Part 5

The late President, in his annual message of December last, recommended an appropriation to satisfy the claims of the Texan Government against the United States, which had been previously adjusted so far as the powers of the Executive extend. These claims arose out of the act of disarming a body of Texan troops under the command of Major Snively by an officer in the service of the United States, acting under the orders of our Government, and the forcible entry into the custom-house at Bryarlys Landing, on Red River, by certain citizens of the United States and taking away therefrom the goods seized by the collector of the customs as forfeited under the laws of Texas. This was a liquidated debt ascertained to be due to Texas when an independent state. Her acceptance of the terms of annexation proposed by the United States does not discharge or invalidate the claim. I recommend that provision be made for its payment.

The commissioner appointed to China during the special session of the Senate in March last shortly afterwards set out on his mission in the United States ship _Columbus_. On arriving at Rio de Janeiro on his passage the state of his health had become so critical that by the advice of his medical attendants he returned to the United States early in the month of October last. Commodore Biddle, commanding the East India Squadron, proceeded on his voyage in the _Columbus_, and was charged by the commissioner with the duty of exchanging with the proper authorities the ratifications of the treaty lately concluded with the Emperor of China. Since the return of the commissioner to the United States his health has been much improved, and he entertains the confident belief that he will soon be able to proceed on his mission.

Unfortunately, differences continue to exist among some of the nations of South America which, following our example, have established their independence, while in others internal dissensions prevail. It is natural that our sympathies should be warmly enlisted for their welfare; that we should desire that all controversies between them should be amicably adjusted and their Governments administered in a manner to protect the rights and promote the prosperity of their people. It is contrary, however, to our settled policy to interfere in their controversies, whether external or internal.

I have thus adverted to all the subjects connected with our foreign relations to which I deem it necessary to call your attention. Our policy is not only peace with all, but good will toward all the powers of the earth. While we are just to all, we require that all shall be just to us. Excepting the differences with Mexico and Great Britain, our relations with all civilized nations are of the most satisfactory character. It is hoped that in this enlightened age these differences may be amicably adjusted.

The Secretary of the Treasury in his annual report to Congress will communicate a full statement of the condition of our finances. The imports for the fiscal year ending on the 30th of June last were of the value of $117,254,564, of which the amount exported was $15,346,830, leaving a balance of $101,907,734 for domestic consumption. The exports for the same year were of the value of $114,646,606, of which the amount of domestic articles was $99,299,776. The receipts into the Treasury during the same year were $29,769,133.56, of which there were derived from customs $27,528,112.70, from sales of public lands $2,077,022.30, and from incidental and miscellaneous sources $163,998.56. The expenditures for the same period were $29,968,206.98, of which $8,588,157.62 were applied to the payment of the public debt. The balance in the Treasury on the 1st of July last was $7,658,306.22. The amount of the public debt remaining unpaid on the 1st of October last was $17,075,445.52. Further payments of the public debt would have been made, in anticipation of the period of its reimbursement under the authority conferred upon the Secretary of the Treasury by the acts of July 21, 1841, and of April 15, 1842, and March 3, 1843, had not the unsettled state of our relations with Mexico menaced hostile collision with that power. In view of such a contingency it was deemed prudent to retain in the Treasury an amount unusually large for ordinary purposes.

A few years ago our whole national debt growing out of the Revolution and the War of 1812 with Great Britain was extinguished, and we presented to the world the rare and noble spectacle of a great and growing people who had fully discharged every obligation. Since that time the existing debt has been contracted, and, small as it is in comparison with the similar burdens of most other nations, it should be extinguished at the earliest practicable period. Should the state of the country permit, and especially if our foreign relations interpose no obstacle, it is contemplated to apply all the moneys in the Treasury as they accrue, beyond what is required for the appropriations by Congress, to its liquidation. I cherish the hope of soon being able to congratulate the country on its recovering once more the lofty position which it so recently occupied. Our country, which exhibits to the world the benefits of self-government, in developing all the sources of national prosperity owes to mankind the permanent example of a nation free from the blighting influence of a public debt.

The attention of Congress is invited to the importance of making suitable modifications and reductions of the rates of duty imposed by our present tariff laws. The object of imposing duties on imports should be to raise revenue to pay the necessary expenses of Government. Congress may undoubtedly, in the exercise of a sound discretion, discriminate in arranging the rates of duty on different articles, but the discriminations should be within the revenue standard and be made with the view to raise money for the support of Government.

It becomes important to understand distinctly what is meant by a revenue standard the maximum of which should not be exceeded in the rates of duty imposed. It is conceded, and experience proves, that duties may be laid so high as to diminish or prohibit altogether the importation of any given article, and thereby lessen or destroy the revenue which at lower rates would be derived from its importation. Such duties exceed the revenue rates and are not imposed to raise money for the support of Government. If Congress levy a duty for revenue of 1 per cent on a given article, it will produce a given amount of money to the Treasury and will incidentally and necessarily afford protection or advantage to the amount of 1 per cent to the home manufacturer of a similar or like article over the importer. If the duty be raised to 10 per cent, it will produce a greater amount of money and afford greater protection. If it be still raised to 20, 25, or 30 per cent, and if as it is raised the revenue derived from it is found to be increased, the protection or advantage will also be increased; but if it be raised to 31 per cent, and it is found that the revenue produced at that rate is less than at 30 per cent, it ceases to be a revenue duty. The precise point in the ascending scale of duties at which it is ascertained from experience that the revenue is greatest is the maximum rate of duty which can be laid for the _bona fide_ purpose of collecting money for the support of Government. To raise the duties higher than that point, and thereby diminish the amount collected, is to levy them for protection merely, and not for revenue. As long, then, as Congress may gradually increase the rate of duty on a given article, and the revenue is increased by such increase of duty, they are within the revenue standard. When they go beyond that point, and as they increase the duties, the revenue is diminished or destroyed; the act ceases to have for its object the raising of money to support Government, but is for protection merely. It does not follow that Congress should levy the highest duty on all articles of import which they will bear within the revenue standard, for such rates would probably produce a much larger amount than the economical administration of the Government would require. Nor does it follow that the duties on all articles should be at the same or a horizontal rate. Some articles will bear a much higher revenue duty than others. Below the maximum of the revenue standard Congress may and ought to discriminate in the rates imposed, taking care so to adjust them on different articles as to produce in the aggregate the amount which, when added to the proceeds of the sales of public lands, may be needed to pay the economical expenses of the Government.

In levying a tariff of duties Congress exercise the taxing power, and for purposes of revenue may select the objects of taxation. They may exempt certain articles altogether and permit their importation free of duty. On others they may impose low duties. In these classes should be embraced such articles of necessity as are in general use, and especially such as are consumed by the laborer and poor as well as by the wealthy citizen. Care should be taken that all the great interests of the country, including manufactures, agriculture, commerce, navigation, and the mechanic arts, should, as far as may be practicable, derive equal advantages from the incidental protection which a just system of revenue duties may afford. Taxation, direct or indirect, is a burden, and it should be so imposed as to operate as equally as may be on all classes in the proportion of their ability to bear it. To make the taxing power an actual benefit to one class necessarily increases the burden of the others beyond their proportion, and would be manifestly unjust. The terms "protection to domestic industry" are of popular import, but they should apply under a just system to all the various branches of industry in our country. The farmer or planter who toils yearly in his fields is engaged in "domestic industry," and is as much entitled to have his labor "protected" as the manufacturer, the man of commerce, the navigator, or the mechanic, who are engaged also in "domestic industry" in their different pursuits. The joint labors of all these classes constitute the aggregate of the "domestic industry" of the nation, and they are equally entitled to the nation's "protection." No one of them can justly claim to be the exclusive recipient of "protection," which can only be afforded by increasing burdens on the "domestic industry" of the others.

If these views be correct, it remains to inquire how far the tariff act of 1842 is consistent with them. That many of the provisions of that act are in violation of the cardinal principles here laid down all must concede. The rates of duty imposed by it on some articles are prohibitory and on others so high as greatly to diminish importations and to produce a less amount of revenue than would be derived from lower rates. They operate as "protection merely" to one branch of "domestic industry" by taxing other branches.

By the introduction of minimums, or assumed and false values, and by the imposition of specific duties the injustice and inequality of the act of 1842 in its practical operations on different classes and pursuits are seen and felt. Many of the oppressive duties imposed by it under the operation of these principles range from 1 per cent to more than 200 per cent. They are prohibitory on some articles and partially so on others, and bear most heavily on articles of common necessity and but lightly on articles of luxury. It is so framed that much the greatest burden which it imposes is thrown on labor and the poorer classes, who are least able to bear it, while it protects capital and exempts the rich from paying their just proportion of the taxation required for the support of Government. While it protects the capital of the wealthy manufacturer and increases his profits, it does not benefit the operatives or laborers in his employment, whose wages have not been increased by it. Articles of prime necessity or of coarse quality and low price, used by the masses of the people, are in many instances subjected by it to heavy taxes, while articles of finer quality and higher price, or of luxury, which can be used only by the opulent, are lightly taxed. It imposes heavy and unjust burdens on the farmer, the planter, the commercial man, and those of all other pursuits except the capitalist who has made his investments in manufactures. All the great interests of the country are not as nearly as may be practicable equally protected by it.

The Government in theory knows no distinction of persons or classes, and should not bestow upon some favors and privileges which all others may not enjoy. It was the purpose of its illustrious founders to base the institutions which they reared upon the great and unchanging principles of justice and equity, conscious that if administered in the spirit in which they were conceived they would be felt only by the benefits which they diffused, and would secure for themselves a defense in the hearts of the people more powerful than standing armies and all the means and appliances invented to sustain governments founded in injustice and oppression.

The well-known fact that the tariff act of 1842 was passed by a majority of one vote in the Senate and two in the House of Representatives, and that some of those who felt themselves constrained, under the peculiar circumstances existing at the time, to vote in its favor, proclaimed its defects and expressed their determination to aid in its modification on the first opportunity, affords strong and conclusive evidence that it was not intended to be permanent, and of the expediency and necessity of its thorough revision.

In recommending to Congress a reduction of the present rates of duty and a revision and modification of the act of 1842, I am far from entertaining opinions unfriendly to the manufacturers. On the contrary, I desire to see them prosperous as far as they can be so without imposing unequal burdens on other interests. The advantage under any system of indirect taxation, even within the revenue standard, must be in favor of the manufacturing interest, and of this no other interest will complain.

I recommend to Congress the abolition of the minimum principle, or assumed, arbitrary, and false values, and of specific duties, and the substitution in their place of _ad valorem_ duties as the fairest and most equitable indirect tax which can be imposed. By the _ad valorem_ principle all articles are taxed according to their cost or value, and those which are of inferior quality or of small cost bear only the just proportion of the tax with those which are of superior quality or greater cost. The articles consumed by all are taxed at the same rate. A system of _ad valorem_ revenue duties, with proper discriminations and proper guards against frauds in collecting them, it is not doubted will afford ample incidental advantages to the manufacturers and enable them to derive as great profits as can be derived from any other regular business. It is believed that such a system strictly within the revenue standard will place the manufacturing interests on a stable footing and inure to their permanent advantage, while it will as nearly as may be practicable extend to all the great interests of the country the incidental protection which can be afforded by our revenue laws. Such a system, when once firmly established, would be permanent, and not be subject to the constant complaints, agitations, and changes which must ever occur when duties are not laid for revenue, but for the "protection merely" of a favored interest.

In the deliberations of Congress on this subject it is hoped that a spirit of mutual concession and compromise between conflicting interests may prevail, and that the result of their labors may be crowned with the happiest consequences.

By the Constitution of the United States it is provided that "no money shall be drawn from the Treasury but in consequence of appropriations made by law." A public treasury was undoubtedly contemplated and intended to be created, in which the public money should be kept from the period of collection until needed for public uses. In the collection and disbursement of the public money no agencies have ever been employed by law except such as were appointed by the Government, directly responsible to it and under its control. The safe-keeping of the public money should be confided to a public treasury created by law and under like responsibility and control. It is not to be imagined that the framers of the Constitution could have intended that a treasury should be created as a place of deposit and safe-keeping of the public money which was irresponsible to the Government. The first Congress under the Constitution, by the act of the 2d of September, 1789, "to establish the Treasury Department," provided for the appointment of a Treasurer, and made it his duty "to receive and keep the moneys of the United States" and "at all times to submit to the Secretary of the Treasury and the Comptroller, or either of them, the inspection of the moneys in his hands."

That banks, national or State, could not have been intended to be used as a substitute for the Treasury spoken of in the Constitution as keepers of the public money is manifest from the fact that at that time there was no national bank, and but three or four State banks, of limited capital, existed in the country. Their employment as depositories was at first resorted to to a limited extent, but with no avowed intention of continuing them permanently in place of the Treasury of the Constitution. When they were afterwards from time to time employed, it was from motives of supposed convenience. Our experience has shown that when banking corporations have been the keepers of the public money, and been thereby made in effect the Treasury, the Government can have no guaranty that it can command the use of its own money for public purposes. The late Bank of the United States proved to be faithless. The State banks which were afterwards employed were faithless. But a few years ago, with millions of public money in their keeping, the Government was brought almost to bankruptcy and the public credit seriously impaired because of their inability or indisposition to pay on demand to the public creditors in the only currency recognized by the Constitution. Their failure occurred in a period of peace, and great inconvenience and loss were suffered by the public from it. Had the country been involved in a foreign war, that inconvenience and loss would have been much greater, and might have resulted in extreme public calamity. The public money should not be mingled with the private funds of banks or individuals or be used for private purposes. When it is placed in banks for safe-keeping, it is in effect loaned to them without interest, and is loaned by them upon interest to the borrowers from them. The public money is converted into banking capital, and is used and loaned out for the private profit of bank stockholders, and when called for, as was the case in 1837, it may be in the pockets of the borrowers from the banks instead of being in the public Treasury contemplated by the Constitution. The framers of the Constitution could never have intended that the money paid into the Treasury should be thus converted to private use and placed beyond the control of the Government.

Banks which hold the public money are often tempted by a desire of gain to extend their loans, increase their circulation, and thus stimulate, if not produce, a spirit of speculation and extravagance which sooner or later must result in ruin to thousands. If the public money be not permitted to be thus used, but be kept in the Treasury and paid out to the public creditors in gold and silver, the temptation afforded by its deposit with banks to an undue expansion of their business would be checked, while the amount of the constitutional currency left in circulation would be enlarged by its employment in the public collections and disbursements, and the banks themselves would in consequence be found in a safer and sounder condition. At present State banks are employed as depositories, but without adequate regulation of law whereby the public money can be secured against the casualties and excesses, revulsions, suspensions, and defalcations to which from overissues, overtrading, an inordinate desire for gain, or other causes they are constantly exposed. The Secretary of the Treasury has in all cases when it was practicable taken collateral security for the amount which they hold, by the pledge of stocks of the United States or such of the States as were in good credit. Some of the deposit banks have given this description of security and others have declined to do so.

Entertaining the opinion that "the separation of the moneys of the Government from banking institutions is indispensable for the safety of the funds of the Government and the rights of the people," I recommend to Congress that provision be made by law for such separation, and that a constitutional treasury be created for the safe-keeping of the public money. The constitutional treasury recommended is designed as a secure depository for the public money, without any power to make loans or discounts or to issue any paper whatever as a currency or circulation. I can not doubt that such a treasury as was contemplated by the Constitution should be independent of all banking corporations. The money of the people should be kept in the Treasury of the people created by law, and be in the custody of agents of the people chosen by themselves according to the forms of the Constitution--agents who are directly responsible to the Government, who are under adequate bonds and oaths, and who are subject to severe punishments for any embezzlement, private use, or misapplication of the public funds, and for any failure in other respects to perform their duties. To say that the people or their Government are incompetent or not to be trusted with the custody of their own money in their own Treasury, provided by themselves, but must rely on the presidents, cashiers, and stockholders of banking corporations, not appointed by them nor responsible to them, would be to concede that they are incompetent for self-government.

In recommending the establishment of a constitutional treasury in which the public money shall be kept, I desire that adequate provision be made by law for its safety and that all Executive discretion or control over it shall be removed, except such as may be necessary in directing its disbursement in pursuance of appropriations made by law.