Fellow-Citizens of the Senate and House of Representatives:

Our devout gratitude is due to the Supreme Being for having graciously continued to our beloved country through the vicissitudes of another year the invaluable blessings of health, plenty, and peace. Seldom has this favored land been so generally exempted from the ravages of disease or the labor of the husbandman more amply rewarded, and never before have our relations with other countries been placed on a more favorable basis than that which they so happily occupy at this critical conjuncture in the affairs of the world.

A rigid and persevering abstinence from all interference with the domestic and political relations of other States, alike due to the genius and distinctive character of our Government and to the principles by which it is directed; a faithful observance in the management of our foreign relations of the practice of speaking plainly, dealing justly, and requiring truth and justice in return as the best conservatives of the peace of nations;

A strict impartiality in our manifestations of friendship in the commercial privileges we concede and those we require from others -- these, accompanied by a disposition as prompt to maintain in every emergency our own rights as we are from principle averse to the invasion of those of others, have given to our country and Government a standing in the great family of nations of which we have just cause to be proud and the advantages of which are experienced by our citizens throughout every portion of the earth to which their enterprising and adventurous spirit may carry them.

Few, if any, remain insensible to the value of our friendship or ignorant of the terms on which it can be acquired and by which it can alone be preserved. A series of questions of long standing, difficult in their adjustment and important in their consequences, in which the rights of our citizens and the honor of the country were deeply involved, have in the course of a few years (the most of them during the successful Administration of my immediate predecessor) been brought to a satisfactory conclusion;

And the most important of those remaining are, I am happy to believe, in a fair way of being speedily and satisfactorily adjusted.

With all the powers of the world our relations are those of honorable peace. Since your adjournment nothing serious has occurred to interrupt or threaten this desirable harmony. If clouds have lowered above the other hemisphere, they have not cast their portentous shadows upon our happy shores. Bound by no entangling alliances, yet linked by a common nature and interest with the other nations of mankind, our aspirations are for the preservation of peace, in whose solid and civilizing triumphs all may participate with a generous emulation.

Yet it behooves us to be prepared for any event and to be always ready to maintain those just and enlightened principles of national intercourse for which this Government has ever contended. In the shock of contending empires it is only by assuming a resolute bearing and clothing themselves with defensive armor that neutral nations can maintain their independent rights.

The excitement which grew out of the territorial controversy between the United States and Great Britain having in a great measure subsided, it is hoped that a favorable period is approaching for its final settlement. Both Governments must now be convinced of the dangers with which the question is fraught, and it must be their desire, as it is their interest, that this perpetual cause of irritation should be removed as speedily as practicable.

In my last annual message you were informed that the proposition for a commission of exploration and survey promised by Great Britain had been received, and that a counter project, including also a provision for the certain and final adjustment of the limits in dispute, was then before the British Government for its consideration.

The answer of that Government, accompanied by additional propositions of its own, was received through its minister here since your separation. These were promptly considered, such as were deemed correct in principle and consistent with a due regard to the just rights of the United States and of the State of Maine concurred in, and the reasons for dissenting from the residue, with an additional suggestion on our part, communicated by the Secretary of State to Mr.

Fox. That minister, not feeling himself sufficiently instructed upon some of the points raised in the discussion, felt it to be his duty to refer the matter to his own Government for its further decision. Having now been for some time under its advisement, a speedy answer may be confidently expected. From the character of the points still in difference and the undoubted disposition of both parties to bring the matter to an early conclusion, I look with entire confidence to a prompt and satisfactory termination of the negotiation.

Three commissioners were appointed shortly after the adjournment of Congress under the act of the last session providing for the exploration and survey of the line which separates the States of Maine and New Hampshire from the British Provinces. They have been actively employed until their progress was interrupted by the inclemency of the season, and will resume their labors as soon as practicable in the ensuing year.

It is understood that their respective examinations will throw new light upon the subject in controversy and serve to remove any erroneous impressions which may have been made elsewhere prejudicial to the rights of the United States. It was, among other reasons, with a view of preventing the embarrassments which in our peculiar system of government impede and complicate negotiations involving the territorial rights of a State that I thought it my duty, as you have been informed on a previous occasion, to propose to the British Government, through its minister at Washington, that early steps should be taken to adjust the points of difference on the line of boundary from the entrance of Lake Superior to the most northwestern point of the Lake of the Woods by the arbitration of a friendly power in conformity with the seventh article of the treaty of Ghent.

No answer has yet been returned by the British Government to this proposition. With Austria, France, Prussia, Russia, and the remaining powers of Europe I am happy to inform you our relations continue to be of the most friendly character. With Belgium a treaty of commerce and navigation, based upon liberal principles of reciprocity and equality, was concluded in March last, and, having been ratified by the Belgian Government, will be duly laid before the Senate.

It is a subject of congratulation that it provides for the satisfactory adjustment of a long-standing question of controversy, thus removing the only obstacle which could obstruct the friendly and mutually advantageous intercourse between the two nations. A messenger has been dispatched with the Hanoverian treaty to Berlin, where, according to stipulation, the ratifications are to be exchanged.

I am happy to announce to you that after many delays and difficulties a treaty of commerce and navigation between the United States and Portugal was concluded and signed at Lisbon on the 26th of August last by the plenipotentiaries of the two Governments. Its stipulations are founded upon those principles of mutual liberality and advantage which the United States have always sought to make the basis of their intercourse with foreign powers, and it is hoped they will tend to foster and strengthen the commercial intercourse of the two countries.

Under the appropriation of the last session of Congress an agent has been sent to Germany for the purpose of promoting the interests of our tobacco trade. The commissioners appointed under the convention for the adjustment of claims of citizens of the United States upon Mexico having met and organized at Washington in August last, the papers in the possession of the Government relating to those claims were communicated to the board.

The claims not embraced by that convention are now the subject of negotiation between the two Governments through the medium of our minister at Mexico. Nothing has occurred to disturb the harmony of our relations with the different Governments of South America. I regret, however, to be obliged to inform you that the claims of our citizens upon the late Republic of Colombia have not yet been satisfied by the separate Governments into which it has been resolved.

The charge' d'affaires of Brazil having expressed the intention of his Government not to prolong the treaty of 1828, it will cease to be obligatory upon either party on the 12th day of December, 1841, when the extensive commercial intercourse between the United States and that vast Empire will no longer be regulated by express stipulations.

It affords me pleasure to communicate to you that the Government of Chili has entered into an agreement to indemnify the claimants in the case of the Macectonian for American property seized in 1819, and to add that information has also been received which justifies the hope of an early adjustment of the remaining claims upon that Government.

The commissioners appointed in pursuance of the convention between the United States and Texas for marking the boundary between them have, according to the last report received from our commissioner, surveyed and established the whole extent of the boundary north along the western bank of the Sabine River from its entrance into the Gulf of Mexico to the thirty-second degree of north latitude.

The commission adjourned on the 16th of June last, to reassemble on the 1st of November for the purpose of establishing accurately the intersection of the thirty-second degree of latitude with the western bank of the Sabine and the meridian line thence to Red River. It is presumed that the work will be concluded in the present season.

The present sound condition of their finances and the success with which embarrassments in regard to them, at times apparently insurmountable, have been overcome are matters upon which the people and Government of the United States may well congratulate themselves. An overflowing Treasury, however it may be regarded as an evidence of public prosperity, is seldom conducive to the permanent welfare of any people, and experience has demonstrated its incompatibility with the salutary action of political institutions like those of the United States.

Our safest reliance for financial efficiency and independence has, on the contrary, been found to consist in ample resources unencumbered with debt, and in this respect the Federal Government occupies a singularly fortunate and truly enviable position. When I entered upon the discharge of my official duties in March, 1837, the act for the distribution of the surplus revenue was in a course of rapid execution.

Nearly $28,000,000 of the public moneys were, in pursuance of its provisions, deposited with the States in the months of January, April, and July of that year. In May there occurred a general suspension of specie payments by the banks, including, with very few exceptions, those in which the public moneys were deposited and upon whose fidelity the Government had unfortunately made itself dependent for the revenues which had been collected from the people and were indispensable to the public service.

This suspension and the excesses in banking and commerce out of which it arose, and which were greatly aggravated by its occurrence, made to a great extent unavailable the principal part of the public money then on hand, suspended the collection of many millions accruing on merchants' bonds, and greatly reduced the revenue arising from customs and the public lands.

These effects have continued to operate in various degrees to the present period, and in addition to the decrease in the revenue thus produced two and a half millions of duties have been relinquished by two biennial reductions under the act of 1833, and probably as much more upon the importation of iron for railroads by special legislation.

Whilst such has been our condition for the last four years in relation to revenue, we have during the same period been subjected to an unavoidable continuance of large extraordinary expenses necessarily growing out of past transactions, and which could not be immediately arrested without great prejudice to the public interest.

Of these, the charge upon the Treasurer in consequence of the Cherokee treaty alone, without adverting to others arising out of Indian treaties, has already exceeded $5,000,000; that for the prosecution of measures for the removal of the Seminole Indians, which were found in progress, has been nearly fourteen millions, and the public buildings have required the unusual sum of nearly three millions.

It affords me, however, great pleasure to be able to say that from the commencement of this period to the present day every demand upon the Government, at home or abroad, has been promptly met. This has been done not only without creating a permanent debt or a resort to additional taxation in any form, but in the midst of a steadily progressive reduction of existing burdens upon the people, leaving still a considerable balance of available funds which will remain in the Treasury at the end of the year.

The small amount of Treasury notes, not exceeding $4,500,000, still outstanding, and less by twenty-three millions than the United States have in deposit with the States, is composed of such only as are not yet due or have not been presented for payment. They may be redeemed out of the accruing revenue if the expenditures do not exceed the amount within which they may, it is thought, be kept without prejudice to the public interest, and the revenue shall prove to be as large as may justly be anticipated.

Among the reflections arising from the contemplation of these circumstances, one, not the least gratifying, is the consciousness that the Government had the resolution and the ability to adhere in every emergency to the sacred obligations of law, to execute all its contracts according to the requirements of the Constitution, and thus to present when most needed a rallying point by which the business of the whole country might be brought back to a safe and unvarying standard -- a result vitally important as well to the interests as to the morals of the people.

There can surely now be no difference of opinion in regard to the incalculable evils that would have arisen if the Government at that critical moment had suffered itself to be deterred from upholding the only true standard of value, either by the pressure of adverse circumstances or the violence of unmerited denunciation.

The manner in which the people sustained the performance of this duty was highly honorable to their fortitude and patriotism. It can not fail to stimulate their agents to adhere under all circumstances to the line of duty and to satisfy them of the safety with which a course really right and demanded by a financial crisis may in a community like ours be pursued, however apparently severe its immediate operation.

The policy of the Federal Government in extinguishing as rapidly as possible the national debt, and subsequently in resisting every temptation to create a new one, deserves to be regarded in the same favorable light. Among the many objections to a national debt, the certain tendency of public securities to concentrate ultimately in the coffers of foreign stockholders is one which is every day gathering strength.

Already have the resources of many of the States and the future industry of their citizens been indefinitely mortgaged to the subjects of European Governments to the amount of twelve millions annually to pay the constantly accruing interest on borrowed money -- a sum exceeding half the ordinary revenues of the whole United States.

The pretext which this relation affords to foreigners to scrutinize the management of our domestic affairs, if not actually to intermeddle with them, presents a subject for earnest attention, not to say of serious alarm. Fortunately, the Federal Government, with the exception of an obligation entered into in behalf of the District of Columbia, which must soon be discharged, is wholly exempt from any such embarrassment.

It is also, as is believed, the only Government which, having fully and faithfully paid all its creditors, has also relieved itself entirely from debt. To maintain a distinction so desirable and so honorable to our national character should be an object of earnest solicitude. Never should a free people, if it be possible to avoid it, expose themselves to the necessity of having to treat of the peace, the honor, or the safety of the Republic with the governments of foreign creditors, who, however well disposed they may be to cultivate with us in general friendly relations, are nevertheless by the law of their own condition made hostile to the success and permanency of political institutions like ours.

Most humiliating may be the embarrassments consequent upon such a condition. Another objection, scarcely less formidable, to the commencement of a new debt is its inevitable tendency to increase in magnitude and to foster national extravagance. He has been an unprofitable observer of events who needs at this day to be admonished of the difficulties which a government habitually dependent on loans to sustain its ordinary expenditures has to encounter in resisting the influences constantly exerted in favor of additional loans;

By capitalists, who enrich themselves by government securities for amounts much exceeding the money they actually advance -- a prolific source of individual aggrandizement in all borrowing countries; by stockholders, who seek their gains in the rise and fall of public stocks; and by the selfish importunities of applicants for appropriations for works avowedly for the accommodation of the public, but the real objects of which are too frequently the advancement of private interests.

The known necessity which so many of the States will be under to impose taxes for the payment of the interest on their debts furnishes an additional and very cogent reason why the Federal Governments should refrain from creating a national debt, by which the people would be exposed to double taxation for a similar object.

We possess within ourselves ample resources for every emergency, and we may be quite sure that our citizens in no future exigency will be unwilling to supply the Government with all the means asked for the defense of the country. In time of peace there can, at all events, be no justification for the creation of a permanent debt by the Federal Government.

Its limited range of constitutional duties may certainly under such circumstances be performed without such a resort. It has, it is seen, been avoided during four years of greater fiscal difficulties than have existed in a similar period since the adoption of the Constitution, and one also remarkable for the occurrence of extraordinary causes of expenditures.

But to accomplish so desirable an object two things are indispensable: First, that the action of the Federal Government be kept within the boundaries prescribed by its founders, and, secondly, that all appropriations for objects admitted to be constitutional, and the expenditure of them also, be subjected to a standard of rigid but well-considered and practical economy.

The first depends chiefly on the people themselves -- the opinions they form of the true construction of the Constitution and the confidence they repose in the political sentiments of those they select as their representatives in the Federal Legislature; the second rests upon the fidelity with which their more immediate representatives and other public functionaries discharge the trusts committed to them.

The duty of economizing the expenses of the public service is admitted on all hands; yet there are few subjects upon which there exists a wider difference of opinion than is constantly manifested in regard to the fidelity with which that duty is discharged. Neither diversity of sentiment nor even mutual recriminations upon a point in respect to which the public mind is so justly sensitive can well be entirely avoided, and least so at periods of great political excitement.

An intelligent people, however, seldom fail to arrive in the end at correct conclusions in such a matter. Practical economy in the management of public affairs can have no adverse influence to contend with more powerful than a large surplus revenue, and the unusually large appropriations for 1837 may without doubt, independently of the extraordinary requisitions for the public service growing out of the state of our Indian relations, be in no inconsiderable degree traced to this source.

The sudden and rapid distribution of the large surplus then in the Treasury and the equally sudden and unprecedentedly severe revulsion in the commerce and business of the country, pointing with unerring certainty to a great and protracted reduction of the revenue, strengthened the propriety of the earliest practicable reduction of the public expenditures.

But to change a system operating upon so large a surface and applicable to such numerous and diversified interests and objects was more than the work of a day. The attention of every department of the Government was immediately and in good faith directed to that end, and has been so continued to the present moment.