It is hoped that all pending questions with Spain growing out of the affairs in Cuba may be adjusted in the spirit of peace and conciliation which has hitherto guided the two powers in their treatment of such questions.

To give importance to and to add to the efficiency of our diplomatic relations with Japan and China, and to further aid in retaining the good opinion of those peoples, and to secure to the United States its share of the commerce destined to flow between those nations and the balance of the commercial world, I earnestly recommend that an appropriation be made to support at least four American youths in each of those countries, to serve as a part of the official family of our ministers there.  Our representatives would not even then be placed upon an equality with the representatives of Great Britain and of some other powers.  As now situated, our representatives in Japan and China have to depend for interpreters and translators upon natives of those countries who know our language imperfectly, or procure for the occasion the services of employees in foreign business houses or the interpreters to other foreign ministers.

I would also recommend liberal measures for the purpose of supporting the American lines of steamers now plying between San Francisco and Japan and China, and the Australian line—­almost our only remaining lines of ocean steamers—­and of increasing their services.

The national debt has been reduced to the extent of $86,057,126.80 during the year, and by the negotiation of national bonds at a lower rate of interest the interest on the public debt has been so far diminished that now the sum to be raised for the interest account is nearly $17,000,000 less than on the 1st of March, 1869.  It was highly desirable that this rapid diminution should take place, both to strengthen the credit of the country and to convince its citizens of their entire ability to meet every dollar of liability without bankrupting them.  But in view of the accomplishment of these desirable ends; of the rapid development of the resources of the country; its increasing ability to meet large demands, and the amount already paid, it is not desirable that the present resources of the country should continue to be taxed in order to continue this rapid payment.  I therefore recommend a modification of both the tariff and internal-tax law.  I recommend that all taxes from internal sources be abolished, except those collected from spirituous, vinous, and malt liquors, tobacco in its various forms, and from stamps.

In readjusting the tariff I suggest that a careful estimate be made of the amount of surplus revenue collected under the present laws, after providing for the current expenses of the Government, the interest account, and a sinking fund, and that this surplus be reduced in such a manner as to afford the greatest relief to the greatest number.  There are many articles not produced at home, but which enter largely