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Fellow-citizens of the Senate and House of Representatives :

In the midst of unprecedented political troubles, we have cause of great gratitude to God for unusual good health, and most abundant harvests.

You will not be surprised to learn that, in the peculiar exigencies of the times, our intercourse with foreign nations has been attended with profound solicitude, chiefly turning upon our own domestic affairs.

A disloyal portion of the American people have, during the whole year, been engaged in an attempt to divide and destroy the Union. A nation which endures factious domestic division, is exposed to disrespect abroad; and one party, if not both, is sure, sooner or later, to invoke foreign intervention.

Nations thus tempted to interfere, are not always able to resist the counsels of seeming expediency and ungenerous ambition, although measures adopted under such influences seldom fail to be unfortunate and injurious to those adopting them.

The disloyal citizens of the United States who have offered the ruin of our country, in return for the aid and comfort which they have invoked abroad, have received less patronage and encouragement than they probably expected. If it were just to suppose, as the insurgents have seemed to assume, that foreign nations, in this case, discarding all moral, social, and treaty obligations, would act solely, and selfishly, for the most speedy restoration of commerce, including, especially, the acquisition of cotton, those nations appear, as yet, not to have seen their way to their object more directly, or clearly, through the destruction, than through the preservation, of the Union. If we could dare to believe that foreign nations are actuated by no higher principle than this, I am quite sure a sound argument could be made to show them that they can reach their aim more readily, and easily, by aiding to crush this rebellion, than by giving encouragement to it.

The principal lever relied on by the insurgents for exciting foreign

nations to hostility against us, as already intimated, is the embarrass. ment of commerce. Those nations, however, not improbably, saw from the first, that it was the Union which made, as well our foreign, as our domestic commerce. They can scarcely have failed to perceive that the effort for disunion produces the existing difficulty; and that one strong nation promises more durable peace, and a more extensive, valuable and reliable commerce, than can the same nation broken into hostile fragments.

It is not my purpose to review our discussions with foreign states; because whatever might be their wishes, or dispositions, the integrity of our country, and the stability of our government, mainly depend, not upon them, but on the loyalty, virtue, patriotism, and intelligence of the American people. The correspondence itself, with the usual reservations, is herewith submitted.

I venture to hope it will appear that we have practiced prudence, and liberality towards foreign powers, averting causes of irritation; and, with firmness, maintaining our own rights and honor.

Since, however, it is apparent that here, as in every other state, foreign dangers necessarily attend domestic difficulties, I recommend that adequate and ample measures be adopted for maintaining the public defences on every side. While, under this general recommendation, provision for defending our sea-coast line readily occurs to the mind, I also, in the same connexion, ask the attention of Congress to our great lakes and rivers. It is believed that some fortifi. cations and depots of arms and munitions, with harbor and navigation improvements, all at well selected points upon these, would be of great importance to the national defence and preservation. I ask attention to the views of the Secretary of War, expressed in his report, upon the same general subject.

I deem it of importance that the loyal regions of East Tennessee and western North Carolina should be connected with Kentucky, and other faithful parts of the Union, by railroad. I therefore recommend, as a military measure, that Congress provide for the construction of such road, as speedily as possible. Kentucky, no doubt, will co-operate, and, through her legislature, make the most judicious selection of a line. The northern terminus must connect with some existing railroad; and whether the route shall be from Lexington, or Nicholasville, to the Cumberland Gap; or from Lebanon to the Tennessee line, in the direction of Knoxville; or on some still

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different line, can easily be determined. Kentucky and the general government co-operating, the work can be completed in a very short time; and when done, it will be not only of vast present usefulness, but also a valuable permanent improvement, worth its cost in all the future.

Some treaties, designed chiefly for the interests of commerce, and having no grave political importance, have been negotiated, and will be submitted to the Senate for their consideration.

Although we have failed to induce some of the commercial powers to adopt a desirable melioration of the rigor of maritime war, we have removed all obstructions from the way of this humane reform, except such as are merely of temporary and accidental occurrence.

I invite your attention to the correspondence between her Britannic Majesty's minister accredited to this government, and the Secretary of State, relative to the detention of the British ship Perthshire in June last, by the United States steamer Massachusetts, for a supposed breach of the blockade. As this detention was occasioned by an obvious misapprehension of the facts, and as justice requires that we should commit no belligerent act not founded in strict right, as sanctioned by public law, I recommend that an appropriation be made to satisfy the reasonable demand of the owners of the vessel for her detention.

I repeat the recommendation of my predecessor, in his annual message to Congress in December last, in regard to the disposition of the surplus which will probably remain after satisfying the claims of American citizens against China, pursuant to the awards of the commissioners under the act of the 3d of March, 1859. If, however, it should not be deemed advisable to carry that recommendation into effect, I would suggest that authority be given for investing the principal, over the proceeds of the surplus referred to, in good securities, with a view to the satisfaction of such other just claims of our citi. zens against China as are not unlikely to arise hereafter in the course of our extensive trade with that Empire.

By the act of the 5th of August last, Congress authorized the President to instruct the commanders of suitable vessels to defend themselves against, and to capture pirates. This authority has been exercised in a single instance only. For the more effectual protection of our extensive and valuable commerce, in the eastern seas especially, it seems to me that it would also be advisable to authorize

the commanders of sailing vessels to re-capture any prizes which pirates may make of United States vessels and their cargoes, and the consular courts, now established by law in eastern countries, to adjudicate the cases, in the event that this should not be objected to by the local authorities.

If any good reason exists why we should persevere longer in withholding our recognition of the independence and sovereignty of Hayti and Liberia, I am unable to discern it. Unwilling, however, to inaugurate a novel policy in regard to them without the approbation of Congress, I submit for your consideration the expediency of an appropriation for maintaining a chargé d'affaires near each of those new states. It does not admit of doubt that important commercial advantages might be secured by favorable treaties with them.

The operations of the treasury during the period which has elapsed since your adjournment have been conducted with signal success. The patriotism of the people has placed at the disposal of the government the large means demanded by the public exigencies. Much of the national loan has been taken by citizens of the industrial classes, whose confidence in their country's faith, and zeal for their country's deliverance from present peril, have induced them to contribute to the support of the government the whole of their limited acquisitions. This fact imposes peculiar obligations to economy in disbursement and energy in action.

The revenue from all sources, including loans, for the financial year ending on the 30th June, 1861, was eighty-six million eight hundred and thirty-five thousand nine hundred dollars and twenty-seven cents, and the expenditures for the same period, including payments on account of the public debt, were eighty-four million five hundred and seventy-eight thousand eight hundred and thirty-four dollars and forty-seven cents; leaving a balance in the treasury, on the 1st July, of two million two hundred and fifty-seven thousand sixty-five dollars and eighty cents. For the first quarter of the financial year, ending on the 30th September, 1861, the receipts from all sources, including the balance of 1st of July, were one hundred and two million five hundred and thirty-two thousand five hundred and nine dollars and twenty-seven cents, and the expenses ninety-eight million two hundred and thirty-nine thousand seven hundred and thirty-three dollars and nine cents; leaving a balance, on the 1st of October, 1861, of four million two hundred and ninety-two thousand seven hundred and seventy-six dollars and eighteen cents.

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