Speech Transcript:

 GENTLEMEN OF THE CONGRESS:

When I addressed myself to performing the duty laid upon the
President by the Constitution to present to you an annual report on
the state of the Union, I found my thought dominated by an immortal
sentence of Abraham Lincoln's--"Let us have faith that right makes
might, and in that faith let us dare to do our duty as we understand
it"--a sentence immortal because it embodies in a form of utter
simplicity and purity the essential faith of the nation, the faith in
which it was conceived, and the faith in which it has grown to glory
and power. With that faith and the birth of a nation founded upon it
came the hope into the world that a new order would prevail
throughout the affairs of mankind, an order in which reason and right
would take precedence over covetousness and force; and I believe that
I express the wish and purpose of every thoughtful American when I
say that this sentence marks for us in the plainest manner the part
we should play alike in the arrangement of our domestic affairs and
in our exercise of influence upon the affairs of the world.

By this faith, and by this faith alone, can the world be lifted out
of its present confusion and despair. It was this faith which
prevailed over the wicked force of Germany. You will remember that
the beginning of the end of the war came when the German people found
themselves face to face with the conscience of the world and realized
that right was everywhere arrayed against the wrong that their
government was attempting to perpetrate. I think, therefore, that it
is true to say that this was the faith which won the war. Certainly
this is the faith with which our gallant men went into the field and
out upon the seas to make sure of victory.

This is the mission upon which Democracy came into the world.
Democracy is an assertion of the right of the individual to live and
to be treated justly as against any attempt on the part of any
combination of individuals to make laws which will overburden him or
which will destroy his equality among his fellows in the matter of
right or privilege; and I think we all realize that the day has come
when Democracy is being put upon its final test. The Old World is
just now suffering from a wanton rejection of the principle of
democracy and a substitution of the principle of autocracy as
asserted in the name, but without the authority and sanction, of the
multitude. This is the time of all others when Democracy should prove
its purity and its spiritual power to prevail. It is surely the
manifest destiny of the United States to lead in the attempt to make
this spirit prevail.

There are two ways in which the United States can assist to
accomplish this great object. First, by offering the example within
her own borders of the will and power of Democracy to make and
enforce laws which are unquestionably just and which are equal in
their administration-laws which secure its full right to Labor and
yet at the same time safeguard the integrity of property, and
particularly of that property which is devoted to the development of
industry and the increase of the necessary wealth of the world.
Second, by standing for right and justice as toward individual
nations. The law of Democracy is for the protection of the weak, and
the influence of every democracy in the world should be for the
protection of the weak nation, the nation which is struggling toward
its right and toward its proper recognition and privilege in the
family of nations.

The United States cannot refuse this role of champion without putting
the stigma of rejection upon the great and devoted men who brought its
government into existence and established it in the face of almost
universal opposition and intrigue, even in the face of wanton force,
as, for example, against the Orders in Council of Great Britain and
the arbitrary Napoleonic decrees which involved us in what we know as
the War of 1812.

I urge you to consider that the display of an immediate disposition
on the part of the Congress to remedy any injustices or evils that
may have shown themselves in our own national life will afford the
most effectual offset to the forces of chaos and tyranny which are
playing so disastrous a part in the fortunes of the free peoples of
more than one part of the world. The United States is of necessity
the sample democracy of the world, and the triumph of Democracy
depends upon its success.

Recovery from the disturbing and sometimes disastrous effects of the
late war has been exceedingly slow on the other side of the water,
and has given promise, I venture-to say, of early completion only in
our own fortunate country; but even with us the recovery halts and is
impeded at times, and there are immediately serviceable acts of
legislation which it seems to me we ought to attempt, to assist that
recovery and prove the indestructible recuperative force of a great
government of the people. One of these is to prove that a great
democracy can keep house as successfully and in as business-like a
fashion as any other government. It seems to me that the first step
toward providing this is to supply ourselves with a systematic method
of handling our estimates and expenditures and bringing them to the
point where they will not be an unnecessary strain upon our income or
necessitate unreasonable taxation; in other words, a workable budget
system. And I respectfully suggest that two elements are essential to
such a system-namely, not only that the proposal of appropriations
should be in the hands of a single body, such as a single
appropriations committee in each house of the Congress, but also that
this body should be brought into such cooperation with the Departments
of the Government and with the Treasury of the United States as would
enable it to act upon a complete conspectus of the needs of the
Government and the resources from which it must draw its income.

I reluctantly vetoed the budget bill passed by the last session of
the Congress because of a constitutional objection. The House of
Representatives subsequently modified the bill in order to meet this
objection. In the revised form, I believe that the bill, coupled with
action already taken by the Congress to revise its rules and
procedure, furnishes the foundation for an effective national budget
system. I earnestly hope, therefore, that one of the first steps to
be taken by the present session of the Congress will be to pass the
budget bill.

The nation's finances have shown marked improvement during the last
year. The total ordinary receipts of $6,694,000,000 for the fiscal
year 1920 exceeded those for 1919 by $1,542,000,000, while the total
net ordinary expenditures decreased from $18,514,000,000 to
$6,403,000,000. The gross public debt, which reached its highest
point on August 31, 1919, when it was $26,596,000,000, had dropped on
November 30, 1920, to $24,175,000,000.

There has also been a marked decrease in holdings of government war
securities by the banking institutions of the country, as well as in
the amount of bills held by the Federal Reserve Banks secured by
government war obligations. This fortunate result has relieved the
banks and left them freer to finance the needs of Agriculture,
Industry, and Commerce. It has been due in large part to the
reduction of the public debt, especially of the floating debt, but
more particularly to the improved distribution of government
securities among permanent investors. The cessation of the
Government's borrowings, except through short-term certificates of
indebtedness, has been a matter of great consequence to the people of
the country at large, as well as to the holders of Liberty Bonds and
Victory Notes, and has had an important bearing on the matter of
effective credit control.

The year has been characterized by the progressive withdrawal of the
Treasury from the domestic credit market and from a position of
dominant influence in that market. The future course will necessarily
depend upon the extent to which economies are practiced and upon the
burdens placed upon the Treasury, as well as upon industrial
developments and the maintenance of tax receipts at a sufficiently
high level. The fundamental fact which at present dominates the
Government's financial situation is that seven and a half billions of
its war indebtedness mature within the next two and a half years. Of
this amount, two and a half billions are floating debt and five
billions, Victory Notes and War. Savings Certificates. The fiscal
program of the Government must be determined with reference to these
maturities. Sound policy demands that Government expenditures be
reduced to the lowest amount which will permit the various services
to operate efficiently and that Government receipts from taxes and
salvage be maintained sufficiently high to provide for current
requirements, including interest and sinking fund charges on the
public debt, and at the same time retire the floating debt and part
of the Victory Loan before maturity.

With rigid economy, vigorous salvage operations, and adequate
revenues from taxation, a surplus of current receipts over current
expenditures can be realized and should be applied to the floating
debt. All branches of the Government should cooperate to see that
this program is realized. I cannot overemphasize the necessity of
economy in Government appropriations and expenditures and the
avoidance by the Congress of practices which take money from the
Treasury by indefinite or revolving fund appropriations. The
estimates for the present year show that over a billion dollars of
expenditures were authorized by the last Congress in addition to the
amounts shown in the usual compiled statements of appropriations.
This strikingly illustrates the importance of making direct and
specific appropriations. The relation between the current receipts
and current expenditures of the Government during the present fiscal
year, as well as during the last half of the last fiscal year, has
been disturbed by the extraordinary burdens thrown upon the Treasury
by the Transportation Act, in connection with the return of the
railroads to private control. Over $600,000,000 has already been paid
to the railroads under this act-$350,000,000 during the present fiscal
year; and it is estimated that further payments aggregating possibly
$650,000,000 must still be made to the railroads during the current
year. It is obvious that these large payments have already seriously
limited the Government's progress in retiring the floating debt.

Closely connected with this, it seems to me, is the necessity for an
immediate consideration of the revision of our tax laws.
Simplification of the income and profits taxes has become an
immediate necessity. These taxes performed an indispensable service
during the war. The need for their simplification, however, is very
great, in order to save the taxpayer inconvenience and expense and in
order to make his liability more certain and definite. Other and more
detailed recommendations with regard to taxes will no doubt be laid
before you by the Secretary of the Treasury and the Commissioner of
Internal Revenue.

It is my privilege to draw to the attention of Congress for very
sympathetic consideration the problem of providing adequate
facilities for the care and treatment of former members of the
military and naval forces who are sick and disabled as the result of
their participation in the war. These heroic men can never be paid in
money for the service they patriotically rendered the nation. Their
reward will lie rather in realization of the fact that they
vindicated the rights of their country and aided in safeguarding
civilization. The nation's gratitude must be effectively revealed to
them by the most ample provision for their medical care and treatment
as well as for their vocational training and placement. The time has
come when a more complete program can be formulated and more
satisfactorily administered for their treatment and training, and I
earnestly urge that the Congress give the matter its early
consideration. The Secretary of the Treasury and the Board for
Vocational Education will outline in their annual reports proposals
covering medical care and rehabilitation which I am sure will engage
your earnest study and commend your most generous support.

Permit me to emphasize once more the need for action upon certain
matters upon which I dwelt at some length in my message to the second
session of the Sixty-sixth Congress. The necessity, for example, of
encouraging the manufacture of dyestuffs and related chemicals; the
importance of doing everything possible to promote agricultural
production along economic lines, to improve agricultural marketing,
and to make rural life more attractive and healthful; the need for a
law regulating cold storage in such a way as to limit the time during
which goods may be kept in storage, prescribing the method of
disposing of them if kept beyond the permitted period, and requiring
goods released from storage in all cases to bear the date of their
receipt. It would also be most serviceable if it were provided that
all goods released from cold storage for interstate shipment should
have plainly marked upon each package the selling or market price at
which they went into storage, in order that the purchaser might be
able to learn what profits stood between him and the producer or the
wholesale dealer. Indeed, It would be very serviceable to the public
if all goods destined for interstate commerce were made to carry upon
every packing case whose form made it possible a plain statement of
the price at which they left the hands of the producer. I
respectfully call your attention also to the recommendations of the
message referred to with regard to a federal license for all
corporations engaged in interstate commerce.

In brief, the immediate legislative need of the time is the removal
of all obstacles to the realization of the best ambitions of our
people in their several classes of employment and the strengthening
of all instrumentalities by. which difficulties are to be met and
removed and justice dealt out, whether by law or by some form of
mediation and conciliation. I do not feel it to be my privilege at
present to, suggest the detailed and particular methods by which
these objects may be attained, but I have faith that the inquiries of
your several committees will discover the way and the method.

In response to what I believe to be the impulse of sympathy and
opinion throughout the United States, I earnestly suggest that the
Congress authorize the Treasury of the United States to make to the
struggling government of Armenia such a loan as was made to several
of the Allied governments during the war, and I would also suggest
that it would be desirable to provide in the legislation itself that
the expenditure of the money thus loaned should be under the
supervision of a commission, or at least a commissioner, from the
United States in order that revolutionary tendencies within Armenia
itself might not be afforded by the loan a further tempting
opportunity.

Allow me to call your attention to the fact that the people of the
Philippine Islands have succeeded in maintaining a stable government
since the last action of the Congress in their behalf, and have thus
fulfilled the condition set by the Congress as precedent to a
consideration of granting independence to the Islands. I respectfully
submit that this condition precedent having been fulfilled, it is now
our liberty and our duty to keep our promise to the people of those
islands by granting them the independence which they so honorably
covet.

I have not so much laid before you a series of recommendations,
gentlemen, as sought to utter a confession of faith, of the faith in
which I was bred and which it is my solemn purpose to stand by until
my last fighting day. I believe this to be the faith of America, the
faith of the future, and of all the victories which await national
action in the days to come, whether in America or elsewhere.