State of the Union Address
December 7, 1926
Members of the Congress:
In reporting to the Congress the state of the Union, I find it impossible
to characterize it other than one of general peace and prosperity. In some
quarters our diplomacy is vexed with difficult and as yet unsolved problems,
but nowhere are we met with armed conflict. If some occupations and areas
are not flourishing, in none does there remain any acute chronic depression.
What the country requires is not so much new policies as a steady continuation
of those which are already being crowned with such abundant success. It
can not be too often repeated that in common with all the world we are
engaged in liquidating the war.
In the present short session no great amount of new legislation is possible,
but in order to comprehend what is most desirable some survey of our general
situation is necessary. A large amount of time is consumed in the passage
of appropriation bills. If each Congress in its opening session would make
appropriations to continue for two years, very much time would be saved
which could either be devoted to a consideration of the general needs of
the country or would result in decreasing the work of legislation.
Our present state of prosperity has been greatly promoted by three important
causes, one of which is economy, resulting in reduction and reform in national
taxation. Another is the elimination of many kinds of waste. The third
is a general raising of the standards of efficiency. This combination has
brought the perfectly astonishing result of a reduction in the index price
of commodities and an increase in the index rate of wages. We have secured
a lowering of the cost to produce and a raising of the ability to consume.
Prosperity resulting from these causes rests on the securest of all foundations.
It gathers strength from its own progress.
In promoting this progress the chief part which the National Government
plays lies in the field of economy. Whatever doubts may have been entertained
as to the necessity of this policy and the beneficial results which would
accrue from it to all the people of the Nation, its wisdom must now be
considered thoroughly demonstrated. It may not have appeared to be a novel
or perhaps brilliant conception, but it has turned out to be preeminently
sound. It has
not failed to work. It has surely brought results. It does not have
to be excused as a temporary expedient adopted as the lesser evil to remedy
some abuse, it is not. a palliative seeking to treat symptoms, but a major
operation for the, eradication at the source of a large number of social
Nothing is easier than the expenditure of public money. It does not
appear to belong to anybody. The temptation is overwhelming to bestow it
on somebody. But the results of extravagance are ruinous. The property
of the country, like the freedom of the country, belongs to the people
of the country. They have not empowered their Government to take a dollar
of it except for a necessary public purpose. But if the Constitution conferred
such right, sound economics would forbid it. Nothing is more, destructive
of the progress of the Nation than government extravagance. It means an
increase in the burden of taxation, dissipation of the returns from enterprise,
a decrease in the real value of wages, with ultimate stagnation and decay.
The whole theory of our institutions is based on the liberty and independence
of the individual. He is dependent on himself for support and therefore
entitled to the rewards of his own industry. He is not to be deprived of
what he earns that others may be benefited by what they do not earn. What
lie saves through his private effort is not to be wasted by Government
Our national activities have become so vast that it is necessary to
scrutinize each item of public expenditure if we are to apply the principle
of economy. At the last session we made an immediate increase in the annual
budget of more than $100,000,000 in benefits conferred on the veterans
of three wars, public buildings, and river and harbor improvement. Many
projects are being broached requiring further large outlays. I am convinced
that it would be greatly for the welfare of the country if we avoid at
the present session all commitments except those of the most pressing nature.
From a reduction of the debt and taxes will accrue a wider benefit to all
the people of this country than from embarking on any new enterprise. When
our war debt is decreased we shall have resources for expansion. Until
that is accomplished we should confine ourselves to expenditures of the
most urgent necessity.
The Department of Commerce has performed a most important function in
making plans and securing support of all kinds of national enterprise for
the elimination of waste. Efficiency has been greatly promoted through
good management and the constantly increasing cooperation of the wage earners
throughout the whole realm of private business. It is my opinion that this
whole development has been predicated on the foundation of a protective
As a result of economy of administration by the Executive and of appropriation
by the Congress, the end of this fiscal year will leave a surplus in the
Treasury estimated at $383,000,000. Unless otherwise ordered, such surplus
is used for the retirement of the war debt. A bond which can be retired
today for 100 cents will cost the, people 104 1/4 cents to retire a year
from now. While I favor a speedy reduction of the debt as already required
by law and in accordance with the promises made to the holders of our Liberty
bonds when they were issued, there is no reason why a balanced portion
of surplus revenue should not be applied to a reduction of taxation. It
can not be repeated too often that the enormous revenues of this Nation
could not be collected without becoming a charge on all the people whether
or not they directly pay taxes. Everyone who is paying or the bare necessities
of fool and shelter and clothing, without considering the better things
of life, is indirectly paying a national tax. The nearly 20,000,000 owners
of securities, the additional scores of millions of holders of insurance
policies and depositors in savings banks, are all paying a national tax.
Millions of individuals and corporations are making a direct contribution
to the National Treasury which runs from 11/2 to 25 per cent of their income,
besides a number of special requirements, like automobile and admission
taxes. Whenever the state of the Treasury will permit, I believe in a reduction
of taxation. I think the taxpayers are entitled to it. But I am not advocating
tax reduction merely for the benefit of the taxpayer; I am advocating it
for the benefit of the country.
If it appeared feasible, I should welcome permanent tax reduction at
this time. The estimated surplus, however, for June 30, 1928, is not much
larger than is required in a going business of nearly $4,000,000,000. We
have had but a few months' experience under the present revenue act and
shall need to know what is developed by the returns of income produced
under it, which are not required t o be made until about the time this
session terminates, and what the economic probabilities of the country
are in the latter part of 1927, before we can reach any justifiable conclusion
as to permanent tax reduction. Moreover the present surplus results from
many nonrecurrent items. Meantime, it is possible to grant some real relief
by a simple measure making reductions in the payments which accrue on the
15th of March and June, 1927. 1 am very strongly of the conviction that
this is so much a purely business matter that it ought not to be dealt
with in a partisan spirit. The Congress has already set the notable example
of treating tax problems without much reference to party, which might well
be continued. What I desire to advocate most earnestly is relief for the
country from unnecessary tax burdens. We can not secure that if we stop
to engage in a partisan controversy. As I do not think any change in the
special taxes, or tiny permanent reduction is practical, I therefore urge
both parties of the House Ways and Means Committee to agree on a bill granting
the temporary relief which I have indicated. Such a reduction would directly
affect millions of taxpayers, release large sums for investment in new
enterprise, stimulating industrial production and agricultural consumption,
and indirectly benefiting every family in the whole country. These are
my convictions stated with full knowledge that it is for the Congress to
decide whether they judge it best to make such a reduction or leave the
surplus for the present year to be applied to retirement of the war debt.
That also is eventually tax reduction.
It is estimated that customs receipts for the present fiscal year will
exceed $615,000,000, the largest which were ever secured from that source.
The value of our imports for the last fiscal year was $4,466,000,000, an
increase of more than 71 per cent since the present tariff law went into
effect. Of these imports about 65 per cent, or, roughly, $2,900,000,000,
came in free of duty, which means that the United States affords a duty-free
market to other countries almost equal in value to the total imports of
Germany and greatly exceeding the total imports of France. We have admitted
a greater volume of free imports than any other country except England.
We are, therefore, levying duties on about $1,550,000,000 of imports.
Nearly half of this, or $700,000,000, is subject to duties for the protection
of agriculture and have their origin in countries other than Europe. They
substantially increased the prices received by our farmers for their produce.
About $300,000.000 more is represented by luxuries such as costly rugs,
furs, precious stones, etc. This leaves only about $550,000,000 of our
imports under a schedule of duties which is in general under consideration
when there is discussion of lowering the tariff. While the duties on this
small portion, representing only about 12 per cent of our imports, undoubtedly
represent the difference between a fair degree of prosperity or marked
depression to many of our industries and the difference between good pay
and steady work or wide unemployment to many of our wage earners, it is
impossible to conceive how other countries or our own importers could be
greatly benefited if these duties are reduced. Those who are starting an
agitation for a reduction of tariff duties, partly at least for the benefit
of those to whom money has been lent abroad, ought to know that there does
not seem to be a very large field within the area of our imports in which
probable reductions would be advantageous to foreign goods. Those who wish
to benefit foreign producers are much more likely to secure that result
by continuing the present enormous purchasing power which comes from our
prosperity that hall?' increased our imports over 71 per cent in four years
than from any advantages that are likely to accrue from a general tariff
The important place which agriculture holds in the economic and social
life of the Nation can not be overestimated. The National Government is
justified in putting forth every effort to make the open country a desirable
place to live. No condition meets this requirement which fails to supply
a fair return on labor expended and capital invested. While some localities
and some particular crops furnish exceptions, in general agriculture is
continuing to make progress in recovering from the depression of 1921 and
1922. Animal products and food products are in a more encouraging position,
while cotton, due to the high prices of past years supplemented by ideal
weather conditions, has been stimulated to a point of temporary over production.
Acting on the request of the cotton growing interests, appointed a committee
to assist in carrying out their plans. As it result of this cooperation
sufficient funds have been pledged to finance the storage and carrying
of 4,000,000 bales of cotton. Whether those who own the cotton are willing
to put a part of their stock into this plan depends on themselves. The
Federal Government has cooperated in providing ample facilities. No method
of meeting the situation would be adequate which does not contemplate a
reduction of about one-third in the acreage for the coming year. The responsibility
for making the plan effective lies with those who own and finance cotton
and cotton lands.
The Department of Agriculture estimates the net income of agriculture
for the year 1920-21 at only $375,000,000; for 1924-25, $2,656,000,000;
for 1925-26, $2,757,000,000. This increase has been brought about in part
by the method already referred to, of Federal tax reduction, the elimination
of waste, and increased efficiency in industry. The wide gap that existed
a few years ago between the index price of agricultural products and the
index price of other products has been gradually closing up, though the
recent depression in cotton has somewhat enlarged it. Agriculture had on
the whole been going higher while industry had been growing lower. Industrial
and commercial activities, being carried on for the most part by corporations,
are taxed at a much higher rate than farming, which is carried on by individuals.
This will inevitably make industrial commodity costs high while war taxation
lasts. It is because of this circumstance that national tax reduction has
a very large indirect benefit upon the farmer, though it can not relieve
him from the very great burden of the local taxes which he pays directly.
We have practically relieved the farmer of any Federal income tax.
There is agreement on all sides that some portions of our agricultural
industry have lagged behind other industries in recovery from the war and
that further improvement in methods of marketing of agricultural products
is most desirable. There is belief also that the Federal Government can
further contribute to these ends beyond the many helpful measures taken
during the last five years through the different acts of Congress for advancing
the interests of the farmers.
The packers and stockyards act,
Establishing of the intermediate credit banks for agricultural purposes,
The Purnell Act for agricultural research,
The Capper-Volstead Cooperative Marketing Act,
The cooperative marketing act of 1926,
Amendments to the warehousing act,
The enlargement of the activities of the Department of Agriculture,
Enlargement of the scope of loans by the Farm Loan Board,
The tariff on agricultural products,
The large Federal expenditure in improvement of waterways and highways,
The reduction of Federal taxes, in all comprise a great series of governmental
actions in the advancement of the special interest of agriculture.
In determination of what further measures may be undertaken it seems
to me there are certain pitfalls which must be avoided and our test in
avoiding them should be to avoid disaster to the farmer himself.
Acting upon my recommendation, the Congress has ordered the interstate
Commerce Commission to investigate the freight-rate structure, directing
that such changes shall be made in freight rates as will promote freedom
of movement of agricultural products. Railroad consolidation which I am
advocating would also result in a situation where rates could be made more
advantageous for farm produce, as has recently been done in the revision
of rates on fertilizers in the South. Additional benefit will accrue from
the development of our inland waterways. The Mississippi River system carries
a commerce of over 50,000,000 tons at a saving of nearly $18,000,000 annually.
The Inland Waterways Corporation operates boats on 2,500 miles of navigable
streams and through its relation with 165 railroads carries freight into
and out of 45 States of the Union. During the past six months it has handled
over 1,000,000 bushels of grain monthly and by its lower freight rates
has raised the price of such grain to the farmer probably 21/2 cents to
3 cents a bushel. The highway system on which the Federal Government expends
about $85,000,000 a year is of vital importance to the rural regions.
The advantages to be derived from a more comprehensive and less expensive
system. of transportation for agriculture ought to be supplemented by provision
for an adequate supply of fertilizer at a lower cost than it is at. present
obtainable. This advantage we are attempting to secure by the proposed
development at Muscle Shoals, and there are promising experiments being
made in synthetic chemistry for the production of nitrates.
A survey should be made of the relation of Government grazing lands
to the livestock industry. Additional legislation is desirable more definitely
to establish the place of grazing in the administration of the national
forests, properly subordinated to their functions of producing timber and
conserving the water supply. Over 180,000,000 acres of grazing lands are
still pastured as commons in the public domain with little or no regulation.
This has made their use so uncertain that it has contributed greatly to
the instability of the livestock industry. Very little of this land is
suited to settlement or private ownership. Some plan ought to be adopted
for its use in grazing, corresponding broadly to that already successfully
applied to the national forests.
The development of sound and strong cooperative associations is of fundamental
importance to our agriculture. It is encouraging to note, therefore, that
a vigorous and healthy growth in the cooperative movement is continuing.
Cooperative associations reporting to the Department of Agriculture at
the end of 1925 had on their membership rolls a total of 2,700,000 producers.
Their total business in 1925 amounted to approximately $2,400,000,000,
compared with $635,800,000 in 1915. Legislative action to assist cooperative
associations and supplement their efforts was passed at the last session
of Congress. Important credit measures were also provided by Congress in
1923 which have been of inestimable value to the cooperative associations.
Although the Federal credit agencies have served agriculture well, I think
it may be possible to broaden and strengthen the service of these institutions.
Attention is again directed to the surplus problem of agriculture by
the present cotton situation. Surpluses often affect prices of various
farm commodities in a disastrous manner, and the problem urgently demand?,
a solution. Discussions both in and out of Congress during the past few
years have given us a better understanding of the subject, and it is my
hope that out of the various proposals made the basis will be found for
a sound and effective solution upon which agreement can be reached. In
my opinion cooperative marketing associations will be important aids to
the ultimate solution of the problem. It may well be, however, that additional
measures will be needed to supplement their efforts. I believe all will
agree that such measures should not conflict with the best interests of
the cooperatives, but rather assist and strengthen them. In working out
this problem to any sound conclusion it is necessary to avoid putting the
Government into the business of production or marketing or attempting to
enact legislation for the purpose of price fixing. The farmer does not
favor any attempted remedies that partake of these elements. He has a sincere
and candid desire for assistance. If matched by an equally sincere and
candid consideration of the different remedies proposed ' a sound measure
of relief ought to result. It is unfortunate that no general agreement
has been reached by the various agricultural interests upon any of the
proposed remedies. Out of the discussion of various proposals which can
be had before the Committees of Agriculture some measure ought to be perfected
which would be generally satisfactory.
Due to the emergency arising from a heavy tropical storm in southern
Florida, I authorized the Secretary of Agriculture to use certain funds
in anticipation of legislation to enable the farmers in that region to
plant their crops. The department will present a bill ratifying the loans
which were made for this purpose.
Federal legislation has been adopted authorizing the cooperation of
the Government with States and private owners in the protection of forest
lands from fire. This preventive measure is of such great importance that
I have recommended for it an increased appropriation.
Another preventive measure of great economic and sanitary importance
is the eradication of tuberculosis in cattle. Active work is now in progress
in one-fourth of the counties of the United States to secure this result.
Over 12,000,000 cattle have been under treatment, and the average degree
of infection has fallen from 4.9 per cent to 2.8 per cent. he Federal Government
is making substantial expenditures for this purpose.
Serious damage is threatened to the corn crop by the European corn borer.
Since 1917 it has spread from eastern New England westward into Indiana
and now covers about 100,000 square miles. It is one of the most formidable
pests because it spreads rapidly and is exceedingly difficult of control.
It has assumed a menace that is of national magnitude and warrants the
Federal Government in extending its cooperation to the State and local
agencies which are attempting to prevent its further spread and secure
The whole question of agriculture needs most careful consideration.
In the past few years the Government has given this subject more attention
than any other and has held more consultations in relation to it than on
any other subject. While the Government is not to be blamed for failure
to perform the impossible, the agricultural regions are entitled to know
that they have its constant solicitude and sympathy. Many of the farmers
are burdened with debts and taxes which they are unable to carry. We are
expending in this country many millions of dollars each year to increase
farm production. We ought now to put more emphasis on the question of farm
marketing. If a sound solution of a permanent nature can be found for this
problem, the Congress ought not to hesitate to adopt it.
DEVELOPMENT OF WATER RESOURCES
In previous messages I have referred to the national importance of the
proper development of our water resources. The great projects of extension
of the Mississippi system, the protection an development of the lower Colorado
River, are before Congress, and I have previously commented upon them.
I favor the necessary legislation to expedite these projects. Engineering
studies are being made for connecting the Great Lakes with the North Atlantic
either through an all-American canal or by way of the St. Lawrence River.
These reports will undoubtedly be before the Congress during its present
session. It is unnecessary to dwell upon the great importance of such a
waterway not only to our mid-continental basin but to the commerce and
development of practically the whole Nation. Our river and harbor improvement
should be continued in accordance with the present policy. Expenditure
of this character is compatible with economy; it is in the nature of capital
investment. Work should proceed on the basic trunk lines if this work is
to be a success. If the country will be content to be moderate and patient
and permit improvements to be made where they will do the greatest general
good, rather than insisting on expenditures at this time on secondary projects,
our internal Waterways can be made a success. If proposes legislation results
in a gross manifestation of local jealousies and selfishness, this program
can not be carried out. Ultimately we can take care of extensions, but
our first effort should be confined to the main arteries.
Our inland commerce has been put to great inconvenience and expense
by reason of the lowering of the water level of the Great Lakes. This is
an international problem on which competent engineers are making reports.
Out of their study it is expected that a feasible method will be developed
for raising the level to provide relief for our commerce and supply water
for drainage. Whenever a practical plan is presented it ought to be speedily
It is increasingly evident that the Federal Government must in the future
take a leading part in the impounding of water for conservation with incidental
power for the development of the irrigable lands of the and region. The
unused waters of the West are found mainly in large rivers. Works to store
and distribute these have such magnitude and cost that they are not attractive
to private enterprise. Water is the irreplaceable natural resource. Its
precipitation can not be increased. Its storage on the higher reaches of
streams, to meet growing needs, to be used repeatedly as it flows toward
the seas, is a practical and prudent business policy.
The United States promises to follow the course of older irrigation
countries, where recent important irrigation developments have been carried
out as national undertakings. It is gratifying, therefore, that conditions
on Federal reclamation projects have become satisfactory. The gross value
of crop,, grown with water from project works increased from $110,000,000
in 1924 to $131,000,000 in 1925. The adjustments made last year by Congress
relieved irrigators from paying construction costs on unprofitable land,
and by so doing inspired new hope and confidence in ability to meet the
payments required. Construction payments by water users last year were
the largest in the history of the bureau.
The anticipated reclamation fund will be fully absorbed for a number
of years in the completion of old projects and the construction of projects
inaugurated in the past three years. We should, however, continue to investigate
and study the possibilities of a carefully planned development of promising
projects, logically of governmental concern because of their physical magnitude,
immense cost, and the interstate and international problems involved. Only
in this way may we be fully prepared to meet intelligently the needs of
our fast-growing population in the years to come.
It would be difficult to conceive of any modern activity which contributes
more to the necessities and conveniences of life than transportation. Without
it our present agricultural production and practically all of our commerce
would ?be completely prostrated. One of the large contributing causes to
the present highly satisfactory state of our economic condition is the
prompt and dependable service, surpassing all our previous records, rendered
by the railroads. This power has been fostered by the spirit of cooperation
between Federal and State regulatory commissions. To render this service
more efficient and effective and to promote a more scientific regulation,
the process of valuing railroad properties should be simplified and the
primary valuations should be completed as rapidly as possible. The problem
of rate reduction would be much simplified by a process of railroad consolidations.
This principle has already been adopted as Federal law. Experience has
shown that a more effective method must be provided. Studies have already
been made and legislation introduced seeking to promote this end. It would
be of great advantage if it could be taken up at once and speedily enacted.
The railroad systems of the country and the convenience of all the people
are waiting on this important decision.
It is axiomatic that no agricultural and industrial country can get
the full benefit of its own advantages without a merchant marine. We have
been proceeding under the act of Congress that contemplates the establishment
of trade routes to be ultimately transferred to private ownership and operation.
Due to temporary conditions abroad and at home we have a large demand just
now for certain types of freight vessels. Some suggestion has been made
for new construction. I do not feel that we are yet warranted in entering,
that field. Such ships as we might build could not be sold after they are
launched for anywhere near what they would cost. We have expended over
$250,000,000 out of the public Treasury in recent years to make up the
losses of operation, not counting the depreciation or any cost whatever
of our capital investment. The great need of our merchant marine is not
for more ships but for more freight.
Our merchants are altogether too indifferent about using American ships
for the transportation of goods which they send abroad or bring home. Some
of our vessels necessarily need repairs, which should be made. I do not
believe that the operation of our fleet is as economical and efficient
as it could be made if placed under a single responsible head, leaving
the Shipping Board free to deal with general matters of policy and regulation.
The Department of Commerce has for some years urgently presented the
necessity for further legislation in order to protect radio listeners from
interference between broadcasting stations and to carry out other regulatory
functions. Both branches of Congress at the last session passed enactments
intended to effect such regulation, but the two bills yet remain to be
brought into agreement and final passage.
Due to decisions of the courts, the authority of the department under
the law of 1912 has broken down; many more stations have been operating
than can be accommodated within the limited number of wave lengths available;
further stations are in course of construction; many stations have departed
from the scheme of allocation set down by the department, and the whole
service of this most important public function has drifted into such chaos
as seems likely, if not remedied, to destroy its great value. I most urgently
recommend that this legislation should be speedily enacted.
I do not believe it is desirable to set tip further independent agencies
in the Government. Rather I believe it advisable to entrust the important
functions of deciding who shall exercise the privilege of radio transmission
and under what conditions, the assigning of wave lengths and determination
of power, to a board to be assembled whenever action on such questions
becomes necessary. There should be right of appeal to the courts from the
decisions of such board. The administration of the decisions of the board
and the other features of regulation and promotion of radio in the public
interest, together with scientific research, should remain in the Department
of Commerce. Such an arrangement makes for more expert, more efficient,
and more economical administration that an independent agency or board,
whose duties, after initial stages, require but little attention, in which
administrative functions are confused with semijudicial functions and from
which of necessity there must be greatly increased personnel and expenditure.
THE WAGE EARNER
The great body of our people are made up of wage earners. Several hundred
thousands of them are on the pay rolls of the United States Government.
Their condition very largely is fixed by legislation. We have recently
provided increases in compensation under a method of reclassification and
given them the advantage of a liberal retirement system as a support for
their declining years. Most of them are under the merit system, which is
a guaranty of
their intelligence, and the efficiency of their service is a demonstration
of their loyalty. The Federal Government should continue to set a good
example for all other employers.
In the industries the condition of the wage earner has steadily improved.
The 12-hour day is almost entirely unknown. Skilled labor is well compensated.
But there are unfortunately a multitude of workers who have not yet come
to share in the general prosperity of the Nation. Both the public authorities
and private enterprise should be solicitous to advance the welfare of this
class. The Federal Government has been seeking to secure this end through
a protective tariff, through restrictive immigration, through requiring
safety devices for the prevention of accidents, through the granting of
workman's compensation, through civilian vocational rehabilitation and
education, through employment information bureaus, and through such humanitarian
relief as was provided in the maternity and infancy legislation. It is
a satisfaction to report that a more general condition of contentment exists
among wage earners and the country is more free from labor disputes than
it has been for years. While restrictive immigration has been adopted in
part for the benefit of the wage earner, and in its entirety for the benefit
of the country, it ought not to cause a needless separation of families
and dependents from their natural source of support contrary to the dictates
No progress appears to have been made within large areas of the bituminous
coal industry toward creation of voluntary machinery by which greater assurance
can be given to the public of peaceful adjustment of wage difficulties
such as has been accomplished in the anthracite industry. This bituminous
industry is one of primary necessity and bears a great responsibility to
the Nation for continuity of supplies. As the wage agreements in the unionized
section of the industry expire on April 1 next, and as conflicts may result
which may imperil public interest, and have for many years often called
for action of the Executive in protection of the public, I again recommend
the passage of such legislation as will assist the Executive in dealing
with such emergencies through a special temporary board of conciliation
and mediation and through administrative agencies for the purpose of distribution
of coal and protection of the consumers of coal from profiteering. At present
the Executive is not only without authority to act but is actually prohibited
by law from making any expenditure to meet the emergency of a coal famine.
The Federal courts hold a high position in the administration of justice
in the world. While individual judicial officers have sometimes been subjected
to just criticism, the courts as a whole have maintained an exceedingly
high standard. The Congress may well consider the question of supplying
fair salaries and conferring upon the Supreme Court the same rule-making
power on the law side of the district courts that they have always possessed
on the equity side. A bill is also pending providing for retirement after
a certain number of years of service, although they have not been consecutive,
which should have your favorable consideration. These faithful servants
of the Government are about the last that remain to be provided for in
the postwar readjustments.
There has been pending in Congress for nearly three years banking legislation
to clarify the national bank act and reasonably to increase the powers
of the national banks. I believe that within the limitation of sound banking
principles Congress should now and for the future place the national banks
upon a fair equality with their competitors, the State banks, and I trust
that means may be found so that the differences on branch-banking legislation
between the Senate and the House of Representatives may be settled along
sound lines and the legislation promptly enacted.
It would be difficult to overestimate the service which the Federal
reserve system has already rendered to the country. It is necessary only
to recall the chaotic condition of our banking organization at the time
the Federal reserve system was put into operation. The old system consisted
of a vast number of independent banking units, with scattered bank reserves
which never could be mobilized in times of greatest need. In spite of vast
banking resources, there was no coordination of reserves or any credit
elasticity. As a consequence, a strain was felt even during crop-moving
periods and when it was necessary to meet other seasonal and regularly
The Federal reserve system is not a panacea for all economic or financial
ills. It can not prevent depression in certain industries which are experiencing
overexpansion of production or contraction of their markets. Its business
is to furnish adequate credit and currency facilities. This it has succeeded
in doing, both during the war and in the more difficult period of deflation
and readjustment which followed. It enables us to look to the future with
confidence and to make plans far ahead, based on the belief that the Federal
reserve system will exercise a steadying influence on credit conditions
and thereby prevent tiny sudden or severe reactions from the period of
prosperity which we are now enjoying. In order that these plans may go
forward, action should be taken at the present session on the question
of renewing the banks' charters and thereby insuring a continuation of
the policies and present usefulness of the Federal reserve system.
I am in favor of reducing, rather than expanding, Government bureaus
which seek to regulate and control the business activities of the people.
Everyone is aware that abuses exist and will exist so long as we are limited
by human imperfections. Unfortunately, human nature can not be changed
by an act of the legislature. When practically the sole remedy for many
evils lies in the necessity of the people looking out for themselves and
reforming their own abuses, they will find that they are relying on a false
security if the Government assumes to hold out the promise that it is looking
out for them and providing reforms for them. This principle is preeminently
applicable to the National Government. It is too much assumed that because
an abuse exists it is the business of the National Government to provide
a remedy. The presumption should be that it is the business of local and
State governments. Such national action results in encroaching upon the
salutary independence of the States and by undertaking to supersede their
natural authority fills the land with bureaus and departments which are
undertaking to do what it is impossible for them to accomplish and brings
our whole system of government into disrespect and disfavor. We ought to
maintain high standards. We ought to punish wrongdoing. Society has not
only the privilege but the absolute duty of protecting itself and its individuals.
But we can not accomplish this end by adopting a wrong method. Permanent
success lies in local, rather than national action. Unless the locality
rises to its own requirements, there is an almost irresistible impulse
for the National Government to intervene. The States and the Nation should
both realize that such action is to be adopted only as a last resort.
The social well-being of our country requires our constant effort for
the amelioration of race prejudice and the extension to all elements of
equal opportunity and equal protection under the laws which are guaranteed
by the. Constitution. The Federal Government especially is charged with
this obligation in behalf of the colored people of the Nation. Not only
their remarkable progress, their devotion and their loyalty, but, our duty
to ourselves under our claim that we are an enlightened people requires
us to use all our power to protect them from the crime of lynching. Although
violence of this kind has very much decreased, while any of it remains
we can not justify neglecting to make every effort to eradicate it by law.
The education of the colored race under Government encouragement is
proceeding successfully and ought to have continuing support. An increasing
need exists for properly educated and trained medical skill to be devoted
to the service of this race.
This Government holds in sacred trusteeship islands which it has acquired
in the East and West Indies. In all of them the people are more prosperous
than at any previous time. A system of good roads, education, and general
development is in progress. The people are better governed than ever before
and generally content.
In the Philippine Islands Maj. Gen. Leonard Wood has been Governor General
for five years and has administered his office with tact and ability greatly
to the success of the Filipino people. These are a proud and sensitive
race, who are making such progress with our cooperation that we can view
the results of this experiment with great satisfaction. As we are attempting
to assist this race toward self-government, we should look upon their wishes
with great respect, granting their requests immediately when they are right,
yet maintaining a frank firmness in refusing when they are wrong. We shall
measure their progress in no small part by their acceptance of the terms
of the organic law under which the islands are governed and their faithful
observance of its provisions. Need exists for clarifying the duties of
the auditor and declaring them to be what everyone had supposed they were.
We have placed our own expenditures under the supervision of the Comptroller
General. It is not likely that the expenditures in the Philippine Islands
need less supervision than our own. The Governor General is hampered in
his selection of subordinates by the necessity of securing a confirmation,
which has oftentimes driven him to the expediency of using Army officers
in work for which civilian experts would be much better fitted. Means should
be provided for this and such other purposes as he may require out of the
revenue which this Government now turns back to the Philippine treasury.
In order that these possessions might stiffer no seeming neglect, I
have recently sent Col. Carmi A Thompson to the islands to make a survey
in cooperation with the Governor General to suggest what might be done
to improve conditions. Later, I may make a more extended report including
recommendations. The economic development of the islands is very important.
They ought not to be turned back to the people until they are both politically
fitted for self-government and economically independent. Large areas are
adaptable to the production of rubber. No one contemplates any time in
the future either under the present or a more independent form of government
when we should not assume some responsibility for their defense. For their
economic advantage, for the employment of their people, and as a contribution
to our power of defense which could not be carried on without rubber, I
believe this industry should be encouraged. It is especially adapted to
the Filipino people themselves, who might cultivate it individually on
a small acreage. It could be carried on extensively by American capital
in a way to furnish employment at good wages. I am opposed to the promotion
of any policy that does not provide for absolute freedom on the part of
the wage earners and do not think we should undertake to give power for
large holdings of land in the islands against the opposition of the people
of the locality. Any development of the islands must be solely with the
first object of benefiting the people of the islands. At an early day,
these possessions should be taken out from under all military control and
administered entirely on the civil side of government.
Our policy of national defense is not one of making war, but of insuring
peace. The land and sea force of America, both in its domestic and foreign
implications, is distinctly a peace force. It is an arm of the police power
to guarantee order and the execution of the law at home and security to
our citizens abroad. No self-respecting nation would neglect to provide
an army and navy proportionate to its population, the extent of its territory,
and the dignity of the place which it occupies in the world. When it is
considered that no navy in the world, with one exception, approaches ours
and none surpasses it, that our Regular Army of about 115,000 men is the
equal of any other like number of troops, that our entire permanent and
reserve land and sea force trained and training consists of a personnel
of about 610,000, and that our annual appropriations are about $680,000,000
a year, expended under the direction of an exceedingly competent staff,
it can not be said that our country is neglecting its national defense.
It is true that a cult of disparagement exists, but that candid examination
made by the Congress through its various committees has always reassured
the country and demonstrated that it is maintaining the most adequate defensive
forces in these present years that it has ever supported in time of peace.
This general policy should be kept in effect. Here and there temporary
changes may be made in personnel to meet requirements in other directions.
Attention should be given to submarines, cruisers, and air forces. Particular
points may need strengthening, but as a whole our military power is sufficient.
The one weak place in the whole line is our still stupendous war debt.
In any modern campaign the dollars are the shock troops. With a depleted
treasury in the rear, no army can maintain itself in the field. A country
loaded with debt is a country devoid of the first line of defense. Economy
is the handmaid of preparedness. If we wish to be able to defend ourselves
to the full extent of our power in the future, we shall discharge as soon
as possible the financial burden of the last war. Otherwise we would face
a crisis with a part of our capital resources already expended.
The amount and kind of our military equipment is preeminently a question
for the decision of the Congress, after giving due consideration to the
advice of military experts and the available public revenue. Nothing is
more laudable than the cooperation of the agricultural and industrial resources
of the country for the purpose of supplying the needs of national defense.
In time of peril the people employed in these interests volunteered in
a most self-sacrificing way, often at the nominal charge of a dollar a
year. But the Army and Navy are not supported for the benefit of supply
concerns; supply concerns are supported for the benefit of the Army and
Navy. The distribution of orders on what is needed from different concerns
for the purpose of keeping up equipment and organization is perfectly justified,
but any attempt to prevail upon the Government to purchase beyond its needs
ought not to be tolerated. It is eminently fair that those who deal with
the Government should do so at a reasonable profit. However, public money
is expended not that some one may profit by it, but in order to serve a
While our policy of national defense will proceed in order that we may
be independent and self-sufficient, I am opposed to engaging in any attempt
at competitive armaments. No matter how much or how little some other country
may feel constrained to provide, we can well afford to set the example,
not of being dictated to by others, but of adopting our own standards.
We are strong enough to pursue that method, which will be a most wholesome
model for the rest of the world. We are eminently peaceful, but we are
by no means weak. While we submit our differences with others, not to the
adjudication of force, but of reason, it is not because we are unable to
defend our rights. While we are doing our best to eliminate all resort
to war for the purpose of settling disputes, we can not but remember that
the peace we now enjoy had to be won by the sword and that if the rights
of our country are to be defended we can not rely for that purpose upon
anyone but ourselves. We can not shirk the responsibility, which is the
first requisite of all government, of preserving its own integrity and
maintaining the rights of its own citizens. It is only in accordance with
these principles that we can establish any lasting foundations for an honorable
and permanent peace.
It is for these reasons that our country, like any other country, proposes
to provide itself with an army and navy supported by a merchant marine.
Yet these are not for competition with any other power. For years we have
besought nations to disarm. We have recently expressed our willingness
at Geneva to enter into treaties for the limitation of all types of warships
according to the ratio adopted at the Washington Conference. This offer
is still pending. While we are and shall continue to be armed it is not
as a menace, but rather a common assurance of tranquility to all the peaceloving
people of the world. For us to do any less would be to disregard our obligations,
evade our responsibilities, and jeopardize our national honor.
This country, not only because it is bound by honor but because of the
satisfaction derived from it, has always lavished its bounty upon its veterans.
For years a service pension has been bestowed upon the Grand Army on reaching
a certain age. Like provision has been made for the survivors of the Spanish
War. A liberal future compensation has been granted to all the veterans
of the World War. But it is in the case of the, disabled and the dependents
that the Government exhibits its greatest solicitude. This work is being
well administered by the Veterans' Bureau. The main unfinished feature
is that of hospitalization. This requirement is being rapidly met. Various
veteran bodies will present to you recommendations which should have your
careful consideration. At the last session we increased our annual expenditure
for pensions and relief on account of the veterans of three wars. While
I approve of proper relief for all suffering, I do not favor any further
extension of our pension system at this time.
We still have in the possession of the Government the alien property.
It has always been the policy of America to hold that private enemy property
should not be confiscated in time of war. This principle we have scrupulously
observed. As this property is security for the claims of our citizens and
our Government, we can not relinquish it without adequate provision for
their reimbursement. Legislation for the return of this property, accompanied
by suitable provisions for the liquidation of the claims of our citizens
and our Treasury, should be adopted. If our Government releases to foreigners
the security which it holds for Americans, it must at the same time provide
satisfactory safeguards for meeting American claims.
The duly authorized public authorities of this country have made prohibition
the law of the land. Acting under the Constitution the Congress and the
legislatures of practically all the, States have adopted legislation for
its enforcement. Some abuses have arisen which require reform. Under the
law the National Government has entrusted to the Treasury Department the
especial duty of regulation and enforcement. Such supplementary legislation
as it requires to meet existing conditions should be carefully and speedily
enacted. Failure to support the Constitution and observe the law ought
not to be tolerated by public opinion. Especially those in public places,
who have taken their oath to support the Constitution, ought to be most
scrupulous in its observance. Officers of the Department of Justice throughout
the country should be vigilant in enforcing the law, but local authorities,
which had always been mainly responsible for the enforcement of law in
relation to intoxicating liquor, ought not to seek evasion by attempting
to shift the burden wholly upon the Federal agencies. Under the Constitution
the States are jointly charged with the Nation in providing for the enforcement
of the prohibition amendment. Some people do not like the amendment, some
do not like other parts of the Constitution, some do not like any of it.
Those who entertain such sentiments have a perfect right to seek through
legal methods for a change. But for any of our inhabitants to observe such
parts of the Constitution as they like, while disregarding others, is a
doctrine that would break down all protection of life and property and
destroy the American system of ordered liberty.
The foreign policy of this Government is well known. It is one of peace
based on that mutual respect that arises from mutual regard for international
rights arid the discharge of international obligations. It is our purpose
to promote understanding and good will between ourselves and all other
people. The American people are altogether lacking in an appreciation of
the tremendous good fortune that surrounds their international position.
We have no traditional enemies. We are not embarrassed over any disputed
territory. We have no possessions that are coveted by others; they have
none that are coveted by us. Our borders are unfortified. We fear no one;
no one fears us. All the world knows that the whole extent of our influence
is against war and in favor of peace, against the use of force and in favor
of negotiation, arbitration, and adjudication as a method of adjusting
international differences. We look with disfavor upon all aggressive warfare.
We are strong enough so that no one can charge us with weakness if we are
slow to anger. Our place is sufficiently established so that we need not
be sensitive over trifles. Our resources, are large enough so that we can
afford to be generous. At the same time we are a nation among nations and
recognize a responsibility not only to ourselves, but in the interests
of a stable and enlightened civilization, to protect and defend the international
rights of our Government and our citizens.
It is because of our historical detachment and the generations of comparative
indifference toward it by other nations that our public is inclined to
consider altogether too seriously the reports that we are criticized abroad.
We never had a larger foreign trade than at the present time. Our good
offices were never more sought and the necessity for our assistance and
cooperation was never more universally declared in any time of peace. We
know that the sentiments which we entertain toward all other nations are
those of the most sincere friendship and good will and of all unbounded
desire to help, which we are perfectly willing to have judged by their
fruits. In our efforts to adjust our international obligations we have
met with a response which, when everything is considered, I believe history
will record as a most remarkable and gratifying demonstration of the sanctity
with which civilized nations undertake to discharge their mutual obligations.
Debt settlements have been negotiated with practically all of those who
owed us and all finally adjusted but two, which are, in process of ratification.
When we consider the real sacrifice that will be necessary on the part
of other nations, considering all their circumstances, to meet their agreed
payments, we ought to hold them in increased admiration and respect. It
is true that we have extended to them very generous treatment, but it is
also true that they have agreed to repay its all that we loaned to them
and some interest.
A special conference on the Chinese customs tariff provided for by the
treaty between the nine powers relating to the Chinese customs tariff signed
at Washington on February 6, 1922, was called by the Chinese Government
to meet at Peking, on October 26, 1925. We participated in this conference
through fully empowered delegates and, with good will, endeavored to cooperate
with the other participating powers with a view to putting into effect
promises made to China at the Washington conference, and considering any
reasonable proposal that might be made by the Chinese Government for the
revision of the treaties on the subject of China's tariff. With these aims
in view the American delegation at the outset of the conference proposed
to put into effect the surtaxes provided for by the Washington treaty and
to proceed immediately to the negotiation of a treaty, which, among other
things, was to make provision for the abolition of taxes collected on goods
in transit, remove the tariff restrictions in existing treaties, and put
into effect the national tariff law of China.
Early in April of the present year the central Chinese Government was
ousted from power by opposing warring factions. It became impossible under
the circumstances to continue the negotiations. Finally, on July 3, the
delegates of the foreign powers, including those of the United States,
issued a statement expressing their unanimous and earnest desire to proceed
with the work of the conference at the earliest possible moment when the
delegates of the Chinese Government are in a position to resume discussions
with the foreign delegates of the problems before the conference. We are
prepared to resume the negotiations thus interrupted whenever a Government
representing the Chinese people and acting on their behalf presents itself.
The fact that constant warfare between contending Chinese factions has
rendered it impossible to bring these negotiations to a successful conclusion
is a matter of deep regret. Throughout these conflicts we have maintained
a position of the most careful neutrality. Our naval vessels in Asiatic
waters, pursuant to treaty rights, have been used only for the protection
of American citizens.
Silas H. Strawn, Esq., was sent to China as American commissioner to
cooperate with commissioners of the other powers in the establishment of
a commission to inquire into the present practice of extraterritorial jurisdiction
in China, with a view to reporting to the Governments of the several powers
their findings of fact in regard to these matters. The commission commenced
its work in January, 1926, and agreed upon a joint report which was signed
on September 16, 1926. The commission's report has been received and is
being studied with a view to determining our future policy in regard to
the question of extraterritorial privileges under treaties between the
United States and China.
The Preparatory Commission for the Disarmament Conference met at Geneva
on May 18 and its work has been proceeding almost continuously since that
date. It would be premature to attempt to form a judgment as to the progress
that has been made. The commission has had before it a comprehensive list
of questions touching upon all aspects of the question of the limitation
of armament. In the commission's discussions many differences of opinion
have developed. However, I am hopeful that at least some measure of agreement
will be reached as the discussions continue. The American representation
on the commission has consistently tried to be helpful, and has kept before
it the practical objective to which the commission is working, namely,
actual agreements for the limitation of armaments. Our representatives
will continue their work in that direction.
One of the most encouraging features of the commission's work thus far
has been the agreement in principle among the naval experts of a majority
of the powers parties to the Washington treaty limiting naval armament
upon methods and standards for the comparison and further limitation of
naval armament. It is needless to say that at the proper time I shall be
prepared to proceed along practical lines to the conclusion of agreements
carrying further the work begun at the Washington Conference in 1921.
Many important subjects which it is impossible even to mention in the
short space of an annual message you will find fully discussed in the departmental
reports. A failure to include them here is not to be taken as indicating
any lack of interest, but only a disinclination to state inadequately what
has been much better done in other documents.
THE CAPITAL CITY
We are embarking on an ambitious building program for the city of Washington.
The Memorial Bridge is under way with all that it holds for use and beauty.
New buildings are soon contemplated. This program should represent the
best that exists in the art and science of architecture. Into these structures
which must be considered as of a permanent nature ought to go the aspirations
of the Nation, its ideals expressed in forms of beauty. If our country
wishes to compete with others, let it not be in the support of armaments
but in the making of a beautiful capital city. Let it express the soul
of America. Whenever an American is at the seat of his Government, however
traveled and cultured he may be, he ought to find a city of stately proportion,
symmetrically laid out and adorned with the best that there is in architecture,
which would arouse his imagination and stir his patriotic pride. In the
coming years Washington should be not only the art center of our own country
but the art center of the world. Around it should center all that is best
in science, in learning, in letters, and in art. These are the results
that justify the creation of those national resources with which we have
America is not and must not be a country without ideals. They are useless
if they are only visionary; they are only valuable if they are practical.
A nation can not dwell constantly on the mountain tops. It has to be replenished
and sustained through the ceaseless toil of the less inspiring valleys.
But its face ought always to be turned upward, its vision ought always
to be fixed on high.
We need ideals that can be followed in daily life, that can be translated
into terms of the home. We can not expect to be relieved from toil, but
we do expect to divest it of degrading conditions. Work is honorable; it
is entitled to an honorable recompense. We must strive mightily, but having
striven there is a defect in our political and social system if we are
not in general rewarded with success. To relieve the land of the burdens
that came from the war, to release to the individual more of the fruits
of his own industry, to increase his earning capacity and decrease his
hours of labor, to enlarge the circle of his vision through good roads
and better transportation, to lace before him the opportunity for education
both in science and in art, to leave him free to receive the inspiration
of religion, all these are ideals which deliver him from the servitude
of the body and exalt him to the service of the soul. Through this emancipation
from the things that are material, we broaden our dominion over the things
that are spiritual.