Securing a Future for “Generations Yet to Come”
By Nancy Spannaus
May 18, 2022—On May 18, 1933 President Franklin D. Roosevelt signed legislation creating the Tennessee Valley Authority (TVA), a private corporation supported by government funding with the mission of lifting one of the nation’s poorest regions out of abject poverty. In so doing, he won a battle which was launched more than a decade before by American System advocates for infrastructure development. The TVA became one of the most successful of the New Deal projects, not only raising living standards in its seven-state region but also making indispensable contributions to victory in World War II. It became a model internationally for in-depth regional development.
Other articles[1] on this blog have detailed the dramatic progress made by the TVA on bringing economic development to this flood-ravaged, disease-ridden, impoverished region. In this article, I will focus on another aspect of the Authority’s history which is still relevant today: the political battle waged for its establishment and survival.
The TVA has always been an embattled institution. It was established over the virulent opposition of the huge private utilities which dominated U.S. power generation in the 1920s and 30s, and has had to constantly fend off charges of “socialism” from ideologues who oppose our Constitutional commitment to the general welfare. It remains under threat today
It is my conviction that only a renewed understanding of the American System by the American people can put us back on the track of technological progress, as epitomized by the TVA. My review of this battle will hopefully contribute to that happy result.
For “Millions Yet Unborn”
Muscle Shoals is a 37-mile stretch of the Tennessee River located in Northern Alabama, which obstructs navigation of that waterway. As early as 1824, then-American System advocate John Calhoun, who was Secretary of War for President James Monroe, advocated improving the river at Muscle Shoals in order to permit clear passage to the Ohio River, and thus onward to the Mississippi. His vision was not acted upon, and although subsequent attempts were made to circumvent the obstruction with a canal, they fell short of what was needed.
The next attempt to develop the region came in World War I, when the National Defense Act authorized the building of the Wilson Dam, two nitrate munitions plants, and two steam-electric plant at the Shoals. The dam was not completed until after the war ended (1921), and President Coolidge vetoed a bill that would have completed the broader development. At that point George Norris, a Republican Senator from Nebraska, took up the cause and expanded it. He introduced a bill for comprehensive flood control and development of the Tennessee River and Valley, which was vetoed by President Hoover in 1931.
Enter Franklin Roosevelt, who at that point was running for President. Roosevelt knew from his experience as governor of New York State, that private power companies were determined to prevent projects like that which Norris proposed, in order to maintain their monopolies over electricity production and milk their customers for inordinate profits.
Roosevelt gave a campaign speech in Oregon in October 1932 which laid out his philosophy toward the utility companies, and implicitly, other vital services. His statement echoed the words of Alexander Hamilton on the relationship between the government and another private institution—the banking system: “Public utility is more truly the object of public Banks, than private profit. And it is the business of Government, to constitute them on such principles, that while the later will result, to a significant degree, to afford competent motives to engage in them, the former be not made subservient to it.”
FDR said:
The water power of the State should belong to all the people. The title to this power must rest forever in the people. No commission–not the Legislature itself–has any right to give, for any consideration whatever, a single potential kilowatt in virtual perpetuity to any person or corporation whatever. It is the duty of our representative bodies to see that this power is transferred into usable electrical energy and distributed at the lowest possible cost…and no inordinate profits must be allowed to those who act as the people’s agent in bringing this power to their homes and workshops. …
In other words, where private enterprise is cheating the people and preventing them from having access to the necessities of life, government must step in. In this case, when dealing with powerful national monopolies, that must be the Federal government, implementing its Constitutional commitments of the general welfare.
Just weeks after winning his election in 1932, FDR acted on this commitment. He invited Senator Norris to accompany him to Muscle Shoals in January of 1933, where they surveyed the area and solidified their agreement that Muscle Shoals should become “part of an even greater development that will take in all that magnificent Tennessee River from the mountains of Virginia to the Ohio.” In a speech in Montgomery, Alabama after the inspection tour, FDR declared:
Muscle Shoals is more today than a mere opportunity for the Federal Government to do a kind turn for the people in one small section of a couple of States. Muscle Shoals gives us the opportunity to accomplish a great purpose for the people of many States and, indeed, for the whole Union. Because there we have an opportunity of setting an example of planning, not just for ourselves but for the generations to come, tying in industry and agriculture and forestry and flood prevention, tying them all into a unified whole over a distance of a thousand miles so that we can afford better opportunities and better places for living for millions of yet unborn in the days to come.
Establishing the TVA
Only a little more than a month after his inauguration, FDR submitted a bill to Congress to establish the institution which would accomplish this broad development task. In his “request for Legislation to Create a Tennessee Valley Authority—A Corporation Clothed with the Power of Government but Possessed of the Flexibility and Initiative of a Private Enterprise,” the President explained that project
transcends mere power development; it enters the wide fields of flood control, soil erosion, afforestation, elimination from agricultural use of marginal lands, and distribution and diversification of industry. In short, this power development of war days[2] leads logically to national planning for a complete river watershed involving many States and the future lives and welfare of millions.
The TVA Act gave its board sweeping powers, including the ability to contract with commercial producers for the production of fertilizers, to arrange with farmers for large-scale use of new fertilizer, and to produce, distribute, and sell electric power. The Authority was authorized to issue up to $50 million in bonds, many of which were purchased by the Treasury and the Reconstruction Finance Corporation. Through revenues from its sales of power, the TVA has been able to retire $65.1 million of bonds from these initial appropriations. Revenue from its sales of power go directly to the Authority, and the TVA was authorized to plow them back into its operations.
From 1933 to 1999, the TVA also received a total of $1.2 billion in Congressional appropriations. As of its May 2021 report, the Authority has paid more than $3 billion (there was interest on top) back to the Federal government, relying totally on its profits from power generation and various fees, to fund ongoing operations and maintain its facilities and programs.
The TVA Act passed the Congress with overwhelming majority in 1933. In the Senate, the vote was 63 to 20 (with 12 abstentions); in the House it was 258 to 112 (with 60 abstentions). But it wasn’t long before the opposition began a concerted battle to block its operations, particularly in the provision of low-cost electricity to the people of the region.
The Court Battles
Leading the opposition to the TVA power operations was Wendell Willkie, who was the president of the electricity utility Commonwealth and Southern. While Willkie had initially applauded the aims of the TVA, he vehemently opposed its entrance into the electricity market, claiming that it represented unfair competition. In fact, the utility companies already existing in the TVA area were not servicing the population, much of which they considered too poor to provide the profits they desired.
The first legal challenge to the TVA operations came from stockholders of the Alabama Power Company, which was an affiliate of Willkie’s Commonwealth and Southern. It was launched in September 1934, and basically challenged the right of the Authority to sell electricity (which it was doing at a much lower rate than the C&S companies). An injunction held up TVA operations until it was overturned on appeal, and eventually by the Supreme Court, which ruled 7 to 1 in favor of the TVA. That suit held up TVA’s sales of electricity until February 1936.
Within three months, however, the opposition launched another legal action, this time directly seeking a ruling that TVA’s operations were unconstitutional because they represented unfair competition with the private utilities. The case was ultimately decided in favor of the TVA by the Supreme Court in 1939, and its operations went full speed ahead. (The two cases that went to the Supreme Court are Ashwander v. TVA and Tennessee Electric Power Co. vs. TVA.)
Not only did the TVA bring dramatic improvements in living standards in the region, and play an indispensable role in winning World War II, but it also became an international model for economic development. Governments worldwide sent their engineers to view the Authority’s operations, and engage in technical discussions about applying its principles to their countries. The Eisenhower administration itself backed proposals for a “TVA on the Jordan” as a peace initiative for the Middle East.
But these successes did not protect the agency after the death of FDR and the commencement of the McCarthy Era.
“Creeping Socialism?”[3]
In 1953 President Eisenhower singled out the TVA as an example of “creeping socialism” and sought to get his new TVA Board chairman to “disband the agency.” Its work is done, the Republicans argued, because the projected dam projects had all been built. The drive for disbandment flew in the face of the fact that it could be demonstrated that the TVA’s projects had created more than half a million jobs in privately owned business and industry between 1933 and 1950.
The Republican argument also contradicted the fact that the TVA’s mandate was not limited to flood control but involved a broader responsibility. It included
- improving the navigability and to provide for the flood control of the Tennessee River;
- providing for reforestation and the proper use of marginal lands in the Tennessee Valley;
- providing for the agricultural and industrial development of said valley;
- providing for the national defense by the creation of a corporation for the operation of Government properties at and near Muscle Shoals in the State of Alabama, and for other purposes.”[4]
Those broad purposes fit precisely with those outlined by Alexander Hamilton in his Opinion on the Constitutionality of the National Bank, that “the powers contained in the constitution of government, especially those which concern the general administration of the affairs of a country, its finances, trade, defence & ought to be construed liberally, in advancement of the public good.”
TVA Chairman Gordon Clapp, a veteran of the agency, did a heroic job defending the Authority’s accomplishments, showing how the entire nation had benefited from the programs of the TVA, which was responsible for spreading electricity throughout its area of operation. The electric appliances which residents of the TVA region were able to purchase as a result of the cheap electricity were built all over the country.
Yet the Republican Party assault continued and resulted in substantial cuts in appropriations. Finally, in 1959, Congress amended the original act with a bill that authorized the TVA to sell bonds on the private market and eliminated all Federal support. It also required the TVA to pay back funds previously invested by Congress, plus interest. Thus, from this time forward, the TVA’s electric power development has been self-financed.
With the dramatic increase in demand for electricity after the war, the power from the hydro-electric plants was not enough. Chairman Clapp had to fight with the Congress to get the ability to build a coal-powered plant, but he succeeded by arguing that the measure was necessary to fulfill the broad purposes of the original act. When President Kennedy was elected in 1961, there was a new champion of the TVA in the Oval Office.
It was during Kennedy’s last year, 1963, that the TVA began developing plans for “going nuclear.” Nuclear power had essentially been born in the TVA region at Oak Ridge. And it was at Oak Ridge that scientists came up with plans for using nuclear power not only for electricity, but for desalination of water. They developed detailed plans for nuclear-powered agro-industrial complexes and began to spread these ideas internationally.
In 1966, the TVA announced plans to build 17 nuclear plants at seven sites in Alabama, Mississippi, and Tennessee. The largest one would be at Browns Ferry, Alabama; it began operations in 1973. But the larger plan was ill-fated. First, it confronted the downturn in demand for electricity created by oil shock and post-1971 financial crisis. Second, it was virulently opposed by the anti-nuclear orientation of the Carter administration. At present, there are only three nuclear plants in operation by the TVA.
The Fight is Not Over
With the advance of electricity deregulation and mandates for increased power from (usually non-nuclear) renewables, TVA’s future remains under threat. At present, the Authority provides reliable electricity for approximately 10 million residents; 39% is provided by its nuclear plants.[5] But it remains under attack by those who wish to privatize it, as well as those seeking to decrease its efficiency by shifts to unreliable solar and wind power.
In reality, TVA’s prospects depend upon the direction of the entire U.S. economy. Can we get our leaders to follow the example of FDR and Hamilton, who wielded government power to deal with the economic crises they faced? With the current collapse of our infrastructure, broken supply chain, and disheartened workforce and population, such determination is sorely needed.
[1] See “FDR’s TVA Provides a Model for Development” and “How the TV Transformed the Tennessee Valley.”
[2] FDR’s use of “war day” refers to the fact that Muscle Shoals had first been partially developed as a resource for World War I.
[3] Much of the information is this section comes from the work of Marsha Freeman, published in 2011. It is available here.
[4] The full bill is available here
[5] See TVA’s Integrated Resource Plan of 2019.
Tags: dams, electricity, FDR, George Norris, Muscle Shoals, Nancy Spannaus, Tennessee Valley Authority, TVA