Refunding-customs, internal revenue, lands, &c.. Miscellaneous... Total estimated expenditures, including sink- Or an estimated deficit of........... $4,675, 900 00 5, 800, 000 00 1,661, 200 00 275, 137, 250 94 $10, 637, 250 94 Excluding the sinking-fund, the estimated expenditures will be $236,334,912 68, showing a surplus of $28,165,087 32. By direction of the President, the estimated expenditures for the next fiscal year have been based upon the appropriations made by Congress for the present fiscal year. The rule has been departed from only as to those branches of the public service belonging to Departments the heads of which deem the estimated increase indispensable, or where existing law demands a greater sum than was appropriated. Such increase is estimated for as follows: Earnestly desirous of co-operating with Congress in the reduction of expenditures to the lowest sum consistent with the proper execution of the law, the Secretary has reduced the expenses of the customs service, during the last fiscal year, compared with the previous year, in the sum of $778,492 25, and herein recommends changes of the law which will enable him to make further reductions therein. The great body of expenditures is fixed by laws which leave no discretion to executive officers. The reduction of appropriations does not reduce expendi tures when the law requires the service to be performed, or fixes the salary and number of employés. It must be accompanied by a careful revision of the laws, reducing the objects of expenditure or the number or compensation of employés. It is believed that, by such a revision, especially of the postal laws, and by a limitation of the amount of appropriations for public works in progress, by the postponement of new works not indispensable for the public service, and by judicious scrutiny of disbursements, that the expenditures for the next fiscal year need not, in the aggregate, exceed the appropriations for the present fiscal year. The estimate of revenue, based upon existing law, is $6,736,121 30 more than the actual revenue of the past year. This estimate can only be realized by strict and impartial enforcement of the revenue laws. This is not only a legal duty of revenue officers, but is the right of every honest tax-payer. The enforcement of the tax on spirits and tobacco has, in some places, been resisted by formidable combinations. too powerful for the Department, with the forces at its command, to overcome. The customs duties, in many cases, have been evaded by smuggling, fraud, undervaluation, and false claims for drawbacks and damage-allowance. Some of these obstructions are incident to the execution of any tax law, but many of them may be overcome by such modifications of the laws as are hereinafter recommended. It is manifest, from these estimates, that, however desirable it may be to reduce existing taxes, it ought not now to be done except by supplying the reductions from other sources of revenue. Stability and certainty in the rate and subject of taxation are of great importance, and, therefore, the Secretary recommends that no change be made in them during the present session, except to convert certain ad-valorem duties, hereinafter stated, into specific duties. RESUMPTION OF SPECIE PAYMENTS. The important duty imposed on this Department by the resumption act, approved January 14, 1875, has been steadily pursued during the past year. The plain purpose of the act is to secure to all interests and all classes the benefits of a sound currency, redeemable in coin, with the least possible disturbance of existing rights and contracts. Three of its provisions have been substantially carried into execution by the gradual substitution of fractional coin for fractional currency, by the free coinage of gold, and by free banking. There remains only the completion of preparations for resumption in coin on the 1st day of January, 1879, and its maintenance thereafter upon the basis of existing law. At the date of my annual report to Congress in December, 1877, it was deemed necessary as a preparation for resumption to accumulate in the Treasury a coin reserve of at least forty per cent. of the amount of United States notes outstanding. At that time it was anticipated that under the provisions of the resumption act the volume of United States notes would be reduced to $300,000,000 by the 1st day of January, 1879, or soon thereafter, and that a reserve in coin of $120,000,000 would then be sufficient. Congress, however, in view of the strong popular feeling against a contraction of the currency, by the act approved May 31, 1878, forbade the retirement of any United States notes after that date, leaving the amount in circulation $346,681,016. Upon the principle of safety upon which the Department was acting, that forty per cent. of coin was the smallest reserve upon which resumption could prudently be commenced, it became necessary to increase the coin reserve to $138,000,000. At the close of the year 1877 this coin reserve, in excess of coin liabilities, amounted to $63,016,050 96, of which $15,000,000 were obtained by the sale of four and a half per cent., and $25,000,000 by the sale of four per cent. bonds, the residue being surplus revenue. Subsequently, on the 11th day of April, 1878, the Secretary entered into a contract with certain bankers in New York and London-the parties to the previous contract of June 9, 1877, already communicated to Congress-for the sale of $50,000,000 four and a half per cent. bonds for resumption. purposes. The bonds were sold at a premium of one and a half per cent. and accrued interest, less a commission of one-half of one per cent. The contract has been fulfilled, and the net proceeds, $50,500,000, have been paid into the Treasury in gold coin. The $5,500,000 coin paid on the Halifax award have been replaced by the sale of that amount of four per cent. bonds sold for resumption purposes, making the aggregate amount of bonds sold for these purposes, $95,500,000, of which $65,000,000 were four and a half per cent. bonds, and $30,500,000 four per cent. bonds. To this has been added the surplus revenue from time to time. The amount of coin held in the Treasury on the 23d day of November last, in excess of coin sufficient to pay all accrued coin liabilities, was $141,888,100, and constitutes the coin reserve prepared for resumption purposes. This sum will be diminished somewhat on the 1st of January next by reason of the large amount of interest accruing on that day in excess of the coin revenue received meanwhile. In anticipation of resumption, and in view of the fact that the redemption of United States notes is mandatory only at the office of the assistant treasurer in the city of New York, it was deemed important to secure the co-operation of the associated banks of that city in the ready collection of drafts on those banks and in the payment of Treasury drafts held by them. A satisfactory arrangement has been made by which all drafts on the banks held by the Treasury are to be paid at the clearing-house, and all drafts on the Treasury held by them are to be paid to the clearing-house at the office of the assistant treasurer, in United States notes; and, after the 1st of January, United States notes are to be received by them as coin. This will greatly lessen the risk and labor of collections both to the Treasury and the banks. Every step in these preparations for resumption has been accompa nied with increased business and confidence. The accumulation of coin, instead of increasing its price, as was feared by many, has steadily reduced its premium in the market. The depressing and ruinous losses that followed the panic of 1873 had not diminished in 1875, when the resumption act passed; but every measure taken in the execution or enforcement of this act has tended to lighten these losses and to reduce the premium on coin, so that now it is merely nominal. The present condition of our trade, industry, and commerce, hereafter more fully stated, our ample reserves, and the general confidence inspired in our financial condition seem to justify the opinion that we are prepared to commence and maintain resumption from and after the first day of January, A. D. 1879. The means and manner of doing this are left largely to the discretion of the Secretary, but, from the nature of the duty imposed, he must restore coin and bullion, when withdrawn in the process of redemption, either by the sale of bonds, or the use of the surplus revenue, or of the notes redeemed from time to time. The power to sell any of the bonds described in the refunding act continues after as well as before resumption. Though it may not be often used, it is essential to enable this Department to meet emergencies. By its exercise it is anticipated that the Treasury at any time can readily obtain coin to reinforce the reserve already accumulated. United States notes must, however, be the chief means under existing law with which the Department must restore coin and bullion when withdrawn in process of redemption. The notes, when redeemed, must necessarily accumulate in the Treasury until their superior use and convenience for circulation enables the Department to exchange them at par for coin or bullion. The act of May 31, 1878, already referred to, provides that when United States notes are redeemed or received in the Treasury under any law, from any source whatever, and shall belong to the United States, they shall not be retired, cancelled, or destroyed, but shall be reissued and paid out again and kept in circulation. The power to reissue United States notes was conferred by section 3579, Revised Statutes, and was not limited by the resumption act. As this, however, was questioned, Congress wisely removed the doubt. Notes redeemed are like other notes received into the Treasury. Payments of them can be made only in consequence of appropriations made by law, or for the purchase of bullion, or for the refunding of the public debt. The current receipts from revenue are sufficient to meet the current expenditures as well as the accruing interest on the public debt. Authority is conferred by the refunding act to redeem six per cent. bonds as they become redeemable, by the proceeds of the sale of bonds bearing a lower rate of interest. The United States notes redeemed under the resumption act are, therefore, the principal means provided for the purchase of bullion or coin with which to maintain resumption, but should only be paid out when they can be used to replace an equal amount of coin withdrawn from the resumption-fund. They may, it is true, be used for current purposes like other money, but when so used their place is filled by money received from taxes or other sources of revenue. In daily business, no distinction need be made between moneys from whatever source received, but they may properly be applied to any of the purposes authorized by law. No doubt coin liabilities, such as interest or principal of the public debt, will be ordinarily paid and willingly received in United States notes, but, when demanded, such payments will be made in coin; and United States notes and coin will be used in the purchase of bullion. This method has already been adopted in Colorado and North Carolina, and arrangements are being perfected to purchase bullion in this way in all the mining regions of the United States. By the act approved June 8, 1878, the Secretary of the Treasury is authorized to constitute any superintendent of a mint or assayer of any assay office an assistant treasurer of the United States to receive gold coin or bullion on deposit. By the legislative appropriation bill approved June 19, 1878, the Secretary of the Treasury is authorized to issue coin-certificates in payment to depositors of bullion at the several mints and assay offices of the United States. These provisions, intended to secure to the producers of bullion more speedy payment, will necessarily bring into the mints and Treasury the great body of the precious metals mined in the United States, and will tend greatly to the easy and steady supply of bullion for coinage. United States notes, when at par with coin, will be readily received for bullion |