Still Draining the Nation

Earlier this year Reason magazine offered up a much dimmer view of the Tennessee Valley Authority than that no doubt favored by the federally owned corporation’s 50-member public relations staff.

In “How Big Government Infrastructure Projects Go Wrong,” the libertarian Cato Institute’s Jim Powell cast “America’s biggest monopoly” in a light that by no means revealed it to be the economic savior and cultural redeemer of its much-publicized promise.

It was heralded as a program to build dams that would control floods, facilitate navigation, lift people out of poverty, and help America recover from the Great Depression. Yet the reality is that the TVA probably flooded more land than it protected; much of the navigation it has facilitated involves barges of coal for coal-fired power plants; people receiving TVA-subsidized electricity have increasingly lagged behind neighbors who did not; and the TVA’s impact on the Great Depression was negligible. The TVA morphed into America’s biggest monopoly, dominating an 80,000 square mile region with 8.8 million people—for all practical purposes, it is a bureaucratic kingdom subject to neither public nor private controls.

Powell’s sentiments are reflective of what seems to be a growing consensus among critics of various ideological stripes who agree on little except that the time has come for the Tennessee Valley Authority to be gone.

Today, TVA, although no longer a beneficiary of direct congressional funding, “pays none of the federal, state, and local taxes that private businesses pay,” Powell said in his article.

“As a government-backed entity similar to Fannie Mae and Freddie Mac, the TVA can borrow money cheaper than private businesses,” said Powell. “Currently, the TVA has about $26 billion of debt.”

In a January 2009 op-ed for a local newspaper, Shaka Mitchell, at the time vice president for the Tennessee Center for Policy Research, observed that the hospitable, appreciative manner in which TVA and its leadership seems always to get handled by state and federal authorities (citizen lawsuits are applying the real heat) is typically (and tragically) symptomatic of government ownership or operation of just about anything.

When a private company screws up, someone is held accountable. People stop buying its products. Shareholders fire the CEO. The company goes bankrupt. But when a government-run company has a similar problem, no one takes the blame.

Officials at TVA don’t have to answer to shareholders or voters. Government run companies, like the TVA, are interested in one thing; maintaining their own existence. As long as they keep their jobs, they couldn’t care less about the quality – or dangers – of their product.

We are learning an important lesson about the differences between what happens when a private company and a public one impact the community negatively. Exxon had to pay over half a billion dollars to fix the mess it caused, and rightfully so. Troublingly, taxpayers will be forced to pay to clean up the TVA’s debacle.

A 2001 paper (highlighted in Powell’s Reason article) from the Northeast-Midwest Institute, a “non-partisan research organization dedicated to economic vitality, environmental quality, and regional equity,” assessed TVA in terms just as damning.

“Sixty-five years after it was created, this giant federal agency can no longer justify its existence,” wrote Richard Munson, now the senior vice president of Recycled Energy Development, in “Restructure TVA: Why the Tennessee Valley Authority Must Be Reformed.”

“Why should 242 million Americans be forced to subsidize the electricity rates of the 3 percent of Americans who happen to live in the Tennessee Valley,” asked Munson, who also testified before Congress on the subject of TVA in 1999. “There’s little doubt that TVA has become a burden to the nation’s taxpayers. What’s becoming increasingly apparent is that the status quo also harms the very Tennessee Valley residents that TVA is supposed to serve.”

Last winter a prominent longtime critic of the Tennessee Valley Authority called on President Obama to embark upon perhaps the most counterintuitive political undertaking an FDR-idolizing stimulator-in-chief could conceive of.

Writing for the Christian Science Monitor back in February, environmental activist William U. Chandler, a graduate of Harvard and the University of Tennessee, offered that if President Obama really wanted to throw his GOP detractors for a real mindbender, he’d take an aggressive run at radically reforming – and perhaps even dispensing with – the granddaddy of all New Deal boondoggles.

Obama will have to grapple with the history and the politics of this question as he ponders how to make TVA a force for more-efficient energy use, better jobs, and a low-carbon future. At the least, Obama could put TVA management on notice of his expectations. He could direct his Department of Energy and Environmental Protection Agency to define steps TVA should take to reform the 75 year-old agency. He could require – and reward – investment in energy efficiency and disincentivize the wasteful use of power. He could require TVA to create the most advanced carbon mitigation measures of any US utility – and then of any utility anywhere in the world. He could inform managers that if by 2011 this plan is not well advanced, they will be replaced, and the agency put up for sale.

Such blasphemies are the sort that once laid low the higher political ambitions of Barry Goldwater, who got himself in Dutch with the Tennessee masses for offhandedly quipping that he’d sell TVA “for a dollar” given half a chance. And speaking of “Dutch,” the plug got summarily pulled on Ronald Reagan’s job as host for General Electric Theater at around the same time, after he expressed similarly contemptuous views of the “big government” powerhouse, which he soon discovered was as “sacred as motherhood” in some quarters.

Of course, all that was long before Dec. 22, 2008, when overnight TVA’s popularity sank to levels rivaling that of a lump of coal in the public’s collective stocking.

For a little perspective on the gargantuan nature of the 5.4 million cubic yards of ash that roared forth from the Kingston Fossil Plant, which as of last summer TVA was estimating would cost up to $1.2 billion to clean up, here’s what Tennessee Department of Environment and Conservation deputy commissioner Paul Sloan told state lawmakers during a hearing last session: “If you took the Great Smoky Mountains and you subdivided it in one-acre tracts – over half a million acres – the amount that spilled (at Kingston) would be sufficient to put about 11 tons of ash on every one of those acres. So that’s the scale that we’re dealing with. So, yes, this is a very long-term cleanup.”

But like the others who have for years criticized the massive agency, it’s not just TVA’s darkest-day disaster that ought to cause America to rethink TVA organization, oversight and even ownership, Chandler argued.

The Tennessee Valley Authority — an “icon of the New Deal” that also happens to have “the worst environmental record of any utility in the nation” — in fact never did “live up to its supposed goals,” he said.  In particular, its promises of bestowing collective prosperity on the region’s inhabitants fell demonstrably short: “Both during and after the Great Depression, manufacturing jobs were created faster just outside the TVA area than within it,” he wrote.

Non-TVA counties in northern Georgia and Alabama and western North Carolina in 1933 were as poor as or poorer than TVA counties, but by 1953 they were generally better off. Even rural electrification and the use of household appliances grew faster in the non-TVA south.

To be sure, TVA created jobs for some 13,000 workers, but for at least four decades, Depression-era investments in TVA dams, waterways, and recreation areas have failed to pay for themselves by any economic measure.

In his 1984 book, “The Myth of TVA,” Chandler observed that “(a)mong the nine states of the southeastern United States, there has been essentially an inverse relationship between income per capita and the extent to which the state was served by TVA.” Furthermore, he wrote, “In a critical measure of economic performance, growth and income, no evidence exists to suggest any special contribution by TVA to the development of the Tennessee Valley.”

Chandler concluded his book with words that no doubt reflect sentiments held today by far more ratepayers and taxpayers than when first published 25 years ago: “The fundamental result of the TVA experiment teaches that buying flexibility by giving away democratic control is a false bargain.”