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United States, as well as of the nations concerned and their governments.

Commissioners have been appointed, under the treaty with Great Britain, on the adjustment of the claims of the Hudson's Bay and Puget's Sound Agricultural Companies in Oregon, and are now proceeding to the execution of the trust assigned to them.

In view of the insecurity of life and property in the region adjacent to the Canadian border, by reason of recent assaults and depredations committed by inimical and desperate persons who are harbored there, it has been thought proper to give notice that after the expiration of six months, the period conditionally stipulated in the existing arrangement with Great Britain, the United States must hold themselves at liberty to increase their naval armament upon the lakes if they shall find that proceeding necessary. The condition of the border will necessarily come into consideration in connection with the question of continuing or modifying the rights of transit from Canada through the United States, as well as the regulation of imposts, which were temporarily established by the Reciprocity Treaty of the 5th of June, 1854.

I desire, however, to be understood while making this statement, that the colonial authorities of Canada are not deemed to be intentionally unjust or unfriendly toward the United States; but, on the contrary, there is every reason to expect that, with the approval of the Imperial Government, they will take the necessary measures to prevent new incursions across the border.

The act passed at the last session for the en

couragement of immigration has, so far as was possible, been put in operation. It seems to need amendment which will enable the officers of the government to prevent the practice of frauds against the immigrants while on their way and on their arrival in the ports, so as to secure them here a free choice of avocations and places of settlement. A liberal disposition toward this great national policy is manifested by most of the European States, and ought to be reciprocated on our part by giving the immigrants effective national protection. I regard our immigrants as one of the principal replenishing streams which are appointed by Providence to repair the ravages of internal war, and its wastes of national strength and health. All that is necessary is to secure the flow of that stream in its present fullness, and to that end the government must, in every way, make it manifest that it neither needs nor designs to impose involuntary military service upon those who come from other lands to cast their lot in our country.

The financial affairs of the government have been successfully administered during the last year. The legislation of the last session of Congress has beneficially affected the revenues, although sufficient time has not yet elapsed to experience the full effect of several of the provisions of the acts of Congress imposing increased taxation.

The receipts during the year, from all sources, upon the basis of warrants signed by the Secretary of the Treasury, including loans and the balance in the treasury on the first day of July, 1863, were $1,394,796,007.62, and the aggregate disbursements, upon the same basis, were $1,298,056,101.89, leaving a balance in the treasury, as shown by warrants, of $96,739,905.73.

Deduct from these amounts the amount of the principal of the public debt redeemed, and the amount of issues in substitution therefor, and the actual cash operations of the treasury were: Receipts, $884,076,646.57; disbursements, $865,234,087.86, which leaves a cash balance in the treasury of $18,842,558.71.

Of the receipts, there were derived from customs, $102,316,152.99; from lands, $588,333.29; from direct taxes, $475,648.96; from internal revenue, $109,741,134.10;

from miscellaneous sources, $47,511,448.10; and from loans applied to actual expenditures, including former balance, $623,443,929.13.

There were disbursed for the civil service, $27,505,599.46; for pensions and Indians, $7,517,930.97; for the War Department, $690,791,842.97; for the Navy Department, $85,733,292.77; for interest on the public debt, $53,685,421.69,-making an aggregate of $865,234,087.86, and leaving a balance in the treasury of $18,842,558.71, as before stated.

For the actual receipts and disbursements for the first quarter, and the estimated receipts and disbursements for the three remaining quarters of the current fiscal year, and the general operations of the treasury in detail, I refer you to the report of the Secretary of the Treasury. I concur with him in the opinion that the proportion of moneys required to meet the expenses consequent upon the war derived from taxation should be still further increased ; and I earnestly invite your attention to this subject, to the end that there may be such additional legislation as

shall be required to meet the just expectations of the Secretary.

The public debt on the first day of July last, as appears by the books of the treasury, amounted to $1,740,690,489.49. Probably should the war continue for another year, that amount may be increased by not far from $500,000,000. Held as it is, for the most part, by our own people, it has become a substantial branch of national though private property. For obvious reasons, the more nearly this property can be distributed among all the people, the better. To favor such general distribution, greater inducements to become owners might, perhaps, with good effect, and without injury, be presented to persons of limited means. With this view, I suggest whether it might not be both competent and expedient for Congress to provide that a limited amount of some future issue of public securities might be held by any bona-fide purchaser exempt from taxtion, and from seizure for debt under such restrictions and limitations as might be necessary to guard against abuse of so important a privilege. This would enable every prudent person to set aside a small annuity against a possible day of want.

Privileges like these would render the possession of such securities, to the amount limited, most desirable to every person of small means who might be able to save enough for the purpose.

The great advantage of citizens being creditors as well as debtors, with relation to the public debt, is obvious. Men readily perceive that they cannot be much oppressed by a debt which they owe to themselves.

The public debt on the first day of July last, although somewhat exceeding the estimate of the Secretary of the Treasury made to Congress at the commencement of the last session, falls short of the estimate of that officer made in the preceding December, as to its probable amount at the beginning of this year, by the sum of $3,995,097-31. This fact exhibits a satisfactory condition and conduct of the operations of the treasury.

The national banking system is proving to be acceptable to capitalists and to the people. On the twenty-fifth day of November 584 national banks had been organized, a considerable number of which were conversions from State banks. Changes from State systems to the national system are rapidly taking place, and it is hoped that very soon there will be in the United States no banks of issue not authorized by Congress, and no bank-note circulation not secured by the government. That the government and the people will derive great benefit from this change in the banking systems of the country, can hardly be questioned. The national system will create a reliable and permanent influence in support of the national credit, and protect the people against losses in the use of paper money. Whether or not any further legislation is advisable for the suppression of State bank issues, it will be for Congress to determine. It seems quite clear that the treasury cannot be satisfactorily conducted unless the government can exercise a restraining power over the bank-note circulation of the country.

The report of the Secretary of War and the accompanying documents will detail the campaigns of the armies in the field since the date

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