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Reason Foundation

Time For the Tennessee Valley Authority to Go Private

Privatization makes sense. The hard part is working out exactly how to do it.

Steve Esposito
April 29, 2013

Recently there was a bit of excitement about the Tennessee Valley Authority (TVA) mention in the President’s Budget (PB). Page 51 of the PB states:

Given TVA’s debt constraints and the impact to the Federal deficit of its increasing capital expenditures, the Administration intends to undertake a strategic review of options for addressing TVA’s financial situation, including the possible divestiture of TVA, in part or as a whole.

TVA: For Sale By OwnerAfter the conservatives and libertarians finish cheering and throwing their top hats in the air, there is something important to remember about federal budgets: they are not created equal.

President’s Budgets are literally meaningless. Of course both the executive and the congressionally constructed budgets are political in nature, but the executive budget submission is nothing but political. There is nothing binding about it at all—it is advisory in a sense—and Congress can ignore it in whole or in part. The Congress also has the last say in the matter because they can override any presidential veto if they so choose.

In my experience with federal budgeting (mostly Army), the way it really works is the various executive branch activities submit budget requirements through the chain, while at the same time representatives of these activities talk to Congressional staffers who have oversight over their activities. That budget is the one that gets horse traded, blackmailed, and argued within the Congress. This is not to say that there are not other battles going on, there certainly are, especially when A is trying to get as much of B’s money to spend on C as possible.

In this case, the President can say he wants to sell off whatever he likes, but no deed or title is getting transferred unless the Congress authorizes it, and I am not aware of any Congressional authorization allowing the President to sell off any parts of TVA. Of course, Presidents do things all the time that the Congress did not authorize them to do, but to get away with it requires the Congress to stand idly by with their hands in their pockets, or yours.

Enter Congressman Mo Brooks (R – AL) who, in an interview with WHNT in Huntsville, Alabama forwarded the false theory that Article 1, Section 8 of the Constitution prohibits TVA from being sold because of navigation issues. For good measure, he adds flood control too:

Article I, Section 8 of the United States Constitution grants the federal government control over America’s navigable waterways. The TVA’s principal function is to own and operate locks and dams to both protect Tennessee Valley citizens from floods and ensure that the Tennessee River is navigable for commercial and recreational boat traffic. I know of no circumstance that justifies President Obama forcing the TVA to abandon its flood control and navigable waterway roles that it has performed so admirably for more than seven decades.

In the first place, there is no mention of “navigable waterways” anywhere in the Constitution, and repeating that it is there does not make this myth any more true. The dreamed up Congressional power that he is talking about came from the Gibbons v. Ogden U.S. Supreme Court case where the Commerce Clause was invoked for the flagging of vessels. A later law comes to mind, The Rivers and Harbors Appropriation Act of 1899, which puts the administration of obstructions in rivers, harbors, and anything else touching communal waters, under the administration of the U.S. Army Corps of Engineers. Big giant dams are certainly within the scope of an obstruction. The current definition is in Title 33, Section 2 of the US Code.

Representative Brooks also misses another point: Dams across the Tennessee River Valley predate the May 1933 creation of TVA by decades, and even TVA admits to that. The Hales Bar Dam and lock was completed in 1913. The Chattanooga and Tennessee River and Power Company (later, the Tennessee Electric Power Company) got a license from Congress to build it, in an area of questionable navigation, on 27 April 1904. The dam and lock system are what helped make that area navigable, and the same process was required for the Great Falls Dam.

Decades later when the FDR administration rolled into Washington, the old class warfare tactic was used to take private property and turn it into a massive public works project. The public argument was that private power companies were “gouging” consumers, so your friendly federal bureaucracy needed to swoop in to help make things fair.

The court argument was much different. In the 1938 arguments before SCOTUS (Tennessee Electric Power Co. et al. v. Tennessee Valley Authority et al.), the feds decided that their hydroelectric dams and coal fired electrical generators were all about navigation and the electricity was just a happy benefit. Which is what the majority of the court bought. An interesting bit from the dissent reveals the truth of the matter:

Any references in the (Tennessee Valley Authority) Act to navigation or to any other constitutional objective are unsubstantial and mere pretenses or pretexts under which it is sought to achieve an object reserved to the States. Except with respect to power available at Wilson Dam prior to the acts complained of, the program is one of creating an outlet for power deliberately produced as a commercial enterprise to be sold in unlawful and destructive competition with power now available in adequate quantities.

The federal shenanigans did not end there. Injured parties were silenced through intimidation. As Reason’s Brian Doherty wrote in Radicals for Capitalism:

A [Foundation for Economic Education (FEE)] board member felt obliged to quit when FEE published an early pamphlet attacking the Tennessee Valley Authority. He (like many early FEE supporters) ran a private electric utility and had a delicate understanding with TVA to not engage in any public attack in exchange for being left alone in return.

Even if one buys the blatantly false argument that TVA is all about making the Tennessee River Valley navigable, they still don’t have to keep doing it themselves. Like those who side with Murray Rothbard in his discussion with William F. Buckley, Jr., yes the lighthouses may be privatized without a problem, and that is how they began.

The Post Office is actually mentioned in Article 1, Section 8, yet the Congress managed to “divest” itself from that, in a way. What they actually did was turn that enumerated power into something that is supposed to pay for itself, and it does not do any better job at that than it does delivering letters. Privatization has to be real to work.

Divesting the government from TVA is actually the easy part. Who gets the property is the hard part. The federal government has proven to be a less-than-honest broker when tossing assets to the private sector. They have all kinds of experience tearing private property from A and selling it to C, while B covers all losses. They also have lots of experience managing other people’s property, to the detriment of the property owners (the Bureau of Indian Affairs is but one example).

In this case, there is a trail of paper showing who the last owners were as TVA gobbled up property in the Valley. Detailed records were kept of who had their property taken and to whom it was given. If you think the latest spat of commercial developments built on the bones of eminent domain abuse is new, you are off by a few decades. On that road of good intentions, TVA was the surveyor. Throughout the TVA system, existing property that merely touched a reservoir was taken and sold to developers, as in vast farms that had less than one acre flooded. The Tellico Plains community is an example of what was once a collection of farms and is now a collection of upscale homes. The farmers were removed from the equations through eminent domain takings.

As for the locks, hydro, and coal power generation (now expanded into nuclear and gravity), the power companies harmed over the years could be the new owners.

Another possibility is a system not unlike the Soviet divestiture, with shares given to the current private users of TVA assets. Scope might be an issue, since TVA power is used across the country. This approach is also problematic with the earlier mentioned way TVA gained its assets - through with some heavy handed use of eminent domain, as well as suppression of dissent. Restoring property to those originally harmed should be a priority.

As for all that toxic waste from the nuclear and coal plants, and if you think private entities are not to be trusted with hazardous waste, read Reason’s 1981 article on Love Canal by Eric Zuesse for some insight on who actually cares for their property and their neighbors better, a school board or a multinational chemical company.

There is no question that a major hurdle of ridding America of the Tennessee Valley Authority is getting it approved by Congress. Silence on the problem, or even worse, going along with those who find it “undoable,” will never get us to the first step. However, the struggle does not end there. Holding our representatives to returning this property to the last private deed holders needs to be underscored from the beginning.


Steve Esposito writes the Austrian Anarchy column at The Freedom Bunker and blogs at AustrianAnarchy. He is a 30-year veteran of the US Army Reserve and National Guard, an ex-Chicago School Economics fan who has recently gone hard-core Austrian. He lives with his wife in a secret, undesclosed East Tennessee lair with the motto “Leave us alone and nobody gets hurt.” Steve can be reached on Twitter @AustrianAnarchy. His current work in progress is “The Anarchist’s Soufflé Book,” coming soon any year now.



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