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rights. In protecting commercial interests, our Consuls have necessarily had to encounter increased labors and responsibilities growing out of the

These they have, for the most part, met and discharged with zeal and efficiency. This acknowledgment justly includes those Consuls who, residing in Morocco, Egypt, Turkey, Japan, China, and other Oriental countries, are charged with complex functions and extraordinary powers.

The condition of the several organized territories is generally satisfactory, although Indian disturbances in New Mexico have not been entirely suppressed.

The mineral resources of Colorado, Nevada, Idaho, New Mexico, and Arizona, are proving far richer than has been heretofore understood. I lay before you a communication on this subject from the Governor of New Mexico. I again submit to your consideration the expediency of establishing a system for the encouragement of emigration. Although this source of national wealth and strength is again flowing with greater freedom than for several years before the insurrection occurred, there is still a great deficiency of laborers in every field of industry, especially in agriculture and in our mines, as well of iron and coal as of the precious metals. While the demand for labor is thus increased here, tens of thousands of persons, destitute of remunerative occupation, are thronging our foreigu consulates, and offering to emigrate to the United States, if essential, but very cheap, assistance can be afforded them. It is easy to see that under the sharp discipline of civil war the nation is beginning a new life. This noble effort demands the aid, and ought to receive the attention and support of the Government.

Injuries unforeseen by the Government, and unintended, may in some cases have been inflicted on the subjects or citizens of foreign countries, both at sea and on land, by persons in the service of the United States. As this Government expects redress from other Powers when similar injuries are inflicted by persons in their service upon citizens of the United States, we must be prepared to do justice to foreigners. If the existing judicial tribunals are inadequate to this purpose, a special Court may be authorized, with power to hear and decide such claims of the character referred to as may have arisen under treaties and the public law. Conventions for adjusting the claims by joint commission have been proposed to some Governments, but no definite answer to the proposition has yet been received from any.

In the course of „he session I shall probably have occasion to request you to provide indemnification to claiınants where decrees of restitution have been rendered, and damages awarded by Admiralty Courts, and in other cases, where this Government may be acknowledged to be liable in principle, and where the amount of that liability has been ascertained by an informal arbitration, the proper officers of the Treas. ury have deemed themselves required by the law of the United States upon the subject, to demand a tax upon the incomes of foreign Con. suls in this country. While such a demand may not, in strictness, be in derogation of public law, or perhaps of any existing treaty between the United States and a foreign country, the expediency of so far modi. fying the act as to exempt from tax the income of such consuls as are not citizens of the United States, derived from the emoluments of their office, or from property not situate in the United States, is submitted to your serious consideration. I make this suggestion upon the ground that a comity which ought to be reciprocated exempts our Consuls in all other countries from taxation to the extent thus indicated. The United States, I think, ought not to be exceptionably illiberal to international trade and commerce.

The operations of the Treasury during the last year have been successfully conducted. The enactment by Congress of a National Banking Law has proved a valuable support of the public credit, and the general legislation in relation to loans has fully answered the expectation of its favorers. Some amendments may be required to perfect existing laws, but no change in their principles or general scope is believed to be needed. Since these measures have been in operation, all demands on the Treasury, including the pay of the Army and Navy, have been promptly met and fully satisfied. No considerable body of troops, it is believed, were ever more amply provided and more liberally and punctually paid; and, it may be added, that by no people were the burdens incident to a great war more cheerfully borne.

The receipts during the year, from all sources, including loans and the balance in the Treasury at its cominencement, were $901,125,674 86, and the aggregate disbursements $895,796,630 65, leaving a balance on the 1st of July, 1863, of $5,329,044 21. Of the receipts, there were derived from Customs $69,059,642 40; from Internal Revenue, $37,640,787 95; from direct tax, $1,485,103 61; from lands, $167,617 17; from miscellaneous sources, $3,046,615 35; and from loans, $776,682,361 57, making the aggregate $901,125,674 86. Of the disbursements there were for tho civil service $23,253,922 08; for pensions and Indians, $4,216,520 79; for interest on public debt, $24,729,846 51; for the War Department, $599,298,600 83; for the

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Navy Department, $63,211,105 27; for payment of funded and temporary debt, $181,086,635 07, making the aggregate $895,796,630 65, and leaving the balance of $5,329,044 21.

But the payment of the funded and temporary debt, having been made from moneys borrowed during the year, must be regarded as merely nominal payments, and the moneys borrowed to make them as merely nominal receipts; and their amount: $181,086,535 07, should therefore be deducted both from receipts and disbursements. This being done, there remains, as actual receipts, $720,039,039 79, and the actual disbursements $714, 709,995 58, leaving the balance as already stated.

The actual receipts and disbursements for the first quarter, and the estimated receipts and disbursements for the remaining three quarters of the current fiscal year, 1864, will be shown in detail by the report of the Secretary of the Treasury, to which I invite your attention.

It is sufficient to say here, that it is not believed that actual results will exbibit a state of the finances less favorable to the country than the estimates of that officer heretofore submitted, while it is confidently expected that, at the close of the year, both disbursements and debt will be found very considerably less than has been anticipated.

The report of the Secretary of War is a document of great interest. It consists of:

First. The military operations of the year detailed in the report of the General-in-Chief.

Second. --The organization of colored persons into the war service.

Third.---The exchange of prisoners fully set forth in the letter of General Hitchcock,

Fourth. The operations under the act for enrolling and calling out the National forces, detailed in the report of the Provost-Marshal General.

Fifth.---The organization of the Invalid Corps. And

Sixth.The operations of the several departments of the Quartermaster-General, Commissary-General, Paymaster-General, Chief of Engineers, Chief of Ordnance, and Surgeon-General. It has appeared impossible to make a valuable summary of this report, except such as would be too extended for this place, and hence I content myself by asking your careful attention to the report itself. The duties devolving on the naval branch of the service during the year, and throughout the whole of this unhappy contest, have been discharged with fidelity and eminent success. The extensive blockade has been constantly increasing in efficiency, as the navy has expanded, yet on so long a line it has, so far, been impossible entirely to suppress illicit trade. From returns received at the Navy Department, it appears that more than one thousand vessels have been captured since the blockade was instituted, and that the value of prizes already sent in for adjudication, amount to over thirteen millions of dollars.

The naval force of the United States consists at this time of five hundred and eighty-eight vessels completed and in the course of completion, and of these seventy-five are iron-elad or armored steamers. The events of the war give an increased interest and importance to the navy, which will probably extend beyond the war itself. The armored vessels in our navy, completed and in service, or which are under contract and approaching completion, are believed to exceed in number those of any other Power; but while these may be relied upon for harbor defence and coast service, others of greater strength and capacity will be necessary for cruising purposes, and to maintain our rightful position on the ocean.

The change that has taken place in naval Fessels and naval warfaro since the introduction of steam as a motive power for ships of war, demands either a corresponding change in some of our existing Navyyards, or the establishment of new ones, for the construction and necessary repair of modern naval vessels. No inconsiderable embarrassment, delay, and public injury, have been experienced from the want of such governmental establishments.

The necessity of such a Navy-yard, so furnished, at some suitable place upon the Atlantic seaboard, has, on repeated occasions, been brought to the attention of Congress by the Navy Department, and is again presented in the report of the Secretary, which accompanies this communication. I think it my duty to invite your special attention to this subject, and also to that of establishing a yard and dépôt for naval purposes upon one of the Western rivers. A naval force has been created on these interior waters, and under many disadvantages, within a little more than two years, exceeding in number the whole naval force of the country at the commencement of the present Administration. Satisfactory and important as have been the performances of the heroic men of the navy at this interesting period, they are scarcely more wonderful than the success of our mechanics and artisans in the production of war-vessels, which has created a new form of naval power.

Our country has advantages superior to any other nation in our resources of iron and timber, with inexhaustible quantities of fuel in the immediate vicinity of both, and all available and in close proximity to navigable waters. Without the advantage of public works, the resources of the nation have been developed, and its power displayed, in the construction of a navy of such magnitude, which has at the very period of its creation rendered signal service to the Union.

The increase of the number of seamen in the public service from 7,500 men in the Spring of 1861, to about 34,000 at the present time, has been accomplished without special legislation or extraordinary bounties to promote that increase. It has been found, however, that the operation of the draft, with the high bounties paid for army recruits, is beginning to affect injuriously the naval service, and will, if not corrected, be likely to impair its efficiency by detaching seamen from their proper vocation, and inducing them to enter the army. I therefore respectfully suggest that Congress might aid both the army and naval service by a definite provision on this subject, which would at the same time be equitable to the communities more especially interested.

I commend to your consideration the suggestions of the Secretary of the Navy, in regard to the policy of fostering and training seamen, and also the education of officers and engineers for the paval service. The Naval Academy is rendering signal service in preparing Midshipmen for the highly responsible duties which in after life they will be required to perform. In order that the country should not be deprived of the proper quota of educated officers, for which legal provision has been made at the naval school, the vacancies caused by the neglect or omission to make nominations from the States in insurrection, have been filled by the Secretary of the Navy. The school is now more full and complete than at any former period, and in every respect entitled to the favorable consideration of Congress.

During the last fiscal year the financial condition of the Post-office Department has been one of increasing prosperity, and I am gratified in being able to state that the actual postal revenue has nearly equalled the entire expenditures, the latter amounting to $11,314,206 84, and the former to $11,163,789 59, leaving a deficiency of but $150,417 25. In 1860, the year immediately preceding the rebellion, the deficiency amounted to $5,656,705 49, the postal receipts for that year being $2,647,225 19 less than those of 1863. The decrease since 1860 in the annual amount of transportation has been only about 25 per cent. ; but the annual expenditure on account of the same has been reduced 35 per

It is manifest, therefore, that the Post-office Department may become self-sustaining in a few years, even with the restoration of the whole service.

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