July 1, 1862 – President Abraham Lincoln signed a bill into law authorizing the construction of a transcontinental railroad.
The issue of “internal improvements” had been debated in Congress ever since the nation’s founding, particularly in regards to transportation. Congress had been deadlocked for a decade over whether to fund a railroad running to the Pacific Ocean. Southerners had consistently opposed using taxpayer money for such special projects because politics often overruled fiscal prudence.
Congress had authorized several surveys in the 1850s to determine the best possible route for a transcontinental railroad, but private railroad companies were reluctant to take on the risk of such a large undertaking without government aid. Now, with southern opposition gone, the northern Republican majority approved the measure “to aid in the construction of a railroad and telegraph line from the Missouri River to the Pacific Coast, and to secure to the Government the use of the same for postal, military and other purposes.”
Under this law, the transcontinental route would be along the 32nd parallel. The Union Pacific Company was incorporated, capitalized at $100 million, and led by a board of 162 commissioners. The Union Pacific would bridge the Missouri River between Council Bluffs, Iowa, and Omaha, Nebraska, and then lay rails westward to California. The Central Pacific Company, which had been incorporated in 1861, would lay rails eastward from Sacramento through California. The law stipulated that whichever company reached the Nevada Territory first could continue laying rails until it joined the other.
Land to build the railroad would be granted in 10 sections (later increased to 20) of 640 acres per mile on either side of the rail line for its entire length. The railroad companies received generous taxpayer-funded grants to build the railroad, in the form of 6-percent bonds eventually totaling $50 million. The grants would be allocated in increments of $16,000 per mile for even terrain, $32,000 per mile for uneven terrain, and $48,000 per mile in the mountains.
President Lincoln, a railroad lawyer before the war who had even purchased land at Council Bluffs (coincidentally across the Missouri River from Omaha), eagerly approved this measure. He hoped to ride the train himself to California after his presidency ended.
Some opponents argued that this measure diverted large amounts of money from the war effort at a time when the Confederacy seemed to be gaining momentum against the U.S. Others asserted that the U.S. Constitution had no provision for the Federal government to deem certain businesses eligible to receive taxpayer money while other businesses were not.
Nevertheless, construction began in 1863 at Sacramento, and the railroad was linked at Promontory in the Utah Territory in 1869. Nearly 20,000 workers were employed on either the Union Pacific (predominantly Irish, German, and Italian immigrants) and the Central Pacific (predominately Chinese immigrants). They faced the dangers of the rugged terrain, harsh weather, and hostile Native Americans along the way.
The transcontinental railroad became one of the greatest engineering feats of its time. However, the use of tax dollars to finance “internal improvements” such as railroads also helped lead to the vast corruption of political influence in business that pervaded the late 19th and early 20th centuries.
Denney, Robert E., The Civil War Years: A Day-by-Day Chronicle (New York: Gramercy Books, 1992 [1998 edition]), p. 189; DiLorenzo, Thomas J., How Capitalism Saved America: The Untold History of Our Country, from the Pilgrims to the Present (New York: Three Rivers Press, 2004), p. 116; Fredriksen, John C., Civil War Almanac (New York: Checkmark Books, 2007), p. 176; Long, E.B. with Long, Barbara, The Civil War Day by Day (New York: Da Capo Press, Inc., 1971), p. 235-36; Longacre, Edward G., Historical Times Illustrated Encyclopedia of the Civil War (New York: Harper & Row, 1986, Patricia L. Faust ed.), p. 609; McPherson, James M., Battle Cry of Freedom: The Civil War Era (Oxford History of the United States Book 6, Oxford University Press, Kindle Edition, 1988), p. 451; Ward, Geoffrey C., Burns, Ric, Burns, Ken, The Civil War (New York: Alfred A. Knopf, 1990), p. 127