Man bites dog: Republicans oppose Obama’s market-based idea

Jim McTague ponders with amusement the strange case of President Obama’s proposal to study potential privatization of the Tennessee Valley Authority. As McTague notes in his “D.C. Current” column for Barron’s, Republicans who should be trumpeting the idea have been quiet at best and critical at worst.

Barack Obama has broken an 80-year-old taboo: No other president since FDR, who created the TVA in 1933, has had the chutzpah to take on this sacred congressional cash cow, and that includes Ronald Reagan, the GOP’s patron saint of small government and free enterprise. Furthermore, because of this study, the TVA forevermore will be fair wood for deficit cutters. …

… IN ADDITION TO PROVIDING LOW-COST POWER, the Tennessee Valley Authority maintains a network of dams, rivers, and lakes, as well as 80 public recreation areas, including hiking trails, campgrounds, day-use sites, and boat-launching ramps. Congressmen use the utility as a piggy bank for pet patronage projects. Tennessee Sen. Lamar Alexander in May got the TVA to pony up $900,000 to keep federal trout hatcheries operating near some TVA dams where state residents like to fish. The hatcheries were being closed because of sequestration cuts to the Interior Department’s budget. Alexander had voted in favor of the original sequestration law.

Tennessee sells about 900,000 fishing licenses each year. A resident license with a trout stamp costs $28. A three-day visitor permit for nonresidents goes for $33. So the state generates about $27 million per year from fishing licenses alone.

Of the seven TVA states, Obama won only Virginia — the one with the smallest TVA footprint — in the 2012 presidential election. This may explain his chutzpah. No surprise then that the most vocal opponents to his privatization proposal are GOP congressmen from the red states. Nor is it a shocker that not a single GOP congressman has praised Obama for acting more like a capitalist than the European-style social democrat they often contend he is. Says Alexander: “This is one more bad idea in a budget full of bad ideas…After deducting its debt, selling TVA would probably cost taxpayers money.”

OBAMA CLAIMS THE SALE would reduce the federal deficit by $25 billion, the approximate amount of TVA’s current debt. Plus, the utility arguably could use private capital to upgrade its aging power plants. The power authority’s capital plan includes $25 billion for new generating capacity and upgrades over the next 10 years. But Obama notes those costs could escalate and exceed the TVA’s statutory borrowing limit of $30 billion. The TVA has worked around that limit in the past with leaseback schemes. The utility claims it can work within the confines of its statutory debt.

A 2011 study by the Government Accountability Office found that the TVA historically has had cost overruns and construction delays. Additionally, critics contend that the TVA encourages power consumption, which requires the utility to continually boost its capacity. Stockholder-owned utilities, on the other hand, incentivize conservation by customers to curb capital expenditures.

Mitch Kokai / Senior Political Analyst

Mitch Kokai is senior political analyst for the John Locke Foundation. He joined JLF in December 2005 as director of communications. That followed more than four years as chie...

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