Speech Transcript:

 To the Senate and House of Representatives:

No nation has greater resources than ours, and I think it can be
truthfully said that the citizens of no nation possess greater energy
and industrial ability. In no nation are the fundamental business
conditions sounder than in ours at this very moment; and it is
foolish, when such is the case, for people to hoard money instead of
keeping it in sound banks; for it is such hoarding that is the
immediate occasion of money stringency. Moreover, as a rule, the
business of our people is conducted with honesty and probity, and
this applies alike to farms and factories, to railroads and banks, to
all our legitimate commercial enterprises.

In any large body of men, however, there are certain to be some who
are dishonest, and if the conditions are such that these men prosper
or commit their misdeeds with impunity, their example is a very evil
thing for the community. Where these men are business men of great
sagacity and of temperament both unscrupulous and reckless, and where
the conditions are such that they act without supervision or control
and at first without effective check from public opinion, they delude
many innocent people into making investments or embarking in kinds of
business that are really unsound. When the misdeeds of these
successfully dishonest men are discovered, suffering comes not only
upon them, but upon the innocent men whom they have misled. It is a
painful awakening, whenever it occurs; and, naturally, when it does
occur those who suffer are apt to forget that the longer it was
deferred the more painful it would be. In the effort to punish the
guilty it is both wise and proper to endeavor so far as possible to
minimize the distress of those who have been misled by the guilty.
Yet it is not possible to refrain because of such distress from
striving to put an end to the misdeeds that are the ultimate causes
of the suffering, and, as a means to this end, where possible to
punish those responsible for them. There may be honest differences of
opinion as to many governmental policies; but surely there can be no
such differences as to the need of unflinching perseverance in the
war against successful dishonesty.

In my Message to the Congress on December 5, 1905, I said:

"If the folly of man mars the general well-being, then those who are
innocent of the folly will have to pay part of the penalty incurred
by those who are guilty of the folly. A panic brought on by the
speculative folly of part of the business community would hurt the
whole business community; but such stoppage of welfare, though it
might be severe, would not be lasting. In the long run, the one vital
factor in the permanent prosperity of the country is the high
individual character of the average American worker, the average
American citizen, no matter whether his work be mental or manual,
whether he be farmer or wage-worker, business man or professional
man.

"In our industrial and social system the interests of all men are so
closely intertwined that in the immense majority of cases a
straight-dealing man, who by his efficiency, by his ingenuity and
industry, benefits himself, must also benefit others. Normally, the
man of great productive capacity who becomes rich by guiding the
labor of many other men does so by enabling them to produce more than
they could produce without his guidance; and both he and they share in
the benefit, which comes also to the public at large. The superficial
fact that the sharing may be unequal must never blind us to the
underlying fact that there is this sharing, and that the benefit
comes in some degree to each man concerned.. Normally, the
wageworker, the man of small means, and the average consumer, as well
as the average producer, are all alike helped by making conditions
such that the man of exceptional business ability receives an
exceptional reward for his ability Something can be done by
legislation to help the general prosperity; but no such help of a
permanently beneficial character can be given to the less able and
less fortunate save as the results of a policy which shall inure to
the advantage of all industrious and efficient people who act
decently; and this is only another way of saying that any benefit
which comes to the less able and less fortunate must of necessity
come even more to the more able and more fortunate. If, therefore,
the less fortunate man is moved by envy of his more fortunate brother
to strike at the conditions under which they have both, though
unequally, prospered, the result will assuredly be that while damage
may come to the one struck at, it will visit with an even heavier
load the one who strikes the blow. Taken as a whole, we must all go
up or go down together.

"Yet, while not merely admitting, but insisting upon this, it is also
true that where there is no governmental restraint or supervision some
of the exceptional men use their energies, not in ways that are for
the common good, but in ways which tell against this common good. The
fortunes amassed through corporate organization are now so large, and
vest such power in those that wield them, as to make it a matter of
necessity to give to the sovereign--that is, to the Government, which
represents the people as a whole--some effective power of supervision
over their corporate use. In order to insure a healthy social and
industrial life, every big corporation should be held responsible by,
and be accountable to, some sovereign strong enough to control its
conduct. I am in no sense hostile to corporations. This is an age of
combination, and any effort to prevent all combination will be not
only useless, but in the end vicious, because of the contempt for law
which the failure to enforce law inevitably produces. We should,
moreover, recognize in cordial and ample fashion the immense good
effected by corporate agencies in a country such as ours, and the
wealth of intellect, energy, and fidelity devoted to their service,
and therefore normally to the service of the public, by their
officers and directors. The corporation has come to stay, just as the
trade union has come to stay. Each can do and has done great good.
Each should be favored so long as it does good. But each should be
sharply checked where it acts against law and justice.

"The makers of our National Constitution provided especially that the
regulation of interstate commerce should come within the sphere of the
General Government. The arguments in favor of their taking this stand
were even then overwhelming. But they are far stronger to-day, in
view of the enormous development of great business agencies, usually
corporate in form. Experience has shown conclusively that it is
useless to try to get any adequate regulation and supervision of
these great corporations by State action. Such regulation and
supervision can only be effectively exercised by a sovereign whose
jurisdiction is coextensive with the field of work of the
corporations--that is, by the National Government. I believe that
this regulation and supervision can be obtained by the enactment of
law by the Congress. Our steady aim should be by legislation,
cautiously and carefully undertaken, but resolutely persevered in, to
assert the sovereignty of the National Government by affirmative
action.

"This is only in form an innovation. In substance it is merely a
restoration; for from the earliest time such regulation of industrial
activities has been recognized in the action of the lawmaking bodies;
and all that I propose is to meet the changed conditions in such
manner as will prevent the Commonwealth abdicating the power it has
always possessed, not only in this country, but also in England
before and since this country became a separate nation.

"It has been a misfortune that the National laws on this subject have
hitherto been of a negative or prohibitive rather than an affirmative
kind, and still more that they have in part sought to prohibit what
could not be effectively prohibited, and have in part in their
prohibitions confounded what should be allowed and what should not be
allowed. It is generally useless to try to prohibit all restraint on
competition, whether this restraint be reasonable or unreasonable;
and where it is not useless it is generally hurtful. The successful
prosecution of one device to evade the law immediately develops
another device to accomplish the same purpose. What is needed is not
sweeping prohibition of every arrangement, good or bad, which may
tend to restrict competition, but such adequate supervision and
regulation as will prevent any restriction of competition from being
to the detriment of the public, as well as such supervision and
regulation as will prevent other abuses in no way connected with
restriction of competition."

I have called your attention in these quotations to what I have
already said because I am satisfied that it is the duty of the
National Government to embody in action the principles thus
expressed.

No small part of the trouble that we have comes from carrying to an
extreme the national virtue of self-reliance, of independence in
initiative and action. It is wise to conserve this virtue and to
provide for its fullest exercise, compatible with seeing that liberty
does not become a liberty to wrong others. Unfortunately, this is the
kind of liberty that the lack of all effective regulation inevitably
breeds. The founders of the Constitution provided that the National
Government should have complete and sole control of interstate
commerce. There was then practically no interstate business save such
as was conducted by water, and this the National Government at once
proceeded to regulate in thoroughgoing and effective fashion.
Conditions have now so wholly changed that the interstate commerce by
water is insignificant compared with the amount that goes by land, and
almost all big business concerns are now engaged in interstate
commerce. As a result, it can be but partially and imperfectly
controlled or regulated by the action of any one of the several
States; such action inevitably tending to be either too drastic or
else too lax, and in either case ineffective for purposes of justice.
Only the National Government can in thoroughgoing fashion exercise the
needed control. This does not mean that there should be any extension
of Federal authority, for such authority already exists under the
Constitution in amplest and most far-reaching form; but it does mean
that there should be an extension of Federal activity. This is not
advocating centralization. It is merely looking facts in the face,
and realizing that centralization in business has already come and
can not be avoided or undone, and that the public at large can only
protect itself from certain evil effects of this business
centralization by providing better methods for the exercise of
control through the authority already centralized in the National
Government by the Constitution itself. There must be no ball in the
healthy constructive course of action which this Nation has elected
to pursue, and has steadily pursued, during the last six years, as
shown both in the legislation of the Congress and the administration
of the law by the Department of Justice. The most vital need is in
connection with the railroads. As to these, in my judgment there
should now be either a national incorporation act or a law licensing
railway companies to engage in interstate commerce upon certain
conditions. The law should be so framed as to give to the Interstate
Commerce Commission power to pass upon the future issue of
securities, while ample means should be provided to enable the
Commission, whenever in its judgment it is necessary, to make a
physical valuation of any railroad. As I stated in my Message to the
Congress a year ago, railroads should be given power to enter into
agreements, subject to these agreements being made public in minute
detail and to the consent of the Interstate Commerce Commission being
first obtained. Until the National Government assumes proper control
of interstate commerce, in the exercise of the authority it already
possesses, it will be impossible either to give to or to get from the
railroads full justice. The railroads and all other great corporations
will do well to recognize that this control must come; the only
question is as to what governmental body can most wisely exercise it.
The courts will determine the limits within which the Federal
authority can exercise it, and there will still remain ample work
within each State for the railway commission of that State; and the
National Interstate Commerce Commission will work in harmony with the
several State commissions, each within its own province, to achieve
the desired end.

Moreover, in my judgment there should be additional legislation
looking to the proper control of the great business concerns engaged
in interstate business, this control to be exercised for their own
benefit and prosperity no less than for the protection of investors
and of the general public. As I have repeatedly said in Messages to
the Congress and elsewhere, experience has definitely shown not
merely the unwisdom but the futility of endeavoring to put a stop to
all business combinations. Modern industrial conditions are such that
combination is not only necessary but inevitable. It is so in the
world of business just as it is so in the world of labor, and it is
as idle to desire to put an end to all corporations, to all big
combinations of capital, as to desire to put an end to combinations
of labor. Corporation and labor union alike have come to stay. Each
if properly managed is a source of good and not evil. Whenever in
either there is evil, it should be promptly held to account; but it
should receive hearty encouragement so long as it is properly
managed. It is profoundly immoral to put or keep on the statute books
a law, nominally in the interest of public morality that really puts a
premium upon public immorality, by undertaking to forbid honest men
from doing what must be done under modern business conditions, so
that the law itself provides that its own infraction must be the
condition precedent upon business success. To aim at the
accomplishment of too much usually means the accomplishment of too
little, and often the doing of positive damage. In my Message to the
Congress a year ago, in speaking of the antitrust laws, I said:

"The actual working of our laws has shown that the effort to prohibit
all combination, good or bad, is noxious where it is not ineffective.
Combination of capital, like combination of labor, is a necessary
element in our present industrial system. It is not possible
completely to prevent it; and if it were possible, such complete
prevention would do damage to the body politic. What we need is not
vainly to try to prevent all combination, but to secure such rigorous
and adequate control and supervision of the combinations as to prevent
their injuring the public, or existing in such forms as inevitably to
threaten injury. It is unfortunate that our present laws should
forbid all combinations instead of sharply discriminating between
those combinations which do evil. Often railroads would like to
combine for the purpose of preventing a big shipper from maintaining
improper advantages at the expense of small shippers and of the
general public. Such a combination, instead of being forbidden by
law, should be favored. It is a public evil to have on the statute
books a law incapable of full enforcement, because both judges and
juries realize that its full enforcement would destroy the business
of the country; for the result is to make decent men violators of the
law against their will, and to put a premium on the behavior of the
willful wrongdoers. Such a result in turn tends to throw the decent
man and the willful wrongdoer into close association, and in the end
to drag down the former to the latter's level; for the man who
becomes a lawbreaker in one way unhappily tends to lose all respect
for law and to be willing to break it in many ways. No more scathing
condemnation could be visited upon a law than is contained in the
words of the Interstate Commerce Commission when, in commenting upon
the fact that the numerous joint traffic associations do technically
violate the law, they say: The decision of the United States Supreme
Court in the Trans-Missouri case and the Joint Traffic Association
case has produced no practical effect upon the railway operations of
the country. Such associations, in fact, exist now as they did before
these decisions, and with the same general effect. In justice to all
parties, we ought probably to add that it is difficult to see how our
interstate railways could be operated with due regard to the interest
of the shipper and the railway without concerted action of the kind
afforded through these associations.

"This means that the law as construed by the Supreme Court is such
that the business of the country can not be conducted without
breaking it."

As I have elsewhere said:

"All this is substantially what I have said over and over again.
Surely it ought not to be necessary to say that it in no shape or way
represents any hostility to corporations as such. On the contrary, it
means a frank recognition of the fact that combinations of capital,
like combinations of labor, are a natural result of modern conditions
and of our National development. As far as in my ability lies my
endeavor is and will be to prevent abuse of power by either and to
favor both so long as they do well. The aim of the National
Government is quite as much to favor and protect honest corporations,
honest business men of wealth, as to bring to justice those
individuals and corporations representing dishonest methods. Most
certainly there will be no relaxation by the Government authorities
in the effort to get at any great railroad wrecker--any man who by
clever swindling devices robs investors, oppresses wage-workers, and
does injustice to the general public. But any such move as this is in
the interest of honest railway operators, of honest corporations, and
of those who, when they invest their small savings in stocks and
bonds, wish to be assured that these will represent money honestly
expended for legitimate business purposes. To confer upon the
National Government the power for which I ask would be a check upon
overcapitalization and upon the clever gamblers who benefit by
overcapitalization. But it alone would mean an increase in the value,
an increase in the safety of the stocks and bonds of law-abiding,
honestly managed railroads, and would render it far easier to market
their securities. I believe in proper publicity. There has been
complaint of some of the investigations recently carried on, but
those who complain should put the blame where it belongs--upon the
misdeeds which are done in darkness and not upon the investigations
which brought them to light. The Administration is responsible for
turning on the light, but it is not responsible for what the light
showed. I ask for full power to be given the Federal Government,
because no single State can by legislation effectually cope with
these powerful corporations engaged in interstate commerce, and,
while doing them full justice, exact from them in return full justice
to others. The conditions of railroad activity, the conditions of our
immense interstate commerce, are such as to make the Central
Government alone competent to exercise full supervision and control.

"The grave abuses in individual cases of railroad management in the
past represent wrongs not merely to the general public, but, above
all, wrongs to fair-dealing and honest corporations and men of
wealth, because they excite a popular anger and distrust which from
the very nature of the case tends to include in the sweep of its
resentment good and bad alike. From the standpoint of the public I
can not too earnestly say that as soon as the natural and proper
resentment aroused by these abuses becomes indiscriminate and
unthinking, it also becomes not merely unwise and unfair, but
calculated to defeat the very ends which those feeling it have in
view. There has been plenty of dishonest work by corporations in the
past. There will not be the slightest let-up in the effort to hunt
down and punish every dishonest man. But the bulk of our business is
honestly done. In the natural indignation the people feel over the
dishonesty, it is essential that they should not lose their heads and
get drawn into an indiscriminate raid upon all corporations, all
people of wealth, whether they do well or ill. Out of any such wild
movement good will not come, can not come, and never has come. On the
contrary, the surest way to invite reaction is to follow the lead of
either demagogue or visionary in a sweeping assault upon property
values and upon public confidence, which would work incalculable
damage in the business world and would produce such distrust of the
agitators that in the revulsion the distrust would extend to honest
men who, in sincere and same fashion, are trying to remedy the
evils."

The antitrust law should not be repealed; but it should be made both
more efficient and more in harmony with actual conditions. It should
be so amended as to forbid only the kind of combination which does
harm to the general public, such amendment to be accompanied by, or
to be an incident of, a grant of supervisory power to the Government
over these big concerns engaged in interstate business. This should
be accompanied by provision for the compulsory publication of
accounts and the subjection of books and papers to the inspection of
the Government officials. A beginning has already been made for such
supervision by the establishment of the Bureau of Corporations.

The antitrust law should not prohibit combinations that do no
injustice to the public, still less those the existence of which is
on the whole of benefit to the public. But even if this feature of
the law were abolished, there would remain as an equally
objectionable feature the difficulty and delay now incident to its
enforcement. The Government must now submit to irksome and repeated
delay before obtaining a final decision of the courts upon
proceedings instituted, and even a favorable decree may mean an empty
victory. Moreover, to attempt to control these corporations by
lawsuits means to impose upon both the Department of Justice and the
courts an impossible burden; it is not feasible to carry on more than
a limited number of such suits. Such a law to be really effective must
of course be administered by an executive body, and not merely by
means of lawsuits. The design should be to prevent the abuses
incident to the creation of unhealthy and improper combinations,
instead of waiting until they are in existence and then attempting to
destroy them by civil or criminal proceedings.

A combination should not be tolerated if it abuse the power acquired
by combination to the public detriment. No corporation or association
of any kind should be permitted to engage in foreign or interstate
commerce that is formed for the purpose of, or whose operations
create, a monopoly or general control of the production, sale, or
distribution of any one or more of the prime necessities of life or
articles of general use and necessity. Such combinations are against
public policy; they violate the common law; the doors of the courts
are closed to those who are parties to them, and I believe the
Congress can close the channels of interstate commerce against them
for its protection. The law should make its prohibitions and
permissions as clear and definite as possible, leaving the least
possible room for arbitrary action, or allegation of such action, on
the part of the Executive, or of divergent interpretations by the
courts. Among the points to be aimed at should be the prohibition of
unhealthy competition, such as by rendering service at an actual loss
for the purpose of crushing out competition, the prevention of
inflation of capital, and the prohibition of a corporation's making
exclusive trade with itself a condition of having any trade with
itself. Reasonable agreements between, or combinations of,
corporations should be permitted, provided they are submitted to and
approved by some appropriate Government body.

The Congress has the power to charter corporations to engage in
interstate and foreign commerce, and a general law can be enacted
under the provisions of which existing corporations could take out
Federal charters and new Federal corporations could be created. An
essential provision of such a law should be a method of
predetermining by some Federal board or commission whether the
applicant for a Federal charter was an association or combination
within the restrictions of the Federal law. Provision should also be
made for complete publicity in all matters affecting the public and
complete protection to the investing public and the shareholders in
the matter of issuing corporate securities. If an incorporation law
is not deemed advisable, a license act for big interstate
corporations might be enacted; or a combination of the two might be
tried. The supervision established might be analogous to that now
exercised over national banks. At least, the antitrust act should be
supplemented by specific prohibitions of the methods which experience
has shown have been of most service in enabling monopolistic
combinations to crush out competition. The real owners of a
corporation should be compelled to do business in their own name. The
right to hold stock in other corporations should hereafter be denied
to interstate corporations, unless on approval by the Government
officials, and a prerequisite to such approval should be the listing
with the Government of all owners and stockholders, both by the
corporation owning such stock and by the corporation in which such
stock is owned.

To confer upon the National Government, in connection with the
amendment I advocate in the antitrust law, power of supervision over
big business concerns engaged in interstate commerce, would benefit
them as it has benefited the national banks. In the recent business
crisis it is noteworthy that the institutions which failed were
institutions which were not under the supervision and control of the
National Government. Those which were under National control stood
the test.

National control of the kind above advocated would be to the benefit
of every well-managed railway. From the standpoint of the public
there is need for additional tracks, additional terminals, and
improvements in the actual handling of the railroads, and all this as
rapidly as possible. Ample, safe, and speedy transportation facilities
are even more necessary than cheap transportation. Therefore, there is
need for the investment of money which will provide for all these
things while at the same time securing as far as is possible better
wages and shorter hours for their employees. Therefore, while there
must be just and reasonable regulation of rates, we should be the
first to protest against any arbitrary and unthinking movement to cut
them down without the fullest and most careful consideration of all
interests concerned and of the actual needs of the situation. Only a
special body of men acting for the National Government under
authority conferred upon it by the Congress is competent to pass
judgment on such a matter.

Those who fear, from any reason, the extension of Federal activity
will do well to study the history not only of the national banking
act but of the pure-food law, and notably the meat inspection law
recently enacted. The pure-food law was opposed so violently that its
passage was delayed for a decade; yet it has worked unmixed and
immediate good. The meat inspection law was even more violently
assailed; and the same men who now denounce the attitude of the
National Government in seeking to oversee and control the workings of
interstate common carriers and business concerns, then asserted that
we were "discrediting and ruining a great American industry." Two
years have not elapsed, and already it has become evident that the
great benefit the law confers upon the public is accompanied by an
equal benefit to the reputable packing establishments. The latter are
better off under the law than they were without it. The benefit to
interstate common carriers and business concerns from the legislation
I advocate would be equally marked.

Incidentally, in the passage of the pure-food law the action of the
various State food and dairy commissioners showed in striking fashion
how much good for the whole people results from the hearty cooperation
of the Federal and State officials in securing a given reform. It is
primarily to the action of these State commissioners that we owe the
enactment of this law; for they aroused the people, first to demand
the enactment and enforcement of State laws on the subject, and then
the enactment of the Federal law, without which the State laws were
largely ineffective. There must be the closest cooperation between
the National and State governments in administering these laws.

In my Message to the Congress a year ago I spoke as follows of the
currency:

"I especially call your attention to the condition of our currency
laws. The national-bank act has ably served a great purpose in aiding
the enormous business development of the country, and within ten years
there has been an increase in circulation per capita from $21.41 to
$33.08. For several years evidence has been accumulating that
additional legislation is needed. The recurrence of each crop season
emphasizes the defects of the present laws. There must soon be a
revision of them, because to leave them as they are means to incur
liability of business disaster. Since your body adjourned there has
been a fluctuation in the interest on call money from 2 per cent to
30 percent, and the fluctuation was even greater during the preceding
six months. The Secretary of the Treasury had to step in and by wise
action put a stop to the most violent period of oscillation. Even
worse than such fluctuation is the advance in commercial rates and
the uncertainty felt in the sufficiency of credit even at high rates.
All commercial interests suffer during each crop period. Excessive
rates for call money in New York attract money from the interior
banks into the speculative field. This depletes the fund that would
otherwise be available for commercial uses, and commercial borrowers
are forced to pay abnormal rates, so that each fall a tax, in the
shape of increased interest charges, is placed on the whole commerce
of the country.

"The mere statement of these facts shows that our present system is
seriously defective. There is need of a change. Unfortunately,
however, many of the proposed changes must be ruled from
consideration because they are complicated, are not easy of
comprehension, and tend to disturb existing rights and interests. We
must also rule out any plan which would materially impair the value
of the United States 2 per cent bonds now pledged to secure
circulation, the issue of which was made under conditions peculiarly
creditable to the Treasury. I do not press any especial plan. Various
plans have recently been proposed by expert committees of bankers.
Among the plans which are possibly feasible and which certainly
should receive your consideration is that repeatedly brought to your
attention by the present Secretary of the Treasury, the essential
features of which have been approved by many prominent bankers and
business men. According to this plan national banks should be
permitted to issue a specified proportion of their capital in notes
of a given kind, the issue to be taxed at so high a rate as to drive
the notes back when not wanted in legitimate trade. This plan would
not permit the issue of currency to give banks additional profits,
but to meet the emergency presented by times of stringency.

"I do not say that this is the right system. I only advance it to
emphasize my belief that there is need for the adoption of some
system which shall be automatic and open to all sound banks, so as to
avoid all possibility of discrimination and favoritism. Such a plan
would tend to prevent the spasms of high money and speculation which
now obtain in the New York market; for at present there is too much
currency at certain seasons of the year, and its accumulation at New
York tempts bankers to lend it at low rates for speculative purposes;
whereas at other times when the crops are being moved there is urgent
need for a large but temporary increase in the currency supply. It
must never be forgotten that this question concerns business men
generally quite as much as bankers; especially is this true of
stockmen, farmers, and business men in the West; for at present at
certain seasons of the year the difference in interest rates between
the East and the West is from 6 to 10 per cent, whereas in Canada the
corresponding difference is but 2 per cent. Any plan must, of course,
guard the interests of western and southern bankers as carefully as
it guards the interests of New York or Chicago bankers, and must be
drawn from the standpoints of the farmer and the merchant no less
than from the standpoints of the city banker and the country
banker."

I again urge on the Congress the need of immediate attention to this
matter. We need a greater elasticity in our currency; provided, of
course, that we recognize the even greater need of a safe and secure
currency. There must always be the most rigid examination by the
National authorities. Provision should be made for an emergency
currency. The emergency issue should, of course, be made with an
effective guaranty, and upon conditions carefully prescribed by the
Government. Such emergency issue must be based on adequate securities
approved by the Government, and must be issued under a heavy tax. This
would permit currency being issued when the demand for it was urgent,
while securing its requirement as the demand fell off. It is worth
investigating to determine whether officers and directors of national
banks should ever be allowed to loan to themselves. Trust companies
should be subject to the same supervision as banks; legislation to
this effect should be enacted for the District of Columbia and the
Territories.

Yet we must also remember that even the wisest legislation on the
subject can only accomplish a certain amount. No legislation can by
any possibility guarantee the business community against the results
of speculative folly any more than it can guarantee an individual
against the results of his extravagance. When an individual mortgages
his house to buy an automobile he invites disaster; and when wealthy
men, or men who pose as such, or are unscrupulously or foolishly
eager to become such, indulge in reckless speculation--especially if
it is accompanied by dishonesty--they jeopardize not only their own
future but the future of all their innocent fellow-citizens, for the
expose the whole business community to panic and distress.

The income account of the Nation is in a most satisfactory condition.
For the six fiscal years ending with the 1st of July last, the total
expenditures and revenues of the National Government, exclusive of
the postal revenues and expenditures, were, in round numbers,
revenues, $3,465,000,0000, and expenditures, $3,275,000,000. The net
excess of income over expenditures, including in the latter the fifty
millions expended for the Panama Canal, was one hundred and ninety
million dollars for the six years, an average of about thirty-one
millions a year. This represents an approximation between income and
outgo which it would be hard to improve. The satisfactory working of
the present tariff law has been chiefly responsible for this
excellent showing. Nevertheless, there is an evident and constantly
growing feeling among our people that the time is rapidly approaching
when our system of revenue legislation must be revised.

This country is definitely committed to the protective system and any
effort to uproot it could not but cause widespread industrial
disaster. In other words, the principle of the present tariff law
could not with wisdom be changed. But in a country of such phenomenal
growth as ours it is probably well that every dozen years or so the
tariff laws should be carefully scrutinized so as to see that no
excessive or improper benefits are conferred thereby, that proper
revenue is provided, and that our foreign trade is encouraged. There
must always be as a minimum a tariff which will not only allow for
the collection of an ample revenue but which will at least make good
the difference in cost of production here and abroad; that is, the
difference in the labor cost here and abroad, for the well-being of
the wage-worker must ever be a cardinal point of American policy. The
question should be approached purely from a business standpoint; both
the time and the manner of the change being such as to arouse the
minimum of agitation and disturbance in the business world, and to
give the least play for selfish and factional motives. The sole
consideration should be to see that the sum total of changes
represents the public good. This means that the subject can not with
wisdom be dealt with in the year preceding a Presidential election,
because as a matter of fact experience has conclusively shown that at
such a time it is impossible to get men to treat it from the
standpoint of the public good. In my judgment the wise time to deal
with the matter is immediately after such election.

When our tax laws are revised the question of an income tax and an
inheritance tax should receive the careful attention of our
legislators. In my judgment both of these taxes should be part of our
system of Federal taxation. I speak diffidently about the income tax
because one scheme for an income tax was declared unconstitutional by
the Supreme Court; while in addition it is a difficult tax to
administer in its practical working, and great care would have to be
exercised to see that it was not evaded by the very men whom it was
most desirable to have taxed, for if so evaded it would, of course,
be worse than no tax at all; as the least desirable of all taxes is
the tax which bears heavily upon the honest as compared with the
dishonest man. Nevertheless, a graduated income tax of the proper
type would be a desirable feature of Federal taxation, and it is to
be hoped that one may be devised which the Supreme Court will declare
constitutional. The inheritance tax, however, is both a far better
method of taxation, and far more important for the purpose of having
the fortunes of the country bear in proportion to their increase in
size a corresponding increase and burden of taxation. The Government
has the absolute right to decide as to the terms upon which a man
shall receive a bequest or devise from another, and this point in the
devolution of property is especially appropriate for the imposition of
a tax. Laws imposing such taxes have repeatedly been placed upon the
National statute books and as repeatedly declared constitutional by
the courts; and these laws contained the progressive principle, that
is, after a certain amount is reached the bequest or gift, in life or
death, is increasingly burdened and the rate of taxation is increased
in proportion to the remoteness of blood of the man receiving the
bequest. These principles are recognized already in the leading
civilized nations of the world. In Great Britain all the estates
worth $5,000 or less are practically exempt from death duties, while
the increase is such that when an estate exceeds five millions of
dollars in value and passes to a distant kinsman or stranger in blood
the Government receives all told an amount equivalent to nearly a
fifth of the whole estate. In France so much of an inheritance as
exceeds $10,000,000 pays over a fifth to the State if it passes to a
distant relative. The German law is especially interesting to us
because it makes the inheritance tax an imperial measure while
allotting to the individual States of the Empire a portion of the
proceeds and permitting them to impose taxes in addition to those
imposed by the Imperial Government. Small inheritances are exempt,
but the tax is so sharply progressive that when the inheritance is
still not very large, provided it is not an agricultural or a forest
land, it is taxed at the rate of 25 per cent if it goes to distant
relatives. There is no reason why in the United States the National
Government should not impose inheritance taxes in addition to those
imposed by the States, and when we last had an inheritance tax about
one-half of the States levied such taxes concurrently with the
National Government, making a combined maximum rate, in some cases as
high as 25 per cent. The French law has one feature which is to be
heartily commended. The progressive principle is so applied that each
higher rate is imposed only on the excess above the amount subject to
the next lower rate; so that each increase of rate will apply only to
a certain amount above a certain maximum. The tax should if possible
be made to bear more heavily upon those residing without the country
than within it. A heavy progressive tax upon a very large fortune is
in no way such a tax upon thrift or industry as a like would be on a
small fortune. No advantage comes either to the country as a whole or
to the individuals inheriting the money by permitting the transmission
in their entirety of the enormous fortunes which would be affected by
such a tax; and as an incident to its function of revenue raising,
such a tax would help to preserve a measurable equality of
opportunity for the people of the generations growing to manhood. We
have not the slightest sympathy with that socialistic idea which
would try to put laziness, thriftlessness and inefficiency on a par
with industry, thrift and efficiency; which would strive to break up
not merely private property, but what is far more important, the
home, the chief prop upon which our whole civilization stands. Such a
theory, if ever adopted, would mean the ruin of the entire country--a
ruin which would bear heaviest upon the weakest, upon those least
able to shift for themselves. But proposals for legislation such as
this herein advocated are directly opposed to this class of
socialistic theories. Our aim is to recognize what Lincoln pointed
out: The fact that there are some respects in which men are obviously
not equal; but also to insist that there should be an equality of
self-respect and of mutual respect, an equality of rights before the
law, and at least an approximate equality in the conditions under
which each man obtains the chance to show the stuff that is in him
when compared to his fellows.

A few years ago there was loud complaint that the law could not be
invoked against wealthy offenders. There is no such complaint now.
The course of the Department of Justice during the last few years has
been such as to make it evident that no man stands above the law, that
no corporation is so wealthy that it can not be held to account. The
Department of Justice has been as prompt to proceed against the
wealthiest malefactor whose crime was one of greed and cunning as to
proceed against the agitator who incites to brutal violence.
Everything that can be done under the existing law, and with the
existing state of public opinion, which so profoundly influences both
the courts and juries, has been done. But the laws themselves need
strengthening in more than one important point; they should be made
more definite, so that no honest man can be led unwittingly to break
them, and so that the real wrongdoer can be readily punished.

Moreover, there must be the public opinion back of the laws or the
laws themselves will be of no avail. At present, while the average
juryman undoubtedly wishes to see trusts broken up, and is quite
ready to fine the corporation itself, he is very reluctant to find
the facts proven beyond a reasonable doubt when it comes to sending
to jail a member of the business community for indulging in practices
which are profoundly unhealthy, but which, unfortunately, the business
community has grown to recognize as well-nigh normal. Both the present
condition of the law and the present temper of juries render it a task
of extreme difficulty to get at the real wrongdoer in any such case,
especially by imprisonment. Yet it is from every standpoint far
preferable to punish the prime offender by imprisonment rather than
to fine the corporation, with the attendant damage to stockholders.

The two great evils in the execution of our criminal laws to-day are
sentimentality and technicality. For the latter the remedy must come
from the hands of the legislatures, the courts, and the lawyers. The
other must depend for its cure upon the gradual growth of a sound
public opinion which shall insist that regard for the law and the
demands of reason shall control all other influences and emotions in
the jury box. Both of these evils must be removed or public
discontent with the criminal law will continue.

Instances of abuse in the granting of injunctions in labor disputes
continue to occur, and the resentment in the minds of those who feel
that their rights are being invaded and their liberty of action and
of speech unwarrantably restrained continues likewise to grow. Much
of the attack on the use of the process of injunction is wholly
without warrant; but I am constrained to express the belief that for
some of it there is warrant. This question is becoming more and more
one of prime importance, and unless the courts will themselves deal
with it in effective manner, it is certain ultimately to demand some
form of legislative action. It would be most unfortunate for our
social welfare if we should permit many honest and law-abiding
citizens to feel that they had just cause for regarding our courts
with hostility. I earnestly commend to the attention of the Congress
this matter, so that some way may be devised which will limit the
abuse of injunctions and protect those rights which from time to time
it unwarrantably invades. Moreover, discontent is often expressed with
the use of the process of injunction by the courts, not only in labor
disputes, but where State laws are concerned. I refrain from
discussion of this question as I am informed that it will soon
receive the consideration of the Supreme Court.

The Federal courts must of course decide ultimately what are the
respective spheres of State and Nation in connection with any law,
State or National, and they must decide definitely and finally in
matters affecting individual citizens, not only as to the rights and
wrongs of labor but as to the rights and wrongs of capital; and the
National Government must always see that the decision of the court is
put into effect. The process of injunction is an essential adjunct of
the court's doing its work well; and as preventive measures are
always better than remedial, the wise use of this process is from
every standpoint commendable. But where it is recklessly or
unnecessarily used, the abuse should he censured, above all by the
very men who are properly anxious to prevent any effort to shear the
courts of this necessary power. The court's decision must be final;
the protest is only against the conduct of individual judges in
needlessly anticipating such final decision, or in the tyrannical use
of what is nominally a temporary injunction to accomplish what is in
fact a permanent decision.

The loss of life and limb from railroad accidents in this country has
become appalling. It is a subject of which the National Government
should take supervision. It might be well to begin by providing for a
Federal inspection of interstate railroads somewhat along the lines of
Federal inspection of steamboats, although not going so far; perhaps
at first all that it would be necessary to have would be some officer
whose duty would be to investigate all accidents on interstate
railroads and report in detail the causes thereof. Such an officer
should make it his business to get into close touch with railroad
operating men so as to become thoroughly familiar with every side of
the question, the idea being to work along the lines of the present
steamboat inspection law.

The National Government should be a model employer. It should demand
the highest quality of service from each of its employees and it
should care for all of them properly in return. Congress should adopt
legislation providing limited but definite compensation for accidents
to all workmen within the scope of the Federal power, including
employees of navy yards and arsenals. In other words, a model
employers' liability act, far-reaching and thoroughgoing, should be
enacted which should apply to all positions, public and private, over
which the National Government has jurisdiction. The number of
accidents to wage-workers, including those that are preventable and
those that are not, has become appalling in the mechanical,
manufacturing, and transportation operations of the day. It works
grim hardship to the ordinary wage-worker and his family to have the
effect of such an accident fall solely upon him; and, on the other
hand, there are whole classes of attorneys who exist only by inciting
men who may or may not have been wronged to undertake suits for
negligence. As a matter of fact a suit for negligence is generally an
inadequate remedy for the person injured, while it often causes
altogether disproportionate annoyance to the employer. The law should
be made such that the payment for accidents by the employer would be
automatic instead of being a matter for lawsuits. Workmen should
receive certain and definite compensation for all accidents in
industry irrespective of negligence. The employer is the agent of the
public and on his own responsibility and for his own profit he serves
the public. When he starts in motion agencies which create risks for
others, he should take all the ordinary and extraordinary risks
involved; and the risk he thus at the moment assumes will ultimately
be assumed, as it ought to be, by the general public. Only in this
way can the shock of the accident be diffused, instead of falling
upon the man or woman least able to bear it, as is now the case. The
community at large should share the burdens as well as the benefits
of industry. By the proposed law, employers would gain a desirable
certainty of obligation and get rid of litigation to determine it,
while the workman and his family would be relieved from a crushing
load. With such a policy would come increased care, and accidents
would be reduced in number. The National laws providing for
employers' liability on railroads engaged in interstate commerce and
for safety appliances, as well as for diminishing the hours any
employee of a railroad should be permitted to work, should all be
strengthened wherever in actual practice they have shown weakness;
they should be kept on the statute books in thoroughgoing form.

The constitutionality of the employers' liability act passed by the
preceding Congress has been carried before the courts. In two
jurisdictions the law has been declared unconstitutional, and in
three jurisdictions its constitutionality has been affirmed. The
question has been carried to the Supreme Court, the case has been
heard by that tribunal, and a decision is expected at an early date.
In the event that the court should affirm the constitutionality of
the act, I urge further legislation along the lines advocated in my
Message to the preceding Congress. The practice of putting the entire
burden of loss to life or limb upon the victim or the victim's family
is a form of social injustice in which the United States stands in
unenviable prominence. In both our Federal and State legislation we
have, with few exceptions, scarcely gone farther than the repeal of
the fellow-servant principle of the old law of liability, and in some
of our States even this slight modification of a completely outgrown
principle has not yet been secured. The legislation of the rest of
the industrial world stands out in striking contrast to our
backwardness in this respect. Since 1895 practically every country of
Europe, together with Great Britain, New Zealand, Australia, British
Columbia, and the Cape of Good Hope has enacted legislation embodying
in one form or another the complete recognition of the principle which
places upon the employer the entire trade risk in the various lines of
industry. I urge upon the Congress the enactment of a law which will
at the same time bring Federal legislation up to the standard already
established by all the European countries, and which will serve as a
stimulus to the various States to perfect their legislation in this
regard.

The Congress should consider the extension of the eight-hour law. The
constitutionality of the present law has recently been called into
question, and the Supreme Court has decided that the existing
legislation is unquestionably within the powers of the Congress. The
principle of the eight-hour day should as rapidly and as far as
practicable be extended to the entire work carried on by the
Government; and the present law should be amended to embrace
contracts on those public works which the present wording of the act
has been construed to exclude. The general introduction of the
eight-hour day should be the goal toward which we should steadily
tend, and the Government should set the example in this respect.

Strikes and lockouts, with their attendant loss and suffering,
continue to increase. For the five years ending December 31, 1905,
the number of strikes was greater than those in any previous ten
years and was double the number in the preceding five years. These
figures indicate the increasing need of providing some machinery to
deal with this class of disturbance in the interest alike of the
employer, the employee, and the general public. I renew my previous
recommendation that the Congress favorably consider the matter of
creating the machinery for compulsory investigation of such
industrial controversies as are of sufficient magnitude and of
sufficient concern to the people of the country as a whole to warrant
the Federal Government in taking action.

The need for some provision for such investigation was forcibly
illustrated during the past summer. A strike of telegraph operators
seriously interfered with telegraphic communication, causing great
damage to business interests and serious inconvenience to the general
public. Appeals were made to me from many parts of the country, from
city councils, from boards of trade, from chambers of commerce, and
from labor organizations, urging that steps be taken to terminate the
strike. Everything that could with any propriety be done by a
representative of the Government was done, without avail, and for
weeks the public stood by and suffered without recourse of any kind.
Had the machinery existed and had there been authority for compulsory
investigation of the dispute, the public would have been placed in
possession of the merits of the controversy, and public opinion would
probably have brought about a prompt adjustment.

Each successive step creating machinery for the adjustment of labor
difficulties must be taken with caution, but we should endeavor to
make progress in this direction.

The provisions of the act of 1898 creating the chairman of the
Interstate Commerce Commission and the Commissioner of Labor a board
of mediation in controversies between interstate railroads and their
employees has, for the first time, been subjected to serious tests
within the past year, and the wisdom of the experiment has been fully
demonstrated. The creation of a board for compulsory investigation in
cases where mediation fails and arbitration is rejected is the next
logical step in a progressive program.

It is certain that for some time to come there will be a constant
increase absolutely, and perhaps relatively, of those among our
citizens who dwell in cities or towns of some size and who work for
wages. This means that there will be an ever-increasing need to
consider the problems inseparable from a great industrial
civilization. Where an immense and complex business, especially in
those branches relating to manufacture and transportation, is
transacted by a large number of capitalists who employ a very much
larger number of wage-earners, the former tend more and more to
combine into corporations and the latter into unions. The relations
of the capitalist and wage-worker to one another, and of each to the
general public, are not always easy to adjust; and to put them and
keep them on a satisfactory basis is one of the most important and
one of the most delicate tasks before our whole civilization. Much of
the work for the accomplishment of this end must be done by the
individuals concerned themselves, whether singly or in combination;
and the one fundamental fact that must never be lost track of is that
the character of the average man, whether he be a man of means or a
man who works with his hands, is the most important factor in solving
the problem aright. But it is almost equally important to remember
that without good laws it is also impossible to reach the proper
solution. It is idle to hold that without good laws evils such as
child labor, as the over-working of women, as the failure to protect
employees from loss of life or limb, can be effectively reached, any
more than the evils of rebates and stock-watering can be reached
without good laws. To fail to stop these practices by legislation
means to force honest men into them, because otherwise the dishonest
who surely will take advantage of them will have everything their own
way. If the States will correct these evils, well and good; but the
Nation must stand ready to aid them.

No question growing out of our rapid and complex industrial
development is more important than that of the employment of women
and children. The presence of women in industry reacts with extreme
directness upon the character of the home and upon family life, and
the conditions surrounding the employment of children bear a vital
relation to our future citizenship. Our legislation in those areas
under the control of the Congress is very much behind the legislation
of our more progressive States. A thorough and comprehensive measure
should be adopted at this session of the Congress relating to the
employment of women and children in the District of Columbia and the
Territories. The investigation into the condition of women and
children wage-earners recently authorized and directed by the
Congress is now being carried on in the various States, and I
recommend that the appropriation made last year for beginning this
work be renewed, in order that we may have the thorough and
comprehensive investigation which the subject demands. The National
Government has as an ultimate resort for control of child labor the
use of the interstate commerce clause to prevent the products of
child labor from entering into interstate commerce. But before using
this it ought certainly to enact model laws on the subject for the
Territories under its own immediate control.

There is one fundamental proposition which can be laid down as
regards all these matters, namely: While honesty by itself will not
solve the problem, yet the insistence upon honesty--not merely
technical honesty, but honesty in purpose and spirit--is an essential
element in arriving at a right conclusion. Vice in its cruder and more
archaic forms shocks everybody; but there is very urgent need that
public opinion should be just as severe in condemnation of the vice
which hides itself behind class or professional loyalty, or which
denies that it is vice if it can escape conviction in the courts. The
public and the representatives of the public, the high officials,
whether on the bench or in executive or legislative positions, need
to remember that often the most dangerous criminals, so far as the
life of the Nation is concerned, are not those who commit the crimes
known to and condemned by the popular conscience for centuries, but
those who commit crimes only rendered possible by the complex
conditions of our modern industrial life. It makes not a particle of
difference whether these crimes are committed by a capitalist or by a
laborer, by a leading banker or manufacturer or railroad man, or by a
leading representative of a labor union. Swindling in stocks,
corrupting legislatures, making fortunes by the inflation of
securities, by wrecking railroads, by destroying competitors through
rebates--these forms of wrongdoing in the capitalist, are far more
infamous than any ordinary form of embezzlement or forgery; yet it is
a matter of extreme difficulty to secure the punishment of the man
most guilty of them, most responsible for them. The business man who
condones such conduct stands on a level with the labor man who
deliberately supports a corrupt demagogue and agitator, whether head
of a union or head of some municipality, because he is said to have
"stood by the union." The members of the business community, the
educators, or clergymen, who condone and encourage the first kind of
wrongdoing, are no more dangerous to the community, but are morally
even worse, than the labor men who are guilty of the second type of
wrongdoing, because less is to be pardoned those who have no such
excuse as is furnished either by ignorance or by dire need. When the
Department of Agriculture was founded there was much sneering as to
its usefulness. No Department of the Government, however, has more
emphatically vindicated its usefulness, and none save the Post-Office
Department comes so continually and intimately into touch with the
people. The two citizens whose welfare is in the aggregate most vital
to the welfare of the Nation, and therefore to the welfare of all
other citizens, are the wage-worker who does manual labor and the
tiller of the soil, the farmer. There are, of course, kinds of labor
where the work must be purely mental, and there are other kinds of
labor where, under existing conditions, very little demand indeed is
made upon the mind, though I am glad to say that the proportion of
men engaged in this kind of work is diminishing. But in any community
with the solid, healthy qualities which make up a really great nation
the bulk of the people should do work which calls for the exercise of
both body and mind. Progress can not permanently exist in the
abandonment of physical labor, but in the development of physical
labor, so that it shall represent more and more the work of the
trained mind in the trained body. Our school system is gravely
defective in so far as it puts a premium upon mere literary training
and tends therefore to train the boy away from the farm and the
workshop. Nothing is more needed than the best type of industrial
school, the school for mechanical industries in the city, the school
for practically teaching agriculture in the country. The calling of
the skilled tiller of the soil, the calling of the skilled mechanic,
should alike be recognized as professions, just as emphatically as
the callings of lawyer, doctor, merchant, or clerk. The schools
recognize this fact and it should equally be recognized in popular
opinion. The young man who has the farsightedness and courage to
recognize it and to get over the idea that it makes a difference
whether what he earns is called salary or wages, and who refuses to
enter the crowded field of the so-called professions, and takes to
constructive industry instead, is reasonably sure of an ample reward
in earnings, in health, in opportunity to marry early, and to
establish a home with a fair amount of freedom from worry. It should
be one of our prime objects to put both the farmer and the mechanic
on a higher plane of efficiency and reward, so as to increase their
effectiveness in the economic world, and therefore the dignity, the
remuneration, and the power of their positions in the social world.

No growth of cities, no growth of wealth, can make up for any loss in
either the number or the character of the farming population. We of
the United States should realize this above almost all other peoples.
We began our existence as a nation of farmers, and in every great
crisis of the past a peculiar dependence has had to be placed upon
the farming population; and this dependence has hitherto been
justified. But it can not be justified in the future if agriculture
is permitted to sink in the scale as compared with other employments.
We can not afford to lose that preeminently typical American, the
farmer who owns his own medium-sized farm. To have his place taken by
either a class of small peasant proprietors, or by a class of great
landlords with tenant-farmed estates would be a veritable calamity.
The growth of our cities is a good thing but only in so far as it
does not mean a growth at the expense of the country farmer. We must
welcome the rise of physical sciences in their application to
agricultural practices, and we must do all we can to render country
conditions more easy and pleasant. There are forces which now tend to
bring about both these re