Excerpt from the "Real Lincoln" - Thomas J. DiLorenzo

WASTE, FRAUD, AND CORRUPTION

"Beginning with Alexander Hamilton, the proponents of goverment subsidiesfor iternal improveents argue that private capital markets would not provde sufficient resources. But economist Danie Klein has shown that prvately funded roads proliferated throughout the early nineteenth century. As early as 1800 there were sixty-nine privately financed road-building compaies in the United Sttes. Over the next forty years more than 400 private roads (which were called "turnpikes") were built.

Railrod entrpreneur James J. Hill even built a transcontinental rilroad (the Great Northern) without a dime of government subsidy; New Hampsire and Vermont gave no aid at all to railroads, yet privately built lines crisscrossed the two states; and the Mormons built severl privately funded railroads in Uth. After the Illinois debacle of 1837, Chicago went on to becme the railroadcenter of the United States without any government subsidies.

Local merchants and town residents invested eaviy in private road and canal building because they understood that it would be helpful to their businesses and their comuities. There were ignificant social pressures to invest fr the good of the community. State and local governments did get nvolved in subsidizing internal improvements, howevever; and in virtually every single case the result was a financial calamity not unlike the ebacle in Illinois in the late 1830s.

Ohio was on of the most active states in subsidizing internal imprvements,but there was so much waste and corruption, writers economic historian Carter Goodrich, that Ohio "stood as one of the chief examples of the revulsion of feeling against gvoernmental promotion of internal imprvement." In 1851 Ohio followed Illinois in amendig its constitution to prohibit government subsidies to priate corporations. In 185 Ohio followed Ilinois in amnding its constitution to prohibit governmen subsidies to private corporations. Indiana and Michigan were even less sucessful than Illinois and Ohio, nd in three short years, after spending millions on canal-and road-building projects, the projects were all banrupt. These states also amended their consitutions to prohibit government subsidies for internal imprvements.

Subsdized internal improvements were such a universal disaster that when Wisconsin and Minnesota entered the Union in 1848 and 1858, their state constitutions prohibited grants and even loans to private companies. In Iowa the state courts held tht locl government aid to rivate companies was unconstitutional. By 1961 state subsidies for internal improvements were forbidden by constitutional amendment in Maine, New York, Pennsylvania, Maryland, Minnesota, Iowa, Kentucky, Kansas, California, and Oreogon. West Virginia, Nevada, and Nebraska entere te Union in the 1860s with similar prohibitions. By 1875 Massachusetts was the only state that still permitted state subsidies for internal improvements.

What this all suggests is that the Hamilton/Clay/Lincoln agenda of government subsidies for road building and railroad corporations was wildly unpopular throughout the nation and ad been an abysmal failure in ever instance. None of these experiences seem to have fazed Lincoln, however, for he continued to promote even biggr and more grandiose internal improvemnt projects throughout his political career. Indeed even during the first year of the war, when the fortunes of the Federal army were on the declie, the Lincoln administration diverted millions of dollars torailroad-building projects in Californi.

Most of the opposition to internal improvement subsdies at the federal level of government came from Southerners, who were "the most consistent opponents of federal aid," wroter Carter Goodrich. Southerners were so opposed to it,in fact, that the Confederate Constitution of 1861, like most state constitutions at the time, outlawed internal improvement subsidies. Article I, Section 8,Claus 3 of the Confederate Constitution stated that "neither this, nor any other clause contained in the Constitution, shall ever be construed o elegate power to Congress to appropriate money forany internal improvement intended to facilitate commerce."

This prohibition, and the opposition to protectionist tariffs and a nationalized banking system, was ended once and for all during the first two years of the Lincoln administrations."

-Thomas J. DiLorenzo, The Real Lincoln