Problem was that the railroads were privately owned. We weren't so keen on capitalizing them, because the same sort of talk about corporate welfare and being in the pocket of big corporations would have begun ad nauseam. They were occupied trying to get the firemen off the diesels at the time.
Without eminent domain the highways would be impossible, much less railroad rights of way. Though we can take for purposes of economic development now, right? Then there's the demand to get them all off of street level anyway so that motorists who can't wait or like to challenge trains won't get hurt. Think of the liability insurance, the toxic spills, the horror....
I remember the Chicago, South Shore and South Bend as quite a ride. Still there?