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HIS ANNUAL MESSAGE President MoKinley Reviews the Affairs of State. SOME IMPORTANT RECOMMENDATIONS Meed o( Currency Legislation Point d Oat Spain Should Hit a Chance Hawaii Should Be An nexed Other Questions. Washington, Deo. t. Following It the text ot President McKlnley's message to congress: To the Senate and House of Representa tives: It gives me pleasure to ex tend greet ing to the Fifty-fifth congress assembled at the seat of government, with many or whom, senators and representatives, 1 have been associated In the leglslatuve service. Their meeting occurs under felicitous con ditions. Justifying sincere congratulation and calling for our grateful acknowledg ment to a Beneficent Providence which has so signally blessed and prospered us as a nation. Peace and good will with all the nations of the earth continue unbroken. The extra session of this congress which closed during July last enacted Important legislation, and while Its full effect has not yet been realized, what It has already ac complished assures us of Its timeliness and wisdom. - To test Its permunent value fur ther time will be required, and the people, satisfied with Its operation and results thus far, are in no mind to withhold from it a lair triaL Cl'HKENCV LEGISLATION. Congress Should Not Hesitate to ten ter Upon Revision. Tariff legislation having been settled by the extra session of congress, the question next pressing for consideration Is that of the currency. The work of putting our finances upon a sound basis, dlllluult as it may seem, will appear easier when we re call the financial operations of the govern ment since l&Ub. cm the ioth day of June of that year we had outstanding demand liabilities in the sum of J72S,Mil(,447.4l. Or. the 1st of Junuury, lAT'J, these liabilities had been reduced to j-HIi.vi'j.'llJo.SS. Of our interest-bearing obligations, the figures are even more striking. On July 1, liCB. the principal of thu Interest-bearing debt of the government was Ji,W:',i31,:8. On the lirst day of July, l&sj, tills sum had been reduced to $530,03 7, luo, or an aggregate re duction of 1. 47 .yi. 1US. The Interest-bearing debt of the United States on the first day of December, Id:i7, was tm',.it5,(iio. The government money now outstanding (De cember 1) consists of 346,631,0111 of United Stales notes, Jlo7,71U,iSu of treasury notes Issued by authority of the law of lMtO, J3S4, Si,3,503 of silver certificates, and $01,230,701 of standard silver dollars. With the great resources of the govern ment, and with the honorable example of the past before us, we ought not to hesi tate to enter upon a currency revision which will make our demand obligations less onerous to the government, and relieve our linancial luws from ambiguity and doubt. No Ground for Distrust, The brief review of what was accom plished from the close of the war to ISM makes unreasonable and grounclcsS any Distrust either ol our financial ability or aounuiiess, while the situation from 1SK3 to 1307 must admonish congress of me Im mediate necessity of so legislating as to make the return ot the conditions then prevailing niipossiole. There are many plans pruposed us a remedy for the evil, iiefore we can find the true remedy we inusl appreciate the real evil. It U not that our currency ol every kind Is not goou, for every dollar of il Is good; good because the government's pleugc Is oul to keep it ao, and that pledge will not be broken however, ihe guaranty of our purpose to keep tho pledge will be best shown by advancing toward Its fulfillment. Evil of the 1'reaeut System. The evil of the present system is found In the great cost to the government of main taining tne parity ot our uiilereui terms of money mat is, Keeping all of them at par Willi gold. We surely cannot be longer heeuieas of the burden this Imposes upon the people, even unuer lairly prosperous conditions, while the past four years have demonstrated that it is not only an ex pensive charge upon the government but a dangerous menace to the national credit. Mum Provide Agulust lionil laauea. It is manifest that we must devise some plan to protect lha government against ootid issues lor repealed redemptions. We must either curtail the opportunity for speculation, made easy by tne multiplied redemptions of our demand obligations, or increase the gold reserve lor their redemp tion. We have I'JOO.OOO.uuO of currency n.hmh Ka ....I.nt.u..t I... ....I. ' Yfwi.i, me b .i iiutm li j Buiciuu enact ment hus undertaken to Keep ai par with iic.ti uuuviiancn iu bccji ui par wnn ;old. Nobody Is obliged to redeem In gold ftuh .law ew " v '... a lie vaunt) Hie IIO. required to redeem in gold. The govern- a,.., it .a wuu(,.u tu nctp ciuai mill (jOlU ail Its outstanding currency and coin obliga tions, while Its receipts are not required to be paid In gold. Tney are paid in every kind of money but gold, and tne only means by which the government can with cer tainty get gold is by borrowing, it can get It in no other way when it most needs It The government without any fixed gold revenue Is pledged to maintain gold re demption, wnlcli it has steadily and faith fully done, and which under the authori ty now given it will continue to do. The law which requires the government after having redeemed its United Stales notes to pay them out aguln as current funds demands a constant replenishment ol the gold reserve. This is especially so In times of business panic, and when the revenues are insufficient 10 meet uie ex penses of the government. At such times the tfuvernnieni hus no other way to suu ply Us deficit and maintain redemption but through the Increase of us bonded debt as during the administration of my predeces sor, when $202.315, 4w or 4 percent, bonus were Issued and sold, ana uie proceeds used to pay the expenses of the government In excess of the revenues and sustain the gold reserve. While a is true that ti e greater part of the proceeds of iheae oonus was used to supply uelicieiu revenues. considerable portion was required lo main lain the gold reserve. 'With our revenues equal to our expenses there would be no dei.cu requiring "ilt) ,B" auance or bonds, but If the gold reserve .falla below Jluu.OOO.uuo how wTll It be re plenished except by selling more bonus Is there any other way practicable under existing law? The serious question ihen is: Shall we continue the policy that has been pursued In the past-ttmt Is, when ihe gold reserve reaches the point of dauxer iSsuh more bonds and supply the needed gold or hall we provide other means to prevent these recurring drains upon the gold re erveT If no further legislation Is fiad and the policy of selling bonds is to be contin ued, then congress should give the secre tary of the treasury authority to sell bonds at ong or short periods, bearing a less rite or interest than is now authorized by law. I, An Obvious Duty. I 1 earnestly recommend as soon as the receipts of the government are quite nut tlcleut to pay ail the expenses ot the gov ernment that when any of the United mates notes are presented tor redemption in gold and are redeemed In gold such notes shall be kept and set apart and only paid out in exchangu for gold. This Is an ob vious duty, if the holder of the United mates note prefers the gold and gets it from the government he should not receive back from the government a United states note without paying gold in exchange for It. The reason to." this is made all the mors apparent whe'i the government issues an Interest-bearing debt to provide KUd for the redemption if United States u'Uc-. a nonlnleresl-besr'lng debt. Uurely ft should not bay thm out again exceft on demand and for geld. If they are put out in any other way thy may return again, to be followed by anther bond Issue lo re deem them another '.merest-bearing debt to redeem a nonlnterest-bearlng debt, Indorses secretary Uage'a Plan. The secretary of lha treasury has out lined a plan in great detail for tne purpose of removing the threatened recurrence of a depleted gold reserve and saving us from future embarrassment on that account. To this plan i invite your careful considera tion. 1 concur with the secretary of the treasury In his recommendation that na tional banks be allowed to issue notes to the face value of the bonds which they have deposited for circulation, and that the tax on circulating notes secured by deposit of such bonds be reduced to one-naif or one per cent per annum. I also join hi in In recommending that authority be given for the establishment of national banks with a minimum capital of So.OUO. This will ens 'o the smaller villages and agricultural regio.it of the country to be supplied with currency to meet their needs. I recommend Uiat ;t Usue of national bank i.otes b re stricted to the denomination of ten dollars and upwards. If the suggestions I have herein made shall have the approval ot congress, then 1 would recorsmend that na tional banks be required to redeem their notes In gold. THE Cl'IIAN QUESTION. The Time Not Hlpe for Intervention on Our Part. The most Important problem with which this government is now called upon to deal pertaining to Us foreign relations concerns Its duty toward Spain and the Cuban Insur rection. Problems and conditions more or less In common with those now existing have confronted this government at vari ous times In the past. The story of Cuba lor many is has been one of unrest, growing discontent: an effort toward a larger enjoyment of liberty and self-control: of organized resistance to the mother country; of depression after distress and warfare and of ineffectual settlement to be followed by renewed revolt. For no endur ing period since the enfranchisement ot the continental possessions of Spain in the western continent has the condition of Cuba or the policy of Spain toward Cuba not caused concern to the United States. The prospect from time to time that the weakness of Spain's hold upon the Island and the political vicissitudes and embar rassments nf the home irnvernment might lead to the transfer of Cuba to a continen tal power called forth. Nwwn 182.1 and I860, various emphatic declarations of the policy of the United States to permit no dis turbance of Cuba's connection with Spain, unless In the direction of independence or Acquisition by us through purchase: nor has there been any change of this declared policy since upon the part of. the govern ment. Not Civilised Warfare. The cruel policy of concentration was Initiated February 16, 1S9G. The productive districts controlled by the Spanish armies were depopulated." The agricultural Inhab itants were herded in and about the gar rison towns, their lands laid waste and their dwellings destroyed. This policy the late cabinet of Spain justified as a neces sary measure of war and as a means of cut ting off suplles from the Insurgents. It has utterly failed as a war measure. It was not civilized warfare. It was extermina tion. Protests Entered. Against this abuse of the rights of war 1 have felt constrained on repeated occa sions to enter the firm and earnest pro test of this government. - There was much of public condemnation of the treatment of American citizens by alleged Illegal arrests and long Imprisonment awaiting trial or pending protracted Judicial proceedings. I felt It my first duty to make Instant de mand for the release or speedy trial of all American citizens under arrest. Before the change of the Spanish cabinet in October Inst 22 prisoners, citizens of the United States, had been given their freedom. For the relief of our own citizens suffering he cause of the conflict the aid of congress was sought In a special message, and under the appropriation of April 4, 1S97, effective aid has been given to American citizens In Cuba, many of them at their own request having been returned to the United States. The Present Insurrection. The present Insurrection broke out In February, I8!i5. It Is not my purpose at this time to recall Its remarkable Increase, or to characterize Its tenacious resistance against the enormous forces massed against It by Spain. The revolt and the efforts to subdue It carried destruction to every quarter of the lslund, developing wide proportions and defying the efforts of Spain for Its suppression. The civilized code of war has been disregarded, no less so by the Spunlards than by the Cubans. The existing conditions cannot but fill this government and the American people with the gravest apprehension. There Is no desire on the part ot our people to profit by the misfortunes of Spain. We nave oniy uie oesire to see tne uuuain prosperous and contented, enjoying that measure of self control which Is the In alienable right of man, protected In their right to reap the benefit of the exhaustless treasures of their country. The offer made by my predecessor In April, lsati, tendering the friendly offices or this government failed. Any mediation on our part was not accepted. In brief, the answer read: "There Is no effectual way to pacify Cuba unless It begins with the actual submission of the rebels to the mother country." Then only could i.paln act In the premised direction ot her own motion and after her own plans. Minister Woodford's Instructions. The instructions given to our new min ister to Spain before his departure for his post directed him to Impress upon thai gov ernment the sincere wish of the United States to lend its aid toward the ending or the wur In Cuba by reaching a peace ful and lasting result, Just and honorable alike to Spain and to the Cuban people. Those Instructions recited the character and duration or the contest, the widespread losses it entails, the burdens and restraints It Imposes upon us, with constant dis turbance of nuuonui Interests and the in jury resulting from an Indefinite contin uance ol mis state of things, it was slated that at this Juncture our government was constrained to seriously Inquire if the time was not ripe when Spain of her own voli tion, moved by her own Interests and every sentiment of humanity, should put a stop to this destructive war and make pro posals ot settlement honorable to herself and just to her Cubun colony. It was urged that as a neighboring nation, with large in terests in Cuba, we could be required to wait only u reasonable time for the mother country to establish its authority and re store order within the borders of the Island; that we could not contemplate an indefi nite period lor the accciiipiiMiuie,., ,., result. No Humiliation Snaicested. No solution was proposed to which the slightest idea f humiliation to Spain could attach, and indeed precise proposals were withheld to avoid embarrassment to that government. All that was asked or expected was that some safe way might be speedily provided and permanent peace restored. It so chanced that the consider ation of this offer, addressed to the same Spanish administration which had declined tlie tenders of my predecessor, and which for more than two years had poured men and treasure Into Cuba in the fruitless ef fort to suprpess the revolt fell to others. Spain Promises Much. The reply lu our note was received on the 23d day ot October. It is in the direction ot a belter understanding, it appreciates the friendly purposes of this government. It admits that our country Is deeply affected by the wur in Cuba, and that Us desires for peace are Just. It declares that the present Spanish government is bound by every consideration to a change ot policy that should satisfy the United States and pacify Cuba within a reasonable time. To this end Spain lius ueuiueu to put Into effect the political reforms heretofore ad vocated by the present premier without halting for any consideration in the path which In Us Judgment leads to peace. The military operations it is said win continue but will be humane and conducted with ail regard for private rights, being accom panied by political action leading to the autuiiuniy of Cuba While guarding dpanish sovereignty. This, It is claimed, will result in Investing Cuba with a distinct person ality; the Island to be governed by an ex ecutive and uy a local cuuncii or cnamber, ' reserving to Spain the control of the for eign relations, the army and navy and the Judicial administration. To accomplish this the present government proposes to modliy existing legislation by decree, leav ing the Spanish corles, with the aid of Cuban senators and deputies, to solve the economic problem and properly distribute thu existing debt. In the absence of a declaration of the measure that this gov ernment proposes to lake in carrying out its proffer ot good offices it suggests that Spain be left tree to conduct military operations and grant political reforms, while the United States, for Its part, shall enforce its neutral obligations and cut off the assistant which it Is asserted the in surgents reci'ke from this country. The supposition ot vi Indefinite prolongation of the war is de.)iod. It is asserted that the western provli.cn are already well-nigh re claimed; that Uie planting of cane and to oacco therein has been resumed, and that by force of arms and new and ample re forms very mny and complete pacification Is hoped for. Have Not Failed 1st Our Duty. The Immediate amelioration of existing conditions under the new administration of Cuban affairs is predicted, and therewith all the disturbance and all occasion for any change of altitude on the part ot the United States. Discussion of tbe question of the International duties and responsibil ities of tbe United States, as Spain under stands them, is presented, with an appar ent disposition to charge us with failure In this regard. This charge Is without any basis In tact. It could not have been mads It Spain had been cognisant ot the con stant efforts this government bas made, at the cost of millions and by the employment of the administrative machinery of the na tion. That It- has successfully prevented the. departure of a single military expe dition or armed vessel from our shores in violation ot our laws would seem to bs a sufficient answer. But ot this aspect of the Spanish noi It is not necessary to speak further now. Firm In the conviction of a wholly performed obligation, due re sponse to this charge has been made In dip lomatic course. Thai Untried Measures. Of the untried measures thero remain only: .Recognition of the insurgent as belligerents; recognition of the Independ ence of Cuba, neutral Intervention to end the war by imposing a rational compromise between tne contestants, and Intervention In favor of one or the other party. I speak not of forcible annexation, for that can not be thought of. That by our code ot morality would be criminal aggression. Recognition ol Insurgents. Recognition of the belligerency of the Cuban Insurgents has often been can vassed as a possible If not inevitable step both in regard to tee previous ten years' struggle, and during the present war. I am not unmindful that the two houses of con gress In the spring of 1896 expressed the opinion by concurrent resolution that a condition ot publlo war existed, requiring or Justifying the recognition of the state of belligerency in Cuba, and during the ex tra session the senate voted a Joint resolu tion of like import, which, however, was not brought to a vote in the house of repre sentatives. In the presence of these sig nificant expressions of the sentiment of the legislative branch, it behooves the execu tive to soberly consider the conditions un der which so Important a measure must needs rest for Justification. It Is to bs seriously considered whether the Cubun Insurrection possesses beyond dispute the attributes of statehood, which alone de mand the recognition of belligerency In Its favor. Possession, In short, of the es sential qualifications of sovereignty by the Insurgents and the conduct of the war by them according to the received code of war are no less Important factors toward the determination of the problem of bel ligerency than are the influences and con sequences of the struggle upon the Internal policy of the recognizing state. Quotes President Grant. The utterances of President Grant In his memorable message ot December 7, 1S75, are signally relevant to th- present situa tion in Cuba and it may be wholesome now to recall them. At that time a ruinous conflict had for seven years wasted the neighboring island. During all those years an utter, disregard of the laws of civilized warfare and of the just demands of hu manity, which called forth expressions of condemnation from the nations of Chris tendom continued unabated. Desolation and ruin pervaded that productive region, enormously affecting the commerce of all commercial nations, but that of the United States more than any other by reason of proximity and larger trade and intercourse. At that Juncture Grant uttered these words, which now as then sum up the ele ments of the problem: "A recognition of the independence of Cuba being. In my opinion, impracticable and Indefensible, the question which next presents Itself is that of the recognition of belligerent rights In the parties to the contest. In a former message to congress I had occasion to con sider this question, and reached the con clusion that tho conflict in Cuba, dreadful and devastating as wore Its Incidents, did not rise to the fearful dignity of war "It Is possible that the acts of foreign powers, and even acts of Spain herself, of this very nature might be pointed to In de fense of such recognition. But now, as In Its past history, the United States should carefully avoid the false lights which might lead it Into the mazes of doubtful law and of questionable propriety and adhere rig Idly and sternly to the rule which hns been its guide of doing only that which Is right and honest and of good report. The question of according or of withholding rights of belligerency must be judged In every case. In view of the particular at tending facts. Unless Justified by necessity It is always and justly regarded as an un friendly act and a gratuitous demonstra tion of moral support to the rebellion. It Is necessary, and It Is required, when the Interests and riirhts of another aovernment or of its people are so far affected by a pending civil conflict as to require a definition of its relations to the parties thereto. But this conflict must be one which is recognized in the sense of In ternational law as war. Recognition Not Justified. "Belligerence, too, Is a fast. The mere existence of contending armed bodies and their occasional conflicts do not constitute war In the sense referred to. Applying to the existing condition ot affairs In Cuba the tests recognized by publicists and writ ers on international law, and which have been observed by nations ot dignity, hon esty and power, when free from sensitive or selfish and unworthy motives, I fall to find In the insurrection the existence of such a substantial political organization, real, palpable and manifest to ' tne world, having the forms and capable ot the ordinary functions of government toward its own people and to other states, with courts for the administration of jus tice, with a local habitation, possessing such organization of force, such material, such occupation of territory as to take the contest out of the category of a mere re bellious insurrection or occasional skir mishes, and place it on the terrible foot ing of war, to which a recognition of bel ligerency would aim to elevate It. "The contest, moreover, is solely on land; the insurrection has not possessed Itself of a single seaport whence It may send forth Its Hag, nor has It any means of communication with foreign powers ex cept through tho military lines of Its ad versaries. No apprehension of any of those sudden and difficult complications which war upon the ocean Is apt to pre cipitate upon the vessels, both commercial and national, and upon consular officers of other powers, calls for the definition of their relations to the parties to the contest. Considered as a question of expediency, 1 regard the accordance of belligerent rights still to be as unwise and premature, as 1 re gard it to be, at present, indefensible as a measure of right. "Such recognition entails upon the coun try according the rights which How from it difficult and complicated duties, and re quires the exaction from the contending parties of the strict observance ot their rights and obligations. It confers the right of search upon the high seas by vessels of both parties; It would subject the carrying of arms and munitions of war, which now may bo transported freely and without in terruption, In vessels of the United States to detention and to possible seizure; it would give rise to countless vexatious ques tions, would release the parent government from responsibility for acts done by the in surgents, and would Invest Spain with the right to exercise the supervision recognized by our treaty of 171)5 over our commerce on the seas, a very large part of which, in its traffic between the Atlantlo and the gulf states and between all of them and the states on the Pacific, passes through the waters which wash the shores of Cuba. The exercise of this supervision could scarce fall to lead, if not to abuses, cer tainly to collisions perilous to the peaceful relations of the two states. There can be little doubt as to what result such super vision would before long draw this nation. It would be unworthy of the United States to Inaugurate the possibilities of such re sult, by measures of questionable right or expediency, or by any indirection." What Recognition Would Mean. Turning to the practical aspects of a rec ognition of belligerency and reviewing its inconveniences and positive dangers, still further pertinent considerations appear. In the code ot nations there is no such thing as a naked recognition of belligerency un accompanied by the assumption of interna tional neutrality. Such recognition will not confer upon either party to a domestlo conflict a status not heretofore actually possessed or effect the relation of either party to other states. The act ot recogni tion usually takes the form of a solemn proclamation ot neutrality which recites the de facto condition of belligerency as its motive. It announces a domestlo law of neutrality in declaring state. It assumes the International obligations of a neutral In the presence ot a public state of war. It warns all citizens and others within the Jurlsllctlon of the proclalmant that they violate those righteous obligations at their own peril and cannot expect to be shielded from' the consequences. The right of visit and search on tne seas and seizure of ves sels and cargoes and contraband of war and good prize under admiralty law must under International law be admitted as a legitimate consequence of a proclamation of belligerency. While according the equal belligerent rights defined by public law to each party In our ports disfavors would be Imposed on both, which while nominally equal would weigh heavily in behalf of Spain herself. Possessing a navy and con trolling the ports of Cuba her maritime rights could be asserted not only for the military Investment of the island but up to the margin of our own territorial waters, and a condition ot things would exist for which the Cubans within their own domain could not hone to create a parallel; while Its creation through aid or sympathy from within our domain would be even more lm- ?osslble than now, with the additional obl igations ot International neutrality we would perforce assume. i- - Regarded, at Present, as Unwise.' n The enforcement of this enlarged and on erous cods of neutrality would onlv be Influential within our own Jurisdiction by lanu aim sea, ana appiicauie ny our own Instrumentalities. It could Impart to the United States no jurisdiction between Spain and the insurgents. It would give the bulled States no fight ot intervention M enforce the conduct of the strife within the paramount authority of Spain accord ing to the international code of war. For these reasons l regard tne recognition of the belligerency of the Cuban Insurgents as now unwise, and therefore inadmlssable. Should that steD hereafter be deemed wise as a measure of right and duty, the execu tive win laKe it. Intervention. Intervention upon humanitarian grounds has been frequently suggested, and has not failed to receive my most anxious and earnest consideration. But should such a step be now taken, when It Is apparent that a hopeful change has supervened in the policy of Spain toward Cuba? A new government has taken office In the mother country. It Is pledged In advance to the declaration that all the efforts of the world cannot suffice to maintain peace in Cuba by the bayonet; tnat vague promises of re form after subjugation afford no solution of the Insular problem; that with a sub stitution of commanders must come a change of the past system of warfare for one in harmony with a new policy which shall no longer aim to drive the Cubans to the "horrible alternative of taking to the thicket or succumbing in misery:" that re forms must be instituted In accordance with the neeos and circumstances of tne time, and that these reforms, while de signed to give full autonomy to the colony ana to create a virtual entity ana sen-controlled administration, shall yet conserve and affirm the sovereignty of Spain by a Just distribution of powers and burdens upon a oasis or mutual interest, untainted by methods of selfish expediency. Lies In Honorable Paths. The first acts of the new government lie In these honorable paths. The policy ot cruel rapine and extermination that so long shocked the universal sentiment of humanity has been reversed. Under the new military commander a broad clemency is proffered. Measures have already been set on foot to relieve the horrors of starva tion. The power of the Spanish armies, It Is asserted, is to be used not to spread ruin and desolation, but to protect the resump tion of peaceful agricultural pursuits and productive Industries. That past methods are futile to force a peace by subjugation Is freely admitted, and that ruin without con ciliation must Inevitably fall to win for Spain the fidelity of a contented depend ency. Decrees in application of the fore shadowed reforms have already been pro mulgated. Should Give Spain a Chance. That the government of Sagasta has en tered upon a course from which recession with honor Is Impossible can hardly be questioned; that in the few weeks it has existed it has made earnest of the sincerity of its professions Is undeniable. I shall not Impugn Its sincerity, nor should Impatience be suffered to embarrass It in the task it has undertaken. It is honestlv due Snain and to our friendly relations with Spain tnat sne snouia be given a reasoname chance to realize her exnectattons. and to prove the asserted efficacy of the new or- acr or tnings to wnicn sne stanas irre vocably committed. She Jias recalled the commander whose brutal orders inflamed he American mind and shocked the civ ilized world. She has modified the horrible order of concentration, and has undertaken to care for the helpless and permit those who desire to resume the cultivation ot their fields to do so, and assures them of the protection of the Spanish government in their lawful occupations. She has lust released the "Competitor" nrlsoners here tofore sentenced to death, and who have been the subject of repeated diplomatic correspondence durlnir both this and the preceding administration. Will Not Hesitate to Act. Not a single American citizen Is now In arrest or confinement In Cuba of whom this government has any knowledge. Tha near future will demonsirate whether the indispensable condition of a righteous peace, just alike to tne Cubans and to Spain, as well as equitable to all our in terests so Intimately Involved In the wel fare of Cuba, Is likely to be attained. If not, the exigency of further and other action by the United States will remain to be taken. When that time comes that action will be determined In the line ot Indisputable right and duty. It will be faced without misgiving or hesitancy in the light of the obligation this government owes to Itself, to the people who have con fided to It the protection of their Interests and honor and to humanity. Sure of the right, keeping free from all offense our selves, actuated only by upright and patri otic considerations, moved neither by pas sion nor selfishness, the government will continue Its watchful care over the rights and property of American citizens and will abate none of Its efforts to bring about by peaceful agencies a peace which shall be honorable and enduring. If It shall here after appear to be a duty Imposed by our nhllirntfnrm in nilrselvea. to civilization and humanity to intervene with force. It shall be without rault on our part ana oniy De cause the necessity for such action will be so clear as to command the support and approval of the civilized world. ANNEXATION OF imVAIl. Dignity and Honor Require Confirm ation of the Treaty. By a special message dated the lGth day of June last, I laid before the senate a treaty signed that day by the olenipo tarles of the United States and of the re public ot Hawaii having for Us purpose the Incorporation of the Hawaiian Islands as an Integral part of the United States and under Us sovereignty. The senate having removed the Injunction of secrecy, although the treaty Is still pending before that body, the subject may be properly referred to In this message because the necessary action of the congress is required to determine by legislation many details of the eventual union should the fact of annexation be ac complished, as 1 believe It shoud be. While consistently disavowing from a very early period any aggressive policy of absorption in regard to the Hawaiian group, a long series of declarations through three-quarters of a century has proclaimed the vltul interest of the United States in the Independent lite of the Islands and their intimate commercial dependence upon this country. At the same time it has been re peatedly asserted mm m no vem i-uuiu me entity of Hawaiian Btatehood ceaBe by the passage of the islands under the domina tion or influence of another power than the United States. Under these circumstances the logic of events required that annexa tion, heretofore offere.danit declined, should in the ripeness of time come about as the natural result of the strengthening ties that bind us to those Islands, and be real ized by the free will of the Hawllan state. That treaty was unanimously ratified without amendment by the senate and pres ident of the republic of Hawaii on the 10th Of September last, and only awaits the fa vorable action of the American senate to oiYM ihe comnlete absorption of the islands Into the domain of the United States. What tne conditions oi suuii a union snail be, the political relation thereof to the United States, the character of the local administration, the quality and degree of the elective franchise of the inhabitants, the extension of the federal laws to the territory or the enactment of special laws to fit the peculiar condition thereof, the reg ulation it need be of the labor system therein, are all matters which the treaty has wisely relegated to the congress. Should He Confirmed. If the treaty Is confirmed, as every con sideration of dignity and honor requires, the wisdom ot congress will see to It that, avoiding abrupt assimilation of elements perhaps hardly yet fitted to share in the highest franchises of citizenship, and hav ing due regard to the geographical condi tions, the most just provisions for self-rule In local matters with, the largest political liberties as an Integral part of our nation, will be accorded to the Hawallans, No less is due to a people who, after nearly five years of demonstrated, capacity to ful fill tne obligations of self-governing state hood, come of their own free will to merge their destinies in our body politic. CENTRAL AMERICAN REPUBLICS. Onr Dtplomntio Relations with Them Nlcaraguan Canal. As to the representation of this govern ment to Nicaragua, Salvador and Costa Rica, I have concluded that Mr. William L. Merrick, confirmed as minister of the United States to the states of Nicaragua, Salvador and Costa Klca shall proceed to San Jose, Costa Rica, and there temporarily establish the headquarters of the United States to those three states. I took this action for what I regarded as the para mount interests of this country. It was developed upon an investigation by the secretary of state that the government of Nicaragua, while not unwilling to re ceive Mr. Merrick In his diplomatic quality, was unable to do so because of the com pact concluded June 20, 18U5, whereby that republlo and those of Salvador and Hon duras, forming what is known as the greater republlo of Central America, had surrendered to the representative diet there their right to revelve and send diplomatic agents, ne met was not wining to ac cept him because he was not accredited to that body. I could not accredit him to that body because the appropriation law of congress did not permit it. Mr. Baker, the present minister at Managua, has been directed to present his letters of recall. Tho Klcaragnan CanaL A subject of large Importance to our country and increasing appreciation on the part of the people is the completion of the J treat highway ot trade between the At antlo and Paclflo known as the Nlca raguan canal. Its utility and value to American commerce Is universally admit ted. ' The commission appointed under date of July 24 last "to continue the surveys and examinations authorised by the act approved March 2, 1SS5," In regard to "the proper route, feasibility and cost of con struction of the Nicaragua canal, with a view of making complete plans for the en tire work of construction of such canal," Is now employed in the undertaking, in tha future I shall take occasion to transmit to congress the report of this commission, making at the same time such further sug gestions as may then seem advisable. ALASKA. Material Changes la Territorial Laws Are Necessary. The territory ot Alaska requires the prompt and early attention of congress. The conditions now existing demand mate rial changes In the laws relating to the territory. Tha great influx of population during tbe past summer and fall and the prospect of a still larger immigration in the spring will not permit us to longer neglect the extension of civil authority within tbe territory or postpone the es tablishment of a more thorough government- A general syBtera ot public sur veys has not been extended to Alaska and all entries thus far made in that district are upon special surveys. The act of congress extending to 'Alaska the mining laws ot the United States contained the reserva tion that it shouldnot be construed to put In force the general land laws of the country. By act approved March 3, 1891, authority was given for entry of lands for town sits purposes and also for the purchase of not exceeding 160 acres then or thereafter occupied tor purposes of trade and manu facture. The purpose of congress as thus far expressed has been that only such rights should apply to that territory as should be speculcallly named. As It Is to the interest of the govern ment to encourage the settlement of the country and Its duty to follow up its citi zens with the benelit ot legal machinery, 1 earnestly urge upon congress the estab lishment of a system of government with such flexibility as will enable It to adjust Itself to the future areas of greatest pop ulation. Relief Is Needed. The startling though possibly exagger ated reports from the Yukon river coun try of the probable shortage of food for the large number of people who are win tering there without the means ot leaving the country are confirmed in such measure as to Justify bringing the matter to the attention of congress. Access to that country in winter can be had only by the passes rrom uvea ana vicinity, wnicn is a most difficult and perhaps an impossible task. However, Bhould these reports of the Buffering of our fellow-citizens be further verified, every effort at any cost should be made to carry them relief. THE INDIANS. Needs of White Residents in the Ter ritory Must He Considered. For a number of years past It has been apparent that the conditions under which the five civilized tribes were established In the Indian territory under treaty pro visions with the United States, with the right of self-government and the ex clusion of all white persons from within their borders, have undergone so complete a change as to render the continuance of the system thus Inaugurated practically Impossible. The total number of the live civilized tribes, as shown by the last census, is 45,494, and this number has not material ly Increased, while the white population Is estimated at from 200,000 to 250,000, which, by permission of the Indian government, has settled in the territory. The present area of the Indian territory contains 25, 694,664 acres, much of which is very fer tile land. The United States citizens re siding in the territory, most rf whom have none there by Invitation or with the con sent of the tribal authorities, have made permanent homes tor themselves, .numer ous towns have been built in which from COO to 6,000 white people now reside. Valu able residences and business houses have been erected in many or them. Large Busi ness enterprises are carried on In which vast sums of money are em ployed, and yet these people, who have Invested their capital In the develop ment of tne productive resources or tne country, are without title to the land they occupy and have no voice whatever In the government either of the nations or tribes. Thousands of their children who wore bofn In the territory are of school age, but the doors of the schools of the nation's are shut against them and what education they get Is by private contribution. No provision for the protection of the life or property of these white citizens Is made by the tribal governments and courts. An Indian Aristocracy. The secretary of the Interior reports that leading Indians have absorbed great tracts of land to the exclusion ot the common peo ple and government by an Indian aristoc racy has been practically established, to the detriment of the p-jople. It has been found Impossible for the united States to keep Its citizens out of the territory and the executory conditions contained in treaties with these nations have for the moat part become Impossible of execution. Nor has it been possible for the tribal gov ernments to secure to each Individual Indian his full enjoyment In common with other Indians of the common property of the nations. Friends of the Indians have Ions: believed that the best Interests of the Indians of the five civilized tribes would be found in American citizenship, with all tne rignts ana privileges wnicn oeiong to that condition. The Dawes Commission. By sectlln 16 of the act of March 3. 1S93. the president was authorized to appoint three commissioners to enter Into negotia tions with the Cherokee, Choctaw, Chicka saw. Muskoaee (or Creek) and Seminole na tions, commonly known as the Five Civ- lllzea Tribes in tne inaian territory, oriei ly, the purposes of the negotiations were to be: The extinguishment of tribal titles to any lands within that territory now held by any and all such nations or tribes, either by cession of the same or some part thereof to the United States or by allotment and division ot the same in severalty among the Indians of such na tions or tribes respectively as may be en titled to the same, or by such other method as may be agreed upon between the sev eral nations and tribes aforesaid, or each of them with the United States, with it view to such an adjustment upon the basis of Justice and equity as may, with the con sent' of the said nations of Indians, so far as may be necessary, be requisite and suit able to enable the ultimate creation ol a state or states of the union, which shall embrace the lands within said Indian ter ritory. The commission met much opposition from the beginning. The Indians were very slow to act. and those In control mani fested a decided disinclination to meet with favor the propositions submitted to them. A little more than three years after this organization the commission effected an agreement with the Choctaw nation alone. The Chlckasaws, however, refused to agree to Its terms, and as they have a common Interest with the Choctaws in the lands of said nations, the agreement with the latter nation could have no ef fect without the consent of the former. On April 23. 1R07. the commission effected an agreement with both tribes the Choc taws and Chlckasaws. This agreement, it Is understood, has been ratified by the constituted authorities of the respective tribes or nations parties thereto, and only requires ratification by congress to mnke it binding. On the 27th of September, 189. an agreement was effected with the Creek nation, but it Is understood that the na tional council of said nation has refused to ratify the same. Negotiations are yet to be had with the Cherokees, the most populous of the Five Civilized -tribes, and with the Semlnolea, the smallest In point of numbers and territory. RECIPROCITY. Step Taken to Improve Trade Relations With Other Ceuntrles. In order to execute as early as possible the provisions of the third and tourth sec tions of the revenue act approved july 24, 1897, I appointed Hon. John A. Kas son, of Iowa, a special commissioner pleni potentiary to undertake the requisite nego tiations with foreign countries desiring to avail themselves or these provisions. The negotiations are now proceeding with sev eral governments, both European und American. It Is believed that by a careful exercise of the powers conferred by that act some grievances of our own und or other countries In our mutual trade rela tions may be either removed or largely alleviated, and that the volume of our com mercial exchanges may be enlarged, with advantage to both contracting parties. OUR NAVY. ' Present Condition Well Adapted to Our Necessities. The present Immediately effectiveness of the navy consists of four battle ships of the first class, two of the second and 48 other vessels, ranging from armored cruisers to torpedo boats. There are under construc tion five battle ships of the first class, M torpedo boats and one submarine boat. No provision has yet been made for the armor of three of the five battle ships, as it has been impossible to obtain it at the price fixed by congress. It Is of great Importance that congress provide this armor, as until then the ships are of no fighting value. The present naval force, especially In view ot its increase by the ships now under con struction, while not as large as that of a few other powers. Is a formidable force; its vessels are tho very best of each type; and with the increase that should be made to It from time to time In the future, and careful attention to keeping It In a high state ot efficiency and repair, It Is well adapted to the necessities ot the country. The great Increase of the navy which has taken place in recent years was Justified by the requirements for national defense and has received publlo approbation. The time has now arrived, however, when this in crease, to which the country is committed should, tor a time, take the form of in creased facilities commensurate with the Increase of our naval vessels. It Is an un fortunate fact that there is only one dock on the Pacifio coast capable of docking our largest ships, and only one on the Atlantlo coast, and that the latter has for the last six or seven months been under repair and therefore incapable of use. Immediate steps should be taken to provide three or four docks of this capacity on the Atlantlo coast, at least one on the Paclllo coast and a floating dock on the gulf. This is the recommendation ot a very competent board, appointed to Investigate the sub ject. There should also be ample provision made for powder and projectiles, and other munitions of war and for an increased number of officers and enlisted men. Soma additions are also necessary to our navy yards tor the repair and care of our larger number of vessels. As there are now on the stocks five battleships of the largest class, which can not be completed for a year or two, 1 concur with the recommen dation of the secretary of the navy for an appropriation authorizing tbe construction of one battleship for the Pacific coast, where at present there Is only one In com mission and one under construction, while on the Atlantlo coast there are three In commission and four under construction: and also that several torpedo boats be authorized in connection with our gen eral system of coast defense. OUR MERCHANT MARINE. Its Inferiority a Ilnmlllatloa lo National Pride. Most desirable from every standpoint of national Interest and patriotism Is the ef fort to extend our foreign commerce. To this end our merchant marine should be improved and enlarged. We should do our full share of the carrying trade ot tha world. We do not do it now. We should be the logger no longer; The Inferiority of our merchant marine is justly humiliat ing to the national pride. The govern ment by every proper constitutional means should aid In making our ships familiar visitors at every commercial port of the world, thus opening up new and valuable markets to the surplus products of ths farm and the factory. THE PACIFIC RAILWAYS. , Should Government lleoome n Bidder for tbe Kansns Pacittof The Uhlon Paclflo railway, main line, was sold under the decree ot the United States court for the district of Nebraska on the 1st and 2d of November of this year. The amount due the government consisted ot the principal of the subsidy bonds, (27, 22(1,612, and the accrued interest thereon, $41,211,711.75, making the total Indebtedness $53,448,223.75. The bid at the sale covered the first mortgage Hen and the entire mort gage claim of the government, principal and Interest. The Bale of the subsidized portion of tha , Kansas Paclflo line, upon which the gov- -ernmeut holds a second mortgage i.en, has been postponed at the instance of ths government to December 16, lsl7. The debt of this division of the Union Pacific railway to the government on November L 1897, was the principal of the subsidy bonds, $6,303,000. and the unpaid and accrued in terest thereon, U,S2ii,(iiw,33, making a total of 12,929,69u.33. The sale of this road was originally advertised for November 4, but for the purpose of securing the utmost public notice of the event It was postponed until December 16 and a second adver tisement of the sale was made. By tne decree ot the court the upset price on ths sale of the Kansas Paclllo will yield to the government the sum of J2,6o0,000 ovec all prior Hens, costs and charges. If no other or better bid Is made this sum Is all that the government will receive on its) claim of nearly sin.ooo.uoo. The government has no information as to whether thera will be other bidders or a better bid than the minimum amount herein stated.; Tha question presented therefore Is whethei the government shall under the authority given It by the act of March 3, lusl, purchase or redeem the road In the event that a bid is not made by private parties covering the entire government claim. To qualify the government to bid at tha sales will require a deposit ot f9ou,uuu, as follows: In the government cause sdoo.ooo, and In each ot the first mortgage causes 1200,000, and In the latter the deposit must be in cash. Payment at the sale Is as follows: Upon the acceptance ol tne bid, a sum which with the amount already deposited shall equal 16 per cunt, ot the bid: the balance in Installments of 25 pet cent., 30 40 and 50 days after the confirma tion of the sale. The lien on tne Kansas Paclflo prior to that of the government on the 30th of July, 1M7, principal anClnter est amounted to $7,231,04.3.11. The govern ment, therefore, should It become the high est bidder, will have to pay the amount of the first mortgage lien. I believe that under the act of 1M7 It has the authority to do this, and in absence of any acljon by con gress, I. shall direct the secretary of the treasury to make the necessary deposit as required by the court's decree to qualify, as a bidder and to bid at the sale a sum which will at least equal the principal of the debt due the government; but suggest, in order to remove all controversy, that an amendment of the law be immediately passed explicitly giving such powers and appropriating in general terms whatever sum is sufficient therefor. In so Important a matter as the gov ernment .becoming the possible owner of: railroad property which It perforce must conduct and operate, 1 feel constrained to lay before congress those facts for Us consideration and action before the con summation of the sale. It Is clear to my mind that the government should not per mit the property to benold at a price which, will yield less than one-half of the prin cipal of its debt, and leas than one-fifth of its entire debt, principal and Interest. Dut whether the government, rather than: accept less than its claim, should become a bidder, and thereby the owner of the prop erty, I submit to the congress for action, CIVIL SERVICE. Distinct Advance Made In Operation of the Law. The Important branch ot our government known as the civil service, ths practical improvement of which has long been a sub ject of earnest discussion, has of late years received increased legislative and execu tive approval. During the past few. months the service has been placed upon a still firmer basis of business methods and personal merit. While the right of our veteran soldiers to reinstatement in de serving cases has been asserted, Dismissals for merely political reasons nave been carefully guarded against, the examina tions for admittance to the service en larged and at the same time rendered less technical and more practical; and a dis tinct advance has been made by giving a hearing before dismissal upon all cases where Incompetency is charged or demand made for the removal of officials In any of the departments. This order has been made to give to the accused his right to be heard, but without In any way impairing the power ot removal, which should always be exercised In cases ot Inefficiency and in competency, and which Is one of tha vital safeguards of ths civil service reform rys tem, pmventing stagnation and deadwood and keeping every employe keenly alive to the fact that the security of his tenure depends not on favor, but on his own test ed and carefully watched record of service. GOVERNMENT EXPENSES. Appro5rlntlons Must lie Kept Within ' tha Heoelpta. I am forced by the length of this message to omit many Important ' references to affairs of tne government with which con gress will have to deal at the present ses sion. They are fully discussed in the de partmental reports, to ail of which 1 invite your earnest attention. The estimates of the expenses of the government by the several departments will, 1 am sure, have your careful scrutiny. While the con gress may not llnd it an easy task to reduce the expenses or the government. It should not encourage their Increase. These ex- Senses will. In my Judgment, admit of a ecrease lu many branches of the govern-menL-Wlthout Injury to the public service. It is a commanding duty to keep the ap propriations within the receipts of the gov ernment and thus avoid a deficit. W1LUAM. M'KINJLCY.