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The Great Compromise

In 1959, a deal hammered out between free-enterprise Republicans and public-power Democrats gave birth to TVA as we know it.

Two dates define the Tennessee Valley Authority. One, May 18, 1933, is well known and widely celebrated as the day Franklin Delano Roosevelt signed the legislation creating TVA.

The other, August 6, 1959, is less noted but almost as important. That’s the day a famous Republican president, Dwight David Eisenhower, signed into law amendments to the TVA Act that essentially resolved an ongoing 25-year argument over the agency and its operations, and created the structure that has sustained TVA as a stable institution to the present day.

In the 1950s, with Cold War anxieties and McCarthyism at their height and resurgent Republicans eager to dismantle the New Deal, politics was a contentious business, and TVA was in the middle of the fight.

Though connections between the Cold War and TVA may seem tenuous now, opponents of TVA in the 1950s regarded their stand as part of the larger struggle against international communism. Ike himself had referred to TVA as an example of “creeping socialism” and told friends in private, “I’d like to sell the whole thing.”

In its first 20 years, TVA had been politically controversial but obviously successful in its mission. By the end of World War II, TVA had become the nation’s leading electricity supplier. Since the agency’s founding in 1933, per capita income in the Valley had risen dramatically, from 44 percent of the national average to 61 percent in 1953.

But, ironically, TVA’s own success increased its political vulnerability. With the completion of Kentucky Dam in 1944, the agency had reached the limits of hydroelectric power generation at the very moment when increasing prosperity boosted the demand for power. From 1950 to 1954, Congress appropriated more than $1 billion for TVA, almost all of it to finance the construction of coal-fired steam plants to meet the rising demand.

The move to steam plants and the appropriations needed to finance it galvanized TVA’s opposition. In 1948, the Republican-controlled Congress turned down TVA’s request to build a coal-fired plant at New Johnsonville, Tenn.. Funds were appropriated for the plant after the Democrats came back in elections that fall. However, Republicans returned to power with Eisenhower’s election in 1952 and again turned off the funds, this time for the construction of a plant at Fulton, Tenn., just north of Memphis.

The private power companies in the area saw their opening. With the backing of the Eisenhower administration, a partnership formed by the Southern Company and Middle South Utilities moved to build a plant to supply power to the City of Memphis and other power distributors, cutting TVA out of the picture. Eisenhower eventually withdrew his support of the two utilities following revelations of conflict of interest (a vice president of the partnership’s financing agent was serving at the same time as a consultant on the contract to the federal Budget Bureau).

However, TVA realized it had a problem. If Congress could not be relied on to provide the financing the agency needed to serve the people of the TVA region, and the administration stood ready to let private utilities move in to fill the gap, its very existence was at risk.

In 1955, the TVA Board asked Congress for the power to issue its own bonds, to be paid off by TVA’s revenues. Operating surpluses would be used to pay off the U.S. Treasury’s $1 billion investment in TVA and interest on the balance. TVA would be self-financing, and the annual battles over appropriations would come to an end.

The prospect of cutting the budgetary lifeline was somewhat daunting to the agency’s defenders, but if TVA could not continue to meet the energy demands of the TVA region its usefulness was finished. “In the end,” concluded Tennessee Senator Albert Gore, TVA’s staunchest backer in Congress (and father of the future vice president), “our choice may . . . be between something not so good and no expansion.”

The Eisenhower administration also appeared ready to make a deal, but the private power companies in neighboring states, and congressmen backing their interests, were not. They feared that a TVA cut loose from traditional financial constraints would feel free to sell cheap power to willing customers in their own states.

For three successive years President Eisenhower asked Congress to approve financial independence for TVA. The bill passed the Senate and the House Public Works Committee, but it was bottled up by the all-powerful House Rules Committee chairman, Howard Smith of Virginia, who, at the behest of private power, refused to let it reach the floor of the House.

Finally, in March 1959, the logjam was broken. The proponents of private power got the concessions they wanted. Georgia Representative Carl Vinson secured passage of an amendment backed by the Georgia Power Company limiting TVA's power sales to the area it had served on July 1, 1957. It was a bitter pill for some TVA backers to swallow. The Decatur, Ala., Daily remembered that when the suggestion of territorial limits had been raised with the “Father of TVA,” Senator George Norris of Nebraska, he had succinctly replied, “Hell, no!”

“The Valley depends on men of his caliber and sense of right in our day,” the Daily blustered, “to speak up courageously against such shameful concessions to the powerful enemies of TVA as Mr. Vinson and some others of our Southern congressmen appear to have been persuaded to make.”

“Don’t fence TVA in!” thundered the Florence, Ala., Times.

The deal was done, though. Last-minute details were hammered out by the President, House Speaker Sam Rayburn, and Senate Majority Leader Lyndon Johnson. The TVA power system became self-financing, and “the Fence” went up. Later on, in the late 1990s, Congressional funding of TVA’s nonpower programs was also phased out, leaving it totally self-supporting.

Most importantly for the agency, the Tennessee Valley region and the country, TVA was transformed from a perennial political football to a permanent fixture of American life.

 

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