Speech Transcript:

 To the Congress of the United States:

You are confronted at the threshold of your legislative duties with a
condition of the national finances which imperatively demands
immediate and careful consideration.

The amount of money annually exacted, through the operation of
present laws, from the industries and necessities of the people
largely exceeds the sum necessary to meet the expenses of the
Government.

When we consider that the theory of our institutions guarantees to
every citizen the full enjoyment of all the fruits of his industry
and enterprise, with only such deduction as may be his share toward
the careful and economical maintenance of the Government which
protects him, it is plain that the exaction of more than this is
indefensible extortion and a culpable betrayal of American fairness
and justice. This wrong inflicted upon those who bear the burden of
national taxation, like other wrongs, multiplies a brood of evil
consequences. The public Treasury, which should only exist as a
conduit conveying the people's tribute to its legitimate objects of
expenditure, becomes a hoarding place for money needlessly withdrawn
from trade and the people's use, thus crippling our national
energies, suspending our country's development, preventing investment
in productive enterprise, threatening financial disturbance, and
inviting schemes of public plunder.

This condition of our Treasury is not altogether new, and it has more
than once of late been submitted to the people's representatives in
the Congress, who alone can apply a remedy. And yet the situation
still continues, with aggravated incidents, more than ever presaging
financial convulsion and widespread disaster.

It will not do to neglect this situation because its dangers are not
now palpably imminent and apparent. They exist none the less
certainly, and await the unforeseen and unexpected occasion when
suddenly they will be precipitated upon us.

On the 30th day of June, 1885, the excess of revenues over public
expenditures, after complying with the annual requirement of the
sinking-fund act, was $17,859,735.84; during the year ended June 30,
1886, such excess amounted to $49,405,545.20, and during the year
ended June 30, 1887, it reached the sum of $55,567,849.54.

The annual contributions to the sinking fund during the three years
above specified, amounting in the aggregate to $138,058,320.94, and
deducted from the surplus as stated, were made by calling in for that
purpose outstanding 3 per cent bonds of the Government. During the six
months prior to June 30, 1887, the surplus revenue had grown so large
by repeated accumulations, and it was feared the withdrawal of this
great sum of money needed by the people would so affect the business
of the country, that the sum of $79,864,100 of such surplus was
applied to the payment of the principal and interest of the 3 per
cent bonds still outstanding, and which were then payable at the
option of the Government. The precarious condition of financial
affairs among the people still needing relief, immediately after the
30th day of June, 1887, the remainder of the 3 per cent bonds then
outstanding, amounting with principal and interest to the sum of
$18,877,500, were called in and applied to the sinking-fund
contribution for the current fiscal year. Notwithstanding these
operations of the Treasury Department, representations of distress in
business circles not only continued, but increased, and absolute peril
seemed at hand. In these circumstances the contribution to the sinking
fund for the current fiscal year was at once completed by the
expenditure of $27,684,283.55 in the purchase of Government bonds not
yet due bearing 4 and 41/2 per cent interest, the premium paid thereon
averaging about 24 per cent for the former and 8 per cent for the
latter. In addition to this, the interest accruing during the current
year upon the outstanding bonded indebtedness of the Government was to
some extent anticipated, and banks selected as depositories of public
money were permitted to somewhat increase their deposits.

While the expedients thus employed to release to the people the money
lying idle in the Treasury served to avert immediate danger, our
surplus revenues have continued to accumulate, the excess for the
present year amounting on the 1st day of December to $55,258,701.19,
and estimated to reach the sum of $113,000,000 on the 30th of June
next, at which date it is expected that this sum, added to prior
accumulations, will swell the surplus in the Treasury to
$140,000,000.

There seems to be no assurance that, with such a withdrawal from use
of the people's circulating medium, our business community may not in
the near future be subjected to the same distress which was quite
lately produced from the same cause. And while the functions of our
National Treasury should be few and simple, and while its best
condition would be reached, I believe, by its entire disconnection
with private business interests, yet when, by a perversion of its
purposes, it idly holds money uselessly subtracted from the channels
of trade, there seems to be reason for the claim that some legitimate
means should be devised by the Government to restore in an emergency,
without waste or extravagance, such money to its place among the
people.

If such an emergency arises, there now exists no clear and undoubted
executive power of relief. Heretofore the redemption of 3 per cent
bonds, which were payable at the option of the Government, has
afforded a means for the disbursement of the excess of our revenues;
but these bonds have all been retired, and there are no bonds
outstanding the payment of which we have a right to insist upon. The
contribution to the sinking fund which furnishes the occasion for
expenditure in the purchase of bonds has been already made for the
current year, so that there is no outlet in that direction.

In the present state of legislation the only pretense of any existing
executive power to restore at this time any part of our surplus
revenues to the people by its expenditure consists in the supposition
that the Secretary of the Treasury may enter the market and purchase
the bonds of the Government not yet due, at a rate of premium to be
agreed upon. The only provision of law from which such a power could
be derived is found in an appropriation bill passed a number of years
ago, and it is subject to the suspicion that it was intended as
temporary and limited in its application, instead of conferring a
continuing discretion and authority. No condition ought to exist
which would justify the grant of power to a single official, upon his
judgment of its necessity, to withhold from or release to the business
of the people, in an unusual manner, money held in the Treasury, and
thus affect at his will the financial situation of the country; and
if it is deemed wise to lodge in the Secretary of the Treasury the
authority in the present juncture to purchase bonds, it should be
plainly vested, and provided, as far as possible, with such checks
and limitations as will define this official's right and discretion
and at the same time relieve him from undue responsibility.

In considering the question of purchasing bonds as a means of
restoring to circulation the surplus money accumulating in the
Treasury, it should be borne in mind that premiums must of course be
paid upon such purchase, that there may be a large part of these
bonds held as investments which can not be purchased at any price,
and that combinations among holders who are willing to sell may
unreasonably enhance the cost of such bonds to the Government.

It has been suggested that the present bonded debt might be refunded
at a less rate of interest and the difference between the old and new
security paid in cash, thus finding use for the surplus in the
Treasury. The success of this plan, it is apparent, must depend upon
the volition of the holders of the present bonds; and it is not
entirely certain that the inducement which must be offered them would
result in more financial benefit to the Government than the purchase
of bonds, while the latter proposition would reduce the principal of
the debt by actual payment instead of extending it.

The proposition to deposit the money held by the Government in banks
throughout the country for use by the people is, it seems to me,
exceedingly objectionable in principle, as establishing too close a
relationship between the operations of the Government Treasury and
the business of the country and too extensive a commingling of their
money, thus fostering an unnatural reliance in private business upon
public funds. If this scheme should be adopted, it should only be
done as a temporary expedient to meet an urgent necessity.
Legislative and executive effort should generally be in the opposite
direction, and should have a tendency to divorce, as much and as fast
as can be safely done, the Treasury Department from private
enterprise.

Of course it is not expected that unnecessary and extravagant
appropriations will be made for the purpose of avoiding the
accumulation of an excess of revenue. Such expenditure, besides the
demoralization of all just conceptions of public duty which it
entails, stimulates a habit of reckless improvidence not in the least
consistent with the mission of our people or the high and beneficent
purposes of our Government.

I have deemed it my duty to thus bring to the knowledge of my
countrymen, as well as to the attention of their representatives
charged with the responsibility of legislative relief, the gravity of
our financial situation. The failure of the Congress heretofore to
provide against the dangers which it was quite evident the very
nature of the difficulty must necessarily produce caused a condition
of financial distress and apprehension since your last adjournment
which taxed to the utmost all the authority and expedients within
executive control; and these appear now to be exhausted. If disaster
results from the continued inaction of Congress, the responsibility
must rest where it belongs.

Though the situation thus far considered is fraught with danger which
should be fully realized, and though it presents features of wrong to
the people as well as peril to the country, it is but a result
growing out of a perfectly palpable and apparent cause, constantly
reproducing the same alarming circumstances--a congested National
Treasury and a depleted monetary condition in the business of the
country. It need hardly be stated that while the present situation
demands a remedy, we can only be saved from a like predicament in the
future by the removal of its cause.

Our scheme of taxation, by means of which this needless surplus is
taken from the people and put into the public Treasury, consists of a
tariff or duty levied upon importations from abroad and
internal-revenue taxes levied upon the consumption of tobacco and
spirituous and malt liquors. It must be conceded that none of the
things subjected to internal-revenue taxation are, strictly speaking,
necessaries. There appears to be no just complaint of this taxation by
the consumers of these articles, and there seems to be nothing so well
able to bear the burden without hardship to any portion of the
people.

But our present tariff laws, the vicious, inequitable, and illogical
source of unnecessary taxation, ought to be at once revised and
amended. These laws, as their primary and plain effect, raise the
price to consumers of all articles imported and subject to duty by
precisely the sum paid for such duties. Thus the amount of the duty
measures the tax paid by those who purchase for use these imported
articles. Many of these things, however, are raised or manufactured
in our own country, and the duties now levied upon foreign goods and
products are called protection to these home manufactures, because
they render it possible for those of our people who are manufacturers
to make these taxed articles and sell them for a price equal to that
demanded for the imported goods that have paid customs duty. So it
happens that while comparatively a few use the imported articles,
millions of our people, who never used and never saw any of the
foreign products, purchase and use things of the same kind made in
this country, and pay therefor nearly or quite the same enhanced
price which the duty adds to the imported articles. Those who buy
imports pay the duty charged thereon into the public Treasury, but
the great majority of our citizens, who buy domestic articles of the
same class, pay a sum at least approximately equal to this duty to
the home manufacturer. This reference to the operation of our tariff
laws is not made by way of instruction, but in order that we may be
constantly reminded of the manner in which they impose a burden upon
those who consume domestic products as well as those who consume
imported articles, and thus create a tax upon all our people.

It is not proposed to entirely relieve the country of this taxation.
It must be extensively continued as the source of the Government's
income; and in a readjustment of our tariff the interests of American
labor engaged in manufacture should be carefully considered, as well
as the preservation of our manufacturers. It may be called protection
or by any other name, but relief from the hardships and dangers of our
present tariff laws should be devised with especial precaution against
imperiling the existence of our manufacturing interests. But this
existence should not mean a condition which, without regard to the
public welfare or a national exigency, must always insure the
realization of immense profits instead of moderately profitable
returns. As the volume and diversity of our national activities
increase, new recruits are added to those who desire a continuation
of the advantages which they conceive the present system of tariff
taxation directly affords them. So stubbornly have all efforts to
reform the present condition been resisted by those of our
fellow-citizens thus engaged that they can hardly complain of the
suspicion, entertained to a certain extent, that there exists an
organized combination all along the line to maintain their
advantage.

We are in the midst of centennial celebrations, and with becoming
pride we rejoice in American skill and ingenuity, in American energy
and enterprise, and in the wonderful natural advantages and resources
developed by a century's national growth. Yet when an attempt is made
to justify a scheme which permits a tax to be laid upon every
consumer in the land for the benefit of our manufacturers, quite
beyond a reasonable demand for governmental regard, it suits the
purposes of advocacy to call our manufactures infant industries still
needing the highest and greatest degree of favor and fostering care
that can be wrung from Federal legislation.

It is also said that the increase in the price of domestic
manufactures resulting from the present tariff is necessary in order
that higher wages may be paid to our workingmen employed in
manufactories than are paid for what is called the pauper labor of
Europe. All will acknowledge the force of an argument which involves
the welfare and liberal compensation of our laboring people. Our
labor is honorable in the eyes of every American citizen; and as it
lies at the foundation of our development and progress, it is
entitled, without affectation or hypocrisy, to the utmost regard. The
standard of our laborers' life should not be measured by that of any
other country less favored, and they are entitled to their full share
of all our advantages.

By the last census it is made to appear that of the 17,392,099 of our
population engaged in all kinds of industries 7,670,493 are employed
in agriculture, 4,074,238 in professional and personal service
(2,934,876 of whom are domestic servants and laborers), while
1,810,256 are employed in trade and transportation and 3,837,112 are
classed as employed in manufacturing and mining.

For present purposes, however, the last number given should be
considerably reduced. Without attempting to enumerate all, it will be
conceded that there should be deducted from those which it includes
375,143 carpenters and joiners, 285,401 milliners, dressmakers, and
seamstresses, 172,726 blacksmiths, 133,756 tailors and tailoresses,
102,473 masons, 76,241 butchers, 41,309 bakers, 22,083 plasterers,
and 4,891 engaged in manufacturing agricultural implements, amounting
in the aggregate to 1,214,023, leaving 2,623,089 persons employed in
such manufacturing industries as are claimed to be benefited by a
high tariff.

To these the appeal is made to save their employment and maintain
their wages by resisting a change. There should be no disposition to
answer such suggestions by the allegation that they are in a minority
among those who labor, and therefore should forego an advantage in the
interest of low prices for the majority. Their compensation, as it may
be affected by the operation of tariff laws, should at all times be
scrupulously kept in view; and yet with slight reflection they will
not overlook the fact that they are consumers with the rest; that
they too have their own wants and those of their families to supply
from their earnings, and that the price of the necessaries of life,
as well as the amount of their wages, will regulate the measure of
their welfare and comfort.

But the reduction of taxation demanded should be so measured as not
to necessitate or justify either the loss of employment by the
workingman or the lessening of his wages; and the profits still
remaining to the manufacturer after a necessary readjustment should
furnish no excuse for the sacrifice of the interests of his
employees, either in their opportunity to work or in the diminution
of their compensation. Nor can the worker in manufactures fail to
understand that while a high tariff is claimed to be necessary to
allow the payment of remunerative wages, it certainly results in a
very large increase in the price of nearly all sorts of manufactures,
which, in almost countless forms, he needs for the use of himself and
his family. He receives at the desk of his employer his wages, and
perhaps before he reaches his home is obliged, in a purchase for
family use of an article which embraces his own labor, to return in
the payment of the increase in price which the tariff permits the
hard-earned compensation of many days of toil.

The farmer and the agriculturist, who manufacture nothing, but who
pay the increased price which the tariff imposes upon every
agricultural implement, upon all he wears, and upon all he uses and
owns, except the increase of his flocks and herds and such things as
his husbandry produces from the soil, is invited to aid in
maintaining the present situation; and he is told that a high duty on
imported wool is necessary for the benefit of those who have sheep to
shear, in order that the price of their wool may be increased. They,
of course, are not reminded that the farmer who has no sheep is by
this scheme obliged, in his purchases of clothing and woolen goods,
to pay a tribute to his fellow-farmer as well as to the manufacturer
and merchant, nor is any mention made of the fact that the sheep
owners themselves and their households must wear clothing and use
other articles manufactured from the wool they sell at tariff prices,
and thus as consumers must return their share of this increased price
to the tradesman.

I think it may be fairly assumed that a large proportion of the sheep
owned by the farmers throughout the country are found in small flocks,
numbering from twenty-five to fifty. The duty on the grade of imported
wool which these sheep yield is 10 cents each pound if of the value of
30 cents or less and 12 cents if of the value of more than 30 cents.
If the liberal estimate of 6 pounds be allowed for each fleece, the
duty thereon would be 60 or 72 cents; and this may be taken as the
utmost enhancement of its price to the farmer by reason of this duty.
Eighteen dollars would thus represent the increased price of the wool
from twenty-five sheep and $36 that from the wool of fifty sheep; and
at present values this addition would amount to about one-third of its
price. If upon its sale the farmer receives this or a less tariff
profit, the wool leaves his hands charged with precisely that sum,
which in all its changes will adhere to it until it reaches the
consumer. When manufactured into cloth and other goods and material
for use, its cost is not only increased to the extent of the farmer's
tariff profit, but a further sum has been added for the benefit of the
manufacturer under the operation of other tariff laws. In the meantime
the day arrives when the farmer finds it necessary to purchase woolen
goods and material to clothe himself and family for the winter. When
he faces the tradesman for that purpose, he discovers that he is
obliged not only to return in the way of increased prices his tariff
profit on the wool he sold, and which then perhaps lies before him in
manufactured form, but that he must add a considerable sum thereto to
meet a further increase in cost caused by a tariff duty on the
manufacture. Thus in the end he is aroused to the fact that he has
paid upon a moderate purchase, as a result of the tariff scheme,
which when he sold his wool seemed so profitable, an increase in
price more than sufficient to sweep away all the tariff profit he
received upon the wool he produced and sold.

When the number of farmers engaged in wool raising is compared with
all the farmers in the country and the small proportion they bear to
our population is considered; when it is made apparent that in the
case of a large part of those who own sheep the benefit of the
present tariff on wool is illusory; and, above all, when it must be
conceded that the increase of the cost of living caused by such
tariff becomes a burden upon those with moderate means and the poor,
the employed and unemployed, the sick and well, and the young and
old, and that it constitutes a tax which with relentless grasp is
fastened upon the clothing of every man, woman, and child in the
land, reasons are suggested why the removal or reduction of this duty
should be included in a revision of our tariff laws.

In speaking of the increased cost to the consumer of our home
manufactures resulting from a duty laid upon imported articles of the
same description, the fact is not ever looked that competition among
our domestic producers sometimes has the effect of keeping the price
of their products below the highest limit allowed by such duty. But
it is notorious that this competition is too often strangled by
combinations quite prevalent at this time, and frequently called
trusts, which have for their object the regulation of the supply and
price of commodities made and sold by members of the combination. The
people can hardly hope for any consideration in the operation of these
selfish schemes.

If, however, in the absence of such combination, a healthy and free
competition reduces the price of any particular dutiable article of
home production below the limit which it might otherwise reach under
our tariff laws, and if with such reduced price its manufacture
continues to thrive, it is entirely evident that one thing has been
discovered which should be carefully scrutinized in an effort to
reduce taxation.

The necessity of combination to maintain the price of any commodity
to the tariff point furnishes proof that someone is willing to accept
lower prices for such commodity and that such prices are remunerative;
and lower prices produced by competition prove the same thing. Thus
where either of these conditions exists a case would seem to be
presented for an easy reduction of taxation.

The considerations which have been presented touching our tariff laws
are intended only to enforce an earnest recommendation that the
surplus revenues of the Government be prevented by the reduction of
our customs duties, and at the same time to emphasize a suggestion
that in accomplishing this purpose we may discharge a double duty to
our people by granting to them a measure of relief from tariff
taxation in quarters where it is most needed and from sources where
it can be most fairly and justly accorded.

Nor can the presentation made of such considerations be with any
degree of fairness regarded as evidence of unfriendliness toward our
manufacturing interests or of any lack of appreciation of their value
and importance.

These interests constitute a leading and most substantial element of
our national greatness and furnish the proud proof of our country's
progress. But if in the emergency that presses upon us our
manufacturers are asked to surrender something for the public good
and to avert disaster, their patriotism, as well as a grateful
recognition of advantages already afforded, should lead them to
willing cooperation. No demand is made that they shall forego all the
benefits of governmental regard; but they can not fail to be
admonished of their duty, as well as their enlightened self-interest
and safety, when they are reminded of the fact that financial panic
and collapse, to which the present condition tends, afford no greater
shelter or protection to our manufactures than to other important
enterprises. Opportunity for safe, careful, and deliberate reform is
now offered; and none of us should be unmindful of a time when an
abused and irritated people, heedless of those who have resisted
timely and reasonable relief, may insist upon a radical and sweeping
rectification of their wrongs.

The difficulty attending a wise and fair revision of our tariff laws
is not underestimated. It will require on the part of the Congress
great labor and care, and especially a broad and national
contemplation of the subject and a patriotic disregard of such local
and selfish claims as are unreasonable and reckless of the welfare of
the entire country.

Under our present laws more than 4,000 articles are subject to duty.
Many of these do not in any way compete with our own manufactures,
and many are hardly worth attention as subjects of revenue. A
considerable reduction can be made in the aggregate by adding them to
the free list. The taxation of luxuries presents no features of
hardship; but the necessaries of life used and consumed by all the
people, the duty upon which adds to the cost of living in every home,
should be greatly cheapened.

The radical reduction of the duties imposed upon raw material used in
manufactures, or its free importation, is of course an important
factor in any effort to reduce the price of these necessaries. It
would not only relieve them from the increased cost caused by the
tariff on such material, but the manufactured product being thus
cheapened that part of the tariff now laid upon such product, as a
compensation to our manufacturers for the present price of raw
material, could be accordingly modified. Such reduction or free
importation would serve besides to largely reduce the revenue. It is
not apparent how such a change can have any injurious effect upon our
manufacturers. On the contrary, it would appear to give them a better
chance in foreign markets with the manufacturers of other countries,
who cheapen their wares by free material. Thus our people might have
the opportunity of extending their sales beyond the limits of home
consumption, saving them from the depression, interruption in
business, and loss caused by a glutted domestic market and affording
their employees more certain and steady labor, with its resulting
quiet and contentment.

The question thus imperatively presented for solution should be
approached in a spirit higher than partisanship and considered in the
light of that regard for patriotic duty which should characterize the
action of those intrusted with the weal of a confiding people. But
the obligation to declared party policy and principle is not wanting
to urge prompt and effective action. Both of the great political
parties now represented in the Government have by repeated and
authoritative declarations condemned the condition of our laws which
permit the collection from the people of unnecessary revenue, and
have in the most solemn manner promised its correction; and neither
as citizens nor partisans are our countrymen in a mood to condone the
deliberate violation of these pledges.

Our progress toward a wise conclusion will not be improved by
dwelling upon the theories of protection and free trade. This savors
too much of bandying epithets. It is a condition which confronts us,
not a theory. Relief from this condition may involve a slight
reduction of the advantages which we award our home productions, but
the entire withdrawal of such advantages should not be contemplated.
The question of free trade is absolutely irrelevant, and the
persistent claim made in certain quarters that all the efforts to
relieve the people from unjust and unnecessary taxation are schemes
of so-called free traders is mischievous and far removed from any
consideration for the public good.

The simple and plain duty which we owe the people is to reduce
taxation to the necessary expenses of an economical operation of the
Government and to restore to the business of the country the money
which we hold in the Treasury through the perversion of governmental
powers. These things can and should be done with safety to all our
industries, without danger to the opportunity for remunerative labor
which our workingmen need, and with benefit to them and all our
people by cheapening their means of subsistence and increasing the
measure of their comforts.

The Constitution provides that the President "shall from time to time
give to the Congress information of the state of the Union." It has
been the custom of the Executive, in compliance with this provision,
to annually exhibit to the Congress, at the opening of its session,
the general condition of the country, and to detail with some
particularity the operations of the different Executive Departments.
It would be especially agreeable to follow this course at the present
time and to call attention to the valuable accomplishments of these
Departments during the last fiscal year; but I am so much impressed
with the paramount importance of the subject to which this
communication has thus far been devoted that I shall forego the
addition of any other topic, and only urge upon your immediate
consideration the "state of the Union" as shown in the present
condition of our Treasury and our general fiscal situation, upon
which every element of our safety and prosperity depends.

The reports of the heads of Departments, which will be submitted,
contain full and explicit information touching the transaction of the
business intrusted to them and such recommendations relating to
legislation in the public interest as they deem advisable. I ask for
these reports and recommendations the deliberate examination and
action of the legislative branch of the Government.

There are other subjects not embraced in the departmental reports
demanding legislative consideration, and which I should be glad to
submit. Some of them, however, have been earnestly presented in
previous messages, and as to them I beg leave to repeat prior
recommendations.

As the law makes no provision for any report from the Department of
State, a brief history of the transactions of that important
Department, together with other matters which it may hereafter be
deemed essential to commend to the attention of the Congress, may
furnish the occasion for a future communication.