With the Barbary Powers we continue in harmony, with the exception of an unjustifiable proceeding of the Dey of Algiers toward our consul to that Regency. Its character and circumstances are now laid before you, and will enable you to decide how far it may, either now or hereafter, call for any measures not within the limits of the Executive authority.

With our Indian neighbors the public peace has been steadily maintained. Some instances of individual wrong have, as at other times, taken place, but in no wise implicating the will of the nation. Beyond the Mississippi the loways, the Sacs, and the Alabamas have delivered up for trial and punishment individuals from among themselves accused of murdering citizens of the United States. On this side of the Mississippi the Creeks are exerting themselves to arrest offenders of the same kind, and the Choctaws have manifested their readiness and desire for amicable and just arrangements respecting depredations committed by disorderly persons of their tribe. And, generally, from a conviction that we consider them as a part of ourselves, and cherish with sincerity their rights and interests, the attachment of the Indian tribes is gaining strength daily—is extending from the nearer to the more remote, and will amply requite us for the justice and friendship practiced toward them. Husbandry and household manufacture are advancing among them more rapidly with the Southern than Northern tribes, from circumstances of soil and climate, and one of the two great divisions of the Cherokee Nation have now under consideration to solicit the citizenship of the United States, and to be identified with us in laws and government in such progressive manner as we shall think best.

In consequence of the appropriations of the last session of Congress for the security of our seaport towns and harbors, such works of defense have been erected as seemed to be called for by the situation of the several places, their relative importance, and the scale of expense indicated by the amount of the appropriation. These works will chiefly be finished in the course of the present season, except at New York and New Orleans, where most was to be done; and although a great proportion of the last appropriation has been expended on the former place, yet some further views will be submitted to Congress for rendering its security entirely adequate against naval enterprise. A view of what has been done at the several places, and of what is proposed to be done, shall be communicated as soon as the several reports are received.

Of the gunboats authorized by the act of December last, it has been thought necessary to build only 103 in the present year. These, with those before possessed, are sufficient for the harbors and waters most exposed, and the residue will require little time for their construction when it shall be deemed necessary.

Under the act of the last session for raising an additional military force so many officers were immediately appointed as were necessary for carrying on the business of recruiting, and in proportion as it advanced others have been added. We have reason to believe their success has been satisfactory, although such returns have not yet been received as enable me to present you a statement of the numbers engaged.

I have not thought it necessary in the course of the last season to call for any general detachments of militia or of volunteers under the laws passed for that purpose. For the ensuing season, however, they will be required to be in readiness should their service be wanted, Some small and special detachments have been necessary to maintain trie laws of embargo on that portion of our northern frontier which offered peculiar facilities for evasion, but these were replaced as soon as it could be done by bodies of new recruits. By the aid of these and of the armed vessels called into service in other quarters the spirit of disobedience and abuse, which manifested itself early and with sensible effect while we were unprepared to meet it, has been considerably repressed.

Considering the extraordinary character of the times in which we live, our attention should unremittingly be fixed on the safety of our country. For a people who are free, and who mean to remain so, a well organized and armed militia is their best security. It is therefore incumbent on us at every meeting to revise the condition of the militia, and to ask ourselves if it is prepared to repel a powerful enemy at every point of our territories exposed to invasion. Some of the States have paid a laudable attention to this object, but every degree of neglect is to be found among others. Congress alone having the power to produce an uniform state of preparation in this great organ of defense, the interests which they so deeply feel in their own and their country's security will present this as among the most important objects of their deliberation.

Under the acts of March 11 and April 23 respecting arms, the difficulty of procuring them from abroad during the present situation and dispositions of Europe induced us to direct our whole efforts to the means of internal supply. The public factories have therefore been enlarged, additional machineries erected, and, in proportion as artificers can be found or formed, their effect, already more than doubled, may be increased so as to keep pace with the yearly increase of the militia. The annual sums appropriated by the latter act have been directed to the encouragement of private factories of arms, and contracts have been entered into with individual undertakers to nearly the amount of the first year's appropriation.

The suspension of our foreign commerce, produced by the injustice of the belligerent powers, and the consequent losses and sacrifices of our citizens are subjects of just concern. The situation into which we have thus been forced has impelled us to apply a pbrtion of our industry and capital to internal manufactures and improvements. The extent of this conversion is daily increasing, and little doubt remains that the establishments formed and forming will, under the auspices of cheaper materials and subsistence, the freedom of labor from taxation with us, and of protecting duties and prohibitions, become permanent. The commerce with the Indians, too, within our own boundaries is likely to receive abundant aliment from the same internal source, and will secure to them peace and the progress of civilization, undisturbed by practices hostile to both.

The accounts of the receipts and expenditures during the year ending the 30th of September last being not yet made up, a correct statement will hereafter be transmitted from the Treasury. In the meantime it is ascertained that the receipts have amounted to near $18,000,000, which, with the eight millions and a half in the Treasury at the beginning of the year, have enabled us, after meeting the current demands and interest incurred, to pay $2,300,000 of the principal of our funded debt, and left us in the Treasury on that day near $14,000,000. Of these, $5,350,000 will be necessary to pay what will be clue on the 1st day of January next, which will complete the reimbursement of the 8 per cent stock. These payments, with those made in the six years and a half preceding, will have extinguished $33,580,000 of the principal of the funded debt, being the whole which could be paid or purchased within the limits of the law and of our contracts, and the amount of principal thus discharged will have liberated the revenue from about $2,000,000 of interest and added that sum annually to the disposable surplus. The probable accumulation of the surpluses of revenue beyond what can be applied to the payment of the public debt whenever the freedom and safety of our commerce shall be restored merits the consideration of Congress. Shall it lie unproductive in the public vaults? Shall the revenue be reduced? Or shall it not rather be appropriated to the improvements of roads, canals, rivers, education, and other great foundations of prosperity and union under the powers which Congress may already possess or such amendment of the Constitution as may be approved by the States? While uncertain of the course of things, the time may be advantageously employed in obtaining the powers necessary for a system of improvement, should that be thought best.