TVA and "First Principles"

TVA and “First Principles” A Conundrum for Fred Thompson

Sometimes we have to return to “First Principles”, as presidential candidate Fred Thompson likes to say, to get back on track. More about Thompson later.

The Tennessee Valley Authority, a unique federal agency, has dominated the economy of the Southeast since 1933. Actually, it started before that when for national security purposes demolition production plants were built at the Shoals in North Alabama along with plans for two power dams. One of the dams, Wilson Dam, was partially completed when WWI abruptly ended.

Subsequent presidents declared those properties surplus and there were some prospective buyers including Henry Ford who in 1922 offered to produce fertilizer with the nitrate plants and to complete the dams for his power needs. A “Detroit of the South” speculation turned the real estate market in North Alabama on its ear but terms never could be reached to sell the federal properties to anyone.

From the start, Sen. George Norris (R-Neb) fought tooth and nail to keep private enterprise from acquiring any of the land or facilities. For years, he fought until he found an ally in FDR who was anti-big business anyway. Norris helped FDR in his first election and FDR paid him back with the New Deal agency, the Tennessee Valley Authority Act, in 1933. Later, Norris kept up his pressure to start some “little TVA’s” but the congress balked on having more than one of them. Besides, it was not clear at all how the experiment of the TVA would turn out.

Federal barriers to competition from outside TVA’s present-day 2,500 mile-long “fence” have never been stronger but the case for federalizing electric utilities grows weaker. With runaway overspending and mismanagement, TVA has become a mockery of prudent business practices. TVA’s debt now stands at over $25 billion and growing with no prospects of liquidating that debt except by dissolution of its assets or unless TVA electricity sales do much better than their languid 1.9 percent annual growth in demand. It is doubtful TVA’s assets would cover the entire debt.

Who then would be on the hook for the remainder? Why, it wouldn’t be the federal government because the government explicitly does not stand behind TVA’s billions in “power bonds”. What about the TVA itself? That would not be possible because the TVA has no money, nor would it have a way to pay off the debt without income from electricity sales (TVA receives no congressional appropriations). After all, the TVA is run by federal employees. Who else is left? Only the users of TVA electricity, the ones benefiting from artificially low power bills for so many years.

The problem with that last scenario is that TVA users, ("stakeholders"), have not been told of the possibility they might be obligated to pay if TVA’s assets were liquidated in the negative, even after another electricity supplier takes over. The TVA bond rating, however, is at the top and the rating agencies claim that the federal government, oh no, would not let TVA bonds default; that TVA is protected from competition. Wouldn’t it depend on who’s in charge?

The TVA literally usurps the rights of parts of seven Southeastern states. Since it was ruled constitutional by the Supreme Court by the narrowest of margins, the TVA remains still a thorn in the side of our U.S. Constitution. Even a modest perusal of how far TVA has strayed from its original legislation should bring quick condemnation of the agency.

Besides restraining interstate commerce trade, TVA’s anti-competitiveness in opposition to the free flow of electricity has, I believe, stultified the economic and social growth of a whole region. Figures show that the economy of the region prior to 1922 was growing at a steady double-digit rate. That was not so after TVA came on the scene. They did offer some temporary construction jobs but not much more than gradual improvement of industrial growth.

The Shoals, North Alabama, Tennessee, and the entire Tennessee Valley could have been the dynamic industrial engine of the South long into the twentieth-century but for the actions of very few people. The main culprit was, of course, FDR who thought he could make a silk purse out of a sow’s ear, a popular saying of the time.

Roosevelt wanted to have an agency with the power of the federal government, eminent domain for one, and the flexibility of a corporation to carry out his nebulous TVA plans. FDR wanted it both ways – an agency to compete with free enterprise thereby increasing a dependency on government and “getting back” at big business that he despised.

Run by an appointed three-person board for most of its 75 years, TVA has changed direction at whim leaving a long line of mismanaged fits and starts and a very, very large debt I call “backdoor financing”. Generations have lived under the pall of federal government control of their electricity and control over their economic development. The seven Southeastern states have had no say in TVA’s electricity rates.

I believe former Sen. Fred Thompson’s arteries run red with TVA blood, that his previous positions on the TVA would not allow him to disown the TVA now even if he truly believed in the “First Principles” of our Founding Fathers he so fervently espouses.

As a Southerner, I cannot say that I am proud of the leadership we have offered for president in the recent past. “Green eyeshade” and “slick” are pejoratives that immediately come to mind.
“First Principles” and “TVA” seem dissonant and irreconcilable and appear to be an “either or” question and not compatible with presidential candidate Fred Thompson’s stated positions.

As to what can be done about the TVA, see my Website http://norsworthyopinion.com/ for some thoughts. I am writing a book about the TVA and would appreciate any source material you might have available.

Write me at enorsworthy1@earthlink.net or emnorsworthy@earthlink.net
For a current in-depth analysis of the Great Depression, see Amity Shlaes new book “The Forgotten Man”, a very readable narrative-history.

Ernest Norsworthy