Collection of the Museum of American Finance
Checks for the enlargement of the Erie Canal, dated July 26, 1842 and September 14, 1849. The Erie Canal
was a prime example of the mixed financing model that combined investor dollars and public monies.
of infrastructure construction. They used
a mixture of investor dollars and public
monies to fund many projects, with the
365-mile Erie Canal being a prime example
of this mixed financing model. By the
end of Madison’s presidency, half a dozen
companies were operating primitive versions
of short-line railroads, and they were
doing so without any federal funding.
From 1825–29, President John Quincy
Adams enthusiastically embraced the federal
role in the development of internal
improvements. This President approved
congressional appropriations for many
projects. He also authorized the purchase
of stock in several canal companies and the
distribution of more federal land grants to
companies building turnpikes and canals.
Even with these clear signs of presidential
support, Congress remained unwilling to
develop a plan for an integrated system
of national transportation improvements
or to pass a constitutional amendment
addressing the federal role in financing
such a program.
At the time, only the most insightful
seemed to appreciate an ominous change
in the attitude of many congressmen as
they contemplated internal improvements.
Lawmakers had always acted based
on their own local and partisan concerns.
In the 19th and 20th congresses, however,
their votes began reflecting the growing
differences between East and West,
as well as North and South. Southern
legislators in particular began demonstrating
their concern that a federal government
empowered to interfere in one
aspect of their states’ prerogatives would
be tempted to exercise its influence over
others, including the maintenance of their
“peculiar institution.” All the same, growing
public demands insured that the construction
of all types of internal improvements
continued apace. During Adams’
one term in office, federal spending on
those projects exceeded $3.8 million.
In his 1829 inaugural address, President
Andrew Jackson called for a less intrusive
and less active federal government. Jackson
no had objection to using federal funds
for river and harbor improvements, such
as breakwaters and piers, and for related
aids to navigation such as lighthouses. The
Constitution did indeed permit spending
on such projects in the furtherance
of national defense. The President also
supported the establishment of improved
transportation networks throughout the
incorporated territories in the West and
the South. While he acknowledged the
federal government’s role in that work, he
insisted that the individual states, not the
federal government, were responsible for
such projects within the Union’s formal
boundaries.
In May 1830, Jackson demonstrated
his opposition to direct federal involvement
in internal improvements within the
states by vetoing a federal investment in
the company building the Maysville Road
turnpike in Kentucky. He also suggested
the sale of all existing ownership interests
in such projects. The President did sign a
bill extending the Cumberland Road, but
he relinquished federal authority over that
road by transferring the responsibility for
future improvements to the several states
through which it ran.
During his eight years in office, President
Jackson supported more than $14
million worth of internal improvements,
mostly throughout the territories. In his
March 1837 farewell address, the President
took credit for ending the federal government’s
role in financing internal improvements
in the states. More accurately,
he put a stop to the on-again-off-again
efforts to establish an integrated, federally
financed system of transportation links
throughout the Union.
Despite President Jackson’s actions,
internal improvements remained very
popular across the nation. Many states
amended their constitutions to provide
financial support for roads, canals and
railroads, even if doing so meant incurring
more debt. Collectively, the states that had
issued about $25 million worth of bonds
during the 1820s floated more than $40
million worth in the first half of the 1830s,
and almost $108 million more from 1835-
37. Some $109 million of their combined
total debt of $172 million at the end of 1838
had been earmarked for turnpikes, canals
and railroads.
The Panic of 1837 had a devastating
impact on the construction of internal
improvements. During the presidency
of Martin Van Buren (1837–41), federal
spending in that area fell to $7.5 million,
much of which involved improvements
to rivers and harbors. Many states
defaulted on their debts; others amended
their constitutions to prohibit spending
18 FINANCIAL HISTORY | Summer 2020 | www.MoAF.org