From A Most Magnificent Machine: America Adopts the Railroad, 1825-1862, by Craig Miner (U. Press of Kansas, 2010), pp. 79-81:
The progress of the years preceding the 1837 Panic surely would resume, many wrote. Apparently insurmountable obstacles had been overcome. The “howling wilderness” was disappearing. “McAdamized highways, railroads and canals, have pervaded the country in every direction, giving free circulation to the products of mechanical skill, of art, and of labor, and animating the whole, immense, diversified country, with every sort of active business and intelligent enterprise.” That was no mean feat. No wonder, however, that types arose who tended to abuse the opportunity—people all too “shrewdly alive to their own interest.” There came a “universal mania” for wealth. “The old beaten track of plodding for our gains, was forsaken and contemned by the restless anxiety for change, and all seemed to engage in the alluring game of running hazards.” A long period of peace and prosperity emboldened them, as though the boom would never end. Yet there was wide consensus that the achievement was impressive. “We take the ground,” wrote a Baltimore man, “that the laborer who turns up a spadeful of earth in excavating a canal, or strikes a blow in constructing a railroad, becomes, by so doing, one of the builders up of a system, the benefits of which will endure so long as the continent on which we live shall endure.”
In the wake of the panic came a long and related crisis over state debts, a large proportion of which had been contracted in order to build railroads. The national debt was nonexistent; in fact there was often a surplus, but it was different with the states, which had borne the brunt of subsidizing rail finance. An Ohio editor estimated in 1839 that eighteen states had authorized public stock for canals and railroads amounting to $170 million, “which is as much a mortgage on our farms as was the national debt.” Interest ran about $12 million per year. It was ridiculous, the regional press thought, that Ohio had an agent in Europe to try to arrange more debt. The Ohio state legislature at its last session had, according to one critic, done more to “degrade the State abroad, and beggar its people at home, than the accumulated energy and labor of years can undo.”
Maybe it was not all bad, a New Yorker commented. Speculation had created 3,000 miles of railroad. “The parent may die, but the offspring will live to enlighten and bless.” A Massachusetts man argued that the Western Railroad there would be completed eventually and would be a good thing. Delays required credit, and credit required the payment of interest and the raising of taxes, but this was not “inconsistent with the business-like character of a business people.” The states received many indirect benefits from the railroads that did not show on their balance sheets proper.
To some that seemed cold comfort. People had been too extravagant in generally prosperous times, importing, for example, $41 million per year in foreign wines—half as much as was spent for railroad iron. Depressions came from overtrading. People seemed to have commenced business on too large a scale. There was a penchant for outright gambling. “Confidence has been destroyed; public and private faith and credit have been grossly abused, and foul deeds of iniquity have been committed.” Public business seemed to be influenced primarily by private business lobbies, and no producers appeared in proportion to the growth in borrowing. The credit of the states had been all too good. New York owed $23 million in 1839, Louisiana $23 million, Pennsylvania $27 million, Maryland $11 million, Massachusetts $4 million, Alabama $10 million, and Tennessee $7 million. And states were adding debt all the time. “Our credit is so good that it will ruin us, if we do not stop and think of the consequences of so severely testing it…. Are we not getting in jeopardy the dearest interests, the honor and independence of our country, and selling our glorious national birthright for a mess of pottage?”