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BY STOCKTON & CO REPORT OP THE SECRETARY OF THE TREASURY. Treasury Department, ; Washington, November 30,1807. > iu conformity with law, the Secretary ot the Treasury has the honor to submit to Congress this, his regular annual report. The finances of the United Btates, notwith standing the continued depreciation of the cur rency, are iu a much more satisfactory condi tion than they were when the Secretary had the houor to make to Congress his last annual re port. Since the first day of November, 1866, $403,900,263 31 of interest-bearing notes, cer tificates of indebtedness and of temporary loans, have been paid or converted into bonds, and the public debt deducting therefrom the cash in the Treasury, which is to be applied to its payment, lias been reduced #59,805,555 73. During the same period dccideed improvement lias also been witnessed in the goneral econom ical condition of the country. The policy of contracting the currency, al though not enfoiced to the extent authorized by law, has prevented an expansion of credits, to which a redundant and especially a depre ciated currency is always an incentive, and has had no little intluenee iu stimulating labor and itcreasing production. Industry has been steadily returning to the healthy channels from •which it was diverted during the war, and al though incomes have been small, and trade generally inactive, in no. other commercial country has there been less financial embarrass ment than in the United States. In order that the action of the Secretary, in the financial administration of the Department, may he properly understood, a brief reference to the condition of the Treasury at the time the war was drawing to a close, and at some subse quent periods, seems to be necessary. On the 31st day of March, 1865, the total debt of the United States was #2,366,955,077 34, of the following descriptions, to-wit : Funded debt $1,100,301,241 80 Matured debt 349,420 09 Temporary loan certilicutes.......... 52,452,328 29 Certificates of indebtedness 171,790,000 00 I nterr-Ht bearim; notes 520,812,800 00 Hupemled or unpaid requisitions 114,256,648 93 Untied States notes (legal tenders)... 433,180,509 00 Fractional currency 21,254,094 07 2,428,437,002 18 Cash iu the Treasury 50,481,924 84 Total 2,306,955,077 34 The resources of the Treasury consisted of ilie money in I lie public depositories in differ ent. parts oi l lie Taointry, amounting as above .dated to #56,481,924 84 ; the revenues from in ternal taxes and customs duties, and the au thority to issue bonds, notes and certificates, under the following acts to the following amounts: .Act ol February 25, 1862. b0ndd....... $4,023,600 00 Aet of March 3,186-1, bonds 27,229,900 00 Act of June SO, 1801, bonds, 7-30 or compound interest notes 79,811,000 00 Uertifioat : for temporary loans, act June 30,1504 97,540,471 71 United States notes for payment of temporary loans, act duly 11, 1802.... 10,839,431 00 (Fractional oiniviice, act June 3(1, 1804.. 25,745,905 93 Act Ol March 3,1805, bonds or Interest bearing notes.... 533,687,200 00 Making a total 0f.... 784,783,508 04 Certificates <>t indebtedness, payable one year from date, or earlier at the option of the Gov < rumen t, bearing interest at the rate ol six per cent, per .minim, might lie issued to an indefi nite amount, but only to public creditors de sirous of receiving them in satisfaction of audit ed and settled demands against the United State?. . Early in April (lie fall of Kielimoud and ■lurt ender of I lie forces which had so long de-‘ tended it, rendered it certain that the war was anon to be terminated, and that provision'must be made for the payment of the army at the ■earliest pm tiea'.ile moment. Asa considerable amount of the seven-thirty notes had recently been disposed of satisfactori ly by the Department, and had proved to be the most popular security ever offered to the people, the Secretary determined to rely upon them. Before the end of July the entire loan, exceed ing five hundred millions, was subscribed and paid for, ami the Secretary was enabled with the proceeds, together with the receipts from customs and iuternal revenues, and the nse to a limited extent ot some of the other means at lliis disposal, to pay every requisition upon the Treasury, and every matured national obliga tion. As evidence of the necessity that existed for prompt, aetiou in the negotiation of this loan, and the straits to which the Treasury was reduced, it will he remembered by those who examined carefully I lie monthly statements of ike Department, that although during the •mo«i.h of April upwards of one hundred mil lions of dollars had been received from the sales of 7-30iuiOl.es, the unpaid requisitions at its close had increased to $120,470,000, while the cash (coin and currency) in all the public de positories amounted only to $16,835,800. Between tlie first days of April and Septem ber 1865, the Secretary used his authority to issue securities as follows : Bonds undei'the act of Feh’ry 25,1562.. $4,023,030 00 Bonds ei'-ler ti'c nei of June 30, 1804... 0,600,000 00 Compound inteffst notes, act June 30, T SiU 24,978,390 00 Certificates lor temporary loans, act Jline 30, 15T4.... 54,695,384 87 Fractional currency, net June <.9. 1864.. 2,090,648 44 Beven-thi:ty notes, March 3,1 s>oi. 629,187,200 00 £20,970,223 31 On the 31st of August, 1805, the j>uWlfl debt reached the highest, point, and was up of the following items, 10-wit: Funded debt $1,108,568,191 SO Mirtim and debt 1,503,620 09 Temnotary loans 107,148,713 10 Certificates ot indebtedness... 85,093,000 00 P'ive p-r e**ot. legal tender notes 38,954,230 00 Compound interest legal tender notes 217,024,160 00 ;.;IJ notes 830,000,000 00 i r . 18. notes (legal tenders) 433,1(50,569 00 Fractional currency 26,344,742 61 {Juspcmled .requisitions uncalled fur.. 2,111,000 00 Total... 2,945,907,626 56 Deduct cash in Treasury 88,218,055 18 Balance 2,757,089,571 43 Os these obligations, it w ill be noticed, $684,- 138,959 were a legal tender, to-wit: United States notes.. $433,160,669 00 Five per cent, n0te5.•................. 33,964.230 09 Compound intereet notes 217,024,160 00 Total 654,138,950 00 Avery large portion of which were in circu lation ac currency. The teotporary loans were payable lu thirty days from the time of deposit, after a notice of ten days. Tlic five tier cent- notes were payable in lawful money, in one and tyro years from December 1, 1863. * The coumpound interest .notes were payable in three years from their respective dates, all becoming due between the tenth day of June, 1867, and the sixteenth day ol October, 1868. The 7-30 notes were payable, in about equal proportions, in August, 1867, and June and July, 1868, in lawful money, or convertible at maturity, at the pleasure oi the holder, into 5-20 bonds. The certificates of indebtednes would mature at various times between the thirty-first day of August, 1565, and the second day of May, 1867. During the month of September, 1865, the army having been reduced nearly to a peace looting, it became apparent that the internal revenues and the receipts for customs would be sufficient to pay all the expenses of the Gov ernment and the interest on the public debt, so that thenceforward the efforts of the Secretary were to be turned from borrowing to funding. Besides the United States notes in circulation, there were nearly $1,300,000,000 of debts iu the form of interest bearing notes, temporary loans, ano' certificates of indebtedness, a portion of ■which were maturing daily, and all of which, with ih« exception of the temporary loans (which, be.Pg > n the nature of loans on call, mi'dit or migi'- t not be continued, according to the" will ot i he'hi, 1 ders,) must be converted into bonds or paid in money before thelGthof Octo ber, 1868. Tbe condition of the country tncT.reasu ry determined the policy of the Secretary, which has been to convert the interest«itgariug notes, temporary loans, into gold-btßU4#£ and8 > and to contract Iho paper circulation 0* pupM States notes. For the last two years this PPhey has been steadily, but carefully pursued, and the result upon the whole has been satislactory to the Secretary, and, as lie believes, to a large majority of the people. Since the first day of September, 1565, the temporary loans, the cer tificates of indebtedness and the five per cent, notes have all been paid (with the exception of small amounts of each not presented for pay ment) the compound interest notes have been. reduced from *217,034,160 to $71,875,040 <tll,- 560.000 haviug been taken up with three peT| cent, certificates); the seven and three-tenth < notes from $830,000,000 to $337,97.8,800; the United States notes, including fractional cur rency, from $459,505,311 51 to $387,871,477 39 while the cash in the Treasury lias been in creased from $88,218,055 13 to $133,998,398 02, and the funded debt has been increased $686,584,- .800. While this has been accomplished there has been no commercial crisis, and .(outside of the Southern States, which are still greatly suf fering from the effects of the war ajuff the JP.p- ®ri-tUcclUn (Constitutionalist. settled state of their industrial interests and political affairs) no considerable financial em barrassment. In his last report the Secretary remarked that “after a careful survey of the whole field, he was of the opinion that specie payments might he resumed, and ought to be resumed, as early as the first day of July, 1808, while he indulged the hope that-such would be the character cf future legislation and sack the condition of our productive industry that this most desirable event-might be brought about at a still earlier day.” These anticipations of the Secretary may not be fully realized. The grain crops of 1866 were barely sufficient for borne consumption. The expenses of the War Department, by reason of Indian hostilities and the. establishment of military governments in the Southern Suites, have greatly exceeded the estimates. Thg Government lias been de frauded of a large part of the revenue upon distilled liquors and the condition of the South has been disturbed and unsatisfactory. These facts, and the apprehension created iu Europe, and to some extent at home, by tlie utterances of some of our public men upon the subjects of finance and taxation, that the public laitti might not be maintained, may postpone the time when specie payments shall be resumed. But, notwithstanding these unexpected embar rassments, much preliminary work has been done, and there is not, in the opinion of the Secretary, any insuperable difficulty in the way of an early and a permanent restoration of the specie standard. It may not be safe to fix the exact time, but, with favorable crops next year and with no legislation unfavorable to con traction at this season, it ought not to be de layed beyond the first of January, or at the farthest the first of July, 1860. Nothing will be gained, however, by a forced resumption.— When the country is in a condition to maintain specie payments they will be restored as a ne cessary consequence. To such a condition of national prosperity as will insure a permanent restoration of the specie standard the follow ing measures arc, in the opinion of the Secre tary, important, if not indispensable : First —The funding or payment of the bal ance ot interest bearing notes, and a continued contraction of the paper currency. Second— The maintenance of the public faith in regard to the funded debt. Third —The restoration of the Southern States to their proper relations to the Federal Government. If this opinion be correct, the question of permanent specie payments, involving as it does the prosperity of the country, underlies the great questions of currency, taxation and reconstruction, which are now engaging the attention of the people, and cannot fail to re ceive the earnest and deliberate attention of Congress. In view of the paramount import ance of this great question the Secretary deems it to be his duty briefly to discuss the measures regarded by him to he necessary for an early and wise disposition of it, even at the risk of a repetition ot what he has said in previous com munications to Congress. The measures regarded by him as important., if not indispensible for national prosperity, and as consequence fora permanent resumption, are: First. The funding or payment c:' the balance of interest bearing notes, and a continued con traction of the paper currency. By the act of March 2, '1867, the Secretary was authorized and directed to issue three per ceut. loan certificates to the amount of fifty millions of dollars, for the purpose of redeem ing and retiring compound interest notes ; and such certificates, on the Ist. iust... had been issued to the amount of #11,560,000, in redemp tion of the notes becoming due in October and December. The notes still outsanding will be either taken up with certificates or paid at ma turity. The seven and three-tenth notes, being ••payable in lawful money or convertible at the option ot the holders into five-twenty bonds, will be paid or converted according to the terms ol the contract. Fortunately all Hie in terest-bearing notes are to be paid or converted within eleven months, and they need not, there fore, to be regarded as a serious impediment to a return to the true standard of value. As to the redemption of these notes, aipl the manner iu which they should he redeemed, there can not, of course, he much difference of opinion. It is iu regard to a contraction of the currency, and upon which Os the two kinds of currency —United States notes or the notes ol the Na tional Banks—contraction should bo brought to bear, that a difference of sentiment seems to exist. In bis report to Uons>CE9, under date ol (lie 4th of December, 1865, the sectvtary presented, as fully and its clearly as he was aide to do, his views upon the subject of the currency, and the necessity of action for the purpose ol bringing about a return to specie payments. The views thus preseuted by'hup ucie approved by the House of Representatives on tit.e «U| of Decem ber, 1865. By the aet of April 12, 18t{6, tip; Secretary was authorized to receive Treasury uotes and other obligations of the Government, whether bearing interest or not, in exchange for bonds, with a proviso that, of United States notes, not more than $10,000,000 should be can celled within sik months from the passage of the act, and thereafter not more tlmu lour mil lions ot dollars iu any one month. This pro viso, while it fixed a limit, to the amount of notes which should be retired per month, so far from indicating an abandonment of the police of contraction, confirmed and estab lished >t. To this polipy (aMiough for reasons that seemed to him to be jqdipious, the regular monthly reduction has not always been ijjade) the action of the Secretary lias been conformed, and the effect has been so salutary, and the con tinuation of It would be so obviously wise, that ha yyould not consider it necessary to say one word in jfs favor were there not indications that, under the teachings of the advocates of a large and consequently a depreciated currency, such views are being inculcated as, jf got cor rected, isay lead to its abandonment. No matter what J;>ws may be enacted to give credit and value to it, an irredeemable curren cy must, unless limited as above staged, always be a depreciated currency. The attempt to give value to paper promises by making them lawful money is not original with the United States. The experiment has been tried by other nations, and generally with the same in jurious, if not disastrous, resulis. Indeed, with rare exceptions, nations that have com menced the direct issue of paper money hare continued to issue it until prevented by its ut ter worthlessness. There may be no danger that this will be true of the United States; but there will always be ground tor apprehen sion as long as au irredeemable and depreci ated currency is not regarded as an evil—au evil to be tolerated only so long as may he neces sary to retire it without derangement of legiti mate business. Inconvertible and depreciated lawful moppv is an agreeable but demoralizing deception, Uis agreeable because it is plenti ful, and because if deludes by the creation of apparent wealth. It is demoralising by famil iarizing the public miud yvitb dishonor,eu obli gations. The prices of (post hinds of property in the United States advanced near three fold daring the war, but this advance was plainly the result of the increase of the circulating me: diuro, and in reality only indicated Its depre ciation, The purchasing power of the money in circulation was diminished in the ratio that its volume was increased. The farmer, for ex ample, received three dollars per bushel for his wheat, but, except for the payment of debts, these three dollars were of no more value i.Q , him than one dollar was before the suspension of specie payments. The same was true of other kinds of property and of labor. The ad vance, except so far os If w> B the result of au increased demand, was apparent oqly and un real. The same cause is sustaining prices the present time, and will continue to do so ail ! long as the cause exists, but the advantages resulting from it are merely imaginary, while the evils are positive and actual. No saue man supposes tbaf tfis own wealth, or the wealth of the nation, is increased by the depreciation ot the standard by which it is measured. If the paper circulation of the United States be doubled during the next year, and the prices of property should be likewise doubled, would it be imagined that the real value of property would be thus advanced ? Or, if the paper currency should, during the pgr riod, be reduced fifty per pent., and prices of property should decline correspondingly, would it follow that the real value of property would thus decline ? In the one case the value pfthe currency would be reduced in propor tion iff its increase in amount. In the other, the currency sv°uld be increased in value as it was diminished iff amount. The increase or decrease of prices would, jf no counteracting causes intervened, be the'natural result of the increase or decrease of the measure of value, while real values remained unchanged.' The .United States notes were made a legal tender apd lawful jnouey because it was thought that this character was necessary to Secure their currency. By reference so the first debate* of Congress upon the subject, It will be noticed those who advocated their issue justified themselves j?n the grouud of necessity. No one who spoke Jo favor pf the measure, fa vored it upon principle, or hesitated to express his apprehensions that evil consequences might result from it. But the Government was in peril, the emergency was pressing, necessity seemed to sanction a departure from sound principles of finance, if not from the letter of jbe .Constitution, and an inconvertible curren- cy lav/ful money of the country.— While the "action of Congress, in authorizing Hie issue of these notes, seemed necessary at the time, aud was undoubtedly approved by a large majority of the people, there can now, in the light of experience, be no question that the apprehensions ol those who advocated the measure as a necessity were well founded. — Had they not been made a legal tender, the amount in circulation would not have been ex cessive, and the national debt would doubtless have been hundreds of millions of dollars less than it is. The issue would have been stayed betore a very large amount had been put in cir culation, not because the notes would have been really depreciated by not being made lawful money, but because the depreciation would have been manifest. By being made lawful money Micy became the legalized measure of value—a substitute for the precious metals— which, as a consequence, were at once demone tized and converted into articles of traffic. — Made by statute a legal tender, they were of course popular with those who had debts to pay or property to sell; costing nothing, and yet seemingly adding to the value of property, supplying the means lor speculation and for creating an artificial and a delusive prosperity, it is an evidence oi the wisdom of Congress that the issue was stopped before the notes had become ruinously depreciated, and the business of the country involved in inextricable difficul ties. But, although the issue of these notes was limited, and we thus escaped the disasters which would have overwhelmed the country without such limitation, it can hardly be doubt ed that the resort to them was a misfortune.— If this means of raisiug money had not been adopted, bonds would have undoubtedly been sold at a heavy discount, but the lact that they were thus sold, without debasing the currency, < would have induced greater economy in the use of the proceeds, while the discount m the bonds would scarcely have exceeded *6e actual ! depreciation of the notes below ff” <-‘Olll stan dard . As long as notes could be issf/id an bonds could be sold at a premium or at for what the statute made money, there w constant temptation to liberal, if not unn sary, expenditures. Had the specie stain, been maintained and bonds been sold at a count for real money, there would have b an economy in all the branches of the pti service which unfortunately was not witn ed, and the country would have escaped evils resulting irom a disregard of the gre°‘ lernational law, which no nation c with impunity, the one that makes silver the only true measure of 1 financial evils under which the r been suffering l'or some years past, * ing of the dangers which loom np in are, iu a great degree, to be traced tc issues by the Government of an in currency with the legal attributes o Upon the demoralizing influee convertible Government current ccssary to enlarge. They are for attention by every day’s observat. eannot be blind to them it we w. u . Government is virtually repudiating It. 0... . ligations by failing to redeem its notes acaorrt ing to their tenor. These notes are payable to hearer on demand in dollars, and not one of them is being so paid. It is not to he expected that a people will|be more honest than the Gov ernment under which they live-; and while the Government ot the United States refuses to pay its notes according to their tenor, or at least as long as it fails to tuakg proper effort to do so, itprictieally teaches to the people the doctrine of repudiation. If the views, thus presented, are con c there can he no question thAt there is stilt a. excess of paper money in the United States; and that the legal tender notes are au obstacle, | and, unless reduced, in amount, ftaust continue to beg an obstacle to a .return to a sf.;fce cur rency. .’ In opposition to these views it i.-, urged’ many intelligent persons that as the credit tern lias been very much curtailed since and sales are made chiefly for cash, larger amount of currency is required mcrly for the convenient trap ness; that there is iu fact t liey iu the United States, butt' tiiiry, all Increase is required' encourage enterprise, and As an evideppe of the cot. ion reference (s Ujajf: to too money market" in the oouimei Hie scarcity of money in thong trie!?. It isjindoubtedly true that the effect of a cur tailment of credits would have been to increase the legitimate demand for currency, if no other meaus had intervened to counteract the effect of if. But such means have intervened. Tn all the cities’ bud t»iyi|S throughout the country, checks upon credits in banks, agd bills of ex change, have largely' taken the place of bank notes. Not a fiftieth part of the business of the large pities is transacted by the actual use of money, and what is true in regard to the busi ne-s of thg chief cities is measurably true in re gard to that of towns aud yjllftges throughout iln: country. Everywhere bank credits aru) bills ot exchange perform the offices of currency to a much greater extent than in former years.— Except in dealing with the Government, for re tail trade, lor the payment of labor and taxes, for traveling expenses, the purchase of pro ducts at first baud, aud for the banker's reserve, money is hardly a necessity. The increased use oj hank cheeks and hills of exchange coun terbalances the increased demand for money resulting from the curtailment of mercantile credits. That money is in demand, aud is com manding full rates ol interest, is true, but this does if op Indicate a scarcity of it. The rates of interest in England Slid fiance have rarely been as low as within the last four months, Upd yet for commercial or manufacturing purposes money has not often been so difficult to be ob tained”. The speculative reaction or over-pro duction of manufactures, together with appre hensions of political troubles, have caused bnsi n,eg} po be sluggish and unprofitable, and made capitalists cautipps aud timid. Thus, in those countries, money was never more plentiful, aud apparently never more scarce. Its apparent scarcity in the United States is attributable to high prices, to its uncertain value, and to its inactivity. Money by no means becomes abun dant by an increase, or scarce by a diminution of its volume. The reverse is more likely to ho trpe, especially when, as is generally the case, high prices are 6pepulat|ve prices, and prevent activity in exchanges. Ifouey is ip de mand at the present (.tope, pot so much f.o tpove crops as to hold them—not to bring them at reasonable prices within the reach of con. sinners, but to withhold them from market un til a large advance of prices can be established. Let ftie great staples of the country come for ward and be sold at market prices, at prlceg as, while the producer is fairly remune-.' rated, will Ihcrcaa.e ficpsurpption and exports— let capitalists be assured "t’hat'process to a stable basis is to be uninterrupted—and mo ney, now considered scarce, will be found to be abundant. The actual legitimate business of the country is not larger than it was in 1860, \vneu {Jjfee hundred millions of coin and bank notes jycre afl kmp'e circulating medium, and when an addition of Jjfty would have pjade it excessive.' “ *' Tmou&fcout a .eqnshJejrabJe portion of tjae best grain growingsegtlohs of the United Stafes there has been, during the past year great com plaint of scarcity of money, aud yet no single article of agricultural product, except wool, was to be sold there for which there was not a purchaser at more than remunerating, if not exorbitant, prices. There was no lack of money in these sections, but a jack of products to exchange for it. The bard tubes 'complained of were the consequence ot short cropsi ana not of deficient circulation. To the farmer who had little to sell and much to buy, an increase cl tjue circulation would have been an iujury: a curtailment qf if s benefit. And yet, by men in such circumstances' tie pejiqy of contracting has met with a condemnation second only to that which it has received at the hands '67 speculators in stocks. Next to the stock board of the commercial metropolis, the opposition to the policy of contraction has been most decided in uiQie sections where, by reason of short crops, .the peopia hayg been less prosperous than heretofore. Unfortunately, ty t})p sapje sections, the harvest has beeif again uri6atlsCi‘c tory, and the demand, not only for a Cessation fff contraption, but for an increase of paper money, jiiay thus he more pressing than ever. This deiq'and, no matter from wbat quarter it comes, or by' what' interest bus'tained, should, in the opinion of the Secretary, be inflexibly re sisted by Congress. To increase the volume ol paper money lor the purpose of giving relief to the country, would be to foster the cause In order to cure the disease. To stay the process of contraction this year will not prepare the way for an increase of circulation the next.— Whenever the policy of reducing the paper circulation op the country, with a view of a re turn to specie payments, sfjgJ! be abandoned, it is to be apprehended that ttie demand spy an increase will be irresistible, and that the coun try will plunge into bankruptcy. The specie standard must be sooner or later restored. — Whether this shall be accomplished by elevat ing the curreucy, by lessening its volume, or after lessening its value by 'inaraasisg ifQ yolume, it is for Congress to determine. That this question will be determined promptly and wisely, the Secretary is not permitted to donbt. Some progress has been made in the right direction during the past, year, but there is still in the United States a plethora of paper money. AUGUSTA, (Ga.) SUNDj® MORNING, DECEMBER 8, 186? If, then, it be admitted that the paper ekdftr tion is excessive, the question arises why sQHfq not the contraction be applied to the, the national banks iustead of the United SfH notes, and thus a large saving of interest KjM Government be effected ? This questionjffj already been answered infcrcntially, bnt itSjßfc portance requires that it shall receive msift definite consideration. . vJT Prior to 1863 the banking institutions of fa country, with the exception of the Bank oftfl United States, were created by the States, am were subject to State authority aloue. were State institutions, over which the General Government exercised no control. The rigJiF of the States to create and mauage them li«&. been so long conceded that no with them by Congress, aud no decision oft& epurts adverse to the constitutionality ot their issues were apprehended. Soon after the commencement T>f war R be came manifest that a system of internal taxa tion must be adopted lor the support of the Government aud thq maintenance of it3 credit, and that this would involve the necessity of a national currency of nniform value aud un doubted solvency. To meet this necessity (United Suites notes being then regarded as only a temporary expedient) the National Ba.ik ing system was created, not to destroy, the State banks nor iujmiowiy $o a licet their bad ness, but to furnish, through their agency and that of new institutions wbleh might be organized under it, a permanent national funk note circulation. The qn:stiou now to be considered, however, is not whether banks of issue should be created, but w>”*’ M *r the National Banking system shot : ucd. In 4,hc pr condition of and in view of | ' .auks sustain to the _Gov«-;,^^’ ffiis connection tlyr. i Secretary has :ouclusion that - are so iute’ bfness. -- bed j netted .bsiitut j ational iV ; nim f g doliafs is. „ no r ;i, j v *...•pop,is charly 2 <7; ren-sy, in W.tk U the *»•; •>-. , asi.eJ 1% back- , and ti. y • bi. #6CO.t >.ooo, . ;. , i ho-r that have g 1 interest ou the f ! ciii as a r-rma paid by them to the * . intf-wilh a eom , -, ib«s heeu savjd in traush ..otng puii.ie money, it would bfc uscertaiuud that the hanks were not debtors to the United States. It is not neces sary, however, lor the Secretary to dwell on Ibis point, as his main ohiectio :'o (he substi tution would, not bcremoiea it a. saving ot interest would be effected by it Regarding as lie does th 'issue r the United States notes In " r t * having been a misfortune, re as n circulating medium, ’> ” he “leadily reduced, as •rotary can con "ould justify a . but legal ten <.M« reduction that in the wav of ‘ , e-' . Substitution o f lIM) , n regarded by him arm ration that resumption j postponed. If those now oe retired the rate of onlv r month, the amount in aetna'i .J)-*soon be srf reduced that ■>usly retard the restoration oftne of value. If, on the contrary, nee, or for any purpose whnt •ite should be increased, espe ■»Ltl tie mails ttm soifrpi*)*-f e country, a false measure of ontinned, speculation will be iistry wjll decline, and the great sis .... red that finauelr’-heoHU Will only ho obtained by a revulsion, the effect of which upon the material interests and credit of the country no one can estimate. Such a revulsion the Secretary is most anxious to prevent; aud he therefore cannot approve the proposition of substituting the notes of the United States for these of the National' Banks, but recommends U)af the policy of contraction be continued. The next subject to be considered, in connec tion with the permanent resqmptiqn of specie payments, is the maintenance ot the public faith, which involves the necessity of wise and stable reyenue laws, impartially and rigorously enforced ; ccononj.v in the public expenditure ; tuid a recognition o| H)C obligation Cjf the Gov ernment to pay its bonds iu accordance with the understanding uoder which they were is sued. The power to (ax is one ot the most import ant powers excrpjsed by governments. To tax wisely, so as to raise large revenues without oppressing industry, is one of the most difficult, duties ever devolved upon the law making power. In the present financial condition ot the country large revenues are indispensable ; and, in adjusting the present tariff, the question ot revenue must necessarily be the question of paramount importance. When the Government was substantially free from " debt and the publip expenditures were small, as the case was before the rebellion, a revenue tariff, properly adjusted to the public necessities, would have been a low tariff. Blit now, when a heavy debt aud liberal expendi tures crcqpira necessity for large revenues, a portion of which must, for some years to/bme, be derived from customs, it is difficult so perceive how, without excessive im portations, a strictly revenue tariff clip fail tq be a high one'. It may thus turn out that the ne cessities of the Government may gjve incident ally to American manufacturers the protection they are supposed so require without special legislation—always ofiionS and generally 'unre liable—in their oehalf inasmuch as large and permanent revenues cannot be realized unless }a»'s arc so framed as not to bear heavily upon Industrial pursuits, a tariff which, harmonizing witii internal taxcf, should year by year yield the largest revenues would undoubtedly prove to be the least prejudicial to national growth and prosperity. A high tariff, by reducing im portations, or by oppressing important branches ot trade and industry which are subject to in ternal duties, might prove to be as unfavorable tc revenue as a low one, and equally nnsuited to the pubiip necessities. The present tariff, although a high one, hak net 'proved to pe pro tective, while, for the past two years, it has been highly productive of revenue ; but its failure to protect those interests for whose benefit it was in a great measure framed, and the large reve nues whic-li have been derived from it, do not f roveitto be in any just sense a rtvenue tariff', t has failed to give to American manufacturers the' if was intended to afford, and it hag yielded much' larg'd Vfejfetitye# tfoffn were anticipated, because the high prices prevailing in the United States have stimulated importa tions. It does not follow, because it is produc ing large revenues now, that it will continue to do so when business and the currency shall be restored to a healthy condition. The time will soon come when the United States will cease to be the raosf favorable country to sell in, and when It must pay f6r Wbht it ptfrehases, not In its bonds, but in its own productibns. In order that the present tariff should be a revenue tariff important modifications will be necessary, which cannot be intelligently made until busi ness ceases to be subject to derangement by an irredeemable currency. Tbe Secretary does not, tnerefdre, recommend a cpmplete revision of the tariff at the present sesilbn ; bht ther'e are some features of it, and some matters con nected with it, which require early attention. The experience of the Department discloses many disadvantages attendant upon the collec tion- of dptieg on imports wffep fbe sa|*s are high and estimated On ah ad valorem basjsi— For the collection of such duties, machinery mere or less complicated‘is necessary for the Verification abroad of invoices of :m portal ions anff f° r the examination and appraisement of tpercjiandlsq on Jt@ arrival in phis ; ountfv. eyery' i’fiaia'hcie' a'gorapaßsdn is required be tween the invoice estimate anff the general value In tbe principal markets of the country wheDee a commodity la exported. The diffi culty ol ascertaining the foreign market value, especially in cases where a commodity is manu factured expressly for exportation, affords tempting opportunities for successful under valuation, and the high rates of duty offer in ducements for evasion more than commensurate With the risjf 9f detection, Since the pafesdge Os the tariff act of March 8, 1861, the rates of duty which, from 1846't0 that period, were exclusively ad valorem, have on many articles been specific. The system of specific duties appears to have given much aat lsla'otion to houofahle de»lers and to officers of the customs for the ease With Which the I'charac ter and quantity of merchandise imported can be determined ; for the uniformity with which duties may be assessed at different ports, and particularly as it precludes the possibility of fraudulent undervaluations. Without recom mending an exclusive adoption of specific dn tles, the Secretary would suggest for the con sideration of Congress whether the system might not with propriety be extended to all commodities ou which the duty bears a large proportion to the value, or of which the foreign market price is subject to great fluctuations, or is from other causes with difficulty ascertained. The Special Commissioner of the Revenue will in his report present the result of his investi gations as to the extent to which the ad valorem rates of the present tariff cau be advantageously converted into corresponding specific dnties. Our commercial relations with Spain and her colonies under the acts of July 13,1832, and Juue 30,1834, particalarly so far as they-relate [to trade with Cuba and Porto Rico, have been j many yoars the source of much perplexity and tas given rise to frequent discussions. The ids above cited were designed as retaliatory measures to induce by a sort of coercion a re axation of the extreme protective system Adopted by Spain in relation to her colonial ki(ade. Not only have they entirely tailed to HOduce the desired effect, but their operation *)« proved on the contrary positively injurious Ip onr interest in every respect. Their cflect, Connection with Spanish exactions, has been (i> drive the greater part of Cuban aud Porto Alcan trade Irom our markets to others where Tie same policy does not prevail. ■The countervailing system thus brings no Muetit to our shipping interests and largely “rtaili our commerce, which, considering the proximity of these islands, should include the wester part of thei.' foreign traffic. It is, therefore, worthy of grave consideration '■fliether sound, enlightened policy does not dictate the repeal at least of the act of 1834. ■\ecomineudations to this effect have been at arious times made to Congress by my prede essors, particularly Mr. Walker in 1849 and iu v. 2 by Mr. Corwin. The experience of the st fifteen years has fully justified the views u expressed. '"he shippiug interest of the United States, “ t great degree prostrated by the war, has not wived during llie past year. Our ship yards a. with rare exceptions, inactive. Onr sur * products are being chiefly transported to nVign countries in foreign ve. 's. The Bec i.i ry is still forced to admit, in the language of his last report, “ that with unequalled facili ties for obtaining the materials, and with ac knowledged skill in ship building, with thou • ’s of miles of sea coast, indented with the harbors in the world, with surplus pro i that require in their transportation a lai* tnd increasing tonnage, we can neither pt' .bly build ships nor successfully compete wi- i English ships in the transportation of our ow /productions.” al change for the better has taken place silica that report was made. On the contrary, the indiertions are that the great ship-building imA ’st of the Eastern and Middle States has been steadily declining, and that, consequently, the * uited States is gradually ceasing to be a gre.D.'maritime power. A return to specie payments will do much, bnt will not be sulfi wrn, to avert this declension and give activity tfi our ship-yards. The materials which enter into'the construction t.. vessels should he re- Hei'l from taxation by means of drawbacks ; or, '*Hhis may be regarded as impracticable, subs, lies might he allowed as an offset to tax ation If subsidies are objeclionabl i, t hen it is recommended that all restrict ons upon the regia ration of foreign-built vessels be removed, so tin * the people of the United States, who cannot, profitably build vessels, may be per rnitlei to purchase them in the cheapest mar ket. :t. is certainly unwise to retain upon the statute-books a law restrictive upon commerce when t no longer accomplishes the object lor whiclwi was enacted. This subject is one of great' r.efflßt to the whole country. The at tention >f Congress is again earnestly called to it. • t''?** 1 the amount of revenue to be raised by ln - e , r , n i taxes must continue to be large, it is r °" a lint many articles now taxable must be I*'"of® 1 uni taxation, in order that the nnm ealiou P ' iute officers may be reduced, dupli eii los .if 1 ** 8 avoided, and the system render- Idcnt to tax-payers, it is also ev he nn * > !e administration, of the law must intenrikipvvemiea of the past year would have largely «>cccded the estimates but lor the fail ure of DP revenue oflicers to collect the taxes Upon J* tilled liquors. This failure lias been welt UtV-S’U to the country, and has been the cause of deep regret and not a little humiliation to the Secretary-as well as to the Commis sioner. The duty upon distilled liquors is so high that there has been a temptation to avoid its payment, wltich lias, to a great extent, demor alized both the manufacturers and the officers of the revenue. A tax of two dollars per gal lon itpon an article which can be madp l'qr thirty cents would be a difficult tax to collect, even in a small country, where appointments to revenue positions depend upon merit alone, and where dishouesty is promptly and severe ly punished. It is especially difficult in a country so vast as the United States, where politics are apt to influence, if not to control, selections for office, and where skill in evading the requirements of revenue laws is not among the least characteristics of the people. The Secretary is not of the opiniou that this tax cannot he collected, bqt he does not hesitate tfl say ihqt even if the ua ete r Which bns beep adopted, and is intended to lie brought into general nse, shall accomplish what is expected from it, the collection of so heavy a tax with thoroughness w'ill be impossible, unless a higher standard of qualification for revenue of ficers than now exists shall be established.— The vjejyg of the Revenue pommissiq&eis on this point are worthy of especial consideration. Now, to what is tbe United States pledged in regard to the public debt? Is it not that it shall be paid according to the understanding between the Government and the subscribers to its loans at the time the subscriptions were solicited and obtained ? And can there be any question in regard to the nature of this under standing? Wqs ft not tkfif, whije'the interesf peariug notes could be converted into bonds or paid in lawful money, the bonds should be paid, principal as well as interest, in coin?— tyas hf>t tffis the understanding of the Con gress which' passed tbe Joan bills and of tbe people who furnished the money? Did any member of the House or of the Senate, prior to 1864, iu the exhaustive discussions of these bills, ever intimate that the bonds to be issued jp aepprejappe with thisw provisions might be paid, when redeemable, iu a depreciated cur rency? Was there a single subscriber to the 520 bonds or to the 7 3-10 notes, which by their terms were convertible into bonds, who did not believe, aDd who was not given to un derstand by the agents of the Government, that both the principal and interest of these bonds were payable in coin ? Does any one suppose that the per,pie of the United sta.es, self-sao rifieing as "they were In the support of the Government, would have sold their stocks, their lauds, the products of their farms, of their factories and their shops, aud in .ested the proceeds iu five-twenty bonds and seven and three-tenth notes, convertible into such bonds, if they had understood that these bonds were, to be redeemed After five years from their ye speetijie ffates iii"a 1 ctifreudy' of 'the' vilue'of Winch they'could form too reliable estimate ? Would the Secretary of the Treasury, of would Congress—when the late of the nation was trembling in the balance, and when a failure to raise money for the support of the Federal army Fould have been success to tbe rebellion and rtin to tbe Union cause—have dared to at teroptffo raise money on bonds redeemable at the pilasure of the government after five years in a turfency the feouVertible Value of Whifiti migbtliiot depend upbff thfe solvency of the Government, but upon tbe amount iu circula tion? I No such understanding existed, aud fortuffitely no such experiment was tried. The bondajwcre. negotiated with the definite under standing that they were mycblp in pqlfi, 4i»q the sfteo aha : lhree-tbnj.h notes with'an equal ly clMhite undersiatfdiog that they Were con vertijie at the option of the holder into bonds of character or payable in lawful monel. The contracts were made ip gooff faith fin pofn sines, a parti of tbeni when the GovijnnU tot was In Imminent peril aad needed ttooijk’ to preserve its existence, the balance wlief|tß necessities were scarcely less urgent, for the payment of its just obligations to ccn traefiprs and'to tbe v r f;L,, natS ba'cf bfieifi suveff.robdait.’ and public hoillr wMdh to it nation are of priceless ■WO*! reqtori-e that thhaC contracts should be coiMied w;th iu tip spirit in which they were nuiM. Tlio holders of our bonds at home and abroad who understand the character of the pcnblc'of the United States and the greatness of the national resources, ought not to need an assitranee that they will be so complied with. Here remarks upon a subject which it ought not to be necessary to discuss might be closed, but the great interest and alarm excited by the doctrines recently promulgated Seem to justify a reference tto the debitt'Cs Wheto the act of Febru aarig), 1862, in somejrespects the most import ajKof the loan bills, was under consideration, hKrder that the action and intention of Con gfsß in regard to tbe legal tender notes and tq 81 bonffs, which it authorized the issue of, may bfunderstoOd. ' ’ act authorized an issue of one hundred af ffifty million of United States notes, Which HI a 6 made receivable for all Government dues, except duties ou imports, and all claims against the United States, except for interest upoii bonds aud notes, which was to be paid iu coin. It also authorized the issue of five hundred millions of bonds, redeemable at the pleasure of the Government after five years from date. The purpose lor which these bonds were to be issued was stated to be “ to enable the Secre tary of the Treasury to fund the Treasury notes and floating debt ot the Uuited States,” aud he was authorized to dispose of them “ at the mar ket value thereof, for coin of the United States or for any Treasury uotes issued under any former act of Congress, or fortheUuited States notes that might be issued under the act.” Re garding only the act itself, it is not supposable that Congress intended to provide for iuuding the floating debt in bonds which might, at the expiration of five yers, he called in and paid in the very notes which, with the Treasury notes, were thus to be funded. These bonds, like all others since and previously issued, were in tended to be a part of the funded debt of the Uuited States, the right to redeem them alter five years having been reserved by the Govern ment not that they might be called in aud paid in a depreciated currency, but in order that bonds bearing a lower rate of interest might be substituted for them, if it should so happen that before their maturity money could be bor rowed ou more favorable terms. The act pro vides that the Uuited States notes of which it is authorized the issue shall be receivable in payment “of all claims and demands against the United States, cf every kind whatsoever, except interest upon bonds and notes, which shall bo p b' in coin.” It is not said, that they shall rot be receivable for the principal of ibe bonds, for the very obvious reason that they were expected to be but a temporary circula tion. A provision that these notes —intended only to meet a temporary emergency—should uot be received for the payment ol the princi pal ol bonds which were not redeemable for five years, would, if it had been advocated and insisted upon, have been quite likely to have prevented their issue. The public judgment bad not then been perverted by an irredeemable currency, and a proposition that indicated a long continued departure from the specie stand ard would have found few supporters in Con gress or among the people. In these debates very little was said upon the subject ol the payment of the principal of the bonds, apparently for the reason that no one supposed that they would or could be paid in anything else than in the heretofore recognized constitutional currency of the country. The same may be said in regard to the debates upon the bills authorizing subsequent issues. The acts of March 3, 1863, and March 3, 1864, arc the only acts which state expressly that the bonds to be issued under them shall be payable in coin; and this provision in these acts, if not accidental, attracted no attention at Hie time, either in Congress or with the public. Under the former net seventy-five millions of twenty years six per cent, bonds (part of those known as bonds of 1881) were issued, aud under the latter aet nearly two hundred millions ol five per cent, bonds, Known as ten-forties; and the fact that tnese six per cent, bonds have had no higher reputation than other bonds of the same class, and that the five per cent, bonds never were a popular security, and have, in the mar ket, until very recently, scarcely possessed a value corresponding with the six per cent, live twenties, shows conclusively that dealers iu Government securities, and the people general ly, have not regarded this provision as placing them on a different footing, as to the kind oi money iu which they are to lie paid, from the bonds issued under acts containing no such provision. There was nothing in the condition of the country when these acts were passed that required at) unusual provision, in order that the loans authorized by them might be suc cessfully negotiated; ou the contrary, the na tional credit was better then than at periods when other loan bills were passed; nor was there any intimation by any member of Con gress, nor was it ever thought by the oflicers ol the Treasury Department that the bonds au thorized by them were of a different character from those issued under other acts. It is un reasonable to suppose that it was the intention of Congress that the bonds authorized by the acts of February 25, June 30,1864, i>»M ‘t* Htosir authorized by the acts ol March 3, 1863, and March 3, 7864, could be paid only In coin. The various isstjes of bonds, constituting the na tional funded debt, stand upon the samo foot ing, and all should be paid iu coin, if any are so paid. National debts are subject to the moral law of the nations. Whenever there is no expres sion to the contrary, coin payments in such obligations are honorably implied. The policy of the Government ot the United States in re gard to the payment ot its debts lias been uni torin and consistent. Prior to February 25, 1802, there \yas iu tjie jJnited States no lawful rqoqey but specie, consequently its Treasury notes, and its bonds previously issued, were payable iu the same currency. Subsequently all interest-bearing notes were made payable iu lawful money, but no change was made in the form of the obligation of the bonds. Thus the seven and three-tenth notes issued after that date, the live per cent, notes, and the compound interest notes, were made payable in lawful money, while the bonds not being so made payable have ever been recognized by Congress, by the Treasury Department, and by the peo ple, as payable only in coin. These different classes of securities were negotiated with this distinct understanding—an understanding which is as binding upon the honor of the na tion as if it were explicitly stated iu the statutes. It is true that the bonds, and notes convertible into bonds issued after the passage ot the first legal pjgder act, were'paid for in depreciated currency, and were therefore, in fact, sold at a discount; but it is not denied that they were sold fairly, aud that every one had ample op portunity to subscribe for them. Agencies were established, and subscriptions solicited, in every part of the country; and, liberal subscrip tions were regarded as evidence of loyalty.— Tbaf they were pqid lor in a depreciated cur rency was not the fault of the subscribers.— They were so'cj at highest price that could be obtained for theip—pat ohiefty to the capi talists o,f the cities, but to men of moderate means throughout the country, who subscribed for them, uot for speculation, but to aid the Government in its struggles witli a gigantic re bellion ; and it is a significant fact that, with rare exceptions, the complaints that they were sold at a discount eotpe irom-those who, doubt ful p.f thp result of the conflict, declined to in vest in them. How would the Government of the United States stand before the wor, 1— how would it stand in the estimation of its owr people, il it should decline to pay, according to agreement, the money it borrowed when its very existence was in peril, ar.d without which it could not have prosecuted the war, cq the ground that the lender? tool; advantage of its necessities and purchased its securities at less Ilian their value ? But if the honor of the nation were not in volved in the question, the inquiry arises in what shall the bonds be paid if not in coin ? Some five hundred and fifteen millious ot five twenty bonds are now redeemable according to their tenor. No ope pertalpiy wopld propose tl;at siisqe of thein'shall be called ip and paid in a currency now worth seyenty cents on the dollar, while the rest shqli remain unredeemed until the currency shall be'still more deprecia ted by additions to its volume or appreciated by contraction. The holders of these bonds stand on the same footing; if any are to be paid before maturity in a depreciated currency, the whole should be so paid, and in a currency of equal value. Bnt the Government has no (Ini ted States notes in the Treasury, aud sis the annual receipts are not likely hereafter to be mnch in exiccss of the expenditures, and as anew loan to raise money for the purpose of violating an agreement under which a previous loan was negotiated would be impracticable, there would be no way in which the bonds noy? yedeetoable could be paid qa proposed, except by putting tee printing'pVe&ses again' at work and issuing more promises, which mnst themselves event ually be paid in coin, converted into pain bonds, of repudiated. The graces* of making money seems so easy one, but our own experience, and the experience of every other nation that has tried it, prove it to be neither judicious nor profitable. Am the paper circulation pi the country is already redundant, it >»oUid be less ened in value by every Adallibn to‘ft, and, by Vpe distrust thus created, its depreciation would doubtless tie in a greater ratio than the addi tions would bear to the volume to which they would be added, js pot too much to say, tfcat'an additiiibal issue of five hundred millions of United States notes would reduce the seven hundred millions of paper money now in cir culation to one-halt their present value; so that a legal tender note or a national bank note, now worth seventy per cent, in coin would not be worth more than thirty-five per cent., even if the apprehension of further issues did not place it on a nay with Udhfiddrate notes at the eoifapso of the rebellion. The bonds would of course decline in valne with the currency in which they would be payable. Can any one seriously propose thus to depreciate, if not to render valueless, the money and securities of the people ? Cap pay one, - knowing the cfiTect which suoh an issue’would have upon the Gov ernment bonds, upon the currency uow afloat, upon business, upon credit, upon the public morals, seriously advocate such a measure, not as a matter of necessity, but to anticipate the payment of debts due many years hence ? The statement ot the proposition exposes Us wick edness. When fairly considered, it cannot fail to be stamped with universal condemnation.— It is a proposition that the people of the United States, who own four-fifths of the national obli gations, shall, by their own deliberate act, rob and ruin themselves, and at the same time cover the nation with inexpressible and ineffaceable disgrace. In opposition to all such expedients for pay ing, oi rather for getting rid of the public debt, is the upright, world-honored economical policy of paying every obligation of the Government' according to the understanding with which it wa? created—the policy of appreciating the paper dollar until it shall represent a dollar in coin, of giving stability to business and assur ance to enterprise, and wiping from the country tlic reproach that re6ts upon it by reason of the low price of its securities in the great marts of the world. That this is the policy which will be sustained by the people aud their represent atives, the Secretary has the fullest confidence. There may hereafter be nations which, ignoring their honorary obligations, may look only to their own statutes for the measure of their lia bilities. If there shall be such nations, Ibe Republic of the United States will not be found among them. It has essentially suffered by the actual repudiation of some gj the States and the virtual repudiation >1 others; it is still suffering Irom the same cause, although more than a quarter of a ceutury lias elapsed since this Htigue. was f-ted upon American credit. It is ; iuffei ’ag also from the fact that Massachusetts a y . California alone, of all the States, have con- Hiiuecl to pay the interest on their bonds in coin. But althougL it bas suffered, and is still suffer ing, irom the bad i'aitli or false economy of some of is memb-.r-, its own financial honor is unsullied. It has -omtmtted the mistake ol making its inconvertible promises a legal tender, but it has never taken advantage of its own legislation to lessen iu the hands of the holders llie value of its securities or violate its engagements by covert repudiation. In the darkest hours of the rebellion it falltered not iu the observance of its contracts. Shall it falter notv when its ability to pay to the utmost larth ing, even without oppressive taxation, cannot be questioned? The importance of llie restoration of the Southern States to their proper relations with the Federal Government cannot be overesti mated. A curtailment of the currency and the maintenance of the public faith are not all that is required to restore the country to perfect financial health. We need, In addition to these, a united country—united In fact as well as in name. It may not lie proper for the Secretary in this report to discuss the measures regarded by him as host calculated to bring about this most desirable result. This, however, he feels it his duty to say, as ire substantially said In Ills last year’s report, that the questions of recon struction, as a purely financial question, Is iu his judgment, second in importance to none ilmt Congress will ever be called upon to consider. The great staples ol the South have for many years constituted a large portion of our ex ports. But for the cotton held In that section ut the close of the rebellion, the lorelgn ex changes would have been so largely against the United State# that a commercial revulsion would have been imminent, if not unavoidable.’ Even in the deplorable condition of these States, Inst year more than two-thirds of our exports consisted of Uielr productions, and it is the crop bt the present year—small though it may be—that is to save us from ruinous in debtedness to Europe. It is of the greatest moment, therefore, that the productive power of the Southern Slates should be restored as rapidly as possible. Little progress has been made in this direction during the past two years, and no real progress will he made until their political condition is determined by their restoration to the Union with all the rights and privileges of other States under the Constitu tion. The Secretary does not allude to this subject for the purpose of calling the attention of Congress to it. This is unnecessary. It is absorbing the public attention, and the further action of Congress in relation to it will bo watched by the people with intense solicitude. Upon the judicious settlement of it depends, iu a great degree, the national prosperity. The views presented by the Secretarr »iw- *» > sniffed, mi ins *iast report, are equally appro- priato at the present tituo. In his report for the year 1865 the Secretary used the following language in retrard to taxa tion by the States of Government obligations : In view Os the fact that the exemption of Government securities from State taxation is by many persons considered an unjust discrimina tion in their favor, efforts may be made to In duce Congress to legislate upon the subject of their taxation. Os course, the exisiting exemp tion from State and municipal taxation of bonds and securities now outstanding will bo scrupu lously.regarded. That exemption is a part of the contract under which the securities have been issued and the money loaned thereon to the Government, and it would not only be un constitutional, but a breach ot the public faith of the nation ro disregard it. Jtjwould also, in the judgment of thp Secretary, be unwise for Congress tft grant to the States the power, Tfhieh they will not possess unless conferred by express Congressional enactment, of impos ing taxes upon securities of the United States which may be hereafter issued. Such taxation, in any form, Would result in serious, if not fatal embarrassment to the Government and, instead of relieving, would eventually injure the great mass of the people, who are to bear their full proportion of the burden of tie pub lic debt. This is a subject in relation to which (here should he no difference of opinion. Every tax payer is personally interested in having the public debt placed at home, and at a low rate oi interest, which cannot be done if the public securities are to be subject to load taxation. Taxes vary largely in different States, aud in different counties ;»nd cities of the same State, and :\ra everywhere so high that, unless pro tected against them, the bonds into which the present debt must be funded cannot be distribu ted among the people, except in some favored localities, unless they bear a rate of interest so high as to make the debt severely oppressive, and to render the prospect of its extinguish ment well nigh hopeless. Exempted irom local taxation, the debt can, it is expected, be funded at an early day at five per cent.-, if local taxation is allowed, no considerable portion of the debt wYich falls slue within the next four years can be funded at home at leg 9 than eighty per cent. The tax payers of the United States cannot af ford to have their burdens thus increased. It is also evident that the relief which iocal tax payers would obtain from Government taxa tion, as • ’ esx't of a low rate ot interest on the fu-ersr ties, TV quid' At least be as great as t in l ease of local taxes to which they would bt -—ejected an account of the exemption of Cjoyeynmert securities ; while if those securities should hear a rate of interest sufficient to se cure their sale when subject to local taxes, few, if any of them, world long remain where those taxes could reach them. They would be rapidly transferred to other countries, into the hands of foreign capitalists, and thus at last the burdens of paying a high rate of interest would be left upon the people of this country without, compensation or alleviation.” The views oi the Secretary, thus exposed, have undergone no change, but the exemption from taxation of any kind of property, by which special privileges are, or seem to be, granted to any class of citizens, is odious to the heavily burdened masses in all countries, and is especially so in a Republic like ours. Local taxes in all the States aye heavy, and no matter what the lay? may say upon the subject, no maifer what the contract may have been under which they were negotiated, there is a general sentiment among tax payers that the exemp tion ot Government bonds from local taxation is not exactly right, and that it ought to be in some way avoided in future \asue*. The Secre tary has no hesitation in admitting that he is iu sympathy with this sentiment. The difficul ty in the way, however, as has been suggested, arises from the fact that that if bonds hereafter to he issued were to be subject to local taxa tion, very few would be held where the taxes are high, and there would boa constant tendency to a concentration of them in §tq(d» and coun ties and cities wbef? are low, or In foreign where they would escape taxation altogether. It is a matter of great im portance that the Government bonds should be a desirable investment ip gU parts of the coun try, and it is obvious that the States should bo in some mannercompensated for the right now denied of iaxing them, as other kinds of pro perty are taxed. After giving the subject care ful consideration, the Secretary can suggest no better way of doing it than by an issue oi bonds to be known as the Consolidated Debt of the States, bearing sjy; pey. cent. Interest, and having twenty years ip run, into which all other obligations of the Government shall as rapjdiy as possible be converted ; oue-sixtb part the interest at each semi-annual payment to be reserved by the Government aud paid over to the States, according to their popula tion. By this means, all the bonds, wherever held, wonld be taxed alike, and a general dis tribution of them would be secured, fjtato taxes, including the levies for county and mu, nicipai purposes, now, as a geqeyar thing, ex ceed one per cent., bnt tflie debts Incur red for the paymep! bounties are paid (and in most o£ States they are already In the process of rapid, extinction) and economy is again practiced yi the administration of State affairs, this indirect assessment will be qnite likely to equal the tax assessed other VOL 24—NO 118 property, if the debt to be funded shall amount to #2,000,000,000, the amount lo be re served and paid to t.m Stales annually would be 1-0,000,000, which would give t > c id, of i he States, in gold, as nearly as now can bo osiima ted, the following sums, to-be reduced of course, with the reduction of the debt: Maine $385,009 76 Massachusetts 748,678 4.4 N. Hampshire 194,411 17 Vermont 186,026 09 Connecticut.. 282,41 SOl Rhode Island. 107,174 16 New York... 2,381,825 89 New Jorsey.. 412,466 92 Pennsylvania. 1,783,647 12 Ohio 1,449,559 68 Indiana 836,727 81 Michigan 472,909 32 Illinois 1,800 892 50 Wisconsin... 521,554,49 lowa 493,050 10 Minnesota.... 177,840 01 Missouri 773.831 70 Kentucky 709,368 45 Tennessee.... 081,147 55 Arkansas .... $207,259 98 Louisiana.,.. 434,640 77 Alabama 580,f>ii) 53 Mississippi... 471,792 23 Ib’GWa 618,906 93 Florida 00,203 00 8. Carolina... 451,905 13 N. Carolina.. 026,034 28 Virginia 730,602 60 Wist Virginia 249,088 IT Maryland 421,080 53 Delaware 68,873 42 Iviinsa* 166,002 80 Nebraska 33,710 80 California.... 288 76 ;14 Nevada 24,048 73 I $20,000,000 OO The bonds, the issue of which is thus recom mended, would be six per cent, to the Govern ment ands :e per cent, so the holders, which is as low a rate of interest as can he expected to prevail in the United States for many years, lo come. Os the practibility of converting tho outstanding obligations of tlie Government into this consolidated debt at an early dav at no considerable expense, the Secretary cntei b.ina no doubt. It is therefore respect,lolly recommended that the act of March 3, 1805, be so amended as to authorize the Secretary of the Trea- nrv to issue six per cent, gold-hearing bomb to' bo known as the Consolidated Debt H tin; ( mtccl States, having twenty years to run, and redeem able if it may be thought, advisable, at an earlier da}', to be exchanged at, par for any and all other obligations ottheGovernment -oue i-ixtU part of the interest on which, ii. lien ,>f ail other taxes, at eaclt semi-annual payment, shall bo reserved by the Government and paid over to thc Btat.cs according to population. The following is a statement ot the public debt on the Ist of July, PS67: DEBT BEARING COIN INTEREST. 5 per dent. Bonds $l9B 431,300 60 6 per cent. Honda of 1867 and 1868 15,181,141 80 6 per cent. Bonds of 1861 283,746,350 00 6 per cent 6-20 bonds 1,127,531 800 cn Navy Pens on Fund. 13,000,000 00 $1,637,890,041 80 lUJMT BEARING CURRENCY INTEREST. 6 per cent. 80nd5.... $14,762 000 00 3 year Compound In- ' ' terest Notes 122 394 isn n,, ' 3 year 7-30 Notes 488,617,425 00 DEBT BEARING NO INTEREST, United States Notes $371,992,029 00 Fractional Currency- 28,307,523 52 Gold Certificates of Total debt 2 692.198.215 12 Amount iu Treasury, . Coin $108,419 638 02 Amount in Treasury, Currency 71,979,003 77 Amount of Debt, less cash in Treasury 5t 1,800,003 33 The following is a statement of th public debt on the Ist of November, 1807 : DEBT BEARING COIN INTEREST. Five per cent. Bonds. $198,846 350 00 Six per cent. Bonds ’ of 1867 and 1868... 14 090 041 80 Six per cent. Bonds, ’ Q , lBBl 283,670,000 0.1 Six per cent. 6-20 Bonds... 1,207,898,100 00 Wavy lYmdon Fund. 13,000,000 00 — 11,778,110,001 80 DEBT BEARING CURRENCY INTEREST. Six per cent. Bonds.. $18,042,000 00 Three year Com pound Interest Notes 62,558.940 00 -Three year 7-00 union 004.007 ,’uo 00 Three per cent. C\m ’ liHf»a*e --•*•••• J n,>t*U,OOv o*' 426,7«8,i'.ii*y MATURED DEBT NOT URKMKNTKII FOR pjriß M Tnree-year 7-30 notes, duo AIN 1 ’ Aug. 15,1867 $3 371,100 00 Compound Interest Notes, matured June 10, July -15, August 15, and Octo ber 16, 1867 9 316 100UO Bonds, Texas indemnity. 162 Out) in treasury Notes, acis July ’ 17,1861, and prior there to IjVl I. | Bonds, April 15, 1842.... W ’ (M , ,u Treasury Notes, March ;t ’ 1863 ”7 868 oio no Temporary Conn, 4 168 375 £,-, Certificates of Indebted- ’ neM " 34,000 00 . . DEBT BEARING NO INTERS T United States N0te5....5357,164,844 uu Fractional Currency 3o 7nil on:: o Gobi Certificates of lie- ’ ’ P° sit 14,514,200 OOJ Total Debt 2 025 60" is (>2 Amount in Treasurv- Coin $111,540 817 3fi Currency 22,1;.5'050 iiv Amonntof Debt, loss L’uhli in Treasurv, .',lol ;.ui i.iuTo The following is a eta,amen I. of i.T’.ii.r, ae'i m petlditu.cs for the llaeal year eiiflitu-.lnin .:ij •-.- ■ Receipts from Custom .$176,417 siu , Lund* 71. Direct Tax 4 200/.';;:: 71 Internal tfeveuuc 2nt»,twi’vn 43 Mis.-, lUneous sources.... 42,820,852 on Expenditures for civil ser vice $.71,110/127 27 Pensions and Indians 25,670,083 48 War Department 95,224,416 65 Navy Department 31,034,011 04 Interest on the public debt 148,781,591 Ot Loans paid, 746,350,525 94 Receipts from loans 640,426,910 29 Deduction of loans 105,925,015 65 The following is a statement of receipts and expen ditures for the quarter ending .September 30, 1867: CECKI CT.S. Customs $48,081,007 01 Lands 287.460 07 Direct tax 647.070 83 In'ernalrevenue 53 784,027 49 Miscellaneous sources... 18,301,462 62 — $121,161,928 03 EXrtiNDITCRE.S. Civil service $13,152,34# 08 Pensions and Indians... 10,484,476 11 War Department 30,637,056 85 Navy Department 5,579,704 67 Interest on public debt. 38,515,640 47 , ~ 98,269,220 J 8 Loans paid 200,176,308 34 Receipts from 10an5.... 135,103,222 00 Reduction of loans 65,073,086 34 The Secretary estimates that the receipts and expenditures lor the ihrcc quarters ending June 30,1868, will be as follows: Receipts from Customs,sll6,soo,ooo 00 Lands 7011,000 00 Int. Revenue 155,000,000 00 Misc’la so’ces 26,000,000 00 The expenditures for the same pe riod, according to his estimates will be: ’ For the civil service $37,000,000 Oil For Pensions & Indians, 22,000,000 00 For tbe War Depart ment, including $24,- 600,000 for bounties.. .100,000,000 00 For the Navy Dep’mnt, 22,000,000 00 Pot the interest on the publie debt 114,000,006 00 Leavirg a surplus of estimated re ceipts over estimated expenditures of. », $1,000,006 00 The receipts aud expenditures for the next fiscal year, eudiug June 30, 1860, are estimated as follows; Receipt* from Customs,sl4s, ooo,ooo 00 Int Revenue. 205,000,000 00 Lands 1,000,000 00 Misc’ls souc’s. 30,000,000 00 The expenditures for the same pe riod are estimated as follows : For the civil service.... $51,000,000 00 For Pensions Sfc Indians, 35,000,000 0O For the War Departm’t, including $25,500,000 for b0untie5.......,. .120,000,000 OO For the Navy Popt’mnt, 36,000,000 00 For fho interest on the public debt. 130,000,000 OO Leaving a surplus of estimated re- , ceipts over estimated expenditures of. $9,000,000 00 The foregoing estimates are made on the gen eral average of the receipts and expenditures for the past nine months. The Secretary is hopeful, however, that Congress will take measures to largely reduce expenditures in all branches of the service, so that a steady reduc tion of the debt may be continued. The report of the Director ot tbe Mint con tains the usual information relative to tbe coin age of the past year. The total value of the bullion deposited at the mint and branches durimr the fiscal year waa $41,893,100 76, of which $40,069,300 06 was in gold, and $1,823,900 70 in silver. Deducting the redeposit, the amount of actual dejiosit waa $34,537,048 39. Tb 9 coinage for the year was, in gold cou\