Chapter 9: TVA: Yardstick or Birch Rod?

CHAPTER 9 TVA: Yardstick or Birch Rod? Probably there would have been no TVA if popular opinion had strongly opposed it. The persons who wanted government ownership and operation of the means of producing electricity were well aware of this. So they set out to create popular opinion favorable to TVA. A re-reading of the newspapers of the early 1930's reveals that two basic approaches were used to accomplish this purpose. First, the owners of private electric companies were accused of "growing fat" on the savings of "the little people." That type of demagoguery is still alive. A representative on the floor of the House recently declaimed about ". . . private power companies . . . with their exorbitant and unconscionable rates, with their discriminatory tactics, with their utter disregard for human welfare, and with their eyes single to profits and dividends."43 The second approach was to suggest that the federal government should set up just one "pilot plant" to prove how cheaply electricity could be produced when it was taken from those "bloated capitalists" and turned over to a "benevolent government." This pilot plant (TVA) was sometimes referred to as a "yardstick," and sometimes as a "birch rod in the cupboard." This "birch rod" — subsidized government competition — was to be used to "whip" the private power companies into obedience.

58 TVA: YARDSTICK OR BIRCH ROD? It is difficult to determine which had the greater popular appeal, the "yardstick" approach or the "birch rod" approach. Let us first briefly summarize TVA as a "yardstick." Comparing TVA to a private electric company is something like comparing a giraffe to a frog. There are certain similarities but there are also certain basic and inherent differences. And so it is with TVA and any private electric company. Both produce electricity. Both use capital. But the private company must secure its capital by voluntary agreement in the open market. TVA has the U.S. Treasury backing it — with the taxpayers' money. Both TVA and private companies pay taxes, or "in lieu of taxes.'' But the private company pays federal taxes. TVA does not. The private company is subject to all local, state and federal laws. In effect, TVA often makes up its own laws as it goes along.

And so on. ... In short, TVA is the federal government. How can the government possibly be compared to an electric company? They are two completely different agencies. And any attempt to combine them must necessarily result in confusion because each was designed to perform specific and different functions. This "yardstick" idea is often used by TVA officials in another way. They point out that, percentagewise, the average advances in wages, industrial activity, savings, and so on have been greater in Tennessee than in the nation as a whole. The implication is that these relative gains are an economic justification for TVA. Of course, one might expect that the spending of hundreds of millions of the taxpayers' dollars for subsidized electricity, for the Oak Ridge Atomic Plant, and for other government projects in Tennessee might have some effect in booming industry and raising the demand for labor in that region at the expense of the general taxpayers from whom the money was taken.

TVA IS GOVERNMENT; IS TVA CONSTITUTIONAL? 59 As it turns out, however, comparable statistics for other areas — Texas, Alabama, Mississippi, the west coast states and other regions — show greater economic improvement, both total and percentagewise, than Tennessee. This study does not presume to inquire into the constitutionality of TVA. In the final analysis, if a sufficient number of American citizens want a TVA, they can get it. If they want any other "new" idea in government, they can get it. If the Constitution interferes, it can be amended or interpreted. Nevertheless, it is of interest to note the arguments used before the Supreme Court to justify TVA in the beginning. It is even more interesting to compare what was then said to what has since happened, and to wonder if TVA would have been declared constitutional if its ultimate purpose had been fully understood at that time. In arguments before the Supreme Court, it was claimed that the primary purpose of TVA was navigation and flood control. It was claimed that the production of electricity was purely secondary and incidental to this primary purpose.

Presumably, this argument was believed then. But surely there is no person who believes it today. Yet, in effect, TVA was declared constitutional on the supposition that its electricity would be produced merely as a by-product of navigation and flood control. TVA was so anxious to prove that it had no intention of going into the power business as such that it had the TVA counsel make this statement before the Supreme Court: MR. O'BRIAN. "[The Muscle Shoals steam generating plant] has never been used. It stands idle. Much is made in my opponents' brief of the danger of the Government selling power from the steam plant. That steam plant is not in this case — it has never been used.... There is nothing in this record to show that the Authority ever intends to use it for the purpose of generating power for sale, and I disavow any such intention at this time.''44 60 TVA: YARDSTICK OR BIRCH ROD?

A similar statement was made by TVA counsel before a United States Circuit Court of Appeals: ". .. the defendants [the top TVA officials] allege that the said steam electric generating plant has not been and is not being operated and that there is no plan or intention to operate said steam plant now or in the future, or to construct or operate any other steam electric generating plants."45 These statements, and others of a similar nature, convinced our highest courts that TVA electricity was to be only a by-product of its flood control and navigation programs, and could thus be considered constitutional. But on page 1285 of the proposed Budget of the United States Government for 1949, we find this statement: "In addition, initiation of work on a $54 million steam generating plant [for TVA] is recommended/' (!) The initial appropriation to get things started would be only $4 million. This new steam generating plant would be located at New Johnsonville, Tennessee.

It would contain three 125,000 kilowatt units. In the congressional debate on this proposal, the advocates of TVA argued that there is not enough hydroelectric power in the Tennessee Valley to supply the needs of TVA customers. And since there are no private electric companies in that region, they said, TVA is obligated to build steam plants to produce electricity to sell to the persons who wish to buy it.46 What happened to the private electric companies? TVA, in the name of the federal government, bought up or otherwise eliminated practically all of the private electric companies in the Tennessee Valley. Now TVA says, in effect, "Well, if private enterprise won't produce electricity for the people in Tennessee, then TVA must do it. This proposal for a steam plant was defeated in Congress, and the initial $4 million appropriation was dropped from the proposed allocation of government funds to TVA. But is that likely to be the end of the issue? More likely they will be back next year and the TVA STEAM PLANTS; THE HOOVER COMMISSION 61 year after that.* Unless their plans are rejected by each succeeding Congress, they will eventually secure passage of the pending legislation for the creation of eight other TVA's.47 This passage from one of the reports recently prepared by the Hoover Commission on government reorganization shows what happens to private industry when government moves into a productive field: "Private utility companies are virtually precluded from developing new sites in major portions of the Nation because of Federal competition. The Federal Power Commission has demonstrated a reluctance to issue licenses for private companies to build at sites in areas where Federal agencies are contemplating construction, and private capital has demonstrated a reluctance to make heavy investments in areas where the Federal Government may establish a competitive project/'48 Most advocates of TVA deny that they wish to see the socialization of the entire electrical industry. But that denial is not logical.

The persons who favor TVA, but deny that they favor more TVA's, are not thinking clearly. For instance, if a person truly believes that TVA is superior to private ownership, obviously he must believe that the same type of agency can, and should, be put into operation elsewhere. Those who believe that government ownership and operation of the means of production is preferable to private ownership and operation should have the courage to face the issue squarely instead of trying to slip it in by the back door. As the perfect example of what happens under this "back door technique," let us take a look at the figures on the production of electricity since TVA and other federal power projects were built for "navigation* irrigation and flood control." A $2& million appropriation to begin construction of this TVA steam plant was passed by the House in early 1949. This measure is now (April 1) before the Senate for action.

62 TVA: YARDSTICK OR BIRCH ROD? In 1934, the federal government was producing less than onehalf of one per cent of all the electricity produced in the United States.49 At the end of 1946, the federal government was producing more than twelve per cent.49 This figure does not include the output of state and local electricity projects. A story on page 48 of U. S. News and World Report of December 10, 1948 throws further light on the expansion of government into the production of electricity: "Expansion programs on the books now will add about 15,000,000 kilowatts of new capacity ... by the end of 1951. A $5,000,000,000 expansion by private utilities accounts for about two-thirds of the total. The remainder is to be installed at municipal and Federal Government projects." Thus it is estimated that government is to own and operate at least 33% of the added generating capacity. But that is only for the next two years. Here is an estimate from a recent report to Congress by the Senate Chairman of our national committee for long-range future government public works:50 "The grand total cost of comprehensive plans for conservation and use of the water resources of the United States, including work completed and under way, may be divided among the various functions of the plan approximately as follows: Flood control $12,295,200,000 Navigation 6,233,100,000 Hydroelectric power 24,086,900,000 Irrigation 8,681,600,000 Drainage 375,400,000 Watershed treatment 4,012,000,000 Pollution control 1,365,800,000 Preservation of fish and wildlife and recreation 456,200,000 $57,506,200,000/' This is more than $24 billion for government production of electricity! And remember that, according to the Constitution, $24 BILLION GOVERNMENT POWER PRODUCTION 63 government production of electricity is supposed to be merely an incidental, by-product of navigation.

Is TVA a "yardstick" or a "nightstick"? And after the electrical industry is 100% government owned and operated, what will be the next industry to be taken over by the TVA idea? Housing? Steel? Railroads? Banks? Coal mines? Medicine? Is any industry, occupation, profession or trade safe from attack by this "idea"? Is there any end to this idea of a "seamless web" of land, water and persons under government control?