If the law were repealed which makes compulsory Treasury purchases of silver, and if that repeal were accompanied by the declaration of Congress that the United States now hold themselves in readiness to unite with France, Germany, and Great Britain in opening their mints to the free coinage of silver and gold at a ratio fixed by international agreement, it is the deliberate judgment of the undersigned that before the expiration of another fiscal year this international monetary dislocation might be corrected by such an international concurrence, the two monetary metals restored to their old and universal function as the one stand ard measure of prices for the world's commodities, the depression of trade and industry relieved, and a general prosperity renewed. Irespectfully recommend to the wisdom of Congress the unconditional repeal of the act of February 28, 1878, accompanied by such a declaration. FINANCES OF THE UNITED STATES. The public debt consists of four principal items, which are, in round numbers; as follows: 1. The unfunded debt United States legal-tender notes..... 2. The funded debt .$346, 000, 000 Loan of 1882, three per cents....... 64, 000, 000 ... 738, 000, 000 Loan of 1891, four and a half per cents............... 250, 000, 000 Loan of 1907, four per cents....... During the last seven years the receipts of the Federal Treasury have been over $2,500,000,000; the net ordinary expenditures have been upon an average $257,000,000 a year; the excess of the ordinary revenue has been, upon an average, over $100,000,000 a year. Including the $2,000,000 a month expended for silver, the total annual surplus revenue has been nearly $125,000,000 a year for the last seven years. With this surplus we have been paying off funded debt at an average rate of $100,000,000 a year, and have been spending the residue mostly on silver dollars, of which, in January next, 250,000,000 will have been coined. Our home consumption, as taxed, gave during the last fiscal year an increase of revenue beyond that of the previous fiscal year of $15,740,395; but the first quarter of the present fiscal year gave $7,303,496 increase of revenue beyond that of the first quarter of the last fiscal year. In other words, our taxes (duties and excise, amounting last year to about $310,000,000) on commodities entered from abroad or produced at home for consumption in the United States are giving an increase, and an augmenting increase. Congress at the last session expressed a solicitude to hasten as fast as practicable the payment of the funded debt subject to call. Exercising due discretion, such has ever been my duty and purpose; and the recent indication of the judgment of Congress on that head, as well as the laws of Congress which direct my action, will continue to receive heedful attention. That part of the funded debt has now been reduced to $64,017,800, and, in September, payment to any holder, without regard to future calls, was publicly offered. According to the best forecast now to be made in a matter that can better be judged of from week to week, it will be practicable to have called for payment the last of the three per cents by the first of next October. If prudent, an earlier date will be attempted. CURRENCY REFORM-TAXATION REFORM. Overwhelming force is thus contributed by Congress and by our rising revenue to the argument and plan for Currency Reform, as first in the order of importance and of time, and for Taxation Reform, which were submitted to the wisdom of Congress in my first Annual Report, and which I now beg leave to state in more detail. Shortly after the term of the present Congress expires, and long before the Fiftieth Congress in the natural order of events would assemble, organize, and determine upon new legislation, it is probable that existing tax laws (at a time when the annual larger commercial need and use of money in moving the crops gives to their operation the most serious consequence) will be withdrawing from circulation and pouring into the Treasury the proceeds of a surplus taxation, beyond all sums of which the present Congress has hitherto considered or prescribed the employment. During the years of the immediate future, under the operation of existing tax laws, this surplus taxation would be at least as onerous and excessive as now. A world-wide monetary dislocation the present Congress can assist to cure. A needless depletion of the people's earnings at the rate of $125,900,000 a year the present Congress can completely cure. SURPLUS TAXATION $125,000,000 A YEAR. Employment for the proceeds of our surplus taxation, reasons for delay in reducing our surplus taxation, can no longer be found in a rapid payment of the funded debt. Setting aside the vanishing three per cents and the unfunded debt of $316,000,000, the residue of the public debt has been in such wise funded by our predecessors that $250,000,000 cannot be paid, except by purchase at a high premium to the bondholder, before September 1, 1891, and that $737,776,400 cannot be paid, except by purchase at a high premium to the bondholder, before July 1, 1907. On and after those dates, respectively, but not until then, those loans are payable, at the option of the United States, at their face and without premium. The present premium on the four and a half per cents of 1891 is about 11 per cent. The present premium on the four per cents of 1907 is about 28 per cent. To continue our present surplus taxation, and to employ its proceeds now or for some years to come in giving to the bondholder any such, or still higher, premiums by anticipatory purchase of those bonds before they are due and payable at par, is a fiscal policy so unnecessary, extravagant, and merciless to the industrious toilers of our land, from whose earnings, profits, or capital are deducted and taken all the revenues of the Treasury, that I cannot presume their representatives in Congress would let stand any law devolving upon the head of this Department such a thriftless task. I also set aside as equally indefensible, the continuance of our present surplus taxation and its employment in extravagant appropriations, by which, of course, I neither mean to include suitable annual appropriations for the large expense of deepening the channel to carry off the floods of the Mississippi river, nor such as are needed for the still larger expense of providing our seaboard cities with a permanent coast defence. These are not the means of naval aggression nor incitements to militancy at home or abroad; they are prudent provisions "for the common defence and general welfare," which require no blanket clause to justify or cover them. Our engineers do not need extravagant appropriations to carry on as fast as practicable these great works, which should be the labor and the legacy of a peaceful generation for the benefit of those who will succeed to our inheritance. I also set aside as alike indefensible the continuance of our present surplus taxation, and its employment to increase the Treasury hoards. These are now in enormous excess of any need which would continue to exist were the legal-tender debt paid off and were the silver basis finally averted and the fear of it removed from the public mind by stopping the silver purchase. But this outline of our financial situation, prospects, and pitfalls requires the addition of one more fact. SINKING FUND WILL CANCEL FUNDED DEBT WHEN DUE. The computations of Treasurer Jordan, in his subjoined report, show that the provisions of the Revised Statutes (Sections 3694 and 3695) as to the sinking fund and the public debt, and compliance therewith, by their continued operation hereafter, will effect the payment of the whole public debt, greenbacks and bonds, by the year 1908,-within a twelvemonth after our last great funded loan becomes due and payable. In other words, I am advised by that able officer that the whole public debt can be thus duly paid without a continuance of our present surplus taxation, but merely by conformity to the sinking-fund law and the regular annual appropriation therefor, from now till 1908— to wit, by "the purchase or payment of one per cent. of the entire debt "of the United States to be made within each fiscal year, which is to be "set apart as a sinking-fund, and the interest on which shall in like "manner be applied to the purchase or payment of the public debt, "as the Secretary of the Treasury shall from time to time direct." But in order to transfer our present and accruing proceeds of surplus taxation from the Treasury vaults to the pockets of the people; in order, also, to effect the most economical compliance with the sinking-fund law above cited, whilst the bonds not yet due are too far beyond our reach; and in order also to fulfil the law in which "the faith of the "United States is solemnly pledged to the payment in coin (redemption is elsewhere separately promised, and since 1879 has been practised) "to the payment in coin or its equivalent, of all the obligations of the "United States not bearing interest, known as United States notes," (R. S., 3693, March 18, 1869,) a mere reduction of our present surplus taxation is not enough. Currency reform and Taxation reform are both necessary and both unavoidable, if the Forty-ninth Congress, during the remaining three months of its life, shall perceive how powerfully we are constrained by our duty, our interest, and our necessities to enter now upon the open path of safety. The financial situation, scanned at large and as a whole, plainly indicates our best policy. We should Reduce taxation immediately to an annual revenue sufficing to pay our annual expenditure, including the sinking-fund, and excluding the silver purchase; Pay our unfunded debt of $346,681,016 with the present surplus, and the surplus which will accrue before the whole reduction of taxation can be made or take effect, and while no more funded debt can be paid except at a premium during the five years from now until 1891. REDUCE TAXES-PAY GREENBACK DEBT WITH SURPLUS. I therefore respectfully recommend: 1. Repeal of the clause in the act of February 28, 1878, making compulsory, Treasury purchases of silver, for the reasons heretofore given and in order to reduce surplus and unnecessary taxation $24,000,000 a year. 2. Further reduction of surplus taxation, beginning in a manner which will be suggested below, close down to the necessities of the Government economically administered. 3. Repeal of the act of May 31, 1878, making compulsory, postredemption issues and reissues of United States legal-tender notes, thus facilitating 4. Gradual purchase and payment of $346,681,016 outstanding promissory notes of the United States with the present and accruing Treasury surplus, issuing silver certificates in their room, and gold certificates if need be, without contraction of the present circulating volume of the currency, these notes (called greenbacks) being now the only debt due and payable before 1891 except the three per cent. bonds, which are probably all to be called and paid, early in the ensuing fiscal year. The extraordinary conjunction of opportunity and necessity making practicable so complete a reform in our currency and so large a reform in our taxation, will, perhaps, excuse a reference to the conditions and the method of their execution which were set out in my last annual report, or any repetition of what I have already had the honor to suggest in respectfully urging upon Congress the easy provision of a better currency for the people of the United States than the best now possessed by any nation,-"a currency in which every dollar note shall be the representative certificate of a coin dollar actually in the Treasury and payable on demand; a currency in which our monetary unit, coined in gold, or its equivalent, coined in silver, shall not be suffered to part company." The act making compulsory post-redemption issues and reissues of United States notes and the act making compulsory Treasury purchases of silver are each a separate menace to the public tranquillity, are each injurious to the public morals, the public faith, and the public interest. But they do not double our difficulties. On the contrary, the repeal of both acts, and the use of the Treasury metal surplus in the substitution of coin certificates for greenbacks, will convert our worst kind of paper currency into the best kind,-indefinite promissory notes of debt made legal tender will be converted into representative certificates of coin, held subject to demand. As the competency of the Federal Government to make its debts a legal tender of payment for the debts of its citizens, one to another, has, in these latter days, been affirmed, despite an absolute consensus of opinion to the contrary among its founders and statesmen of all par5 Ab |