Since the liberal proposition of the United States was authorized to be made, in April last, large expenditures have been incurred and the precious blood of many of our patriotic fellow-citizens has been shed in the prosecution of the war.  This consideration and the obstinate perseverance of Mexico in protracting the war must influence the terms of peace which it may be deemed proper hereafter to accept.  Our arms having been everywhere victorious, having subjected to our military occupation a large portion of the enemy’s country, including his capital, and negotiations for peace having failed, the important questions arise, in what manner the war ought to be prosecuted and what should be our future policy.  I can not doubt that we should secure and render available the conquests which we have already made, and that with this view we should hold and occupy by our naval and military forces all the ports, towns, cities, and Provinces now in our occupation or which may hereafter fall into our possession; that we should press forward our military operations and levy such military contributions on the enemy as may, as far as practicable, defray the future expenses of the war.

Had the Government of Mexico acceded to the equitable and liberal terms proposed, that mode of adjustment would have been preferred, Mexico having declined to do this and failed to offer any other terms which could be accepted by the United States, the national honor, no less than the public interests, requires that the war should be prosecuted with increased energy and power until a just and satisfactory peace can be obtained.  In the meantime, as Mexico refuses all indemnity, we should adopt measures to indemnify ourselves by appropriating permanently a portion of her territory.  Early after the commencement of the war New Mexico and the Californias were taken possession of by our forces.  Our military and naval commanders were ordered to conquer and hold them, subject to be disposed of by a treaty of peace.

These Provinces are now in our undisputed occupation, and have been so for many months, all resistance on the part of Mexico having ceased within their limits.  I am satisfied that they should never be surrendered to Mexico.  Should Congress concur with me in this opinion, and that they should be retained by the United States as indemnity, I can perceive no good reason why the civil jurisdiction and laws of the United States should not at once be extended over them.  To wait for a treaty of peace such as we are willing to make, by which our relations toward them would not be changed, can not be good policy; whilst our own interest and that of the people inhabiting them require that a stable, responsible, and free government under our authority should as soon as possible be established over them.  Should Congress, therefore, determine to hold these Provinces permanently, and that they shall hereafter be considered as constituent parts of our country, the early establishment of Territorial governments over them will be important for the more perfect protection of persons and property; and I recommend that such Territorial governments be established.  It will promote peace and tranquillity among the inhabitants, by allaying all apprehension that they may still entertain of being again subjected to the jurisdiction of Mexico.  I invite the early and favorable consideration of Congress to this important subject.