Speech Transcript:

 Members of the Congress:

It is gratifying to report that for the fourth consecutive year the
state of the Union in general is good. We are at peace. The country
as a whole has had a prosperity never exceeded. Wages are at their
highest range, employment is plentiful. Some parts of agriculture and
industry have lagged; some localities have suffered from storm and
flood. But such losses have been absorbed without serious detriment
to our great economic structure. Stocks of goods are moderate and a
wholesome caution is prevalent. Rates of interest for industry,
agriculture, and government have been reduced. Savers and investors
are providing capital for new construction in industry and public
works. The purchasing power of agriculture has increased. If the
people maintain that confidence which they are entitled to have in
themselves, in each other, and in America, a comfortable prosperity
will continue.

CONSTRUCTIVE ECONOMY

Without constructive economy in Government expenditures we should not
now be enjoying these results or these prospects. Because we are not
now physically at war, some people are disposed to forget that our
war debt still remains. The Nation must make financial sacrifices,
accompanied by a stern self-denial in public expenditures, until we
have conquered the disabilities of our public finance. While our
obligation to veterans and dependents is large and continuing, the
heavier burden of the national debt is being steadily eliminated. At
the end of this fiscal year it will be reduced from about
$26,600,000,000 to about $17,975,000,000. Annual interest, including
war savings, will have been reduced from $1,055,000,000 to
$670,0001,000. The sacrifices of the people, the economy of the
Government, are showing remarkable results. They should be continued
for the purpose of relieving the Nation of the burden of interest and
debt and releasing revenue for internal improvements and national
development.

Not only the amount, but the rate, of Government interest has been
reduced. Callable bonds have been refunded and paid, so that during
this year the average rate of interest on the present public debt for
the first time fell below 4 per cent. Keeping the credit of the Nation
high is a tremendously profitable operation.

TAX REDUCTION

The immediate fruit of economy and the retirement of the public debt
is tax reduction. The annual saving in interest between 1925 and 1929
is $212,000,000. Without this no bill to relieve the taxpayers would
be worth proposing. The three measures already enacted leave our
Government revenues where they are not oppressive. Exemptions, have
been increased until 115,000,000 people make but 2,500,000 individual
taxable returns, so that further reduction should be mainly for the
purpose of removing inequalities. The Secretary of the Treasury has
recommended a measure which would give us a much better balanced
system of taxation and without oppression produce sufficient revenue.
It has my complete support.

Unforeseen contingencies requiring money are always arising. Our
probable surplus for June 30, 1929, is small. A slight depression in
business would greatly reduce our revenue because of our present
method of taxation. The people ought to take no selfish attitude of
pressing for removing moderate and fair taxes which might produce a
deficit. We must keep our budget balanced for each year. That is the
corner stone of our national credit, the trifling price we pay to
command the lowest rate of interest of any great power in the world.
Any surplus can be applied to debt reduction, and debt reduction is
tax reduction. Under the present circumstances it would be far better
to leave the rates as they are than to enact a bill carrying the peril
of a deficit. This is not a problem to be approached in a narrow or
partisan spirit. All of those who participate in finding a reasonable
solution will be entitled to participate in any credit that accrues
from it without regard to party. The Congress has already
demonstrated that tax legislation can be removed from purely
political consideration into the realm of patriotic business
principles.

Any bill for tax reduction should be written by those who are
responsible for raising, managing, and expending the finances of the
Government. If special interests, too often selfish, always
uninformed of the national needs as a whole, with hired agents using
their proposed beneficiaries as engines of propaganda, are permitted
to influence the withdrawal of their property from taxation, we shall
have a law that is unbalanced and unjust, bad for business, bad for
the country, probably resulting in a deficit, with disastrous
financial Consequences. The Constitution has given the Members of the
Congress sole authority to decide what tax measures shall be presented
for approval. While welcoming information from any quarter, the
Congress should continue to exercise its own judgment in a matter so
vital and important to all the interests of the country as taxation.

NATIONAL DEFENSE

Being a nation relying not on force, but on fair dealing and good
will, to maintain peace with others, we have provided a moderate
military force in a form adapted solely to defense. It should be
continued with a very generous supply of officers and with the
present base of personnel, subject to fluctuations which may be
temporarily desirable.

The five-year program for our air forces is in keeping with this same
policy and commensurate with the notable contributions of America to
the science of aeronautics. The provisions of the law lately enacted
are being executed as fast as the practical difficulties of an
orderly and stable development permit.

While our Army is small, prudence requires that it should be kept in
a high state of efficiency and provided with such supplies as would
permit of its immediate expansion. The garrison ration has lately
been increased. Recommendations for an appropriation of $6,166,000
for new housing made to the previous Congress failed to pass. While
most of the Army is well housed, some of it which is quartered in
wartime training camps is becoming poorly housed. In the past three
years $12,533,000 have been appropriated for reconstruction and
repairs, and an authorization has been approved of $22,301,000 for
new housing, under which $8,070,000 has already been appropriated. A
law has also been passed, complying with the request of the War
Department, allocating funds received from the sale of buildings and
land for housing purposes. The work, however, is not completed, so
that other appropriations are being recommended.

Our Navy is likewise a weapon of defense. We have a foreign commerce
and ocean lines of trade unsurpassed by any other country. We have
outlying territory in the two great oceans and long stretches of
seacoast studded with the richest cities in the world. We are
responsible for the protection of a large population and the greatest
treasure ever bestowed upon any people. We are charged with an
international duty of defending the Panama Canal. To meet these
responsibilities we need a very substantial sea armament. It needs
aircraft development, which is being provided under the five-year
program. It needs submarines as soon as the department decides upon
the best type of construction. It needs airplane carriers and a
material addition to its force of cruisers. We can plan for the
future and begin a moderate building program.

This country has put away the Old World policy of competitive
armaments. It can never be relieved of the responsibility of adequate
national defense. We have one treaty secured by an unprecedented
attitude of generosity on our part for a limitation in naval
armament. After most careful preparation, extending over months, we
recently made every effort to secure a three-power treaty to the same
end. We were granted much cooperation by Japan, but we were unable to
come to an agreement with Great Britain. While the results of the
conference were of considerable value, they were mostly of a negative
character. We know now that no agreement can be reached which will be
inconsistent with a considerable building program on our part. We are
ready and willing to continue the preparatory investigations on the
general subject of limitation of armaments which have been started
under the auspices of the League of Nations.

We have a considerable cruiser tonnage, but a part of it is obsolete.
Everyone knew that had a three-power agreement been reached it would
have left us with the necessity of continuing our building program.
The failure to agree should not cause us to build either more or less
than we otherwise should. Any future treaty of limitation will call on
us for more ships. We should enter on no competition. We should
refrain from no needful program. It should be made clear to all the
world that lacking a definite agreement, the attitude of any other
country is not to be permitted to alter our own policy. It should
especially be demonstrated that propaganda will not cause us to
change our course. Where there is no treaty limitation, the size of
the Navy which America is to have will be solely for America to
determine. No outside influence should enlarge it or diminish it. But
it should be known to all that our military power holds no threat of
aggrandizement. It is a guaranty of peace and security at home, and
when it goes abroad it is an instrument for the protection of the
legal rights of our citizens under international law, a refuge in
time of disorder, and always the servant of world peace. Wherever our
flag goes the rights of humanity increase.

MERCHANT MARINE

The United States Government fleet is transporting a large amount of
freight and reducing its drain on the Treasury. The Shipping Board is
constantly under pressure, to which it too often yields, to protect
private interests, rather than serve the public welfare. More
attention should be given to merchant ships as an auxiliary of the
Navy. The possibility of including their masters and crews in the
Naval Reserve, with some reasonable compensation, should be
thoroughly explored as a method of encouraging private operation of
shipping. Public operation is not a success. No investigation, of
which I have caused several to be made, has failed to report that it
could not succeed or to recommend speedy transfer to private
ownership. Our exporters and importers are both indifferent about
using American ships. It should be our policy to keep our present
vessels in repair and dispose of them as rapidly as possible, rather
than undertake any new construction. Their operation is a burden on
the National Treasury, for which we are not receiving sufficient
benefits.

COMMERCIAL AVIATION

A rapid growth is taking place in aeronautics. The Department of
Commerce has charge of the inspection and licensing system and the
construction of national airways. Almost 8,000 miles are already
completed and about 4,000 miles more contemplated. Nearly 4,400 miles
are now equipped and over 3,000 miles more will have lighting and
emergency landing fields by next July. Air mail contracts are
expected to cover 24 of these lines. Daily airway flying is nearly
15,000 miles and is expected to reach 25,000 miles early next year.

Flights for other purposes exceed 22,000 miles each day. Over 900
airports, completed and uncompleted, have been laid out. The demand
for aircraft has greatly increased. The policy already adopted by the
Congress is producing the sound development of this coming industry.

WESTERN HEMISPHERE AIR MAIL

Private enterprise is showing much interest in opening up aviation
service to Mexico and Central and South America. We are particularly
solicitous to have the United States take a leading part in this
development. It is understood that the governments of our sister
countries would be willing to cooperate. Their physical features, the
undeveloped state of their transportation, make an air service
especially adaptable to their usage. The Post Office Department
should be granted power to make liberal long-term contracts for
carrying our mail, and authority should be given to the Army and the
Navy to detail aviators and planes to cooperate with private
enterprise in establishing such mail service with the consent of the
countries concerned. A committee of the Cabinet will later present a
report on this subject.

GOOD ROADS

The importance and benefit of good roads is more and more coming to
be appreciated. The National Government has been making liberal
contributions to encourage their construction. The results and
benefits have been very gratifying. National participation, however,
should be confined to trunk-line systems. The national tax on
automobiles is now nearly sufficient to meet this outlay. This tax is
very small, and on low-priced cars is not more than $2 or $3 each
year.

While the advantage of having good roads is very large, the desire
for improved highways is not limited to our own country. It should
and does include all the Western Hemisphere. The principal points in
Canada are already accessible. We ought to lend our encouragement in
any way we can for more good roads to all the principal points in
this hemisphere south of the Rio Grande. It has been our practice to
supply these countries with military and naval advisers, when they
have requested it, to assist them in national defense. The arts of
peace are even more important to them and to us. Authority should be
given by law to provide them at their request with engineering
advisers for the construction of roads and bridges. In some of these
countries already wonderful progress is being made in road building,
but the engineering features are often very exacting and the
financing difficult. Private interests should look with favor on all
reasonable loans sought by these countries to open such main lines of
travel.

This general subject has been promoted by the Pan American Congress
of Highways, which will convene again at Rio de Janeiro in July,
1928. It is desirable that the Congress should provide for the
appointment of delegates to represent the Government of the United
States.

CUBAN PARCEL POST

We have a temporary parcel-post convention with Cuba. The advantage
of it is all on our side. During 1926 we shipped twelve times as many
parcels, weighing twenty-four times as much, as we received. This
convention was made on the understanding that we would repeal an old
law prohibiting the importation of cigars and cigarettes in
quantities less than 3,000 enacted in 1866 to discourage smuggling,
for which it has long been unnecessary. This law unjustly
discriminates against an important industry of Cuba. Its repeal has
been recommended by the Treasury and Post Office Departments. Unless
this is done our merchants and railroads will find themselves
deprived of this large parcel-post business after the 1st of next
March, the date of the expiration of the convention, which has been
extended upon the specific understanding that it would expire at that
time unless this legislation was enacted. We purchase large quantities
of tobacco made in Cuba. It is not probable that our purchases would
be any larger if this law was repealed, while it would be an
advantage to many other industries in the United States.

INSULAR POSSESSIONS

Conditions in the Philippine Islands have been steadily improved.
Contentment and good order prevail. Roads, irrigation works, harbor
improvements, and public buildings are being constructed. Public
education and sanitation have been advanced. The Government is in a
sound financial condition. These immediate results were especially
due to the administration of Gov. Gen. Leonard Wood. The six years of
his governorship marked a distinct improvement in the islands and rank
as one of the outstanding accomplishments of this distinguished man.
His death is a loss to the Nation and the islands.

Greater progress could be made, more efficiency could be put into
administration, if the Congress would undertake to expend, through
its appropriating power, all or a part of the customs revenues which
are now turned over to the Philippine treasury. The powers of the
auditor of the islands also need revision and clarification. The
government of the islands is about 98 per cent in the hands of the
Filipinos. An extension of the policy of self-government will be
hastened by the demonstration on their part of their desire and their
ability to carry out cordially and efficiently the provisions of the
organic law enacted by the Congress for the government of the
islands. It would be well for a committee of the Congress to visit
the islands every two years.

A fair degree of progress is being made in Porto Rico. Its
agricultural products are increasing; its treasury position, which
has given much concern, shows improvement. I am advised by the
governor that educational facilities are still lacking. Roads are
being constructed, which he represents are the first requisite for
building schoolhouses. The loyalty of the island to the United States
is exceedingly gratifying. A memorial will be presented to you
requesting authority to have the governor elected by the people of
Porto Rico. This was never done in the case of our own Territories.
It is admitted that education outside of the towns is as yet very
deficient. Until it has progressed further the efficiency of the
government and the happiness of the people may need the guiding hand
of an appointed governor. As it is not contemplated that any change
should be made immediately, the general subject may well have the
thoughtful study of the Congress.

PANAMA CANAL

The number of commercial ships passing through the Panama Canal has
increased from 3,967 in 1923 to 5,475 in 1927. The total amount of
tolls turned into the Treasury is over $166,000,000, while all the
operations of the canal have yielded a surplus of about $80,000,000.
In order to provide additional storage of water and give some control
over the floods of the Chagres River, it is proposed to erect a dam to
cost about $12,000,000 at Alhajuela. It will take some five years to
complete this work.

AGRICULTURE

The past year has seen a marked improvement in the general condition
of agriculture. Production is better balanced and without acute
shortage or heavy surplus. Costs have been reduced and the average
output of the worker increased. The level of farm prices has risen
while others have fallen, so that the purchasing power of the farmer
is approaching a normal figure. The individual farmer is entitled to
great credit for the progress made since 1921. He has adjusted his
production and through cooperative organizations and other methods
improved his marketing. He is using authenticated facts and employing
sound methods which other industries are obliged to use to secure
stability and prosperity. The old-fashioned haphazard system is being
abandoned, economics are being applied to ascertain the best adapted
unit of land, diversification is being promoted, and scientific
methods are being used in production, and business principles in
marketing.

Agriculture has not fully recovered from postwar depression. The fact
is that economic progress never marches forward in a straight line. It
goes in waves. One part goes ahead, while another halts and another
recedes. Everybody wishes agriculture to prosper. Any sound and
workable proposal to help the farmer will have the earnest support of
the Government. Their interests are not all identical. Legislation
should assist as many producers in as many regions as possible. It
should be the aim to assist the farmer to work out his own salvation
socially and economically. No plan will be of any permanent value to
him which does not leave him standing on his own foundation.

In the past the Government has spent vast sums to bring land under
cultivation. It is apparent that this has reached temporarily the
saturation point. We have had a surplus of production and a poor
market for land, which has only lately shown signs of improvement.
The main problem which is presented for solution is one of dealing
with a surplus of production. It is useless to propose a temporary
expedient. What is needed is permanency and stability. Government
price fixing is known to be unsound and bound to result in disaster.
A Government subsidy would work out in the same way. It can not be
sound for all of the people to hire some of the people to produce a
crop which neither the producers nor the rest of the people want.

Price fixing and subsidy will both increase the surplus, instead of
diminishing it. Putting the Government directly into business is
merely a combination of subsidy and price fixing aggravated by
political pressure. These expedients would lead logically to telling
the farmer by law what and how much he should plant and where he
should plant it, and what and how much he should sell and where he
should sell it. The most effective means of dealing with surplus
crops is to reduce the surplus acreage. While this can not be done by
the individual farmer, it can be done through the organizations
already in existence, through the information published by the
Department of Agriculture, and especially through banks and others
who supply credit refusing to finance an acreage manifestly too
large.

It is impossible to provide by law for an assured success and
prosperity for all those who engage in farming. If acreage becomes
overextended, the Government can not assume responsibility for it.
The Government can, however, assist cooperative associations and
other organizations in orderly marketing and handling a surplus
clearly due to weather and seasonal conditions, in order to save the
producer from preventable loss. While it is probably impossible to
secure this result at a single step, and much will have to be worked
out by trial and rejection, a beginning could be made by setting up a
Federal board or commission of able and experienced men in marketing,
granting equal advantages under this board to the various
agricultural commodities and sections of the country, giving
encouragement to the cooperative movement in agriculture, and
providing a revolving loan fund at a moderate rate of interest for
the necessary financing. Such legislation would lay the foundation
for a permanent solution of the surplus problem.

This is not a proposal to lend more money to the farmer, who is
already fairly well financed, but to lend money temporarily to
experimental marketing associations which will no doubt ultimately be
financed by the regularly established banks, as were the temporary
operations of the War Finance Corporation. Cooperative marketing
especially would be provided with means of buying or building
physical properties.

The National Government has almost entirely relieved the farmer from
income taxes by successive tax reductions, but State and local taxes
have increased, putting on him a grievous burden. A policy of rigid
economy should be applied to State and local expenditures. This is
clearly within the legislative domain of the States. The Federal
Government has also improved our banking structure and system of
agricultural credits. The farmer will be greatly benefited by similar
action in many States. The Department of Agriculture is undergoing
changes in organization in order more completely to separate the
research and regulatory divisions, that each may be better
administered. More emphasis is being placed on the research program,
not only by enlarging the appropriations for State experiment
stations but by providing funds for expanding the research work of
the department. It is in this direction that much future progress can
be expected.

THE PROTECTIVE TARIFF

The present tariff rates supply the National Treasury with well over
$600,000,000 of annual revenue. Yet, about 65 per cent of our imports
come in duty free. Of the remaining 35 per cent of imports on which
duties are laid about 23 per cent consists of luxuries and
agricultural products, and the balance of about 12 per cent,
amounting, to around $560,000,000 is made up of manufactures and
merchandise. As no one is advocating any material reduction in the
rates on agriculture or luxuries, it is only the comparatively small
amount of about $560,000,000 of other imports that are really
considered in any discussion of reducing tariff rates. While this
amount, duty free, would be large enough seriously to depress many
lines of business in our own country, it is of small importance when
spread over the rest of the world.

It is often stated that a reduction of tariff rates on industry would
benefit agriculture. It would be interesting to know to what
commodities it is thought this could be applied. Everything the
farmer uses in farming is already on the free list. Nearly everything
he sells is protected. It would seem to be obvious that it is better
for the country to have the farmer raise food to supply the domestic
manufacturer than the foreign manufacturer. In one case our country
would have only the farmer; in the other it would have the farmer and
the manufacturer. Assuming that Europe would have more money if it
sold us larger amounts of merchandise, it is not certain it would
consume more food, or, if it did, that its purchases would be made in
this country. Undoubtedly it would resort to the cheapest market,
which is by no means ours. The largest and best and most profitable
market for the farmer in the world is our own domestic market. Any
great increase in manufactured imports means the closing of our own
plants. Nothing would be worse for agriculture.

Probably no one expects a material reduction in the rates on
manufactures while maintaining the rates on agriculture. A material
reduction in either would be disastrous to the farmer. It would mean
a general shrinkage of values, a deflation of prices, a reduction of
wages, a general depression carrying our people down to the low
standard of living in our competing countries. It is obvious that
this would not improve but destroy our market for imports, which is
best served by maintaining our present high purchasing power under
which in the past five years imports have increased 63 per cent.

FARM LOAN SYSTEM

It is exceedingly important that the Federal land and joint-stock
land banks should furnish the best possible service for agriculture.
Certain joint-stock banks have fallen into improper and unsound
practices, resulting in the indictment of the officials of three of
them. More money has been provided for examinations, and at the
instance of the Treasury rules and regulations of the Federal Farm
Board have been revised. Early last May three of its members
resigned. Their places were filled with men connected with the War
Finance Corporation. Eugene Meyer being designated as Farm Loan
Commissioner. The new members have demonstrated their ability in the
field of agricultural finance in the extensive operations of he War
Finance Corporation. Three joint-stock banks have gone into
receivership. It is necessary to preserve the public confidence in
this system in order to find a market for their bonds. A recent
flotation was made at a record low rate of 4 per cent. Careful
supervision is absolutely necessary to protect the investor and
enable these banks to exercise their chief function in serving
agriculture.

MUSCLE SHOALS

The last year has seen considerable changes in the problem of Muscle
Shoals. Development of other methods show that nitrates can probably
be produced at less cost than by the use of hydroelectric power.
Extensive investigation made by the Department of War indicates that
the nitrate plants on this project are of little value for national
defense and can probably be disposed of within two years. The
oxidation part of the plants, however, should be retained
indefinitely. This leaves this project mostly concerned with power.
It should, nevertheless, continue to be dedicated to agriculture. It
is probable that this desire can be best served by disposing of the
plant and applying the revenues received from it to research for
methods of more economical production of concentrated fertilizer and
to demonstrations and other methods of stimulating its use on the
farm. But in disposing of the property preference should be given to
proposals to use all or part of it for nitrate production and
fertilizer manufacturing.

FLOOD CONTROL

For many years the Federal Government has been building a system of
dikes along the Mississippi River for protection against high water.
During the past season the lower States were overcome by a most
disastrous flood. Many thousands of square miles were inundated a
great many lives were lost, much livestock was drowned, and a very
heavy destruction of property was inflicted upon the inhabitants. The
American Red Cross at once went to the relief of the stricken
communities. Appeals for contributions have brought in over
$17,000,000. The Federal Government has provided services, equipment,
and supplies probably amounting to about $7,000,000 more. Between
$5,000,000 and $10,000,000 in addition have been provided by local
railroads, the States, and their political units. Credits have been
arranged by the Farm Loan Board, and three emergency finance
corporations with a total capital of $3,000,000 have insured
additional resources to the extent of $12,000,000. Through these
means the 700,000 people in the flooded areas have been adequately
supported. Provision has been made to care for those in need until
after the 1st of January.

The Engineering Corps of the Army has contracted to close all breaks
in the dike system before the next season of high water. A most
thorough and elaborate survey of the whole situation has been made
and embodied in a report with recommendations for future flood
control, which will be presented to the Congress. The carrying out of
their plans will necessarily extend over a series of years. They will
call for a raising and strengthening of the dike system with
provision for emergency spillway's and improvements for the benefit
of navigation.

Under the present law the land adjacent to the dikes has paid
one-third of the cost of their construction. This has been a most
extraordinary concession from the plan adopted in relation to
irrigation, where the general rule has been that the land benefited
should bear the entire expense. It is true, of course, that the
troublesome waters do not originate on the land to be reclaimed, but
it is also true that such waters have a right of way through that
section of the country and the land there is charged with that
easement. It is the land of this region that is to be benefited. To
say that it is unable to bear any expense of reclamation is the same
thing as saying that it is not worth reclaiming. Because of expenses
incurred and charges already held against this land, it seems
probable that some revision will have to be made concerning the
proportion of cost which it should bear. But it is extremely
important that it should pay enough so that those requesting
improvements will be charged with some responsibility for their cost,
and the neighborhood where works are constructed have a pecuniary
interest in preventing waste and extravagance and securing a wise and
economical expenditure of public funds.

It is necessary to look upon this emergency as a national disaster.
It has been so treated from its inception. Our whole people have
provided with great generosity for its relief. Most of the
departments of the Federal Government have been engaged in the same
effort. The governments of the afflicted areas, both State and
municipal, can not be given too high praise for the courageous and
helpful way in which they have come to the rescue of the people. If
the sources directly chargeable can not meet the demand, the National
Government should not fail to provide generous relief. This, however,
does not mean restoration. The Government is not an insurer of its
citizens against the hazard of the elements. We shall always have
flood and drought, heat and cold, earthquake and wind, lightning and
tidal wave, which are all too constant in their afflictions. The
Government does not undertake to reimburse its citizens for loss and
damage incurred under such circumstances. It is chargeable, however,
with the rebuilding of public works and the humanitarian duty of
relieving its citizens from distress.

The people in the flooded area and their representatives have
approached this problem in the most generous and broad-minded way.
They should be met with a like spirit on the part of the National
government. This is all one country. The public needs of each part
must be provided for by the public at large. No required relief
should be refused. An adequate plan should be adopted to prevent a
recurrence of this disaster in order that the people may restore to
productivity and comfort their fields and their towns.

Legislation by this Congress should be confined to our principal and
most pressing problem, the lower Mississippi, considering tributaries
only so far as they materially affect the main flood problem. A
definite Federal program relating to our waterways was proposed when
the last Congress authorized a comprehensive survey of all the
important streams of the country in order to provide for their
improvement, including flood control, navigation, power, and
irrigation. Other legislation should wait pending a report on this
survey. The recognized needs of the Mississippi should not be made a
vehicle for carrying other projects. All proposals for development
should stand on their own merits. Any other method would result in
ill-advised conclusions, great waste of money, and instead of
promoting would delay the orderly and certain utilization of our
water resources.

Very recently several of the New England States have suffered
somewhat similarly from heavy rainfall and high water. No reliable
estimate of damage has yet been computed, but it is very large to
private and public property. The Red Cross is generously undertaking
what is needed for immediate relief, repair and reconstruction of
houses, restocking of domestic animals, and food, clothing, and
shelter. A considerable sum of money will be available through the
regular channels in the Department of Agriculture for reconstruction
of highways. It may be necessary to grant special aid for this
purpose. Complete reports of what is required will undoubtedly be
available early in the session.

INLAND NAVIGATION

The Congress in its last session authorized the general improvements
necessary to provide the Mississippi waterway system with better
transportation. Stabilization of the levels of the Great Lakes and
their opening to the sea by an effective shipway remain to be
considered. Since the last session the Board of Engineers of the War
Department has made a report on the proposal for a canal through the
State of New York, and the Joint Board of Engineers, representing
Canada and the United States, has finished a report on the St.
Lawrence River. Both of these boards conclude that the St. Lawrence
project is cheaper, affords a more expeditious method of placing
western products in European markets, and will cost less to operate.
The State Department has requested the Canadian Government to
negotiate treaties necessary to provide for this improvement. It will
also be necessary to secure an agreement with Canada to put in works
necessary to prevent fluctuation in the levels of the Great Lakes.

Legislation is desirable for the construction of a dam at Boulder
Canyon on the Colorado River, primarily as a method of flood control
and irrigation. A secondary result would be a considerable power
development and a source of domestic water supply for southern
California. Flood control is clearly a national problem, and water
supply is a Government problem, but every other possibility should be
exhausted before the Federal Government becomes engaged in the power
business. The States which are interested ought to reach mutual
agreement. This project is in reality their work. If they wish the
Federal Government to undertake it, they should not hesitate to make
the necessary concessions to each other. This subject is fully
discussed in the annual report of the Secretary of the Interior. The
Columbia River Basin project is being studied and will be one to be
considered at some future time.

The Inland Waterways Corporation is proving successful and especially
beneficial to agriculture. A survey is being made to determine its
future needs. It has never been contemplated that if inland rivers
were opened to navigation it would then be necessary for the Federal
Government to provide the navigation. Such a request is very nearly
the equivalent of a declaration that their navigation is not
profitable, that the commodities which they are to carry can be taken
at a cheaper rate by some other method, in which case the hundreds of
millions of dollars proposed to be expended for opening rivers to
navigation would be not only wasted, but would entail further
constant expenditures to carry the commodities of private persons for
less than cost.

The policy is well established that the Government should open public
highways on land and on water, but for use of the public in their
private capacity. It has put on some demonstration barge lines, but
always with the expectation that if they prove profitable they would
pass into private hands and if they do not prove profitable they will
be withdrawn. The problems of transportation over inland waterways
should be taken up by private enterprise, so that the public will
have the advantage of competition in service. It is expected that
some of our lines can be sold, some more demonstration work done, and
that with the completion of the Ohio project a policy of private
operation can be fully developed.

PROHIBITION

After more than two generations of constant debate, our country
adopted a system of national prohibition under all the solemnities
involved in an amendment to the Federal Constitution. In obedience to
this mandate the Congress and the States, with one or two notable
exceptions, have passed required laws for its administration and
enforcement. This imposes upon the citizenship of the country, and
especially on all public officers, not only the duty to enforce, but
the obligation to observe the sanctions of this constitutional
provision and its resulting laws. If this condition could be secured,
all question concerning prohibition would cease. The Federal
Government is making every effort to accomplish these results through
careful organization, large appropriations, and administrative effort.
Smuggling has been greatly cut down, the larger sources of supply for
illegal sale have been checked, and by means of injunction and
criminal prosecution the process of enforcement is being applied. The
same vigilance on the part of local governments would render these
efforts much more successful. The Federal authorities propose to
discharge their obligation for enforcement to the full extent of
their ability.

THE NEGRO

History does not anywhere record so much progress made in the same
length of time as that which has been accomplished by the Negro race
in the United States since the Emancipation Proclamation. They have
come up from slavery to be prominent in education, the professions,
art, science, agriculture, banking, and commerce. It is estimated
that 50,000 of them are on the Government pay rolls, drawing about
$50,000,000 each year. They have been the recipients of presidential
appointments and their professional ability has arisen to a
sufficiently high plane so that they have been intrusted with the
entire management and control of the great veterans hospital at
Tuskegee, where their conduct has taken high rank. They have shown
that they have been worthy of all the encouragement which they have
received. Nevertheless, they are too often subjected to thoughtless
and inconsiderate treatment, unworthy alike of the white or colored
races. They have especially been made the target of the foul crime of
lynching. For several years these acts of unlawful violence had been
diminishing. In the last year they have shown an increase. Every
principle of order and law and liberty is opposed to this crime. The
Congress should enact any legislation it can under the Constitution
to provide for its elimination.

AMERICAN INDIAN

The condition of the American Indian has much improved in recent
years. Full citizenship was bestowed upon them on June 2, 1924, and
appropriations for their care and advancement have been increased.
Still there remains much to be done.

Notable increases in appropriations for the several major functions
performed by the Department of the Interior on behalf of the Indians
have marked the last five years. In that time, successive annual
increases in appropriations for their education total $1,804,325; for
medical care, $578,000; and for industrial advancement, $205,000; or
$2,582,325 more than would have been spent in the same period on the
basis of appropriations for 1923 and the preceding years.

The needs along health, educational, industrial and social lines
however, are great, and the Budget estimates for 1929 include still
further increases for Indian administration.

To advance the time when the Indians may become self-sustaining, it
is my belief that the Federal Government should continue to improve
the facilities for their care, and as rapidly as possible turn its
responsibility over to the States.

COAL

Legislation authorizing a system of fuel administration and the
appointment by the President of a Board of Mediation and Conciliation
in case of actual or threatened interruption of production is needed.
The miners themselves are now seeking information and action from the
Government, which could readily be secured through such a board. It is
believed that a thorough investigation and reconsideration of this
proposed policy by the Congress will demonstrate that this
recommendation is sound and should be adopted.

PETROLEUM CONSERVATION

The National Government is undertaking to join in the formation of a
cooperative committee of lawyers, engineers, and public officers, to
consider what legislation by the States or by the Congress can be
adopted for the preservation and conservation of our supply of
petroleum. This has come to be one of the main dependencies for
transportation and power so necessary to our agricultural and
industrial life. It is expected the report of this committee will be
available for later congressional action. Meantime, the requirement
that the Secretary of the Interior should make certain leases of land
belonging to the Osage Indians, in accordance with the act of March 3,
1921, should be repealed. The authority to lease should be
discretionary, in order that the property of the Indians way not be
wasted and the public suffer a future lack of supply.

ALIEN PROPERTY

Under treaty the property held by the Alien Property Custodian was to
be retained until suitable provision had been made for the
satisfaction of American claims. While still protecting the American
claimants, in order to afford every possible accommodation to the
nationals of the countries whose property was held, the Congress has
made liberal provision for the return of a larger part of the
property. All trusts under $10,000 were returned in full, and partial
returns were made on the others. The total returned was approximately
$350,000,000.

There is still retained, however, about $250,000,000. The Mixed
Claims Commission has made such progress in the adjudication of
claims that legislation can now be enacted providing for the return
of the property, which should be done under conditions which will
protect our Government and our claimants. Such a measure will be
proposed, and I recommend its enactment.

RAILROAD CONSOLIDATION

In order to increase the efficiency of transportation and decrease
its cost to the shipper, railroad consolidation must be secured.
Legislation is needed to simplify the necessary procedure to secure
such agreements and arrangements for consolidation, always under the
control and with the approval of the Interstate Commerce Commission.
Pending this, no adequate or permanent reorganization can be made of
the freight-rate structure. Meantime, both agriculture and industry
are compelled to wait for needed relief. This is purely a business
question, which should be stripped of all local and partisan bias and
decided on broad principles and its merits in order to promote the
public welfare. A large amount of new construction and equipment,
which will furnish employment for labor and markets for commodities
of both factory and farm, wait on the decision of this important
question. Delay is holding back the progress of our country.

Many of the same arguments are applicable to the consolidation of the
Washington traction companies.

VETERANS

The care which this country has lavished on its veterans is known of
all men. The yearly outlay for this purpose is about $750,000,000, or
about the cost of running the Federal Government, outside of the Post
Office Department, before the World War. The Congress will have
before it recommendations of the American Legion, the Veterans of
Foreign Wars, and other like organizations, which should receive
candid consideration. We should continue to foster our system of
compensation and rehabilitation, and provide hospitals and insurance.
The magnitude of the undertaking is already so large that all requests
calling for further expenditure should have the most searching
scrutiny. Our present system of pensions is already sufficiently
liberal. It was increased by the last Congress for Civil and Spanish
War veterans and widows and for some dependents.

It has been suggested that the various governmental agencies now
dealing with veterans' relief be consolidated. This would bring many
advantages. It is recommended that the proper committees of the
Congress make a thorough survey of this subject, in order to
determine if legislation to secure such consolidation is desirable.

EDUCATION

For many years it has been the policy of the Federal Government to
encourage and foster the cause of education. Large sums of money are
annually appropriated to carry on vocational training. Many millions
go into agricultural schools. The general subject is under the
immediate direction of a Commissioner of Education. While this
subject is strictly a State and local function, it should continue to
have the encouragement of the National Government. I am still of the
opinion that much good could be accomplished through the
establishment of a Department of Education and Relief, into which
would be gathered all of these functions under one directing member
of the Cabinet.

DEPARTMENT OF LABOR

Industrial relations have never been more peaceful. In recent months
they have suffered from only one serious controversy. In all others
difficulties have been adjusted, both management and labor wishing to
settle controversies by friendly agreement rather than by compulsion.
The welfare of women and children is being especially guarded by our
Department of Labor. Its Children's Bureau is in cooperation with 26
State boards and 80 juvenile courts.

Through its Bureau of Immigration it has been found that medical
examination abroad has saved prospective immigrants from much
hardship. Some further legislation to provide for reuniting families
when either the husband or the wife is in this country, and granting
more freedom for the migration of the North American Indian tribes is
desirable.

The United States Employment Service has enabled about 2,000,000 men
and women to gain paying positions in the last fiscal year.
Particular attention has been given to assisting men past middle life
and in providing field labor for harvesting agricultural crops. This
has been made possible in part through the service of the Federal
Board for Vocational Education, which is cooperating with the States
in a program to increase the technical knowledge and skill of the
wage earner.

PUBLIC BUILDINGS

Construction is under way in the country and ground has been broken
for carrying out a public-building program for Washington. We have
reached a time when not only the conveniences but the architectural
beauty of the public buildings of the Capital City should be given
much attention. It will be necessary to purchase further land and
provide the required continuing appropriations.

HISTORICAL CELEBRATIONS

Provision is being made to commemorate the two hundredth anniversary
of the birth of George Washington. Suggestion has been made for the
construction of a memorial road leading from the Capital to Mount
Vernon, which may well have the consideration of the Congress, and
the commission intrusted with preparations for the celebration will
undoubtedly recommend publication of the complete writings of
Washington and a series of writings by different authors relating to
him.

February 25, 1929. is the one hundred and fiftieth anniversary of the
capture of Fort Sackville, at Vincennes, in the State of Indiana. This
eventually brought into the Union what was known as the Northwest
Territory, embracing the region north of the Ohio River between the
Alleghenies and the Mississippi River. This expedition was led by
George Rogers Clark. His heroic character and the importance of his
victory are too little known and understood. They gave us not only
this Northwest Territory but by means of that the prospect of
reaching the Pacific. The State of Indiana is proposing to dedicate
the site of Fort Sackville as a national shrine. The Federal
Government may well make some provision for the erection under its
own management of a fitting memorial at that point.

FOREIGN RELATIONS

It is the policy of the United States to promote peace. We are a
peaceful people and committed to the settling of disputes by amicable
adjustment rather than by force. We have believed that peace can best
be secured by a faithful observance on our part of the principles of
international law, accompanied by patience and conciliation, and
requiring of others a like treatment for ourselves. We have lately
had some difference with Mexico relative to the injuries inflicted
upon our nationals and their property within that country. A firm
adherence to our rights and a scrupulous respect for the sovereignty
of Mexico, both in accordance with the law of nations, coupled with
patience and forbearance, it is hoped will resolve all our
differences without interfering with the friendly relationship
between the two Governments.

We have been compelled to send naval and marine forces to China to
protect the lives and property of our citizens. Fortunately their
simple presence there has been sufficient to prevent any material
loss of life. But there has been considerable loss of property. That
unhappy country is torn by factions and revolutions which bid fair to
last for an indefinite period. Meanwhile we are protecting our
citizens and stand ready to cooperate with any government which may
emerge in promoting the welfare of the people of China. They have
always had our friendship, and they should especially merit our
consideration in these days of their distraction and distress.

We were confronted by similar condition on a small scale in
Nicaragua. Our marine and naval forces protected our citizens and
their property and prevented a heavy sacrifice of life and the
destruction of that country by a reversion to a state of revolution.
Henry L. Stimson, former Secretary of War, was sent there to
cooperate with our diplomatic and military officers in effecting a
settlement between the contending parties. This was done on the
assurance that we would cooperate in restoring a state of peace where
our rights would be protected by giving our assistance in the conduct
of the next presidential election, which occurs in a few months. With
this assurance the population returned to their peacetime pursuits,
with the exception of some small roving bands of outlaws.

In general, our relations with other countries can be said to have
improved within the year. While having a due regard for our own
affairs, the protection of our own rights, and the advancement of our
own people, we can afford to be liberal toward others. Our example has
become of great importance in the world. It is recognized that we are
independent, detached, and can and do take a disinterested position
in relation to international affairs. Our charity embraces the earth.
Our trade is far flung. Our financial favors are widespread. Those who
are peaceful and law-abiding realize that not only have they nothing
to fear from us, but that they can rely on our moral support.
Proposals for promoting the peace of the world will have careful
consideration. But we are not a people who are always seeking for a
sign. We know that peace comes from honesty and fair dealing, from
moderation, and a generous regard for the rights of others. The heart
of the Nation is more important than treaties. A spirit of generous
consideration is a more certain defense than great armaments. We
should continue to promote peace by our example, and fortify it by
such international covenants against war as we are permitted under
our Constitution to make.

AMERICAN PROGRESS

Our country has made much progress. But it has taken, and will
continue to take, much effort. Competition will be keen, the
temptation to selfishness and arrogance will be severe, the
provocations to deal harshly with weaker peoples will be many. All of
these are embraced in the opportunity for true greatness. They will be
overbalanced by cooperation by generosity, and a spirit of neighborly
kindness. The forces of the universe are taking humanity in that
direction. In doing good, in walking humbly, in sustaining its own
people in ministering to other nations, America will work out its own
mighty destiny.