Speech Transcript:

 Members of the Congress:

In meeting the constitutional requirement of informing the Congress
upon the state of the Union, it is exceedingly gratifying to report
that the general condition is one of progress and prosperity. Here
and there are comparatively small and apparently temporary
difficulties needing adjustment and improved administrative methods,
such as are always to be expected, but in the fundamentals of
government and business the results demonstrate that we are going in
the right direction. The country does not appear to require radical
departures from the policies already adopted so much as it needs a
further extension of these policies and the improvement of details.
The age of perfection is still in the somewhat distant future, but it
is more in danger of being retarded by mistaken Government activity
than it is from lack of legislation. We are by far the most likely to
accomplish permanent good if we proceed with moderation.

In our country the people are sovereign and independent, and must
accept the resulting responsibilities. It is their duty to support
themselves and support the Government. That is the business of the
Nation, whatever the charity of the Nation may require. The functions
which the Congress are to discharge are not those of local government
but of National Government. The greatest solicitude should be
exercised to prevent any encroachment upon the rights of the States
or their various political subdivisions. Local self-government is one
of our most precious possessions. It is the greatest contributing
factor to the stability strength liberty, and progress of the Nation.
It ought not to be in ringed by assault or undermined by purchase. It
ought not to abdicate its power through weakness or resign its
authority through favor. It does not at all follow that because
abuses exist it is the concern of the Federal Government to attempt
the r reform.

Society is in much more danger from encumbering the National
Government beyond its wisdom to comprehend, or its ability to
administer, than from leaving the local communities to bear their own
burdens and remedy their own evils. Our local habit and custom is so
strong, our variety of race and creed is so great the Federal
authority is so tenuous, that the area within which it can function
successfully is very limited. The wiser policy is to leave the
localities, so far as we can, possessed of their own sources of
revenue and charged with their own obligations.
Government economy

It is a fundamental principle of our country that the people are
sovereign. While they recognize the undeniable authority of the
state, they have established as its instrument a Government of
limited powers. They hold inviolate in their own hands the
jurisdiction over their own freedom and the ownership of their own
property. Neither of these can be impaired except by due process of
law. The wealth of our country is not public wealth, but private
wealth. It does not belong to the Government, it belongs to the
people. The Government has no justification in taking private
Property except for a public purpose. It is always necessary to keep
these principles in mind in the laying of taxes and in the making of
appropriations. No right exists to levy on a dollar, or to order the
expenditure of a dollar, of the money of the people, except for a
necessary public purpose duly authorized by the Constitution. The
power over the purse is the power over liberty.

That is the legal limitation within which the Congress can act, How
it will, proceed within this limitation is always a question of
policy. When the country is prosperous and free from debt, when the
rate of taxation is low, opportunity exists for assuming new burdens
and undertaking new enterprises. Such a condition now prevails only
to a limited extent. All proposals for assuming new obligations ought
to be postponed, unless they are reproductive capital investments or
are such as are absolutely necessary at this time. We still have an
enormous debt of over $20,000,000,000, on which the interest and
sinking-fund requirements are $1,320,000,000. Our appropriations for
the Pension Office and the Veterans' Bureau are $600,000,000. The War
and Navy Departments call for $642,000,000. Other requirements,
exclusive of the Post Office which is virtually self-sustaining,
brought the appropriations for the current year up to almost
$3,100,060,000. This shows an expenditure of close to $30 for every
inhabitant of our country. For the average family of five it means a
tax, directly or indirectly paid, of about $150 for national purposes
alone. The local tax adds much more. These enormous expenditures ought
not to be increased, but through every possible effort they ought to
be reduced.

Only one of these great items can be ultimately extinguished. That is
the item of our war debt. Already this has been reduced to about
$6,000,000,000, which means an annual saving in interest of close to
$250,000,000. The present interest charge is about $820,000,000
yearly. It would seem to be obvious that the sooner this debt can be
retired the more the taxpayers will save in interest and the easier
it will be to secure funds with which to prosecute needed running
expenses, constructions, and improvements. This item of $820,000,000
for interest is a heavy charge on all the people of the country, and
it seems to me that we might well consider whether it is not greatly
worth while to dispense with it as early as possible by retiring the
principal debt which it is required to serve.

It has always been our policy to retire our debts. That of the
Revolutionary War period, notwithstanding the additions made in 1812,
was paid by 1835. and the Civil War debt within 23 years. Of the
amount already paid, over $1,000,000,000 is a reduction in cash
balances. That source is exhausted. Over one and two-thirds billions
of dollars was derived from excess receipts. Tax reduction eliminates
that. The sale of surplus war materials has been another element of
our income. That is practically finished. With these eliminated, the
reduction of the debt has been only about $500,000,000 each year, not
an excessive sum on so large a debt.

Proposals have been made to extend the payment over a period of 62
years. If $1,000,000,000 is paid at the end of 20 years, the cost to
the taxpayers is the principal and, if the interest is 4% per cent, a
total of $1,850,000,000. If the same sum is paid at the end of 62
years, the cost is $3,635,000,000, or almost double. Here is another
consideration: Compared with its purchasing power in 1913, the dollar
we borrowed represented but 52 cents. As the value of our dollar
increases, due to the falling prices of commodities, the burden of
our debt increases. It has now risen to 631/2 cents. The taxpayer
will be required to produce nearly twice the amount of commodities to
pay his debt if the dollar returns to the 1913 value. The more we pay
while prices are high, the easier it will be.

Deflation of government after a war period is slower than deflation
of business, where curtailment is either prompt and effective or
disaster follows. There is room for further economy in the cost of
the Federal Government, but a co n of current expenditures with
pre-war expenditures is not able to the efficiency with which
Government business is now being done. The expenditures of 19161 the
last pre-war year, were $742,000,000, and in 1925 over
$3,500,000,000, or nearly five times as great. If we subtract
expenditures for debt retirements and interest, veterans' relief,
increase of pensions, and other special outlays, consisting of
refunds, trust investments, and like charges, we find that the
general expenditures of the Government in 1925 were slightly more
than twice as large as in 1916.

As prices in 1925 were approximately 40 per cent higher than in 1916,
the cost of the same Government must also have increased. But the
Government is not the same. It is more expensive to collect the much
greater revenue necessary and to administer our great debt. We have
given enlarged and improved services to agriculture and commerce.
Above all, America has grown in population and wealth. Government
expenditures must always share in this growth. Taking into account
the factors I have mentioned, I believe that present Federal expenses
are not far out of line with pre-war expenses. We have nearly
accomplished the deflation.

This does not mean that further economies will not come. As we reduce
our debt our interest charges decline. There are many details yet to
correct. The real improvement, however, must come not from additional
curtailment of expenses, but by a more intelligent, more ordered
spending. Our economy must be constructive. While we should avoid as
far as possible increases in permanent current expenditures,
oftentimes a capital outlay like internal improvements will result in
actual constructive saving. That is economy in its best sense. It is
an avoidance of waste that there may be the means for an outlay
to-day which will bring larger returns to-morrow. We should
constantly engage in scientific studies of our future requirements
and adopt an orderly program for their service. Economy is the method
by which we prepare to-day to afford the improvements of to-morrow.

A mere policy of economy without any instrumentalities for putting it
into operation would be very ineffective. The Congress has wisely set
up the Bureau of the Budget to investigate and inform the President
what recommendations he ought to make for current appropriations.
This gives a centralized authority where a general and comprehensive
understanding can be reached of the sources of income and the most
equitable distribution of expenditures. How well it has worked is
indicated by the fact that the departmental estimates for 1922,
before the budget law, were $4,068,000,000 while the Budget estimates
for 1927 are $3,156,000,000. This latter figure shows the reductions
in departmental estimates for the coming year made possible by the
operation of the Budget system that the Congress has provided.

But it is evidently not enough to have care in making appropriations
without any restraint upon expenditure. The Congress has provided
that check by establishing the office of Comptroller General.

The purpose of maintaining the Budget Director and the Comptroller
General is to secure economy and efficiency in Government
expenditure. No better method has been devised for the accomplishment
of that end. These offices can not be administered in all the various
details without making some errors both of fact and of judgment. But
the important consideration remains that these are the
instrumentalities of the Congress and that no other plan has ever
been adopted which was so successful in promoting economy and
efficiency. The Congress has absolute authority over the
appropriations and is free to exercise its judgment, as the evidence
may warrant, in increasing or decreasing budget recommendations. But
it ought to resist every effort to weaken or break down this most
beneficial system of supervising appropriations and expenditures.
Without it all the claim of economy would be a mere pretense.
Taxation

The purpose of reducing expenditures is to secure a reduction in
taxes. That purpose is about to be realized. With commendable
promptness the Ways and Means Committee of the House has undertaken
in advance of the meeting of the Congress to frame a revenue act. As
the bill has proceeded through the committee it has taken on a
nonpartisan character, and both Republicans and Democrats have joined
in a measure which embodies many sound principles of tax reform. The
bill will correct substantially the economic defects injected into
the revenue act of 1924, as well as many which have remained as
war-time legacies. In its present form it should provide sufficient
revenue for the Government.

The excessive surtaxes have been reduced, estate tax rates are
restored to more reasonable figures, with every prospect of
withdrawing from the field when the States have had the opportunity
to correct the abuses in their own inheritance tax laws, the gift tax
and publicity section are to be repealed many miscellaneous taxes are
lowered or abandoned, and the Board of Tax Appeals and the
administrative features of the law are improved and strengthened. I
approve of the bill in principle. In so far as income-tax exemptions
are concerned, it seems, to me the committee has gone as far as it is
Safe to go and somewhat further than I should have gone. Any further
extension along these lines would, in my opinion, impair the
integrity of our income-tax system.

I am advised that the bill will be through the House by Christmas.
For this prompt action the country call thank the good sense of the
Ways and Means Committee in framing an economic measure upon economic
considerations. If this attitude continues to be reflected through the
Congress, the taxpayer will have his relief by the time his March 15th
installment of income taxes is due. Nonpartisan effort means certain,
quick action. Determination of a revenue law definitely, promptly and
solely as a revenue law, is one of the greatest gifts a legislature
can bestow upon its constituents. I commend the example of file Ways
and Means Committee. If followed, it will place sound legislation
upon the books in time to give the taxpayers the full benefit of tax
reduction next year. This means that the bill should reach me prior
to March 15.

All these economic results are being sought not to benefit the rich,
but to benefit the people. They are for the purpose of encouraging
industry in order that employment may be plentiful. They seek to make
business good in order that wages may be good. They encourage
prosperity in order that poverty may be banished from the home. They,
seek to lay the foundation which, through increased production, may,
give the people a more bountiful supply of the necessaries of life,
afford more leisure for the improvement of the mind, the appreciation
of the arts of music and literature, sculpture and painting, and the
beneficial enjoyment of outdoor sports and recreation, enlarge the
resources which minister to charity and by all these means attempting
to strengthen the spiritual life of the Nation.
Foreign relations

The policy of our foreign relations, casting aside any suggestion of
force, rests solely on the foundation of peace, good will, and good
works. We have sought, in our intercourse with other nations, better
understandings through conference and exchange of views its befits
beings endowed with reason. The results have been the gradual
elimination of disputes, the settlement of controversies, and the
establishment of a firmer friendship between America and the rest of
the world that has ever existed tit any previous time.

The example of this attitude has not been without its influence upon
other countries. Acting upon it, an adjustment was made of the
difficult problem of reparations. This was the second step toward
peace in Europe. It paved the way for the agreements which were drawn
up at the Locarno Conference. When ratified, these will represent the
third step toward peace. While they do not of themselves provide an
economic rehabilitation, which is necessary for the progress of
Europe, by strengthening the guarantees of peace they diminish the
need for great armaments. If the energy which now goes into military
effort is transferred to productive endeavor it will greatly assist
economic progress.

The Locarno agreements were made by the, European countries directly
interested without any formal intervention of America, although on
July 3 I publicly advocated such agreements in an address made in
Massachusetts. We have consistently refrained from intervening except
when our help has been sought and we have felt it could be effectively
given, as in the settlement of reparations and the London Conference.
These recent Locarno agreements represent the success of this policy
which we have been insisting ought to be adopted, of having European
countries settle their own political problems without involving this
country. This beginning seems to demonstrate that this policy is
sound. It is exceedingly gratifying to observe this progress, both in
its method and in its result promises so much that is beneficial to
the world.

When these agreements are finally adopted, they will provide
guarantees of peace that make the present prime reliance upon force
in some parts of Europe very much less necessary. The natural
corollary to these treaties should be further international contracts
for the limitation of armaments. This work was successfully begun at
the Washington Conference. Nothing was done at that time concerning
land forces because of European objection. Our standing army has been
reduced to around 118,000, about the necessary police force for
115,000,000 people. We are not proposing to increase it, nor is it
supposable that any foreign country looks with the slightest
misapprehension upon our land forces. They do not menace anybody.
They are rather a protection to everybody.

The question of disarming upon land is so peculiarly European in its
practical aspects that our country would look with particular
gratitude upon any action which those countries might take to reduce
their own military forces. This is in accordance with our policy of
not intervening unless the European powers are unable to agree and
make request for our assistance. Whenever they are able to agree of
their own accord it is especially gratifying to its, and such
agreements may be sure of our sympathetic support.

It seems clear that it is the reduction of armies rather than of
navies that is of the first importance to the world at the present
time. We shall look with great satisfaction upon that effort and give
it our approbation and encouragement. If that can be settled, we may
more easily consider further reduction and limitation of naval
armaments. For that purpose our country has constantly through its
Executive, and through repeated acts of Congress, indicated its
willingness to call such a conference. Under congressional sanction
it would seem to be wise to participate in any conference of the
great powers for naval limitation of armament proposed upon such
conditions that it would hold a fair promise of being effective. The
general policy of our country is for disarmament, and it ought not to
hesitate to adopt any practical plan that might reasonably be expected
to succeed. But it would not care to attend a conference which from
its location or constituency would in all probability prove futile.

In the further pursuit, of strengthening the bonds of peace and good
will we have joined with other nations in an international conference
held at Geneva and signed an agreement which will be laid before the
Senate for ratification providing suitable measures for control and
for publicity in international trade in arms, ammunition, and
implements of war, and also executed a protocol providing for a
prohibition of the use of poison gas in war, in accordance with the
principles of Article 5 of the treaty relating thereto signed at the
Washington Conference. We are supporting the Pan American efforts
that are being made toward the codification of international law, and
looking with sympathy oil the investigations conducted under
philanthropic auspices of the proposal to agreements outlawing war.
In accordance with promises made at the Washington Conference, we
have urged the calling of and are now represented at the Chinese
Customs Conference and on the Commission on Extraterritoriality,
where it will be our policy so far as possible to meet the,
aspirations of China in all ways consistent with the interests of the
countries involved.
Court of international justice

Pending before the Senate for nearly three years is the proposal to
adhere to the protocol establishing the Permanent Court of
International Justice. A well-established line of precedents mark
America's effort to effect the establishment of it court of this
nature.. We took a leading part in laying the foundation on which it
rests in the establishment of The Hague Court of Arbitration. It is
that tribunal which nominates the judges who are elected by the
Council and Assembly of the League of Nations.

The proposal submitted to the Senate was made dependent upon four
conditions, the first of which is that by supporting the court we do
not assume any obligations under the league; second, that we may
participate upon an equality with other States in the election of
judges; third, that the Congress shall determine what part of the
expenses we shall bear; fourth, that the statute creating the court
shall not be amended without out consent; and to these I have
proposed an additional condition to the effect that we are not to be
bound by advisory opinions rendered without our consent.

The court appears to be independent of the league. It is true the
judges are elected by the Assembly and Council, but they are
nominated by the Court of Arbitration, which we assisted to create
and of which we are a part. The court was created by it statute,
so-called, which is really a treaty made among some forty-eight
different countries, that might properly be called a constitution of
the court. This statute provides a method by which the judges are
chosen so that when the Court of Arbitration nominates them and the
Assembly and Council of the League elect them, they are not acting as
instruments of the Court of Arbitration or instruments of the league,
but as instruments of the statute.

This will be even more apparent if our representatives sit with the
members of the council and assembly in electing the judges. It is
true they are paid through the league though not by the league, but
by the countries which are members of the league and by our country
if we accept the protocol. The judges are paid by the league only in
the same sense that it could be said United States judges are paid by
the Congress. The court derives all its authority from the statute and
is so completely independent of the league that it could go on
functioning if the league were disbanded, at least until the terms of
the judges expired.

The most careful provisions are made in the statute as to the
qualifications of judges. Those who make the nominations are
recommended to consult with their highest court of justice, their law
schools and academies. The judges must be persons of high moral
character, qualified to hold the highest judicial offices in that
country, or be jurisconsults of recognized competence in
international law. It must be assumed that these requirements will
continue to be carefully met, and with America joining the countries
already concerned it is difficult to comprehend how human ingenuity
could better provide for the establishment of a court which would
maintain its independence. It has to be recognized that independence
is to a considerable extent a matter of ability, character, and
personality. Some effort was made in the early beginnings to
interfere with the independence of our Supreme Court. It did not
succeed because of the quality of the men who made up that tribunal.

It does not seem that the authority to give advisory opinions
interferes with the independence of the court. Advisory opinions in
and of themselves are not harmful, but may be used in such a way as
to be very beneficial because they undertake to prevent injury rather
than merely afford a remedy after the injury has been done. As a
principle that only implies that the court shall function when proper
application is made to it. Deciding the question involved upon issues
submitted for an advisory opinion does not differ materially from
deciding the question involved upon issues submitted by contending
parties. Up to the present time the court has given an advisory
opinion when it judged it had jurisdiction, and refused to give one
when it judged it did not have jurisdiction. Nothing in the work of
the court has yet been an indication that this is an impairment of
its independence or that its practice differs materially from the
giving of like opinions under the authority of the constitutions of
several of our States.

No provision of the statute seems to me to give this court any
authority to be a political rather than a judicial court. We have
brought cases in this country before our courts which, when they have
been adjudged to be political, have been thereby dismissed. It is not
improbable that political questions will be submitted to this court,
but again up to the present time the court has refused to pass on
political questions and our support would undoubtedly have a tendency
to strengthen it in that refusal.

We are not proposing to subject ourselves to any compulsory
jurisdiction. If we support the court, we can never be obliged to
submit any case which involves our interests for its decision. Our
appearance before it would always be voluntary, for the purpose of
presenting a case which we had agreed might be presented. There is no
more danger that others might bring cases before the court involving
our interests which we did not wish to have brought, after we have
adhered, and probably not so much, than there would be of bringing
such cases if we do not adhere. I think that we would have the same
legal or moral right to disregard such a finding in the one case that
we would in the other.

If we are going to support any court, it will not be one that we have
set up alone or which reflects only our ideals. Other nations have
their customs and their institutions, their thoughts and their
methods of life. If a court is going to be international, its
composition will have to yield to what is good in all these various
elements. Neither will it be possible to support a court which is
exactly perfect, or under which we assume absolutely no obligations.
If we are seeking that opportunity, we might as well declare that we
are opposed to supporting any court. If any agreement is made, it
will be because it undertakes to set up a tribunal which can do some
of the things that other nations wish to have done. We shall not find
ourselves bearing a disproportionate share of the world's burdens by
our adherence, and we may as well remember that there is absolutely
no escape for our country from bearing its share of the world's
burdens in any case. We shall do far better service to ourselves and
to others if we admit this and discharge our duties voluntarily, than
if we deny it and are forced to meet the same obligations
unwillingly.

It is difficult to imagine anything that would be more helpful to the
world than stability, tranquility and international justice. We may
say that we are contributing to these factors independently, but
others less fortunately located do not and can not make a like
contribution except through mutual cooperation. The old balance of
power, mutual alliances, and great military forces were not brought
bout by any mutual dislike for independence, but resulted from the
domination of circumstances. Ultimately they were forced on us. Like
all others engaged in the war whatever we said as a matter of fact we
joined an alliance, we became a military power, we impaired our
independence. We have more at stake than any one else in avoiding a
repetition of that calamity. Wars do not, spring into existence. They
arise from small incidents and trifling irritations which can be
adjusted by an international court. We can contribute greatly to the
advancement of our ideals by joining with other nations in
maintaining such a tribunal.
Foreign debts

Gradually, settlements have been made which provide for the
liquidation of debts due to our Government from foreign governments.
Those made with Great Britain, Finland, Hungary Lithuania, and Poland
have already been approved by the Congress. Since the adjournment,
further agreements have been entered into with Belgium,
Czechoslovakia, Latvia, Estonia, Italy, and Rumania. These 11
nations, which have already made settlements, represent
$6,419,528,641 of the original principal of the loans. The principal
sums without interest, still pending, are the debt of France, of
$3,340,000,000; Greece, $15,000,000; Yugoslavia, $.51,000,000;
Liberia, $26,000; Russia, $192,000,000, which those at present in
control have undertaken, openly to repudiate; Nicaragua, $84,000,
which is being paid currently; and Austria, $24,000,000, on which by
act of Congress a moratorium of 20 years has been granted. The only
remaining sum is $12,000,000, due from Armenia, which has now ceased
to exist as an independent nation.

In accordance with the settlements made, the amount of principal and
interest which is to be paid to the United States under these
agreements aggregate $15,200,688,253.93. It is obvious that the
remaining settlements, which will undoubtedly be made, will bring
this sum up to an amount which will more than equal the principal due
on our present national debt. While these settlements are very large
in the aggregate, it has been felt that the terms granted were in all
cases very generous. They impose no undue burden and are mutually
beneficial in the observance of international faith and the
improvement of international credit.

Every reasonable effort will be made to secure agreements for
liquidation with the remaining countries, whenever they are in such
condition that they can be made. Those which have already been
negotiated under the bipartisan commission established by the
Congress have been made only after the most thoroughgoing and
painstaking investigation, continued for a long time before meeting
with the representatives of the countries concerned. It is believed
that they represent in each instance the best that can be done and
the wisest settlement that can be secured. One very important result
is the stabilization of foreign currency, making exchange assist
rather than embarrass our trade. Wherever sacrifices have been made
of money, it will be more than amply returned in better understanding
and friendship, while in so far as these adjustments will contribute
to the financial stability of the debtor countries, to their good
order, prosperity, and progress, they represent hope of improved
trade relations and mutual contributions to the civilization of the
world.
Alien problem

Negotiations are progressing among the interested parties in relation
to the final distribution of the assets in the hands of the Alien
Property Custodian. Our Government and people are interested as
creditors; the German Government and people are interested as debtors
and owners of the seized property. Pending the outcome of these
negotiations, I do not recommend any affirmative legislation. For the
present we should continue in possession of this property which we
hold as security for the settlement of claims due to our people and
our Government.
Immigration

While not enough time has elapsed to afford a conclusive
demonstration, such results as have been secured indicate that our
immigration law is on the whole beneficial. It is undoubtedly a
protection to the wage earners of this country. The situation should
however, be carefully surveyed, in order to ascertain whether it is
working a needless hardship upon our own inhabitants. If it deprives
them of the comfort and society of those bound to them by close
family ties, such modifications should be adopted as will afford
relief, always in accordance with the principle that our Government
owes its first duty to our own people and that no alien, inhabitant
of another country, has any legal rights whatever under our
Constitution and laws. It is only through treaty, or through
residence here that such rights accrue. But we should not, however,
be forgetful of the obligations of a common humanity.

While our country numbers among its best citizens many of those of
foreign birth, yet those who now enter in violation of our laws by
that very act thereby place themselves in a class of undesirables.
Investigation reveals that any considerable number are coming here in
defiance of our immigration restrictions, it will undoubtedly create
the necessity for the registration of all aliens. We ought to have no
prejudice against an alien because he is an alien. The standard which
we apply to our inhabitants is that of manhood, not place of birth.
Restrictive immigration is to a large degree for economic purposes.
It is applied in order that we may not have a larger annual increment
of good people within our borders than we can weave into our economic
fabric in such a way as to supply their needs without undue injury to
ourselves.
National defense

Never before in time of peace has our country maintained so large and
effective a military force as it now has. The Army, Navy, Marine
Corps, National Guard, and Organized Reserves represent a strength of
about 558,400 men. These forces are well trained, well equipped, and
high in morale.

A sound selective service act giving broad authority for the
mobilization in time of peril of all the resources of the country,
both persons and materials, is needed to perfect our defense policy
in accordance with our ideals of equality. The provision for more
suitable housing to be paid for out of funds derived from the sale of
excess lands, pending before the last Congress, ought to be brought
forward and passed. Reasonable replacements ought to be made to
maintain a sufficient ammunition reserve.

The Navy has the full treaty tonnage of capital ships. Work is going
forward in modernizing the older ones, building aircraft carriers,
additional fleet submarines, and fast scout cruisers, but we are
carefully avoiding anything that might be construed as a competition
in armaments with other nations. The joint Army and Navy maneuvers at
Hawaii, followed by the cruise of a full Battle Fleet to Australia and
New Zealand, were successfully carried out. These demonstrations
revealed a most satisfactory condition of the ships and the men
engaged.

Last year at my suggestion the General Board of the Navy made an
investigation and report on the relation of aircraft to warships. As
a result authorizations and appropriations were made for more scout
cruisers and fleet submarines and for completing aircraft carriers
and equipping them with necessary planes. Additional training in
aviation was begun at the Military and Naval Academies. A method of
coordination and cooperation of the Army and Navy and the principal
aircraft builders is being perfected. At the suggestion of the
Secretaries of War and Navy I appointed a special board to make a
further study of the problem of aircraft.

The report of the Air Board ought to be reassuring to the country,
gratifying to the service and satisfactory to the Congress. It is
thoroughly complete and represents the mature thought of the best
talent in the country. No radical change in organization of the
service seems necessary. The Departments of War, Navy, and Commerce
should each be provided with an additional assistant secretary, not
necessarily with statutory duties but who would be available under
the direction of the Secretary to give especial attention to air
navigation. We must have an air strength worthy of America. Provision
should be made for two additional brigadier generals for the Army Air
Service. Temporary rank corresponding to their duties should be
awarded to active flying officers in both Army and Navy.

Aviation is of great importance both for national defense and
commercial development. We ought to proceed in its improvement by the
necessary experiment and investigation. Our country is not behind in
this art. It has made records for speed and for the excellence of its
planes. It ought to go on maintaining its manufacturing plants capable
of rapid production, giving national assistance to the la in out of
airways, equipping itself with a moderate number of planes and
keeping an air force trained to the highest efficiency.

While I am a thorough believer in national defense and entirely
committed to the policy of adequate preparation, I am just as
thoroughly opposed to instigating or participating in a policy of
competitive armaments. Nor does preparation mean a policy of
militarizing. Our people and industries are solicitous for the cause
of 0111, country, and have great respect for the Army and Navy and
foil the uniform worn by the men who stand ready at all times for our
protection to encounter the dangers and perils necessary to military
service, but all of these activities are to be taken not in behalf of
aggression but in behalf of peace. They are the instruments by which
we undertake to do our part to promote good will and support
stability among all peoples.
Veterans

If any one desires to estimate the esteem in which the veterans of
America are held by their fellow citizens, it is but necessary to
remember that the current budget calls for an expenditure of about
$650,000.000 in their behalf. This is nearly the amount of the total
cost of the National Government, exclusive of the post office, before
we entered the last war.

At the two previous sessions of Congress legislation affecting
veterans' relief was enacted and the law liberalized. This
legislation brought into being a number of new provisions tending
more nearly to meet the needs of our veterans, as well as afford the
necessary authority to perfect the administration of these laws.

Experience with the new legislation so far has clearly demonstrated
its constructive nature. It has increased the benefits received by
many and has made eligible for benefits many others. Direct
disbursements to the veteran or his dependents exceeding $21,000,000
have resulted, which otherwise would not have been made. The degree
of utilization of our hospitals has increased through making
facilities available to the incapacitated veteran regardless of
service origin of the disability. This new legislation also has
brought about a marked improvement of service to the veteran.

The organizations of ex-service men have proposed additional
legislative changes which you will consider, but until the new law
and the modifications made at the last session of Congress are given
a more thorough test further changes in the basic law should be few
and made only after careful though sympathetic consideration.

The principal work now before the Veterans' Bureau is the perfection
of its organization and further improvements in service. Some minor
legislative changes are deemed necessary to enable the bureau to
retain that high grade of professional talent essential in handling
the problems of the bureau. Such changes as tend toward the
improvement of service and the carrying forward to completion of the
hospital construction program are recommended for the consideration
of the proper committees of Congress.

With the enormous outlay that is now being made in behalf of the
veterans and their dependents, with a tremendous war debt still
requiring great annual expenditure, with the still high rate of
taxation, while every provision should be made for the relief of the
disabled and the necessary care of dependents, the Congress may well
consider whether the financial condition of the Government is not
such that further bounty through the enlargement of general pensions
and other emoluments ought not to be postponed.
Agriculture

No doubt the position of agriculture as a whole has very much
improved since the depression of three and four years ago. But there
are many localities and many groups of individuals, apparently
through no fault of their own, sometimes due to climatic conditions
and sometimes to the prevailing price of a certain crop, still in a
distressing condition. This is probably temporary, but it is none the
less acute. National Government agencies, the Departments of
Agriculture and Commerce, the Farm Loan Board, the intermediate
credit banks, and the Federal Reserve Board are all cooperating to be
of assistance and relief. On the other hand, there are localities and
individuals who have had one of their most prosperous years. The
general price level is fair, but here again there are exceptions both
ways, some items being poor while others are excellent. In spite of a
lessened production the farm income for this year will be about the
same as last year and much above the three preceding years.

Agriculture is a very complex industry. It does not consist of one
problem, but of several. They can not be solved at one stroke. They
have to be met in different ways, and small gains are not to be
despised.

It has appeared from all the investigations that I have been able to
make that the farmers as a whole are determined to maintain the
independence of their business. They do not wish to have meddling on
the part of the Government or to be placed under the inevitable
restrictions involved in any system of direct or indirect
price-fixing, which would result from permitting the Government to
operate in the agricultural markets. They are showing a very
commendable skill in organizing themselves to transact their own
business through cooperative marketing, which will this year turn
over about $2,500,000,000, or nearly one-fifth of the total
agricultural business. In this they are receiving help from the
Government. The Department of Agriculture should be strengthened in
this facility, in order to be able to respond when these marketing
associations want help. While it ought not to undertake undue
regulation, it should be equipped to give prompt information on crop
prospects, supply, demand, current receipts, imports, exports, and
prices.

A bill embodying these principles, which has been drafted under the
advice and with the approval of substantially all the leaders and
managers in the cooperative movement, will be presented to the
Congress for its enactment. Legislation should also be considered to
provide for leasing the unappropriated public domain for grazing
purposes and adopting a uniform policy relative to grazing on the
public lands and in the national forests.

A more intimate relation should be established between agriculture
and the other business activities of the Nation. They are mutually
dependent and can each advance their own prosperity most by advancing
the prosperity of the other. Meantime the Government will continue
those activities which have resulted in an unprecedented amount of
legislation and the pouring out of great sums of money during the
last five years. The work for good roads, better land and water
transportation, increased support for agricultural education,
extension of credit facilities through the Farm Loan Boards and the
intermediate credit banks, the encouragement of orderly marketing and
a repression of wasteful speculation, will all be continued.

Following every other depression, after a short period the price of
farm produce has taken and maintained the lead in the advance. This
advance had reached a climax before the war. Everyone will recall the
discussion that went on for four or five years prior to 1914
concerning the high cost of living. This history is apparently
beginning to repeat itself. While wholesale prices of other
commodities have been declining, farm prices have been increasing.
There is every reason to suppose that a new era in agricultural
prosperity lies just before us, which will probably be
unprecedented.
Muscle shoals

The problem of Muscle Shoals seems to me to have assumed a place all
out of proportion with its real importance. It probably does not
represent in market value much more than a first-class battleship,
yet it has been discussed in the Congress over a period of years and
for months at a time. It ought to be developed for the production of
nitrates primarily, and incidentally for power purposes. This would
serve defensive, agricultural, and industrial purposes. I am in favor
of disposing of this property to meet these purposes. The findings of
the special commission will be transmitted to the Congress for their
information. I am convinced that the best possible disposition can be
made by direct authorization of the Congress. As a means of
negotiation I recommend the immediate appointment of a small joint
special committee chosen from the appropriate general standing
committees of the House and Senate to receive bids, which when made
should be reported with recommendations as to acceptance, upon which
a law should be enacted, effecting a sale to the highest bidder who
will agree to carry out these purposes.

If anything were needed to demonstrate the almost utter incapacity of
the National Government to deal directly with an industrial and
commercial problem, it has been provided by our experience with this
property. We have expended vast fortunes, we have taxed everybody,
but we are unable to secure results, which benefit anybody. This
property ought, to be transferred to private management under
conditions which will dedicate it to the public purpose for which it
was conceived.
Reclamation

The National Government is committed to a policy of reclamation and
irrigation which it desires to establish on a sound basis and
continue in the interest of the localities concerned. Exhaustive
studies have recently been made of Federal reclamation, which have
resulted in improving the projects and adjusting many difficulties.
About one third of the projects is in good financial condition,
another third can probably be made profitable, while the other third
is under unfavorable conditions. The Congress has already provided
for a survey which will soon be embodied in a report. That ought to
suggest a method of relief which will make unnecessary further
appeals to the Congress. Unless this can be done, Federal reclamation
will be considerably retarded. With the greatly increased cost of
construction and operation, it has become necessary to plan in
advance, by community organization and selective agriculture, methods
sufficient to repay these increasing outlays.

The human and economic interests of the farmer citizens suggest that
the States should be required to exert some effort and assume some
responsibility, especially in the intimate, detailed, and difficult
work of securing settlers and developing farms which directly profit
them, but only indirectly and remotely can reimburse the Nation. It
is believed that the Federal Government should continue to be the
agency for planning and constructing the great undertakings needed to
regulate and bring into use the rivers the West, many of which are
interstate in character, but the detailed work of creating
agricultural communities and a rural civilization on the land made
ready for reclamation ought to be either transferred to the State in
its entirety or made a cooperative effort of the State and Federal
Government.
Shipping

The maintenance of a merchant marine is of the utmost importance for
national defense and the service of our commerce. We have a large
number of ships engaged in that service. We also have a surplus
supply, costly to care for, which ought to be sold. All the
investigations that have been made under my direction, and those
which have been prosecuted independently, have reached the conclusion
that the fleet should be under the direct control of a single
executive head, while the Shipping Board should exercise its judicial
and regulatory functions in Accordance with its original conception.
The report of Henry G. Dalton, a business man of broad experience,
with a knowledge of shipping, made to me after careful investigation,
will be transmitted for the information of the Congress, the studies
pursued under the direction of the United States Chamber of Commerce
will also be accessible, and added to these will be the report of the
special committee of the House.

I do not advocate the elimination of regional considerations, but it
has become apparent that without centralized executive action the
management of this great business, like the management of any other
great business, will flounder in incapacity and languish under a
division of council. A plain and unmistakable reassertion of this
principle of unified control, which I have always been advised was
the intention of the Congress to apply, is necessary to increase the
efficiency of our merchant fleet.
Coal

The perennial conflict in the coal industry is still going on to the
great detriment of the wage earners, the owners, and especially to
the public. With deposits of coal in this country capable of
supplying its needs for hundreds of years, inability to manage and
control this great resource for the benefit of all concerned is very
close to a national economic failure. It has been the subject of
repeated investigation and reiterated recommendation. Yet the
industry seems never to have accepted modern methods of adjusting
differences between employers and employees. The industry could serve
the public much better and become subject to a much more effective
method of control if regional consolidations and more freedom in the
formation of marketing associations, under the supervision of the
Department of Commerce, were permitted.

At the present time the National Government has little or no
authority to deal with this vital necessity of the life of the
country. It has permitted itself to remain so powerless that its only
attitude must be humble supplication. Authority should be lodged with
the President and the Departments of Commerce and Labor, giving them
power to deal with an emergency. They should be able to appoint
temporary boards with authority to call for witnesses and documents,
conciliate differences, encourage arbitration, and in case of
threatened scarcity exercise control over distribution. Making the
facts public under these circumstances through a statement from an
authoritative source would be of great public benefit. The report of
the last coal commission should be brought forward, reconsidered, and
acted upon.
Prohibition

Under the orderly processes of our fundamental institutions the
Constitution was lately amended providing for national prohibition.
The Congress passed an act for its enforcement, and similar acts have
been provided by most of the States. It is the law of the land. It is
the duty of all who come under its, jurisdiction to observe the
spirit of that law, and it is the duty of the Department of Justice
and the Treasury Department to enforce it. Action to prevent
smuggling, illegal transportation in interstate commerce, abuse in
the use of permits, and existence of sources of supply for illegal
traffic is almost entirely imposed upon the Federal Government.

Through treaties with foreign governments and increased activities of
the Coast Guard, revenue agents, district attorneys and enforcement
agents effort is being made to prevent these violations. But the
Constitution also puts a concurrent duty on the States. We need their
active and energetic cooperation, the vigilant action of their police,
and the jurisdiction of their courts to assist in enforcement. I
request of the people observance, of the public officers continuing
efforts for enforcement, and of the Congress favorable action on the
budget recommendation for the prosecution of this work.
Waterway development

For many years our country has been employed in plans and M for the
development of our intracoastal and inland waterways. This work along
our coast is an important adjunct to our commerce. It will be carried
on, together with the further opening up of our harbors, as our
resources permit. The Government made an agreement during the war to
take over the Cape Cod Canal, under which the owners made valuable
concessions. This pledged faith of the Government ought to be
redeemed.

Two other main fields are under consideration. One is the Great Lakes
and St. Lawrence, including the Erie Canal. This includes stabilizing
the lake level, and is both a waterway and power project. A joint
commission of the United States and Canada is working on plans and
surveys which will not be completed until next April. No final
determination can be made, apparently, except under treaty as to the
participation of both countries. The other is the Mississippi River
stem. This is almost entirely devoted to navigation. Work on the Ohio
River will be completed in about three years. A modern channel
connecting Chicago, New Orleans, Kansas City, and Pittsburgh should
be laid out and work on the tributaries prosecuted. Some work is
being done of a preparatory nature along the Missouri, and large
expenditures are being made yearly in the lower reaches of the
Mississippi and its tributaries which contribute both to flood
control and navigation. Preliminary measures are being taken on the
Colorado River project, which is exceedingly important for flood
control, irrigation, power development, and water supply to the area
concerned. It would seem to be very doubtful, however, whether it is
practical to secure affirmative action of the Congress, except under
a Joint agreement of the several States.

The Government has already expended large sums upon scientific
research and engineering investigation in promotion of this Colorado
River project. The actual progress has been retarded for many years
by differences among the seven States in the basin over their
relative water rights and among different groups as to methods. In an
attempt to settle the primary difficulty of the water rights, Congress
authorized the Colorado River Commission which agreed on November 24,
1922, upon an interstate compact to settle these rights, subject to
the ratification of the State legislatures and Congress. All seven
States except Arizona at one time ratified, the Arizona Legislature
making certain reservations which failed to meet the approval of the
governor. Subsequently an attempt was made to establish the compact
upon a six-State basis, but in this case California imposed
reservations. There appears to be no division of opinion upon the
major principles of the compact, but difficulty in separating
contentions to methods of development from the discussion of it. It
is imperative that flood control be undertaken for California and
Arizona. preparation made for irrigation, for power, and for domestic
water.

Some or all of these questions are combined in every proposed
development. The Federal Government is interested in some of these
phases, State governments and municipalities and irrigation districts
in others, and private corporations in still others. Because of all
this difference of view it is most desirable that Congress should
consider the creation of some agency that will be able to determine
methods of improvement solely upon economic and engineering facts,
that would be authorized to negotiate and settle, subject to the
approval of Congress, the participation, rights, and obligations of
each group in any particular works. Only by some such method can
early construction be secured.
Water power

Along with the development of navigation should go every possible
encouragement for the development of our water power. While steam
still plays a dominant part, this is more and more becoming an era of
electricity. Once installed, the cost is moderate, has not tended
greatly to increase, and is entirely free from the unavoidable dirt
and disagreeable features attendant upon the burning of coal. Every
facility should be extended for the connection of the various units
into a superpower plant, capable at all times of a current increasing
uniformity over the entire system.
Railroads

The railroads throughout the country are in a fair state of
prosperity. Their service is good and their supply of cars is
abundant. Their condition would be improved and the public better
served by a system of consolidations. I recommend that the Congress
authorize such consolidations tinder the supervision of the
Interstate Commerce Commission, with power to approve or disapprove
when proposed parts are excluded or new parts added. I am informed
that the railroad managers and their employees have reached a
substantial agreement as to what legislation is necessary to regulate
and improve their relationship. Whenever they bring forward such
proposals, which seem sufficient also to protect the interests of the
public, they should be enacted into law.

It is gratifying to report that both the railroad managers and
railroad employees are providing boards for the mutual adjustment of
differences in harmony with the principles of conference,
conciliation, and arbitration. The solution of their problems ought
to be an example to all other industries. Those who ask the
protections of civilization should be ready to use the methods of
civilization.

A strike in modern industry has many of the aspects of war in the
modern world. It injures labor and it injures capital. If the
industry involved is a basic one, it reduces the necessary economic
surplus and, increasing the cost of living, it injures the economic
welfare and general comfort of the whole people. It also involves a
deeper cost. It tends to embitter and divide the community into
warring classes and thus weakens the unity and power of our national
life.

Labor can make no permanent gains at the cost of the general welfare.
All the victories won by organized labor in the past generation have
been won through the support of public opinion. The manifest
inclination of the managers and employees of the railroads to adopt a
policy of action in harmony with these principles marks a new epoch in
our industrial life.
Outlying possessions

The time has come for careful investigation of the expenditures and
success of the laws by which we have undertaken to administer our
outlying possessions. A very large amount of money is being expended
for administration in Alaska. It appears so far out of proportion to
the number of inhabitants and the amount of production as to indicate
cause for thorough investigation. Likewise consideration should be
given to the experience under the law which governs the Philippines.
From such reports as reach me there are indications that more
authority should be given to the Governor General, so that he will
not be so dependent upon the local legislative body to render
effective our efforts to set an example of the, sound administration
and good government, which is so necessary for the preparation of the
Philippine people for self-government under ultimate independence. If
they are to be trained in these arts, it is our duty to provide for
them the best that there is.
Retirement of judges

The act of March 3, 1911, ought to be amended so that the term of
years of service of judges of any court of the United States
requisite for retirement with pay shall be computed to include not
only continuous but aggregate service.
Mothers' aid

The Government ought always to be alert on the side of the
humanities. It Ought to encourage provisions for economic justice for
the defenseless. It ought to extend its relief through its national
and local agencies, as may be appropriate in each case, to the
suffering and the needy. It ought to be charitable.

Although more than 40 of our States have enacted measures in aid of
motherhood, the District of Columbia is still without such a law. A
carefully considered bill will be presented, which ought to have most
thoughtful consideration in order that the Congress may adopt a
measure which will be hereafter a model for all parts of the Union.
Civil service

In 1883 the Congress passed the civil service act, which from a
modest beginning of 14,000 employees has grown until there are now
425,000 in the classified service. This has removed the clerical
force of the Nation from the wasteful effects of the spoils system
and made it more stable and efficient. The time has come to consider
classifying all postmasters, collectors of customs, collectors of
internal revenue, and prohibition agents, by an act covering in those
at present in office, except when otherwise provided by Executive
order.

The necessary statistics are now being gathered to form the basis of
a valuation of the civil service retirement fund based on current
conditions of the service. It is confidently expected that this
valuation will be completed in time to be made available to the
Congress during the present session. It will afford definite
knowledge of existing, and future liabilities under the present law
and determination OF liabilities under any proposed change in the
present law. We should have this information before creating further
obligations for retirement annuities which will become liabilities to
be met in the future from the money of the taxpayer.

The classification act of 1923, with the subsequent legislative
action providing for adjustment of the compensation of field service
positions, has operated materially to improve employment conditions
in the Federal service. The administration of the act is in the hands
of an impartial board, functioning without the necessity of a direct
appropriation. It would be inadvisable at this time to place in other
hands the administration of this act.
Federal trade commission

The proper function of the Federal Trade Commission is to supervise
and correct those practices in commerce which are detrimental to fair
competition. In this it performs a useful function and should be
continued and supported. It was designed also to be a help to honest
business. In my message to the Sixty-eighth Congress I recommended
that changes in the procedure then existing be made. Since then the
commission by its own action has reformed its rules, giving greater
speed and economy in the disposal of its cases and full opportunity
for those accused to be heard. These changes are improvements and, if
necessary, provision should be made for their permanency.
Reorganization

No final action has yet been taken on the measure providing for the
reorganization of the various departments. I therefore suggest that
this measure, which will be of great benefit to the efficient and
economical administration of the business of the Government, be
brought forward and passed.
The negro

Nearly one-tenth of our population consists of the Negro race. The
progress which they have made in all the arts of civilization in the
last 60 years is almost beyond belief. Our country has no more loyal
citizens. But they do still need sympathy, kindness, and helpfulness.
They need reassurance that the requirements of the Government and
society to deal out to them even-handed justice will be met. They
should be protected from all violence and supported in the peaceable
enjoyment of the fruits of their labor. Those who do violence to them
should be punished for their crimes. No other course of action is
worthy of the American people.

Our country has many elements in its population, many different modes
of thinking and living, all of which are striving in their own way to
be loyal to the high ideals worthy of the crown of American
citizenship. It is fundamental of our institutions that they seek to
guarantee to all our inhabitants the right to live their own lives
under the protection of the public law. This does not include any
license to injure others materially, physically, morally, to Incite
revolution, or to violate the established customs which have long had
the sanction of enlightened society.

But it does mean the full right to liberty and equality before the
law without distinction of race or creed. This condition can not be
granted to others, or enjoyed by ourselves, except by the application
of the principle of broadest tolerance. Bigotry is only another name
for slavery. It reduces to serfdom not only those against whom it is
directed, but also those who seek to apply it. An enlarged freedom
can only be secured by the application of the golden rule. No other
utterance ever presented such a practical rule of life.
Conclusion

It is apparent that we are reaching into an era of great general
prosperity. It will continue only so long as we shall use it
properly. After all, there is but a fixed quantity of wealth in this
country at any fixed time. The only way that we can all secure more
of it is to create more. The element of time enters into production,
If the people have sufficient moderation and contentment to be
willing to improve their condition by the process of enlarging
production, eliminating waste, and distributing equitably, a
prosperity almost without limit lies before its. If the people are to
be dominated by selfishness, seeking immediate riches by nonproductive
speculation and by wasteful quarreling over the returns from industry,
they will be confronted by the inevitable results of depression and
privation. If they will continue industrious and thrifty, contented
with fair wages and moderate profits, and the returns which accrue
from the development of oar natural resources, our prosperity will
extend itself indefinitely.

In all your deliberations you should remember that the purpose of
legislation is to translate principles into action. It is an effort
to have our country be better by doing better. Because the thoughts
and ways of people are firmly fixed and not easily