Thomas Sargent gives an interesting perspective in An American History Lesson for Europe, in the Wall Street Journal 2/3/12.
To finance canals and railroads, many state governments incurred large debts in the 1820s and 1830s. A financial crisis in the late 1830s pushed many of those state debts into default.
Appealing to the precedent set by the 1789 bailout, state creditors asked the federal government to bail out the states once again. After an enlightening debate, in the early 1840s Congress declined, so many states repudiated their debts.
In the aftermath of those repudiations, many states rewrote their constitutions to require year-by-year balanced budgets, something they had never done before. As noted, fiscal crises, like the one in Europe today, often produce political rearrangements—at best peaceful ones like these.
Did the federal government do the right thing in refusing to bail out the states in the early 1840s? By doing so, the federal government reset its reputation vis-a-vis the states, telling them in effect not to expect it to underwrite their profligacy. In the short run, that cost the federal government substantially in terms of its reputation with its own creditors. Federal credit abroad suffered along with state credit. But in the long run, the decision exposed state governments to continuing market discipline, making future crises and requests for federal bailouts less likely.
If the federal government had chosen to bail out the states a second time, it probably would have taken greater control over state taxes and revenues in order to prevent yet another bailout situation. Refusal to bail out the states was thus a pivot point in sustaining a federal system in the United States. It led the states to discipline themselves by rearranging their constitutions in ways designed to allow them to retain freedom and responsibility for taxing and spending within their borders.
Part of the bargain to ratify the constitution was for the federal government to assume the debts of the states, largely incurred to win the war. But under careful consideration the Congress did not let that become a precedent. They looked beyond the immediate crisis, and its very real costs, and felt this position was in the long term best interest of the nation.
While Sargent wrote this as a lesson to Europe, it is also a lesson to us to look beyond short term problems. It has been our unwillingness to face short term pain that has led to solutions that only magnify the problem later on.