The suggestions in this report in regard to the complication and progressive expansion of the business of the different bureaus of the Department, to the pension system, to the colonization of Indian tribes, and the recommendations in relation to various improvements in the District of Columbia are especially commended to your consideration.

The report of the Postmaster-General presents fully the condition of that Department of the Government.  Its expenditures for the last fiscal year were $10,407,868 and its gross receipts $7,620,801, making an excess of expenditure over receipts of $2,787,046.  The deficiency of this Department is thus $744,000 greater than for the year ending June 30, 1853.  Of this deficiency $330,000 is to be attributed to the additional compensation allowed to postmasters by the act of Congress of June 22, 1854.  The mail facilities in every part of the country have been very much increased in that period, and the large addition of railroad service, amounting to 7,908 miles, has added largely to the cost of transportation.

The inconsiderable augmentation of the income of the Post-Office Department under the reduced rates of postage and its increasing expenditures must for the present make it dependent to some extent upon the Treasury for support.  The recommendations of the Postmaster-General in relation to the abolition of the franking privilege and his views on the establishment of mail steamship lines deserve the consideration of Congress.  I also call the special attention of Congress to the statement of the Postmaster-General respecting the sums now paid for the transportation of mails to the Panama Railroad Company, and commend to their early and favorable consideration the suggestions of that officer in relation to new contracts for mail transportation upon that route, and also upon the Tehuantepec and Nicaragua routes.

The United States continue in the enjoyment of amicable relations with all foreign powers.

When my last annual message was transmitted to Congress two subjects of controversy, one relating to the enlistment of soldiers in this country for foreign service and the other to Central America, threatened to disturb the good understanding between the United States and Great Britain.  Of the progress and termination of the former question you were informed at the time, and the other is now in the way of satisfactory adjustment.

The object of the convention between the United States and Great Britain of the 19th of April, 1850, was to secure for the benefit of all nations the neutrality and the common use of any transit way or interoceanic communication across the Isthmus of Panama which might be opened within the limits of Central America.  The pretensions subsequently asserted by Great Britain to dominion or control over territories in or near two of the routes, those of Nicaragua and Honduras, were deemed by the United States not merely incompatible