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leaving to each state the care of its domestic concerns, and devolving on the federal gov. ernment those of general import, admits in safety of the greatest expansion ; but, at the same time, I deem it proper to add that there will be found to exist at all times an impe. rious necessity for restraining all the functionaries of this government within the range of their respective powers, thereby preserving a just balance between the powers granted to this government and those reserved to the states and to the people.

From the report of the Secretary of the Treasury, you will perceive that the fiscal means, present and accruing, are insufficient to supply the wants of the government for the current year. The balance in the treasury on the fourth day of March last, not cor. ered by outstanding drafts, and exclusive of trust funds, is estimated at $860,000. This includes the sum of $215,000 deposited in the mint and its branches to procure metal for coining, and in the process of coinage, and which could not be withdrawn without inconvenience ; thus leaving subject to draft, the various depositories, the sum of $645,000. By virtue of two several acts of Congress, the Secretary of the Treasury was authorized to issue, on and after the fourth day of March last, treasury notes to the amount of $5,413,000, making an aggregate available fund of $6,058,000 on hand.

But this fund was chargeable with outstanding treasury notes redeemable in the current year, and interest thereon, to the estimated amount of five millions two hundred and eighty thousand dollars. There is also thrown upon the treasury the payment of a large amount of demands accrued in whole or in part in former years, which will exhaust the available means of the treasury, and leave the accruing revenue, reduced as it is in amount, burdened with debt, and charged with the current expenses of the government. The aggregate amount of outstanding appropriations on the fourth day of March last, was $33,429,616 50, of which $24,210,000 will be required during the current year; and there will also be required for the use of the War Department additional appropria. tions to the amount of $2,511,132 98, the special objects of which will be seen by reference to the report of the Secretary of War.

The anticipated means of the treasury are greatly inadequate to this demand. The receipts from customs for the last three quarters of the last year, and the first quarter of the present year, amounted to $12,100,000; the receipts for lands for the same time to $2,742,430 60; showing an average revenue, from both sources, of $1,236,870 per month. A gradual expansion of trade, growing out of a restoration of confidence, together with a reduction in the expenses of collecting, and punctuality on the part of cellecting officers, may cause an addition to the monthly receipts from the customs. They are estimated for the residue of the year from the fourth of March, at $12,000,000; the receipts from the public lands for the same time are estimated at $2,500,000; and from miscellaneous sources, at $170,000; making an aggregate of available fund within the year of $14,670,000; which will leave a probable deficit of $11,406,000. To meet this, some temporary provision is necessary, until the amount can be absorbed by the excess of revenues which are anticipated to accrue at no distant day.

There will fall due, within the next three months, treasury notes of the issues of 1840, including interest, about $2,850,000. There is chargeable in the same period for arrear ages for taking the sixth census, $294,000 ; and the estimated expenditures for the cur. rent service are about $8,100,000, making the aggregate demand upon the treasury, prior to the first of September next, about $11,340,000.

The ways and means in the treasury, and estimated to accrue within the above named period, consist of about $694,000 of funds available on the 28th ultimo; an unissued balance of treasury notes, authorized by the act of 1841, amounting to $1,955,000, and estimated receipts from all sources of $3,800,000, making an aggregate of about $6,450,000, and leaving a probable deficit on the first of September next of about $4,845,000.

In order to supply the wants of the government, an intelligent constituency, in view of their best interests, will, without hesitation, submit to all necessary burdens. But it is nevertheless important so to impose them as to avoid defeating the just expectations of the country, growing out of pre-existing laws. The act of the 2d March, 1833, com. monly called the compromise act, should not be altered except under urgent necessities

, which are not believed at this time to exist. One year only remains to complete the series of reductions provided for by that law, at which time provisions made by the same law, and which then will be brought actively in aid of the manufacturing interests of the Union, will not fail to produce the most beneficial results. Under a system of discrim

inating duties imposed for purposes of revenue, in unison with the provisions of existing laws, it is to be hoped that our policy will, in the future, be fixed and permanent, so as to avoid those constant fluctuations which defeat the very objects they have in view. We shall thus best maintain a position which, while it will enable us the more lily to meet the advances of other countries, calculated to promote our trade and commerce, will, at the same time, leave in our own hands the means of retaliating with greater effect unjust regulations.

In intimate connection with the question of revenue, is that which makes provision for a suitable fiscal agent, capable of adding increased facilities in the collection and dis. bursement of the public revenues, rendering more secure their custody, and consulting a true economy in the great, multiplied, and delicate operations of the Treasury Depart. ment. Upon such an agent depends, in an eminent degree, the establishment of a currency of uniform value, which is of so great importance to all the essential interests of society; and on the wisdom to be manifested in its creation, much depends. So inti. mately interwoven are its operations not only with the interests of individuals, but of states, that it may be regarded in a great degree as controlling both. If paper be used as the chief medium of circulation, and the power be vested in the government of issuing it at pleasure, either in the form of treasury drafts or any other, or if banks be used as the public depositories, with liberty to regard all surpluses, from day to day, as so much added to their active capital, prices are exposed to constant fluctuations, and industry to severe suffering. In the one case, political considerations, directed to party purposes, may control, while excessive cupidity may prevail in the other. The public is thus constantly liable to imposition. Expansions and contractions may follow each other in rapid succession, the one engendering a reckless spirit of adventure and speculation, which embraces states as well as individuals ; the other causing a fall in prices, and accomplish. ing an entire change in the aspect of affairs. Stocks of all kinds rapidly decline-indi. viduals are ruined, and states embarrassed even in their efforts to meet with punctuality the interest on their debts. Such, unhappily, is the condition of things now existing in the United States. These effects may readily be traced to the causes above referred to. The public revenues, on being removed from the then Bank of the United States, under an order of a late President, were placed in selected state banks, which, actuated by the double motive of conciliating the government and augmenting their profits to the greatest possible extent, enlarged extravagantly their discounts, thus enabling all other existing banks to do the same. Large dividends were declared, which, stimulating the cupidity of capitalists, caused a rush to be made to the legislatures of the respective states for similar acts of incorporation, which, by many of the states, under a temporary infatua. tion, were readily granted; and thus the augmentation of the circulating medium, consisting almost exclusively of paper, produced a most fatal delusion. An illustration, derived from the land sales of the period alluded to, will serve best to show the effect of the whole system. The average sales of the public lands, for a period of ten years prior to 1834, had not much exceeded $2,000,000 per annum. In 1834 they attained, in round numbers, to the amount of $6,000,000. In the succeeding year of 1835, they reached $16,000,000; and in 1836 they amounted to the enormous sum of $25,000,000 -thus crowding into the short space of three years upwards of twenty-three years' purchase of the public domain. So apparent had become the necessity of arresting this course of things, that the Executive Department assumed the highly questionable power of discriminating in the funds to be used in payment by different classes of public debtors-a discrimination which was doubtless designed to correct this most ruinous state of things by the exaction of specie in all payments for the public lands, but which could not at once arrest the tide which had so strongly set in. Hence the demands for specie became unceasing, and corresponding prostration rapidly ensued under the necessities created with the banks to curtail their discounts, and thereby to reduce their circulation. I recur to these things with no disposition to censure pre-existing administrations of the govern. ment, but simply in exemplification of the truth of the position which I have assumed. If, then, any fiscal agent which may be created shall be placed, without due restrictions, either in the hands of the administrators of the government or those of private individuals, the temptation to abuse will prove to be resistless. Objects of political aggrandize. ment may seduce the first, and the promptings of a boundless cupidity will assail the last. Aided by the experience of the past, it will be the pleasure of Congress so to guard and fortify the public interests, in the creation of any new agent, as to place them, so far as human wisdom can accomplish it, on a footing of perfect security. Within a few years past, three different schemes have been before the country. The charter of the Bank of the United States expired by its own limitation in 1836. An effort was made to renew it, which received the sanction of the two Houses of Congress, but the then President of the United States exercised his veto power, and the measure was defeated. A regard to truth requires me to say that the President was fully sustained in the course he had taken by the popular voice. His successor in the chair of state unqualifiedly pronounced his opposition to any new charter of a similar institution ; and not only the popular elec. tion which brought him into power, but the elections through much of his term, seemed clearly to indicate a concurrence with him in sentiment on the part of the people. After the public moneys were withdrawn from the United States Bank, they were placed in deposite with the state banks, and the result of that policy has been before the country. To say nothing as to the question whether that experiment was made under propitious or adverse circumstances, it may safely be asserted that it did receive the unqualified condemnation of most of its early advocates, and it is believed was also condemned by the popular sentiment. The existing sub-treasury system does not seem to stand in higher favor with the people, but has recently been condemned in a manner too plainly indicated to admit of a doubt. Thus, in the short period of eight years, the popular voice may be regarded as having successively condemned each of the three schemes of finance to which I have adverted. As to the first, it was introduced at a time (1816) when the state banks, then comparatively few in number, had been forced to suspend specie payments, by reason of the war which had previously prevailed with Great Britain. Whether, if the United States Bank charter, which expired in 1811, had been renewed in due season, it would have been enabled to continue specie payments during the war, and the disastrous period to the commerce of the country which immediately succeeded, is, to say the least, problematical : and whether the United States Bank of 1816 produced a restoration of specie payments, or the same was accomplished through the instrumentality of other means, was a matter of some difficulty at that time to determine. Certain it is that, for the first years of the operation of that Bank, its course was as disastrous as for the greater part of its subsequent career it became eminently successful. As to the second, the ex. periment was tried with a redundant treasury, which continued to increase until it seemed to be the part of wisdom to distribute the surplus revenue among the states, which, operating at the same time with the specie circular, and the causes before adverted to, caused them to suspend specie payments, and involved the country in the greatest embar. rassment. And, as to the third, if carried through all the stages of its transmutation, from paper and specie to nothing but the precious metals, 10 say nothing of the insecurity of the public moneys, its injurious effects have been anticipated by the country in its unqual. ified condemnation. What is now to be regarded as the judgment of the American people on this whole subject, I have no accurate means of determining, but by appealing to their more immediate representatives. The late contest, which terminated in the election of General Harrison to the Presidency, was decided on principles well known, and openly declared : and, while the sub.treasury received in the result the most decided condemna. tion, yet no other scheme of finance seemed to have been concurred in. To you, then, who have come more directly from the body of our common constituents, I submit the entire question, as best qualified to give a full exposition of their wishes and opinions. I shall be ready to concur with you in the adoption of such system as you may propose, reserving to myself the ultimate power of rejecting any measure which may, in my view of it, conflict with the constitution, or otherwise jeopard the prosperity of the country power which I could not part with, even if I would, but which I will not believe any act of yours will ca!l into requisition.

I cannot avoid recurring, in connection with this subject, to the necessity which exists for adopting some suitable measure whereby the unlimited creation of banks by the states may be corrected in future. Such result can be most readily achieved by the consent of the states, to be expressed in the form of a compact among themselves, which they can only enter into with the consent and approbation of this government-a consent which, in the present emergency of the public demands, may justifiably be given by Congress in advance of any action by the states, as an inducement to such action, upon terms well defined by the act of tender. Such a measure, addressing itself to the calm reflection of the states, would find, in the experience of the past and the condition of the present, much to sustain it. And it is greatly to be doubted whether any scheme of finance can

prove for any length of time successful, while the states shall continue in the unrestrained exercise of the power of creating banking corporations. This power can only be limited by their consent.

With the adoption of a financial agency of a satisfactory character, the hope may be indulged that the country may once more return to a state of prosperity. Measures aux.

iliary thereto, and in some measure inseparably connected with its success, will doubtless claim the attention of Congress. Among such, a distribution of the proceeds of the sales of the public lands, provided such distribution does not force upon Congress the necessity of imposing upon commerce heavier burdens than those contemplated by the act of 1833, would act as an efficient remedial measure, by being brought directly in aid of the states. * As one sincerely devoted to the task of preserving a just balance in our system of gov. ernment, by the maintenance of the states in a condition the most free and respectable, and in the full possession of all their power, I can no otherwise than feel desirous for their ernancipation from the situation to which the pressure on their finances now subjects them. And while I must repudiate, as a measure founded in error, and wanting constitutional sanction, the slightest approach to an assumption by this government of the debts of the states, yet I can see, in the distribution adverted to, much to recommend it. The compacts between the proprietor states and this government expressly guaranty to the states all the benefits which may arise from the sales. The mode by which this is to be effected addresses itself to the discretion of Congress, as the trustee for the states ; and its exercise, after the most beneficial manner, is restrained by nothing in the grants or in the constitution, so long as Congress shall consult that equality in the distribution which the compacts require. In the present condition of some of the states, the question of distribution may be regarded as substantially a question between direct and indirect tax. ation. If the distribution be not made in some form of other, the necessity will daily become more urgent with the debtor states for a resort to an oppressive system of direct taxation, or their credit, and necessarily their power and influence, will be greatly dimin. ish-d. The payment of taxes, after the most inconvenient and oppressive mode, will be exacted in place of contributions for the most part voluntarily made, and therefore comparatively unoppressive. The states are emphatically the constituents of this government; and we should be entirely regardless of the objects held in view by them in the creation of this government, if we could be indifferent to their good. The happy effects of such a measure upon all the states would immediately be manifested. With the debtor states, it would effect the relief, to a great extent, of the citizens from a heavy burden of direct taxation, which presses with severity on the laboring classes, and eminently assist in restoring the general prosperity. An immediate advance would take place in the price of the state securities, and the attitude of the states would become once more, as it enould ever be, lofty and erect. With states laboring under no extreme pressure from debt, the fund which they would derive from this source would enable them to improve their condition in an eminent degree. So far as this government is concerned, appropri. ations to domestic objects, approaching in amount the revenue derived from the land sales, might be abandoned ; and thus a system of unequal and therefore unjust legislation would be substituted by one dispensing equality to all the members of this confederacy. Whether such distribution should be made directly to the states in the proceeds of the sales, or in the form of profits by virtue of the operations of any fiscal agency having these proceeds as its basis, should such measure be contemplated by Congress, would well deserve its consideration. Nor would such disposition of the proceeds of the sales in any manner prevent Congress, from time to time, from passing all necessary pre-emption laws for the benefit of actual settlers, or from making any new arrangement as to the price of the public lands, which might in future be esteemed desirable.

I beg leave particularly to call your attention to the accompanying report from the Secretary of War. Besides the present state of the war which has so long afflicted the Territory of Florida, and the various other matters of interest therein referred to, you will learn from it that the Secretary has instituted an inquiry into abuses, which promises to develope gross enormities in connection with Indian treaties which have been negotia. ted, as well as in the expenditures for the removal and subsistence of the Indians He represents, also, other irregularities of a serious nature that have grown up in the practice of the Indian Department, which will require the appropriation of upwards of $200,000 to correct, and which claim the immediate attention of Congress.

In reflecting on the proper means of defending the country, we cannot shut our eyes to the consequences which the introduction and use of the power of steam upon the ocean are likely to produce in wars between maritime states. We cannot yet see the extent to which this power may be applied in belligerent operations, connecting itself as it does with recent improvements in the science of gunnery and projectiles; but we need hare no fear of being left, in regard to these things, behind the most active and skilful of other nations, if the genius and enterprise of our fellow-citizens receive proper encouragemen! and direction from government.

True wisdom would, nevertheless, seem to dictate the necessity of placing in perfect condition those fortifications which are designed for the protection of our principal cities and roadsteads. For the defence of our extended maritime coast, our chief reliance should be placed on our navy, aided by those inventions which are destined to recom. mend themselves to public adoption. But no time should be lost in placing our principal cities on the seaboard and the lakes in a state of entire security from foreign assault Separated as we are from the countries of the old world, and in much unaffected by their policy, we are happily relieved from the necessity of maintaining large standing armies in times of peace. The policy which was adopted by Mr. Monroe, shortly after the conclu. sion of the late war with Great Britain, of preserving a regularly organized staff, sufficient for the command of a large military force, should the necessity for one arise, is founded as well in economy as in true wisdom. Provision is thus made, upon filling up the rank and file, which can readily be done on any emergency, for the introduction of a system of discipline, both promptly and efficiently. All that is required in time of peace is to maintain a sufficient number of men to guard our fortifications, to meet any sudden cos. tingency, and to encounter the first shock of war. Our chief reliance must be placed on the mihtia. They constitute the great body of national guards, and, inspired by an ardent love of country, will be found ready at all times and at all seasons to repair with alacrity to its defenee. It will be regarded by Congress, I doubt not, at a suitable time, as one of its highest duties, to attend to their complete organization and discipline.

By the report of the Secretary of the Navy, it will be seen that the state of the naty pension fund requires the immediate attention of Congress. By the operation of the act of the 31 of March, 1837, entitled " An act for the more equitable administration of the navy pension fund," that fand has been exhausted. It will be seen that there will be required for the payment of navy pensions, on the first of July next, $88,706 06, and on the first of January, 1849, the sum of $69,000. In addition to these sums, about $6,000 will be required to pay arrears of pensions which will probably be allowed between the firse July and the tirst of January, 1812, making in the whole $163,706 06. To meet these paviments,

there is within the control of the department the sum of $28,040, lear. ing a decat or $130,066 06. The public faith requires that immediate provision should be made for the payment of these sums. la unier to introduce into the navy a desirable efficiency, a new system of accountabil

. ir mar a tinund to be indispensably necessary. To mature a plan having for its object te* ****popukshment of an end w important, and to meet the just expectations of the coun. try, my mur ane than has yet been allowed to the Secretary at the head of that peer paar neak The dy is induiged that, by the time of your next regular session, meas,

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Award the laws regulating the Past Office Department only require from the officer charged with a dreson to report at the usual annual session of Congress, the Postmas inconeral des presented to me se facs connected with the financial condition of the Smartment, which are deemed warcày the attention of Congress. By the accompanying

that weer, it appears that the ensuing isa bahides of that departmen, beyond the ****ennemt at Rand, cannot be less than $500.000. As the laws organ.

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