its and that substantial reductions be also made in the revenues
from customs. A statute has since been enacted by which the annual tax
and tariff receipts of the Government have been cut down to the extent
of at least fifty or sixty millions of dollars.

While I have no doubt that still further reductions may be wisely made,
I do not advise the adoption at this session of any measures for large
diminution of the national revenues. The results of the legislation of
the last session of the Congress have not as yet become sufficiently
apparent to justify any radical revision or sweeping modifications of
existing law.

In the interval which must elapse before the effects of the act of March
3, 1883, can be definitely ascertained a portion at least of the surplus
revenues may be wisely applied to the long-neglected duty of
rehabilitating our Navy and providing coast defenses for the protection
of our harbors. This is a matter to which I shall again advert.

Immediately associated with the financial subject just discussed is the
important question what legislation is needed regarding the national
currency.

The aggregate amount of bonds now on deposit in the Treasury to support
the national-bank circulation is about $350,000,000. Nearly $200,000,000
of this amount consists of 3 percents, which, as already stated, are
payable at the pleasure of the Government and are likely to be called in
within less than four years unless meantime the surplus revenues shall
be diminished.

The probable effect of such an extensive retirement of the securities
which are the basis of the national-bank circulation would be such a
contraction of the volume of the currency as to produce grave commercial
embarrassments.

How can this danger be obviated? The most effectual plan, and one whose
adoption at the earliest practicable opportunity I shall heartily
approve, has already been indicated.

If the revenues of the next four years shall be kept substantially
commensurate with the expenses, the volume of circulation will not be
likely to suffer any material disturbance; but if, on the other hand,
there shall be great delay in reducing taxation, it will become
necessary either to substitute some other form of currency in place of
the national-bank notes or to make important changes in the laws by
which their circulation is now controlled.

In my judgment the latter course is far preferable. I commend to your
attention the very interesting