pensioners and their widows; has re- Growth of Foreign Trade.-Our foreign vived the free homestead policy. In its trade shows a satisfactory and increasgreat financial law it provided for the ing growth. The amount of our exports establishment of banks of issue with a for the year 1900 over those of the excapital of $25,000 for the benefit of vil- ceptionally prosperous year of 1899 lages and rural communities, and bringing was about $500,000 for every day of the opportunity for profitable business in the year, and these sums have gone into banking within the reach of moderate cap- the homes and enterprises of the people. ital. Many are already availing them- There has been an increase of over $50,selves of this privilege. 000,000 in the exports of agricultural Prosperity of the Country.-During products: $92.692,220 in manufactures, the past year more than $19,000,000 and in the products of the mines of over United States bonds have been paid from $10,000,000 Our trade balances cannot the surplus revenues of the treasury, fail to give satisfaction to the people of and in addition $25,000,000 2 per cents. the country. In 1898 we sold abroad matured, called by the government, are in process of payment. Pacific Railroad bonds issued by the government in aid of the roads in the sum of nearly $44,000,000 have been paid since Dec. 31, 1897. The treasury balance is in satisfactory condition, showing on Sept. 1 $135,419,000, in addition to the $150,000,000 gold reserve held in the treasury. The government's relations with the Pacific railroads have been substantially closed, $124,421,000 being received from these roads, the greater part in cash, and the remainder with ample securities for payments deferred.

Instead of diminishing, as was predicted four years ago, the volume of our currency is greater per capita than it has ever been. It was $21.10 in 1896. It had increased to $26.25 on July 1, 1900, and $26.85 on Sept. 1, 1900. Our total money on July 1, 1896, was $1,506,434,966; on July 1, 1900, it was $2,062,425,490, and $2,096,683,042 on Sept. 1, 1900.

$615,432,676 of products more than we bought abroad; in 1899, $529,874.813, and in 1900, $544,471,701, making during the three years a total balance in our favor of $1,689,779,190 nearly five times the balance of trade in our favor for the whole period of 108 years, from 1790 to June 30, 1897, inclusive.

Four hundred and thirty-six million dollars of gold have been added to the gold stock of the United States since July 1, 1896. The law of March 14, 1900, authorized the refunding into 2 per cent. bonds of that part of the public debt represented by the 3 per cents. due in 1908, the 4 per cents. due in 1907, and the 5 per cents. due in 1904, aggregating $840,000,000. More than one-third of the sum of these bonds was refunded in the first three months after the passage of the act, and on Sept. 1 the sum had been increased more than $33,000,000, making in all $330,578,050, resulting in a net saving of over $8,379,520. The ordinary receipts of the government for the fiscal year 1900 were $79,527,060 in excess of its expenditures.

Our industrial and agricultural conditions are more promising than they have been for many years; probably more so than they have ever been. Prosperity Decreased Expenditures.-While our reabounds everywhere throughout the re- ceipts, both from customs and internal public. I rejoice that the Southern as revenue, have been greatly increased, our well as the Northern States are enjoying expenditures have been decreasing. Civil a full share of these improved national and miscellaneous expenses for the fiscal conditions, and that all are contributing year ended June 30, 1900, were nearly so largely to our remarkable industrial $14,000,000 less than in 1899, while on development. The money - lender receives lower rewards for his capital than if it were invested in active business. The rates of interest are lower than they have ever been in this country, while those things which are produced on the farm and in the workshop, and the labor producing them, have advanced in value.

the war account there is a decrease of more than $95,000,000. There were required $8,000,000 less to support the navy this year than last, and the expenditures on account of Indians were nearly $2,750,000 less than in 1899. The only two items of increase in the public expenses of 1900 over 1899 are for pensions and

interest on the public debt. For 1890 The British government declined to ac

we expended for pensions $139,394,929, and for the fiscal year 1900 our payments on this account amounted to $140,877,316. The net increase of interest on the public debt of 1900 over 1899 required by the war loan was $263,408.25. While Congress authorized the government to make a war loan of $400,000,000 at the beginning of the war with Spain, only $200,000,000 of bonds were issued, bearing 3 per cent. interest, which were promptly and patriotically taken by our citizens.

Unless something unforeseen occurs to reduce our revenues or increase our expenditures, the Congress at its next session should reduce taxation very materially.

cept the intervention of any power.

Need of American Shipping.-Ninetyone per cent. of our exports and imports are now carried by foreign ships. For ocean transportation we pay annually to foreign ship-owners over $165,000,000. We ought to own the ships for our carrying - trade with the world, and we ought to build them in American ship-yards and man them with American sailors. Our own citizens should receive the transportation charges now paid to foreigners. I have called the attention of Congress to this subject in my several annual messages. In that of Dec. 6, 1897, I said:

We

In my message of Dec. 5, 1899, I said: "Our national development will be onesided and unsatisfactory so long as the remarkable growth of our inland industries remains unaccompanied by progress on the seas. There is no lack of constitutional authority for legislation which shall give to the country maritime strength commensurate with its industrial achievements and with its rank among the nations of the earth.

Most desirable from every stand-pointof national interest and patriotism is the Five years ago we were selling govern- effort to extend our foreign commerce. ment bonds bearing as high as 5 per cent. To this end our merchant marine should interest. Now we are redeeming them be improved and enlarged. We should with a bond at par bearing 2 per cent. do our full share of the carrying - trade interest. We are selling our surplus prod- of the world. We do not do it now. ucts and lending our surplus money to should be the laggard no longer." Europe. One result of our selling to other nations so much more than we have bought from them during the past three years is a radical improvement of our financial relations. The great amounts of capital which have been borrowed of Europe for our rapid material development have remained a constant drain upon our resources for interest and dividends, and made our money markets liable to constant disturbances by calls for payment or heavy sales of our securities whenever moneyed stringency or panic occurred abroad. We have now been paying these debts and bringing home many of our securities and establishing countervailing credits abroad by our loans and placing ourselves upon a sure foundation of financial independence.

“The past year has recorded exceptional activity in our ship-yards, and the promises of continual prosperity in ship-building are abundant. Advanced legislation for the protection of our seamen has been enacted. Our coast - trade under regulations wisely framed at the beginning of the government and since shows results for the past fiscal year unequalled in our records or those of any other power. We shall fail to realize our opportunities, however, if we complacently regard only matters at home and blind ourselves to the necessity of securing our share in the valuable carrying-trade of the world." I now reiterate these views.

Action in the Boer War.-In the unfortunate contest between Great Britain and the Boer states of South Africa, the United States has maintained an attitude of neutrality in accordance with its wellknown traditional policy. It did not hesitate, however, when requested by the governments of the South African republics, to exercise its good offices for a cessation The Inter-Oceanic Canal.-A subject of of hostilities. It is to be observed that immediate importance to our country is while the South African republics made the completion of a great waterway of like request of other powers, the United commerce between the Atlantic and PaStates was the only one which complied. cific. The construction of a maritime ca

nal is now more than ever indispensable labor in a depreciated currency. For to that intimate and ready communica- labor, a short day is better than a short tion between our Eastern and Western dollar; one will lighten the burdens; the seaports demanded by the annexation of other lessens the rewards of toil. The the Hawaiian Islands and the expansion one will promote contentment and indeof our influence and trade in the Pacific. pendence; the other penury and want. Our national policy more imperatively The wages of labor should be adequate than ever calls for its completion and to keep the home in comfort, educate the control by this government, and it is be- children, and, with thrift and economy, lieved that the next session of Congress, lay something by for the days of infirmity after receiving the full report of the com- and old age. mission appointed under the act approved March 3, 1899, will make provisions for the sure accomplishment of this great work.

Civil Service Reform.-Practical civil service reform has always had the support or encouragement of the Republican party. The future of the merit system is safe in its hands. During the present administration, as occasions have arisen for modification or amendment in the existing civil service law and rules, they have been made. Important amendments were promulgated by executive order under date of May 29, 1899, having for their principal purpose the exception from competitive examination of certain places in

Trusts and Labor. — Combinations of capital which control the market in commodities necessary to the general use of the people, by suppressing natural and ordinary competition, thus enhancing prices to the general consumer, are obnoxious to the common law and the public welfare. They are dangerous conspiracies against the public good and should be made the subject of prohibitory or volving fiduciary responsibilities or duties. penal legislation. Publicity will be a helpful influence to check the evil. Uniformity of legislation in the several States should be secured. Discrimination between what is injurious and what is useful and necessary in business operations is essential to the wise and effective treatment of this subject. Honest co-operation of capital is necessary to meet new business conditions and extend our rapidly increasing foreign trade, but conspiracies and combinations intended to restrict business, create monopolies, and control prices should be effectively restrained.

The best service which can be rendered to labor is to afford it an opportunity for steady and remunerative employment, and give it every encouragement for advancement. The policy that subserves this end is the true American policy. The past three years have been more satisfactory to American workingmen than many preceding years. Any change of the present industrial or financial policy of the government would be disastrous to their highest interests. With prosperity at home and an increasing foreign market for American products, employment should continue to wait upon labor, and with the present gold standard the workingman is secured against payment for his

of a strictly confidential, scientific, or executive character, which it was thought might better be filled either by non-competitive examination or by other tests of fitness in the discretion of the appointing officer. It is gratifying that the experience of more than a year has vindicated these changes, in the marked improvement of the public service. The merit system, as far as practicable, is made the basis for appointments to office in our new territory.

Pensions should be Liberal.-The American people are profoundly grateful to the soldiers, sailors, and marines who have in every time of conflict fought their country's battles and defended its honor. The survivors and the widows and orphans of those who have fallen are justly entitled to receive the generous and considerate care of the nation. Few are now left of those who fought in the Mexican War, and while many of the veterans of the Civil War are still spared to us, their numbers are rapidly diminishing and age and infirmity are increasing their dependence. These, with the soldiers of the Spanish War, will not be neglected by their grateful countrymen. The pension laws have been liberal. They should be justly administered and will be.

Preference should be given to the sol- the United States, Congress complied diers, sailors, and marines, their widows with my recommendation by removing, and orphans, with respect to employment on May last, 85 per cent. of the in the public service.

duties and providing for the removal of the remaining 15 per cent. on March 1. 1902, or earlier, if the legislature of Porto Rico shall provide local revenues for the expenses of conducting the government.

Cuba and Porto Rico.-We have been in possession of Cuba since Jan. 1, 1899. We have restored order and established domestic tranquillity. We have fed the starving, clothed the naked, and ministered to the sick. We have improved During this intermediate period Porto the sanitary condition of the island. We Rican products coming into the United have stimulated industry, introduced pub- States pay a tariff of 15 per cent. of the lic education, and taken a full and com- rates under the Dingley act, and our prehensive enumeration of the inhabi- goods going to Porto Rico pay a like tants. The qualification of electors has been settled, and under it officers have been chosen for all the municipalities of Cuba. These local governments are now in operation, administered by the people. Our military establishment has been reduced from 43,000 men to less than 6,000. An election has been ordered to be held on Sept. 15, under a fair election law already tried in the municipal elections, to choose members of a constitutional convention, and the convention by the same order is to assemble on the first Monday of November to frame a constitution upon which an independent government for the island will rest. All this is a long step in the fulfilment of our sacred guarantees to the people of Cuba.

rate. The duties thus paid and collected, both in Porto Rico and the United States, are paid to the government of Porto Rico; and no part thereof is taken by the national government. All of the duties from Nov. 1, 1898, to June 30, 1900, aggregating the sum of $2,250,523.21, paid at the custom houses in the United States upon Porto Rican products under the laws existing prior to the above-mentioned act of Congress, have gone into the treasury of Porto Rico to relieve the destitute and for schools and other public purposes.

In addition to this, we have expended for relief, education, and improvement of 10ads the sum of $1,513,084.95. The United States military force on the isl and has been reduced from 11,000 to 1,500, and native Porto Ricans constitute for the most part the local constabulary.

We hold Porto Rico by the same title as the Philippines. The treaty of peace which ceded us the one conveyed to us the Under the new law and the inauguraother. Congress has given to this island tion of civil government there has been a government in which the inhabitants a gratifying revival of business. The participate, elect their own legislature, manufactures of Porto Rico are developenact their own local laws, provide their ing; her imports are increasing, her tariff own system of taxation, and in these is yielding increased returns, her fields respects have the same power and privi- are being cultivated, free schools are being leges enjoyed by other territories belong- established. Notwithstanding the many ing to the United States, and a much embarrassments incident to a change of larger measure of self-government than national conditions, she is rapidly showing was given to the inhabitants of Louisi- the good effects of her new relations to ana under Jefferson. A district court of this nation.

the United States for Porto Rico has been The Philippine Problem.-For the sake established and local courts have been of full and intelligent understanding of inaugurated, all of which are in oper- the Philippine question, and to give to ation.

the people authentic information of the The generous treatment of the Porto acts and aims of the administration, I Ricans accords with the most liberal present at some length the events of imthought of our own country and encour- portance leading up to the present situages the best aspirations of the people ation. The purposes of the executive of the island. While they do not have are best revealed and can best be judged instant free commercial intercourse with by what he has done and is doing. It

will be seen that the power of the govern- the dictates of humanity and in the fulment has been used for the liberty, the filment of high public and moral oblipeace, and the prosperity of the Philip- gations. We had no design of aggranpine peoples, and that force has been dizement, and no ambition of conquest. employed only against force which stood Through the long course of repeated repin the way of the realization of these resentations which preceded and aimed to ends. avert the struggle and in the final arbitrament of force, this country was impelled solely by the purpose of relieving grievous wrongs and removing long-existing conditions which disturbed its tranquillity, which shocked the moral sense of mankind, and which could no longer be endured.

"It is my earnest wish that the United

the same high rule of conduct which guided it in facing war. It should be as scrupulous and magnanimous in the con

On April 25, 1898, Congress declared that a state of war existed between Spain and the United States. On May 1, 1898, Admiral Dewey destroyed the Spanish fleet in Manila Bay. On May 19, 1898, Major - General Merritt, United States army, was placed in command of the military expedition to Manila, and directed among other things to immediately States, in making peace, should follow "publish a proclamation declaring that we come not to make war upon the people of the Philippines, nor upon any part or faction among them, but to protect cluding settlement as it was just and huthem in their homes, in their employments, and in their personal and religious rights. All persons who, either by active aid or by honest submission, co-operate with the United States in its efforts to give effect to this beneficent purpose will receive the reward of its support and protection."

On July 3, 1898, the Spanish fleet, in attempting to escape from Santiago Harbor, was destroyed by the American fleet, and on July 17, 1898, the Spanish garrison in the city of Santiago surrendered to the commander of the American forces. Peace Envoys' Instructions. - Follow ing these brilliant victories, on Aug. 12, 1898, upon the initiative of Spain, hostilities were suspended and a protocol was signed with a view to arranging terms of peace between the two governments. In pursuance thereof I appointed as commissioners the following distinguished citizens to conduct the negotiations on the part of the United States: William R. Day, of Ohio; William P. Frye, of Maine; Cushman K. Davis, of Minnesota; George Gray, of Delaware, and Whitelaw Reid, of New York. In addressing the peace commission before its departure for Paris, I said:

mane in its original action. . . . Our aim in the adjustment of peace should be directed to lasting results, and to the achievement of the common good under the demands of civilization, rather than to ambitious designs. . .

"Without any original thought of complete or even partial acquisition, the presence and success of our arms in Manila imposes upon us obligations which we cannot disregard. The march of events rules and overrules human action. Avowing unreservedly the purpose which has animated all our effort, and still solicitous to adhere to it, we cannot be unmindful that without any desire or design on our part the war has brought us new duties and responsibilities which we must meet and discharge as becomes a great nation on whose growth and career from the beginning the Ruler of Nations has plainly written the high command and pledge of civilization."

On Oct. 28, 1898, while the peace commission was continuing its negotiations in Paris, the following additional instruction was sent:

"It is imperative upon us that as victors we should be governed only by motives which will exalt our nation. Territorial "It is my wish that throughout the ne- expansion should be our least concern, gotiations intrusted to the commission the that we shall not shirk the moral obligapurpose and spirit with which the United tions of our victory is of the greatest. States accepted the unwelcome necessity It is undisputed that Spain's authority of war should be kept constantly in view. is permanently destroyed in every part We took up arms only in obedience to of the Philippines. To leave any part in