped and
believed that his Government will take a more dispassionate and just
view of this subject, and not be disposed to construe a measure of
justifiable precaution, made necessary by its known inability in
execution of the stipulations of our treaty to act upon the frontier,
into an encroachment upon its rights or a stain upon its honor.

In the mean time the ancient complaints of injustice made on behalf
of our citizens are disregarded, and new causes of dissatisfaction
have arisen, some of them of a character requiring prompt
remonstrance and ample and immediate redress. I trust, however, by
tempering firmness with courtesy and acting with great forbearance
upon every incident that has occurred or that may happen, to do and
to obtain justice, and thus avoid the necessity of again bringing
this subject to the view of Congress.

It is my duty to remind you that no provision has been made to
execute our treaty with Mexico for tracing the boundary line between
the two countries. What ever may be the prospect of Mexico's being
soon able to execute the treaty on its part, it is proper that we
should be in anticipation prepared at all times to perform our
obligations, without regard to the probable condition of those with
whom we have contracted them.

The result of the confidential inquiries made into the condition and
prospects of the newly declared Texan Government will be communicated
to you in the course of the session.

Commercial treaties promising great advantages to our enterprising
merchants and navigators have been formed with the distant
Governments of Muscat and Siam. The ratifications have been
exchanged, but have not reached the Department of State. Copes of the
treaties will be transmitted to you if received before, or published
if arriving after, the close of the present session of Congress.

Nothing has occurred to interrupt the good understanding that has
long existed with the Barbary Powers, nor to check the good will
which is gradually growing up from our intercourse with the dominions
of the Government of growing of the distinguished chief of the Ottoman
Empire.

Information has been received at the Department of State that a
treaty with the Emperor of Morocco has just been negotiated, which, I
hope, will be received in time to be laid before the Senate previous
to the close of the session.

You will perceive from the report of the Secretary of the Treasury
that the financial means of the country continue to keep pace with
its improvement in all other respects. The receipts into the Treasury
during the present year

will amount to about $47,691,898; those from customs being estimated
at $22,523,151, those from lands at about $24,000,000, and the
residue from miscellaneous sources. The expenditures for all objects
during the year are estimated not to exceed $32,000,000, which will
leave a balance in the Treasury for public purposes on the first day
of January next of about $41,723,959. This sum, with the exception of
$5,000,000, will be transferred to the several States in accordance
with the provisions of the act regulating the deposits of the public
money.

The unexpended balances of appropriation on the first day of January
next are estimated at $14,636,062, exceeding by $9,636,062 the amount
which will be left in the deposit banks, subject to the draft of the
Treasurer of the United States, after the contemplated transfers to
the several States are made. If, therefore, the future receipts
should not be sufficient to meet these outstanding and future
appropriations, there may be soon a necessity to use a portion of the
funds deposited with the States.

The consequences apprehended when the deposit act of the last session
received a reluctant approval have been measurably realized. Though an
act merely for the deposit of the surplus moneys of the United States
in the State treasuries for safe-keeping until they may be wanted for
the service of the General Government, it has been extensively spoken
of as an act to give the money to the several States, and they have
been advised to use it as a givt, without regard to the means of
refunding it when called for. Such a suggestion has doubtless been
made without a proper attention to the various principles and
interests which are affected by it.

It is manifest that the law itself can not sanction such a
suggestion, and that as it now stands the States have no more
authority to receive and use these deposits without intending to
return them than any deposit bank or any individual temporarily
charged with the safe-keeping or application of the public money
would now have for converting the same to their private use without
the consent and against the will of the Government. But independently
of the violation of public faith and moral obligation which are
involved in this suggestion when examined in reference to the terms
of the present deposit act, it is believed that the considerations
which should govern the future legislation of Congress on this
subject will be equally conclusive against the adoption of any
measure recognizing the principles on which the suggestion has been
made.

Considering the intimate connection of the subject with the financial
interests of the country and its great importance in whatever aspect
it can be viewed, I have bestowed upon it the most anxious
reflection, and feel it to be my duty to state to Congress such
thoughts as have occurred to me, to aid their deliberation in
treating it in the manner best calculated to conduce to the common
good.

The experience of other nations admonished us to hasten the
extinguishment of the public debt; but it will be in vain that we
have congratulated each other upon the disappearance of this evil if
we do not guard against the equally great one of promoting the
unnecessary accumulation of public revenue. No political maxim is
better established than that which tells us that an improvident
expenditure of money is the parent of profligacy, and that no people
can hope to perpetuate their liberties who long acquiesce in a policy
which taxes them for objects not necessary to the legitimate and real
wants of their Government. Flattering as is the condition of our
country at the present period, because of its unexampled advance in
all the steps of social and political improvement, it can not be
disguised that there is a lurking danger already apparent in the
neglect of this warning truth, and that the time has arrived when the
representatives of the people should be employed in devising some more
appropriate remedy than now exists to avert it.

Under our present revenue system there is every probability that
there will continue to be a surplus beyond the wants of the
Government, and it has become our duty to decide whether such a
result be consistent with the true objects of our Government.

Should a surplus be permitted to accumulate beyond the
appropriations, it must be retained in the Treasury, as it now is, or
distributed among the people or the States.

To retain it in the Treasury unemployed in any way is impracticable;
it is, besides, against the genius of our free institutions to lock
up in vaults the treasure of the nation. To take from the people the
right of bearing arms and put their weapons of defense in the hands
of a standing army would be scarcely more dangerous to their
liberties than to permit the Government to accumulate immense amounts
of treasure beyond the supplies necessary to its legitimate wants.
Such a treasure would doubtless be employed at some time, as it has
been in other countries, when opportunity tempted ambition.

To collect it merely for distribution to the States would seem to be
highly impolitic, if not as dangerous as the proposition to retain it
in the Treasury.

The shortest reflection must satisfy everyone that to require the
people to pay taxes to the Government merely that they may be paid
back again is sporting with the substantial interests of the country,
and no system which produces such a result can be expected to receive
the public countenance. Nothing could be gained by it even if each
individual who contributed a portion of the tax could receive back
promptly the same portion. But it is apparent that no system of the
kind can ever be enforced which will not absorb a considerable
portion of the money to be distributed in salaries and commissions to
the agents employed in the process and in the various losses and
depreciations which arise from other causes, and the practical effect
of such an attempt must ever be to burden the people with taxes, not
for purposes beneficial to them, but to swell the profits of deposit
banks and support a band of useless public officers.

A distribution to the people is impracticable and unjust in other
respects. It would be taking one man's property and giving it to
another. Such would be the unavoidable result of a rule of equality
(and none other is spoken of or would be likely to be adopted), in as
much as there is no mode by which the amount of the individual
contributions of our citizens to the public revenue can be
ascertained. We know that they contribute unequally, and a rule,
therefore, that would distribute to them equally would be liable to
all the objections which apply to the principle of an equal division
of property. To make the General Government the instrument of
carrying this odious principle into effect would be at once to
destroy the means of its usefulness and change the character designed
for it by the framers of the Constitution.

But the more extended and injurious consequences likely to result
from a policy which would collect a surplus revenue from the purpose
of distributing it may be forcibly illustrated by an examination of
the effects already produced by the present deposit act. This act,
although certainly designed to secure the safe-keeping of the public
revenue, is not entirely free in its tendencies from any of the
objections which apply to this principle of distribution. The
Government had without necessity received from the people a large
surplus, which, instead of being employed as heretofore and returned
to them by means of the public expenditure, was deposited with sundry
banks. The banks proceeded to make loans upon this surplus, and thus
converted it into banking capital, and in this manner it has tended
to multiply bank charters and has had a great agency in producing a
spirit of wild speculation. The possession and use of the property
out of which this surplus was created belonged to the people, but the
Government has transferred its possession to incorporated banks, whose
interest and effort it is to make large profits out of its use. This
process need only be stated to show its injustice and bad policy.

And the same observations apply to the influence which is produced by
the steps necessary to collect as well as to distribute such a
revenue. About 3/5 of all the duties on imports are paid in the city
of New York, but it is obvious that the means to pay those duties are
drawn from every quarter of the Union. Every citizen in every State
who purchases and consumes an article which has paid a duty at that
port contributes to the accumulating mass. The surplus collected
there must therefore be made up of moneys or property withdrawn from
other points and other States. Thus the wealth and business of every
region from which these surplus funds proceed must be to some extent
injured, while that of the place where the funds are concentrated and
are employed in banking are proportionably extended. But both in
making the transfer of the funds which are first necessary to pay the
duties and collect the surplus and in making the re-transfer which
becomes necessary when the time arrives for the distribution of that
surplus there is a considerable period when the funds can not be
brought into use, and it is manifest that, besides the loss
inevitable from such an operation, its tendency is to produce
fluctuations in the business of the country, which are always
productive of speculation and detrimental to the interests of regular
trade. Argument can scarcely be necessary to show that a measure of
this character ought not to receive further legislative
encouragement.

By examining the practical operation of the ration for distribution
adopted in the deposit bill of the last session we shall discover
other features that appear equally objectionable. Let it be assumed,
for the sake of argument, that the surplus moneys to be deposited
with the States have been collected and belong to them in the ration
of their federal representative population -- an assumption founded
upon the fact that any deficiencies in our future revenue from
imposts and public lands must be made up by direct taxes collected
from the States in that ration. It is proposed to distribute this
surplus -- say $30,000,000 -- not according to the ration in which it
has been collected and belongs to the people of the States, but in
that of their votes in the colleges of electors of President and Vice
President. The effect of a distribution upon that ration is shown by
the annexed table, marked A.

By an examination of that table it will be perceived that in the
distribution of a surplus of $30,000,000 upon that basis there is a
great departure from the principle which regards representation as
the true measure of taxation, and it will be found that the tendency
of that departure will be to increase whatever inequalities have been
supposed to attend the operation of our federal system in respect to
its bearings upon the different interests of the Union. In making the
basis of representation the basis of taxation the framers of the
Constitution intended to equalize the burdens which are necessary to
support the Government, and the adoption of that ratio, while it
accomplished this object, was also the means of adjusting other great
topics arising out of the conflicting views respecting the political
equality of the various members of the Confederacy. What ever,
therefore, disturbs the liberal spirit of the compromises which
established a rule of taxation so just and equitable, and which
experience has proved to be so well adapted to the genius and habits
of our people, should be received with the greatest caution and
distrust.

A bare inspection in the annexed table of the differences produced by
the ration used in the deposit act compared with the results of a
distribution according to the ration of direct taxation must satisfy
every unprejudiced mind that the former ration contravenes the spirit
of the Constitution and produces a degree of injustice in the
operations of the Federal Government which would be fatal to the hope
of perpetuating it. By the ration of direct taxation, for example, the
State of Delaware in the collection of $30,000,000 of revenue would
pay into the Treasury $188,716, and in a distribution of $30,000,000
she would receive back from the Government, according to the ration
of the deposit bill, the sum of $306,122; and similar results would
follow the comparison between the small and the large States
throughout the Union, thus realizing to the small States an advantage
which would be doubtless as unacceptable to them as a motive for
incorporating the principle in any system which would produce it as
it would be inconsistent with the rights and expectations of the
large States.

It was certainly the intention of that provision of the Constitution
which declares that "all duties, imposts, and excises" shall "be
uniform throughout the United States" to make the burdens of taxation
fall equally upon the people in what ever State of the Union they may
reside. But what would be the value of such a uniform rule if the
moneys raised by it could be immediately returned by a different one
which will give to the people of some States much more and to those
of others much less than their fair proportions? Were the Federal
Government to exempt in express terms the imports, products, and
manufactures of some portions of the country from all duties while it
imposed heavy ones on others, the injustice could not be greater. It
would be easy to show how by the operation of such a principle the
large States of the Union would not only have to contribute their
just share toward the support of the Federal Government, but also
have to bear in some degree the taxes necessary to support the
governments of their smaller sisters; but it is deemed unnecessary to
state the details where the general principle is so obvious.

A system liable to such objections can never be supposed to have been
sanctioned by the framers of the Constitution when they conferred on
Congress the taxing power, and I feel persuaded that a mature
examination of the subject will satisfy everyone that there are
insurmountable difficulties in the operation of any plan which can be
devised of collecting revenue for the purpose of distributing it.
Congress is only authorized to levy taxes "to pay the debts and
provide for the common defense and general welfare of the United
States". There is no such provision as would authorize Congress to
collect together the property of the country, under the name of
revenue, for the purpose of dividing it equally or unequally among
the States or the people. Indeed, it is not probable that such an
idea ever occurred to the States when they adopted the Constitution.
But however this may be, the only safe rule for us in interpreting
the powers granted to the Federal Government is to regard the absence
of express authority to touch a subject so important and delicate as
this as equivalent to a prohibition.

Even if our powers were less doubtful in this respect as the
Constitution now stands, there are considerations afforded by recent
experience which would seem to make it our duty to avoid a resort to
such a system. All will admit that the simplicity and economy of the
State governments mainly depend on the fact that money has to be
supplied to support them by the same men, or their agents, who vote
it away in appropriations. Hence when there are extravagant and
wasteful appropriations there must be a corresponding increase of
taxes, and the people, becoming awakened, will necessarily scrutinize
the character of measures which thus increase their burdens. By the
watchful eye of self-interest the agents of the people in the State
governments are repressed and kept within the limits of a just
economy.

But if the necessity of levying the taxes be taken from those who
make the appropriations and thrown upon a more distant and less
responsible set of public agents, who have power to approach the
people by an indirect and stealthy taxation, there is reason to fear
that prodigality will soon supersede those characteristics which have
thus far made us look with so much pride and confidence to the State
governments as the main-stay of our Union and liberties. The State
legislatures, instead of studying to restrict their State
expenditures to the smallest possible sum, will claim credit for
their profusion, and harass the General Government for increased
supplies.

Practically there would soon be but one taxing power, and that vested
in a body of men far removed from the people, in which the farming and
mechanic interests would scarcely be represented. The States would
gradually lose their purity as well as their independence; they would
not dare to murmur at the proceedings of the General Government, lest
they should lose their supplies; all would be merged in a practical
consolidation, cemented by wide-spread corruption, which could only
be eradicated by one of those bloody revolutions which occasionally
over-throw the despotic systems of the Old World.

In all the other aspects in which I have been able to look at the
effect of such a principle of distribution upon the best interests of
the country I can see nothing to compensate for the disadvantages to
which I have adverted. If we consider the protective duties, which
are in a great degree the source of the surplus revenue, beneficial
to one section of the Union and prejudicial to another, there is no
corrective for the evil in such a plan of distribution. On the
contrary, there is reason to fear that all the complaints which have
sprung from this cause would be aggravated. Everyone must be sensible
that a distribution of the surplus must beget a disposition to cherish
the means which create it, and any system, therefore, into which it
enters must have a powerful tendency to increase rather than diminish
the tariff. If it were even admitted that the advantages of such a
system could be made equal to all the sections of the Union, the
reasons already so urgently calling for a reduction of the revenue
would never the less lose none of their force, for it will always be
improbable that an intelligent and virtuous community can consent to
raise a surplus for the mere purpose of dividing it, diminished as it
must inevitably be by the expenses of the various machinery necessary
to the process.

The safest and simplest mode of obviating all the difficulties which
have been mentioned is to collect only revenue enough to meet the
wants of the Government, and let the people keep the balance of their
property in their own hands, to be used for their own profit. Each
State will then support its own government and contribute its due
share toward the support of the General Government. There would be no
surplus to cramp and lessen the resources of individual wealth and
enterprise, and the banks would be left to their ordinary means.
Whatever agitations and fluctuations might arise from our unfortunate
paper system, they could never be attributed, justly or unjustly, to
the action of the Federal Government. There would be some guaranty
that the spirit of wild speculation which seeks to convert the
surplus revenue into banking capital would be effectually checked,
and that the scenes of demoralization which are now so prevalent
through the land would disappear.

Without desiring to conceal that the experience and observation of
the last two years have operated a partial change in my views upon
this interesting subject, it is never the less regretted that the
suggestions made by me in my annual messages of 1829 and 1830 have
been greatly misunderstood. At that time the great struggle was begun
against that latitudinarian construction of the Constitution which
authorizes the unlimited appropriation of the revenues of the Union
to internal improvements within the States, tending to invest in the
hands and place under the control of the General Government all the
principal roads and canals of the country, in violation of State
rights and in derogation of State authority.

At the same time the condition of the manufacturing interest was such
as to create an apprehension that the duties on imports could not
without extensive mischief be reduced in season to prevent the
accumulation of a considerable surplus after the payment of the
national debt. In view of the dangers of such a surplus, and in
preference to its application to internal improvements in derogation
of the rights and powers of the States, the suggestion of an
amendment of the Constitution to authorize its distribution was made.
It was an alternative for what were deemed greater evils -- a
temporary resort to relieve an over-burdened treasury until the
Government could, without a sudden and destructive revulsion in the
business of the country, gradually return to the just principle of
raising no more revenue from the people in taxes than is necessary
for its economical support.

Even that alternative was not spoken of but in connection with an
amendment of the Constitution. No temporary inconvenience can justify
the exercise of a prohibited power not granted by that instrument, and
it was from a conviction that the power to distribute even a temporary
surplus of revenue is of that character that it was suggested only in
connection with an appeal to the source of all legal power in the
General Government, the States which have established it. No such
appeal has been taken, and in my opinion a distribution of the
surplus revenue by Congress either to the States or the people is to
be considered as among the prohibitions of the Constitution.

As already intimated, my views have undergone a change so far as to
be convinced that no alteration of the Constitution in this respect
is wise or expedient. The influence of an accumulating surplus upon
the credit system of the country, producing dangerous extensions and
ruinous contractions, fluctuations in the price of property, rash
speculation, idleness, extravagance, and a deterioration of morals,
have taught us the important lesson that any transient mischief which
may attend the reduction of our revenue to the wants of our Government
is to be borne in preference to an over-flowing treasury.

I beg leave to call your attention to another subject intimately
associated with the preceding one -- the currency of the country.

It is apparent from the whole context of the Constitution, as well as
the history of the times which gave birth to it, that it was the
purpose of the Convention to establish a currency consisting of the
precious metals. These, from their peculiar properties which rendered
them the standard of value in all other countries, were adopted in
this as well to establish its commercial standard in reference to
foreign countries by a permanent rule as to exclude the use of a
mutable medium of exchange, such as of certain agricultural
commodities recognized by the statutes of some States as a tender for
debts, or the still more pernicious expedient of a paper currency.

The last, from the experience of the evils of the issues of paper
during the Revolution, had become so justly obnoxious as not only to
suggest the clause in the Constitution forbidding the emission of
bills of credit by the States, but also to produce that vote in the
Convention which negatived the proposition to grant power to Congress
to charter corporations -- a proposition well understood at the time
as intended to authorize the establishment of a national bank, which
was to issue a currency of bank notes on a capital to be created to
some extent out of Government stocks. Although this proposition was
refused by a direct vote of the Convention, the object was afterwards
in effect obtained by its ingenious advocates through a strained
construction of the Constitution. The debts of the Revolution were
funded at prices which formed no equivalent compared with the nominal
amount of the stock, and under circumstances which exposed the motives
of some of those who participated in the passage of the act to
distrust.

The facts that the value of the stock was greatly enhanced by the
creation of the bank, that it was well understood that such would be
the case, and that some of the advocates of the measure were largely
benefited by it belong to the history of the times, and are well
calculated to diminish the respect which might otherwise have been
due to the action of the Congress which created the institution.

On the establishment of a national bank it became the interest of its
creditors that gold should be superseded by the paper of the bank as a
general currency. A value was soon attached to the gold coins which
made their exportation to foreign countries as a mercantile commodity
more profitable than their retention and use at home as money. It
followed as a matter of course, if not designed by those who
established the bank, that the bank became in effect a substitute for
the Mint of the United States.

Such was the origin of a national bank currency, and such the
beginning of those difficulties which now appear in the excessive
issues of the banks incorporated by the various States.

Although it may not be possible by any legislative means within our
power to change at once the system which has thus been introduced,
and has received the acquiescence of all portions of the country, it
is certainly our duty to do

all that is consistent with our constitutional obligations in
preventing the mischiefs which are threatened by its undue extension.
That the efforts of the fathers of our Government to guard against it
by a constitutional provision were founded on an intimate knowledge
of the subject has been frequently attested by the bitter experience
of the country. The same causes which led them to refuse their
sanction to a power authorizing the establishment of incorporations
for banking purposes now exist in a much stronger degree to urge us
to exert the utmost vigilance in calling into action

the means necessary to correct the evils resulting from the
unfortunate exercise of the power, and it is hoped that the
opportunity for effecting this great good will be improved before the
country witnesses new scenes of embarrassment and distress.

Variableness must ever be the characteristic of a currency of which
the precious metals are not the chief ingredient, or which can be
expanded or contracted without regard to the principles that regulate
the value of those metals as a standard in the general trade of the
world. With us bank issues constitute such a currency, and must ever
do so until they are made dependent on those just proportions of gold
and silver as a circulating medium which experience has proved to be
necessary not only in this but in all other commercial countries.
Where those proportions are not infused into the circulation and do
not control it, it is manifest that prices must vary according to the
tide of bank issues, and the value and stability of property must
stand exposed to all the uncertainty which attends the administration
of institutions that are constantly liable to the temptation of an
interest distinct from that of the community in which they are
established.

The progress of an expansion, or rather a depreciation, of the
currency by excessive bank issues is always attended by a loss to the
laboring classes. This portion of the community have neither time nor
opportunity to watch the ebbs and flows of the money market. Engaged
from day to day in their useful toils, they do not perceive that
although their wages are nominally the same, or even somewhat higher,
they are greatly reduced in fact by the rapid increase of a spurious
currency, which, as it appears to make money abound, they are at
first inclined to consider a blessing.

It is not so with the speculator, by whom this operation is better
understood, and is made to contribute to his advantage. It is not
until the prices of the necessaries of life become so dear that the
laboring classes can not supply their wants out of their wages that
the wages rise and gradually reach a justly proportioned rate to that
of the products of their labor. When thus, by depreciation in
consequence of the quantity of paper in circulation, wages as well as
prices become exorbitant, it is soon found that the whole effect of
the adulteration is a tariff on our home industry for the benefit of
the countries where gold and silver circulate and maintain uniformity
and moderation in prices. It is then perceived that the enhancement of
the price of land and labor produces a corresponding increase in the
price of products until these products do not sustain a competition
with similar ones in other countries, and thus both manufactured and
agricultural productions cease to bear expectation from the country
of the spurious currency, because they can not be sold for cost.

This is the process by which specie is banished by the paper of the
banks. Their vaults are soon exhausted to pay for foreign
commodities. The next step is a stoppage of specie payment -- a total
degradation of paper as a currency -- unusual depression of prices,
the ruin of debtors, and the accumulation of property in the hands of
creditors and cautious capitalists.

It was in view of these evils, together with the dangerous power
wielded by the Bank of the United States and its repugnance to our
Constitution, that I was induced to exert the power conferred upon me
by the American people to prevent the continuance of that institution.
But although various dangers to our republican institutions have been
obviated by the failure of that bank to extort from the Government a
renewal of its charter, it is obvious that little has been
accomplished except a salutary change of public opinion toward
restoring to the country the sound currency provided for in the
Constitution.

In the acts of several of the States prohibiting the circulation of
small notes and the auxiliary enactments of Congress at the last
session forbidding their reception or payment on public account, the
true policy of the country has been advanced and a larger portion of
the precious metals infused into our circulating medium. These
measures will probably be followed up in due time by the enactment of
State laws banishing from circulation bank notes of still higher
denominations, and the object may be materially promoted by further
acts of Congress forbidding the employment as fiscal agents of such
banks as continue to issue notes of low denominations and throw
impediments in the way of the circulation of gold and silver.

The effects of an extension of bank credits and over-issues of bank
paper have been strikingly illustrated in the sales of the public
lands. From the returns made by the various registers and receivers
in the early part of last summer it was perceived that the receipts
arising from the sales of the public lands were increasing to an
unprecedented amount. In effect, however, these receipts amounted to
nothing more than credits in bank. The banks lent out their notes to
speculators. They were paid to the receivers and immediately returned
to the banks, to be lent out again and again, being mere instruments
to transfer to speculators the most valuable public land and pay the
Government by a credit on the books of the banks.

Those credits on the books of some of the Western banks, usually
called deposits, were already greatly beyond their immediate means of
payment, and were rapidly increasing. Indeed, each speculation
furnished means for another; for no sooner had one individual or
company paid in the notes than they were immediately lent to another
for a like purpose, and the banks were extending their business and
their issues so largely as to alarm considerate men and render it
doubtful whether these bank credits, if permitted to accumulate,
would ultimately be of the least value to the Government. The spirit
of expansion and speculation was not confined to the deposit banks,
but pervaded the whole multitude of banks throughout the Union and
was giving rise to new institutions to aggravate the evil.

The safety of the public funds and the interest of the people
generally required that these operations should be checked; and it
became the duty of every branch of the General and State Governments
to adopt all legitimate and proper means to produce that salutary
effect. Under this view of my duty I directed the issuing of the
order which will be laid before you by the Secretary of the Treasury,
requiring payment for the public lands sold to be made in specie, with
an exception until the 15th of the present month in favor of actual
settlers.

This measure has produced many salutary consequences. It checked the
career of the Western banks and gave them additional strength in
anticipation of the pressure which has since pervaded our Eastern as
well as the European commercial cities. By preventing the extension
of the credit system it measurably cut off the means of speculation
and retarded its progress in monopolizing the most valuable of the
public lands. It has tended to save the new States from a
non-resident proprietorship, one of the greatest obstacles to the
advancement of a new country and the prosperity of an old one. It has
tended to keep open the public lands for entry by emigrants at
Government prices instead of their being compelled to purchase of
speculators at double or triple prices. And it is conveying into the
interior large sums in silver and gold, there to enter permanently
into the currency of the country and place it on a firmer foundation.
It is confidently believed that the country will find in the motives
which induced that order and the happy consequences which will have
ensued much to commend and nothing to condemn.

It remains for Congress if they approve the policy which dictated
this order to follow it up in its various bearings. Much good, in my
judgment, would be produced by prohibiting sales of the public lands
except to actual settlers at a reasonable reduction of price, and to
limit the quantity which shall be sold to them. Although it is
believed the General Government never ought to receive anything but
the constitutional currency in exchange for the public lands, that
point would be of less importance if the lands were sold for
immediate settlement and cultivation. Indeed, there is scarcely a
mischief arising out of our present land system, including the
accumulating surplus of revenues, which would not be remedied at once
by a restriction on land sales to actual settlers; and it promises
other advantages to the country in general and to the new States in
particular which can not fail to receive the most profound
consideration of Congress.

Experience continues to realize the expectations entertained as to
the capacity of the State banks to perform the duties of fiscal
agents for the Government at the time of the removal of the deposits.
It was alleged by the advocates of the Bank of the United States that
the State banks, what ever might be the regulations of the Treasury
Department, could not make the transfers required by the Government
or negotiate the domestic exchanges of the country. It is now well
ascertained that the real domestic exchanges performed through
discounts by the United States Bank and its 25 branches were at least
1/3 less than those of the deposit banks for an equal period of time;
and if a comparison be instituted between the amounts of service
rendered by these institutions on the broader basis which has been
used by the advocates of the United States Bank in estimating what
they consider the domestic exchanges transacted by it, the result
will be still more favorable to the deposit banks.

The whole amount of public money transferred by the Bank of the
United States in 1832 was $16,000,000. The amount transferred and
actually paid by the deposit banks in the year ending the first of
October last was $39,319,899; the amount transferred and paid between
that period and the 6th of November was $5,399,000, and the amount of
transfer warrants outstanding on that day was $14,450,000, making an
aggregate of $59,168,894. These enormous sums of money first
mentioned have been transferred with the greatest promptitude and
regularity, and the rates at which the exchanges have been negotiated
previously to the passage of the deposit act were generally below
those charged by the Bank of the United States. Independently of
these services, which are far greater than those rendered by the
United States Bank and its 25 branches, a number of the deposit banks
have, with a commendable zeal to aid in the improvement of the
currency, imported from abroad, at their own expense, large sums of
the precious metals for coinage and circulation.

In the same manner have nearly all the predictions turned out in
respect to the effect of the removal of the deposits -- a step
unquestionably necessary to prevent the evils which it was foreseen
the bank itself would endeavor to create in a final struggle to
procure a renewal of its charter. It may be thus, too, in some degree
with the further steps which may be taken to prevent the excessive
issue of other bank paper, but it is to be hoped that nothing will
now deter the Federal and State authorities from the firm and
vigorous performance of their duties to themselves and to the people
in this respect.

In reducing the revenue to the wants of the Government your
particular attention is invited to those articles which constitute
the necessaries of life. The duty on salt was laid as a war tax, and
was no doubt continued to assist in providing for the payment of the
war debt. There is no article the release of which from taxation
would be felt so generally and so beneficially. To this may be added
all kinds of fuel and provisions. Justice and benevolence unite in
favor of releasing the poor of our cities from burdens which are not
necessary to the support of our Government and tend only to increase
the wants of the destitute.

It will be seen by the report of the Secretary of the Treasury and
the accompanying documents that the Bank of the United States has
made no payment on account of the stock held by the Government in
that institution, although urged to pay any portion which might suit
its convenience, and that it has given no information when payment
may be expected. Nor, although repeatedly requested, has it furnished
the information in relation to its condition which Congress authorized
the Secretary to collect at their last session. Such measures as are
within the power of the Executive have been taken to ascertain the
value of the stock and procure the payment as early as possible.

The conduct and present condition of that bank and the great amount
of capital vested in it by the United States require your careful
attention. Its charter expired on the third day of March last, and it
has now no power but that given in the twenty-first section, "to use
the corporate name, style, and capacity for the purpose of suits for
the final settlement and liquidation of the affairs and accounts of
the corporation, and for the sale and disposition of their estate --
real, personal, and mixed -- but not for any other purpose or in any
other manner what so ever, nor for a period exceeding two years after
the expiration of the said term of incorporation".

Before the expiration of the charter the stock-holders of the bank
obtained an act of incorporation from the legislature of
Pennsylvania, excluding only the United States. Instead of proceeding
to wind up their concerns and pay over to the United States the amount
due on account of the stock held by them, the president and directors
of the old bank appear to have transferred the books, papers, notes,
obligations, and most or all of its property to this new corporation,
which entered upon business as a continuation of the old concern.

Amongst other acts of questionable validity, the notes of the expired
corporation are known to have been used as its own and again put in
circulation. That the old bank had no right to issue or re-issue its
notes after the expiration of its charter can not be denied, and that
it could not confer any such right on its substitute any more than
exercise it itself is equally plain. In law and honesty the notes of
the bank in circulation at the expiration of its charter should have
been called in by public advertisement, paid up as presented, and,
together with those on hand, canceled and destroyed.

Their re-issue is sanctioned by no law and warranted by no necessity.
If the United States be responsible in their stock for the payment of
these notes, their re- issue by the new corporation for their own
profit is a fraud on the Government. If the United States is not
responsible, then there is no legal responsibility in any quarter,
and it is a fraud on the country. They are the redeemed notes of a
dissolved partnership, but, contrary to the wishes of the retiring
partner and without his consent, are again re-issued and circulated.

It is the high and peculiar duty of Congress to decide whether any
further legislation be necessary for the security of the large amount
of public property now held and in use by the new bank, and for
vindicating the rights of the Government and compelling a speedy and
honest settlement with all the creditors of the old bank, public and
private, or whether the subject shall be left to the power now
possessed by the Executive and judiciary. It remains to be seen
whether the persons who as managers of the old bank undertook to
control the Government, retained the public dividends, shut their
doors upon a committee of the House of Representatives, and filled
the country with panic to accomplish their own sinister objects may
now as managers of a new bank continue with impunity to flood the
country with a spurious currency, use the $7M of Government stock for
their own profit, and refuse to the United States all information as
to the present condition of their own property and the prospect of
recovering it into their own possession.

The lessons taught by the Bank of the United States can not well be
lost upon the American people. They will take care never again to
place so tremendous a power in irresponsible hands, and it will be
fortunate if they seriously consider the consequences which are
likely to result on a smaller scale from the facility with which
corporate powers are granted by their State governments.

It is believed that the law of the last session regulating the
deposit banks operates onerously and unjustly upon them in many
respects, and it is hoped that Congress, on proper representations,
will adopt the modifications which are necessary to prevent this
consequence.

The report of the Secretary of War ad interim and the accompanying
documents, all which are herewith laid before you, will give you a
full view of the diversified and important operations of that
Department during the past year.

The military movements rendered necessary by the aggressions of the
hostile portions of the Seminole and Creek tribes of Indians, and by
other circumstances, have required the active employment of nearly
our whole regular force, including the Marine Corps, and of large
bodies of militia and volunteers. With all these events so far as
they were known at the seat of Government before the termination of
your last session you are already acquainted, and it is therefore
only needful in this place to lay before you a brief summary of what
has since occurred.

The war with the Seminoles during the summer was on our part chiefly
confined to the protection of our frontier settlements from the
incursions of the enemy, and, as a necessary and important means for
the accomplishment of that end, to the maintenance of the posts
previously established. In the course of this duty several actions
took place, in which the bravery and discipline of both officers and
men were conspicuously displayed, and which I have deemed it proper
to notice in respect to the former by the granting of brevet rank for
gallant services in the field. But as the force of the Indians was not
so far weakened by these partial successes as to lead them to submit,
and as their savage inroads were frequently repeated, early measures
were taken for placing at the disposal of Governor Call, who as
commander in chief of the Territorial militia had been temporarily
invested with the command, an ample force for the purpose of resuming
offensive operations in the most efficient manner so soon as the
season should permit. Major General Jesup was also directed, on the
conclusion of his duties in the Creek country, to repair to Florida
and assume the command.

The result of the first movement made by the forces under the
direction of Governor Call in October last, as detailed in the
accompanying papers, excited much surprise and disappointment. A full
explanation has been required of the causes which led to the failure
of that movement, but has not yet been received. In the mean time, as
it was feared that the health of Governor Call, who was understood to
have suffered much from sickness, might not be adequate to the
crisis, and as Major General Jesup was known to have reached Florida,
that officer was directed to assume command, and to prosecute all
needful operations with the utmost promptitude and vigor. From the
force at his disposal and the dispositions he has made and is
instructed to make, and from the very efficient measures which it is
since ascertained have been taken by Governor Call, there is reason
to hope that they will soon be enabled to reduce the enemy to
subjection. In the mean time, as you will perceive from the report of
the Secretary, there is urgent necessity for further appropriations to
suppress these hostilities.

Happily for the interests of humanity, the hostilities with the
Creeks were brought to a close soon after your adjournment, without
that effusion of blood which at one time was apprehended as
inevitable. The unconditional submission of the hostile party was
followed by their speedy removal to the country assigned them West of
the Mississippi. The inquiry as to alleged frauds in the purchase of
the reservations of these Indians and the causes of their
hostilities, requested by the resolution of the House of
Representatives of the first of July last [1836-07-01] to be made by
the President, is now going on through the agency of commissioners
appointed for that purpose. Their report may be expected during your
present session.

The difficulties apprehended in the Cherokee country have been
prevented, and the peace and safety of that region and its vicinity
effectually secured, by the timely measures taken by the War
Department, and still continued.

The discretionary authority given to General Gaines to cross the
Sabine and to occupy a position as far West as Nacogdoches, in case
he should deem such a step necessary to the protection of the
frontier and to the fulfillment of the stipulations contained in our
treaty with Mexico, and the movement subsequently made by that
officer have been alluded to in a former part of this message. At the
date of the latest intelligence from Nacogdoches our troops were yet
at that station, but the officer who has succeeded General Gaines has
recently been advised that from the facts known at the seat of
Government there would seem to be no adequate cause for any longer
maintaining that position, and he was accordingly instructed, in case
the troops were not already withdrawn under the discretionary powers
before possessed by him, to give the requisite orders for that
purpose on the receipt of the instructions, unless he shall then have
in his possession such information as shall satisfy him that the
maintenance of the post is essential to the protection of our
frontiers and to the due execution of our treaty stipulations, as
previously explained to him.

Whilst the necessities existing during the present year for the
service of militia and volunteers have furnished new proofs of the
patriotism of our fellow citizens, they have also strongly
illustrated the importance of an increase in the rank and file of the
Regular Army. The views of this subject submitted by the Secretary of
War in his report meet my entire concurrence, and are earnestly
commended to the deliberate attention of Congress. In this connection
it is also proper to remind you that the defects in our present
militia system are every day rendered more apparent. The duty of
making further provision by law for organizing, arming, and
disciplining this arm of defense has been so repeatedly presented to
Congress by myself and my predecessors that I deem it sufficient on
this occasion to refer to the last annual message and to former
Executive communications in which the subject has been discussed.

It appears from the reports of the officers charged with mustering
into service the volunteers called for under the act of Congress of
the last session that more presented themselves at the place of
rendezvous in Tennessee than were sufficient to meet the requisition
which had been made by the Secretary of War upon the governor of that
State. This was occasioned by the omission of the governor to
apportion the requisition to the different regiments of militia so as
to obtain the proper number of troops and no more. It seems but just
to the patriotic citizens who repaired to the general rendezvous
under circumstances authorizing them to believe that their services
were needed and would be accepted that the expenses incurred by them
while absent from their homes should be paid by the Government. I
accordingly recommend that a law to this effect be passed by
Congress, giving them a compensation which will cover their expenses
on the march to and from the place of rendezvous and while there; in
connection with which it will also be proper to make provision for
such other equitable claims growing out of the service of the militia
as may not be embraced in the existing laws.

On the unexpected breaking out of hostilities in Florida, Alabama,
and Georgia it became necessary in some cases to take the property of
individuals for public use. Provision should be made by law for
indemnifying the owners; and I would also respectfully suggest
whether some provision may not be made, consistently with the
principles of our Government, for the relief of the sufferers by
Indian depredations or by the operations of our own troops.

No time was lost after the making of the requisite appropriations in
resuming the great national work of completing the unfinished
fortifications on our sea-board and of placing them in a proper state
of defense. In consequence, however, of the very late day at which
those bills were passed, but little progress could be made during the
season which has just closed. A very large amount of the moneys
granted at your last session accordingly remains unexpended; but as
the work will be again resumed at the earliest moment in the coming
spring, the balance of the existing appropriations, and in several
cases which will be laid before you, with the proper estimates,
further sums for the like objects, may be usefully expended during
the next year.

The recommendations of an increase in the Engineer Corps and for a
reorganization of the Topographical Corps, submitted to you in my
last annual message, derive additional strength from the great
embarrassments experienced during the present year in those branches
of the service, and under which they are now suffering. Several of
the most important surveys and constructions directed by recent laws
have been suspended in consequence of the want of adequate force in
these corps.

The like observations may be applied to the Ordnance Corps and to the
general staff, the operations of which as they are now organized must
either be frequently interrupted or performed by officers taken from
the line of the Army, to the great prejudice of the service.

For a general view of the condition of the Military Academy and of
other branches of the military service not already noticed, as well
as for further illustrations of those which have been mentioned, I
refer you to the accompanying documents, and among the various
proposals contained therein for legislative action I would
particularly notice the suggestion of the Secretary of War for the
revision of the pay of the Army as entitled to your favorable
regard.

The national policy, founded alike in interest and in humanity, so
long and so steadily pursued by this Government for the removal of
the Indian tribes originally settled on this side of the Mississippi
to the W of that river, may be said to have been consummated by the
conclusion of the late treaty with the Cherokees. The measures taken
in the execution of that treaty and in relation to our Indian affairs
generally will fully appear by referring to the accompanying papers.
Without dwelling on the numerous and important topics embraced in
them, I again invite your attention to the importance of providing a
well-digested and comprehensive system for the protection,
supervision, and improvement of the various tribes now planted in the
Indian country.

The suggestions submitted by the Commissioner of Indian Affairs, and
enforced by the Secretary, on this subject, and also in regard to the
establishment of additional military posts in the Indian country, are
entitled to your profound consideration. Both measures are necessary,
for the double purpose of protecting the Indians from intestine war,
and in other respects complying with our engagements with them, and
of securing our western frontier against incursions which otherwise
will assuredly be made on it. The best hopes of humanity in regard to
the aboriginal race, the welfare of our rapidly extending settlements,
and the honor of the United States are all deeply involved in the
relations existing between this Government and the emigrating tribes.
I trust, therefore, that the various matters submitted in the
accompanying documents in respect to those relations will receive
your early and mature deliberation, and that it may issue in the
adoption of legislative measures adapted to the circumstances and
duties of the present crisis.

You are referred to the report of the Secretary of the Navy for a
satisfactory view of the operations of the Department under his
charge during the present year. In the construction of vessels at the
different navy yards and in the employment of our ships and squadrons
at sea that branch of the service has been actively and usefully
employed. While the situation of our commercial interests in the West
Indies required a greater number than usual of armed vessels to be
kept on that station, it is gratifying to perceive that the
protection due to our commerce in other quarters of the world has not
proved insufficient. Every effort has been made to facilitate the
equipment of the exploring expedition authorized by the act of the
last session, but all the preparation necessary to enable it to sail
has not yet been completed. No means will be spared by the Government
to fit out the expedition on a scale corresponding with the liberal
appropriations for the purpose and with the elevated character of the
objects which are to be effected by it.

I beg leave to renew the recommendation made in my last annual
message respecting the enlistment of boys in our naval service, and
to urge upon your attention the necessity of further appropriations
to increase the number of ships afloat and to enlarge generally the
capacity and force of the Navy. The increase of our commerce and our
position in regard to the other powers of the world will always make
it our policy and interest to cherish the great naval resources of
our country.

The report of the PostMaster General presents a gratifying picture of
the condition of the Post Office Department. Its revenues for the year
ending the 30th June last were $3,398,455.19, showing an increase of
revenue over that of the preceding year of $404,878.53, or more than
13%. The expenditures for the same year were $2,755,623.76,
exhibiting