State of the Union Address
December 7, 1920
GENTLEMEN OF THE CONGRESS:
When I addressed myself to performing the duty laid upon the President
by the Constitution to present to you an annual report on the state of
the Union, I found my thought dominated by an immortal sentence of Abraham
Lincoln's-"Let us have faith that right makes might, and in that faith
let us dare to do our duty as we understand it" -a sentence immortal because
it embodies in a form of utter simplicity and purity the essential faith
of the nation, the faith in which it was conceived, and the faith in which
it has grown to glory and power. With that faith and the birth of a nation
founded upon it came the hope into the world that a new order would prevail
throughout the affairs of mankind, an order in which reason and right would
take precedence over covetousness and force; and I believe that I express
the wish and purpose of every thoughtful American when I say that this
sentence marks for us in the plainest manner the part we should play alike
in the arrangement of our domestic affairs and in our exercise of influence
upon the affairs of the world.
By this faith, and by this faith alone, can the world be lifted out
of its present confusion and despair. It was this faith which prevailed
over the wicked force of Germany. You will remember that the beginning
of the end of the war came when the German people found themselves face
to face with the conscience of the world and realized that right was everywhere
arrayed against the wrong that their government was attempting to perpetrate.
I think, therefore, that it is true to say that this was the faith which
won the war. Certainly this is the faith with which our gallant men went
into the field and out upon the seas to make sure of victory.
This is the mission upon which Democracy came into the world. Democracy
is an assertion of the right of the individual to live and to be treated
justly as against any attempt on the part of any combination of individuals
to make laws which will overburden him or which will destroy his equality
among his fellows in the matter of right or privilege; and I think we all
realize that the day has come when Democracy is being put upon its final
test. The Old World is just now suffering from a wanton rejection of the
principle of democracy and a substitution of the principle of autocracy
as asserted in the name, but without the authority and sanction, of the
multitude. This is the time of all others when Democracy should prove its
purity and its spiritual power to prevail. It is surely the manifest destiny
of the United States to lead in the attempt to make this spirit prevail.
There are two ways in which the United States can assist to accomplish
this great object. First, by offering the example within her own borders
of the will and power of Democracy to make and enforce laws which are unquestionably
just and which are equal in their administration-laws which secure its
full right to Labor and yet at the same time safeguard the integrity of
property, and particularly of that property which is devoted to the development
of industry and the increase of the necessary wealth of the world. Second,
by standing for right and justice as toward individual nations. The law
of Democracy is for the protection of the weak, and the influence of every
democracy in the world should be for the protection of the weak nation,
the nation which is struggling toward its right and toward its proper recognition
and privilege in the family of nations.
The United States cannot refuse this role of champion without putting
the stigma of rejection upon the great and devoted men who brought its
government into existence and established it in the face of almost universal
opposition and intrigue, even in the face of wanton force, as, for example,
against the Orders in Council of Great Britain and the arbitrary Napoleonic
decrees which involved us in what we know as the War of 1812.
I urge you to consider that the display of an immediate disposition
on the part of the Congress to remedy any injustices or evils that may
have shown themselves in our own national life will afford the most effectual
offset to the forces of chaos and tyranny which are playing so disastrous
a part in the fortunes of the free peoples of more than one part of the
world. The United States is of necessity the sample democracy of the world,
and the triumph of Democracy depends upon its success.
Recovery from the disturbing and sometimes disastrous effects of the
late war has been exceedingly slow on the other side of the water, and
has given promise, I venture-to say, of early completion only in our own
fortunate country; but even with us the recovery halts and is impeded at
times, and there are immediately serviceable acts of legislation which
it seems to me we ought to attempt, to assist that recovery and prove the
indestructible recuperative force of a great government of the people.
One of these is to prove that a great democracy can keep house as successfully
and in as business-like a fashion as any other government. It seems to
me that the first step toward providing this is to supply ourselves with
a systematic method of handling our estimates and expenditures and bringing
them to the point where they will not be an unnecessary strain upon our
income or necessitate unreasonable taxation; in other words, a workable
budget system. And I respectfully suggest that two elements are essential
to such a system-namely, not only that the proposal of appropriations should
be in the hands of a single body, such as a single appropriations committee
in each house of the Congress, but also that this body should be brought
into such cooperation with the Departments of the Government and with the
Treasury of the United States as would enable it to act upon a complete
conspectus of the needs of the Government and the resources from which
it must draw its income.
I reluctantly vetoed the budget bill passed by the last session of the
Congress because of a constitutional objection. The House of Representatives
subsequently modified the bill in order to meet this objection. In the
revised form, I believe that the bill, coupled with action already taken
by the Congress to revise its rules and procedure, furnishes the foundation
for an effective national budget system. I earnestly hope, therefore, that
one of the first steps to be taken by the present session of the Congress
will be to pass the budget bill.
The nation's finances have shown marked improvement during the last
year. The total ordinary receipts of $6,694,000,000 for the fiscal year
1920 exceeded those for 1919 by $1,542,000,000, while the total net ordinary
expenditures decreased from $18,514,000,000 to $6,403,000,000. The gross
public debt, which reached its highest point on August 31, 1919, when it
was $26,596,000,000, had dropped on November 30, 1920, to $24,175,000,000.
There has also been a marked decrease in holdings of government war
securities by the banking institutions of the country, as well as in the
amount of bills held by the Federal Reserve Banks secured by government
war obligations. This fortunate result has relieved the banks and left
them freer to finance the needs of Agriculture, Industry, and Commerce.
It has been due in large part to the reduction of the public debt, especially
of the floating debt, but more particularly to the improved distribution
of government securities among permanent investors. The cessation of the
Government's borrowings, except through short-term certificates of indebtedness,
has been a matter of great consequence to the people of the country at
large, as well as to the holders of Liberty Bonds and Victory Notes, and
has had an important bearing on the matter of effective credit control.
The year has been characterized by the progressive withdrawal of the
Treasury from the domestic credit market and from a position of dominant
influence in that market. The future course will necessarily depend upon
the extent to which economies are practiced and upon the burdens placed
upon the Treasury, as well as upon industrial developments and the maintenance
of tax receipts at a sufficiently high level. The fundamental fact which
at present dominates the Government's financial situation is that seven
and a half billions of its war indebtedness mature within the next two
and a half years. Of this amount, two and a half billions are floating
debt and five billions, Victory Notes and War. Savings Certificates. The
fiscal program of the Government must be determined with reference to these
maturities. Sound policy demands that Government expenditures be reduced
to the lowest amount which will permit the various services to operate
efficiently and that Government receipts from taxes and salvage be maintained
sufficiently high to provide for current requirements, including interest
and sinking fund charges on the public debt, and at the same time retire
the floating debt and part of the Victory Loan before maturity.
With rigid economy, vigorous salvage operations, and adequate revenues
from taxation, a surplus of current receipts over current expenditures
can be realized and should be applied to the floating debt. All branches
of the Government should cooperate to see that this program is realized.
I cannot overemphasize the necessity of economy in Government appropriations
and expenditures and the avoidance by the Congress of practices which take
money from the Treasury by indefinite or revolving fund appropriations.
The estimates for the present year show that over a billion dollars of
expenditures were authorized by the last Congress in addition to the amounts
shown in the usual compiled statements of appropriations. This strikingly
illustrates the importance of making direct and specific appropriations.
The relation between the current receipts and current expenditures of the
Government during the present fiscal year, as well as during the last half
of the last fiscal year, has been disturbed by the extraordinary burdens
thrown upon the Treasury by the Transportation Act, in connection with
the return of the railroads to private control. Over $600,000,000 has already
been paid to the railroads under this act-$350,000,000 during the present
fiscal year; and it is estimated that further payments aggregating possibly
$650,000,000 must still be made to the railroads during the current year.
It is obvious that these large payments have already seriously limited
the Government's progress in retiring the floating debt.
Closely connected with this, it seems to me, is the necessity for an
immediate consideration of the revision of our tax laws. Simplification
of the income and profits taxes has become an immediate necessity. These
taxes performed an indispensable service during the war. The need for their
simplification, however, is very great, in order to save the taxpayer inconvenience
and expense and in order to make his liability more certain and definite.
Other and more detailed recommendations with regard to taxes will no doubt
be laid before you by the Secretary of the Treasury and the Commissioner
of Internal Revenue.
It is my privilege to draw to the attention of Congress for very sympathetic
consideration the problem of providing adequate facilities for the care
and treatment of former members of the military and naval forces who are
sick and disabled as the result of their participation in the war. These
heroic men can never be paid in money for the service they patriotically
rendered the nation. Their reward will lie rather in realization of the
fact that they vindicated the rights of their country and aided in safeguarding
civilization. The nation's gratitude must be effectively revealed to them
by the most ample provision for their medical care and treatment as well
as for their vocational training and placement. The time has come when
a more complete program can be formulated and more satisfactorily administered
for their treatment and training, and I earnestly urge that the Congress
give the matter its early consideration. The Secretary of the Treasury
and the Board for Vocational Education will outline in their annual reports
proposals covering medical care and rehabilitation which I am sure will
engage your earnest study and commend your most generous support.
Permit me to emphasize once more the need for action upon certain matters
upon which I dwelt at some length in my message to the second session of
the Sixty-sixth Congress. The necessity, for example, of encouraging the
manufacture of dyestuffs and related chemicals; the importance of doing
everything possible to promote agricultural production along economic lines,
to improve agricultural marketing, and to make rural life more attractive
and healthful; the need for a law regulating cold storage in such a way
as to limit the time during which goods may be kept in storage, prescribing
the method of disposing of them if kept beyond the permitted period, and
requiring goods released from storage in all cases to bear the date of
their receipt. It would also be most serviceable if it were provided that
all goods released from cold storage for interstate shipment should have
plainly marked upon each package the selling or market price at which they
went into storage, in order that the purchaser might be able to learn what
profits stood between him and the producer or the wholesale dealer. Indeed,
It would be very serviceable to the public if all goods destined for interstate
commerce were made to carry upon every packing case whose form made it
possible a plain statement of the price at which they left the hands of
the producer. I respectfully call your attention also to the recommendations
of the message referred to with regard to a federal license for all corporations
engaged in interstate commerce.
In brief, the immediate legislative need of the time is the removal
of all obstacles to the realization of the best ambitions of our people
in their several classes of employment and the strengthening of all instrumentalities
by. which difficulties are to be met and removed and justice dealt out,
whether by law or by some form of mediation and conciliation. I do not
feel it to be my privilege at present to, suggest the detailed and particular
methods by which these objects may be attained, but I have faith that the
inquiries of your several committees will discover the way and the method.
In response to what I believe to be the impulse of sympathy and opinion
throughout the United States, I earnestly suggest that the Congress authorize
the Treasury of the United States to make to the struggling government
of Armenia such a loan as was made to several of the Allied governments
during the war, and I would also suggest that it would be desirable to
provide in the legislation itself that the expenditure of the money thus
loaned should be under the supervision of a commission, or at least a commissioner,
from the United States in order that revolutionary tendencies within Armenia
itself might not be afforded by the loan a further tempting opportunity.
Allow me to call your attention to the fact that the people of the Philippine
Islands have succeeded in maintaining a stable government since the last
action of the Congress in their behalf, and have thus fulfilled the condition
set by the Congress as precedent to a consideration of granting independence
to the Islands. I respectfully submit that this condition precedent having
been fulfilled, it is now our liberty and our duty to keep our promise
to the people of those islands by granting them the independence which
they so honorably covet.
I have not so much laid before you a series of recommendations, gentlemen,
as sought to utter a confession of faith, of the faith in which I was bred
and which it is my solemn purpose to stand by until my last fighting day.
I believe this to be the faith of America, the faith of the future, and
of all the victories which await national action in the days to come, whether
in America or elsewhere.