It might be argued that, under the coefficient or Sweeping Clause of the Constitution, quoted in the preceding chapter, as applied by the Supreme Court respecting a banking corporation for the needs of the Government, Congress could create a corporation deemed "necessary and proper" to aid its lawful activity in the control of floods of an interstate river and the promotion of navigation thereon.
But it certainly has no authority to create a corporation for the manufacture and sale of electric power in competition with private industry.
That was conceded by counsel for the United States before the Supreme Court in the case to be examined, and was pointed out by Chief Justice Hughes.
However, the Tennessee Valley Authority is manufacturing and selling electric power in large volume, and many persons and newspapers passing as among the thinking classes are charmed with the results.
Of course, the schools, colleges, and universities left those classes without understanding of what is more important than any valley made lovely with other people's money, namely, that "departure from the lines there laid down," as President Cleveland said of the Constitution, "is failure."
Thus, what seems to some a great success in the development of a valley may be in reality a failure in government, tending to destroy free enterprise, property rights, and the liberty which the Constitution was designed to protect and promote.
There has been great rejoicing in the Northwest also and among Socialists throughout the country over the construction by the Government of the Bonneville and the Grand Coulee dams in the Columbia River, about 400 miles apart. But the question raised regarding the achievements in the Tennessee Valley presents itself as to those projects: can "departure from the lines" laid down in the Constitution be compensated for by all such developments imaginable?
As valleys from the Atlantic to the Pacific, and the wide plains between, have been developed without breach of the Constitution, why should disregard of the limitations which it prescribes be advocated and practiced now? In the development of the United States, unprecedented in the activities of men, prosperity in each valley and each region has been achieved by the brains, labor, and money of the dwellers. The residents of no area have thought of asking the people of the rest of the country to provide the money for bringing development to their locality!
Neither did the people of the Tennessee Valley ask for this project. The idea originated in the minds of Socialists, Fascists, and political adventurers far away. The idea was not so much to develop this particular valley, industrially, as it was to "grab off" this promising location as a means of demonstrating in the United States the beauty and utility of an alien belief at variance with our constitutional system. And, as before said, many who should know better think the demonstration has been a charmer.
It is the money of the people in all the States that paid for and is continuing to support "the wonderful works" in Tennessee. The doings are unfair as well as unconstitutional.
The propagandizing activity of the Tennessee Valley Authority in carrying the beauties of this Socialism and Fascism to the public has been so persistent (and expensive) as to draw criticism in Congress. It has had its effect on many.
It may be that those unconstitutional power projects were in the mind of General Dwight D. Eisenhower when, as President of Columbia University, he spoke on February 10, 1949, to a group of students about "a creeping paralysis of thought" which leads to dictatorship. Addressing 130 leaders of students in preparatory and high schools, the General, who had opportunity to learn all about the way things go in Washington, said:
"There is a kind of dictatorship which can come about through a creeping paralysis of thought, readiness to accept paternalistic measures of Government, and along with those paternalistic measures coming a surrender of our own responsibilities and, therefore, a surrender of our own thought over our own lives and our own right to exercise our vote indicating the policies of our country."
General Eisenhower may have had in mind too the report of the Committee on Organization of the Executive Branch of the Government, headed by former President Hoover, that "billions not millions but billions" could be saved by reshaping and reducing the 1,800 bureaus running at large and employing 2,200,000 civilian workers, increased from 580,000 twenty years ago. The pay of those employees increased from $1,000,000,000 to $6,500,000,000 a year. They, with the voting members of their families, can control the election of the President.
On May 13, 1933, Congress created the Tennessee Valley Authority as a body corporate "for the purpose of maintaining and operating the properties now owned by the United States in the vicinity of Muscle Shoals, Alabama, in the interest of national defense and for agricultural and industrial development, and to improve navigation in the Tennessee River and to control the destructive flood waters in the Tennessee River and Mississippi River Basins."
What clause of the Constitution authorizes Congress to concern itself with "agricultural and industrial development"? None. That part of the Act is lawless.
By implication, the Commerce Clause empowers Congress "to improve navigation" of waters carrying interstate commerce and to control "destructive floods" in such streams.
But it receives from the Constitution no authority respecting "agricultural and industrial development." Then, why were those words employed by the nonelected persons who drafted the Act? Were they ignorant of the Constitution, or contemptuous of it?
"The properties now owned by the United States in the vicinity of Muscle Shoals" referred to the Wilson Dam, which was begun in 1917 and completed in 1926 under authority of the National Defense Act of June 31, 1916, which empowered the President to have investigation made as to "the best, cheapest and most available means for the production of nitrates and other products for munitions of war." That provided also for the designation of exclusive sites upon navigable or nonnavigable rivers or the public lands for carrying out the purposes of the Act; and it authorized the President "to construct, maintain, and operate" on any such sites "dams, locks, improvements to navigation, power houses and other plants and equipment ... for the generation of electrical or other power and for the production of nitrates or other products needed for munitions of war and useful in the manufacture of fertilizers and other useful products." (The foregoing italics are inserted.)
The National Defense Act of 1916 was passed in expectation of the war which we declared on Germany ten months later.
But why did the draftsmen of that act bring in with "munitions" of war "the manufacture of fertilizers and other useful products"?
That the Act creating the Tennessee Valley Authority, which is long enough to fill ten columns of a newspaper, and which is of almost infinite and very difficult detail, could have been put through Congress two months after inauguration, means that it had been worked out long before the election of November, 1932. It had been kept in the dark from the writers of the platform and it never was revealed from the stump to the people. Alien-minded persons outside Government had probably prepared the Fascist creature for the incoming group.
In 1946 the Tennessee Valley Authority, besides producing electric power, was engaged in the manufacture of agricultural implements, of fertilizer for agriculture, and of the instruments of sanitation. It was engaged in mineral development, in providing means of recreation, in the care and promotion of wild life, in demonstrations, in farm management assistance, and in many other activities. On these, it lost for the year the money of the taxpayers to the amount of $3,600,000.
Its losses on the manufacture of power and all other activities amount to $8,041,000 for the year 1946. From its beginning in 1934 it has cost the taxpayers almost $100,000,000. These figures are from an analysis of the financial statements of the corporation by the Edison Electric Institute a trade association representing about 75 per cent of the private electric light and power industry.
An analysis of the records of Tennessee Valley Authority for the United States Chamber of Commerce was made by C. J. Green, formerly accountant for the Federal Power Commission, and given to the Press in October, 1948. He found that from May, 1933, to June, 1946, funds of the Treasury of the taxpayers invested in all Tennessee Valley Authority activities totaled $742,386,524. From that he subtracted $74,525,261 in Treasury investments not connected with river power, and added $44,394,436 for power investments "omitted" by Tennessee Valley Authority in its accounting system, arriving at a net power investment of public funds of $712,255,699.
He found that if Tennessee Valley Authority had paid taxes on the basis on which private power companies paid, it would have returned to governments $155,237,363 for their support.
Had Tennessee Valley Authority been obliged to pay interest on the funds which the Treasury provided from the pockets of the taxpayers, the money would have cost it $78,309,109.
How can private investors in electric power companies compete with a set-up like that?
And yet many commentators and propagandists have severely condemned the "selfish" and "anti-social" spirit of private investors who have complained of and offered opposition to such competition from the corporations of Fascism! Thus, we have almost reached in our Republic the equivalent of lese majesty. It may be with us tomorrow.
The Appropriations Committee of the House of Representatives has proposed that the Tennessee Valley Authority be required to repay within forty years the funds of the Treasury establishing and enlarging it.
But how can that be done unless the Authority has income? And how can it derive income from dams and reservoirs merely controlling floods?
"Flood control" is the disguise in which the Fascists wrapped themselves when they "put across" within two months after inauguration in 1933 a complicated bill of more than 10,000 words which must have been in preparation long before the election in November. The constitutional enemy from Europe was waiting to come in.
When the Government's entry into this business was under discussion, President Roosevelt argued that it was necessary to provide a "yardstick" for the prices which the manufacturers of electricity should charge the public, the contention being that those prices were then out of all reason.
Still, if that were true and it was not, for the States had power to prescribe and regulate rates and were doing so that was none of the business of the United States.
As private power companies pay Federal, State, and local taxes, it was determined that the Authority (probably to appear "fair") should not be entirely tax free, so it and its distributors contributed as a donative about 4.5 per cent of their combined gross power income to State and local treasuries. The Georgia Power, a competitor, contributed 5.5 per cent of its gross intake to State and local taxes.
But the Authority paid (1946) no Federal taxes, while the Georgia Power paid 17.5 per cent of its gross to the United States. To Federal, State, and local taxation combined, the private owner thus paid 23 per cent of its gross income, while the Authority paid 4.5 per cent of the gross of itself and its distributors.
That is a mathematical demonstration of the purpose of the Government of the United States to drive private power companies out of business and become to that extent a corporative state of Fascism. In a dissenting opinion in the case arising out of this Tennessee Valley activity on the part of the native aliens in Washington, Justice McReynolds showed from the record that the purpose was to drive private investors out.
And in March, 1947, a press dispatch from Boston said that the President of the Puget Sound Power and Light Company recommended the sale of the properties of the company "to public power agencies, the Grand Coulee Dam, the Bonneville Dam, and others, as the only way to protect the stockholders' interest." In a speech at a meeting of stockholders he "charged unfair competition from government-owned utilities" which "makes it impossible for public and private power distributors to operate side by side." A power company of the Government would, he said, "escape about $2,600,000 annually in Federal taxes and 1 million in State and local taxes paid by this company." He said, further, that "Government-subsidized competition has cut rates and earnings to the point where the company cannot expect to attract private investment capital."
All that sort of advantage to the monopoly of Government was shown of record in the case of the Tennessee Valley Authority, which case (297 U. S. 288) arose out of the attempt of the common stockholders of a private power company to sell part of its property to the Tennessee Valley Authority in order to save themselves from a competition which they knew would finish them. The preferred stockholders resisted, and lost in the Supreme Court.
The Federal power companies are using as a bludgeon the "yardstick" of which President Roosevelt talked so much as a means of doing "justice." The Tenth Amendment forbids the United States to interfere thus in the field of local law. And, precedent to that, the Constitution forbids by not authorizing Congress to create a corporation for manufacturing and selling electric power, or doing any other business.
In the dissenting opinion in the case now to be examined, Justice McReynolds stated the purpose of the Socialists and Fascists who had "put over" the Tennessee Valley Authority:
"Public service corporations were to be brought to terms or put out of business."
It is manifest from the foregoing figures that they could not compete with a corporation which pays comparatively no taxes, and which operates on taxpayers' money, for which it pays no interest yearly. The Annual Report of the Secretary of the Treasury for 1945 shows that the United States (taxpayers) pays that interest for the money which it furnishes to the Authority.
When competing private power companies borrow money, they must pay interest at current rates, as they pay full taxes.
The analysis by the Edison Electric Institute of the reports of the Tennessee Valley Authority for 1946 shows these expenses for production:
for Electric Power $6,198,023
for Navigation 2,309,548
for Flood Control 2,020,740
Those figures show that this corporation was created chiefly to manufacture and sell electric power. The pretense that it was primarily to control floods and develop navigation in an interstate river was pretense only.
On January 4, 1934, the Tennessee Valley Authority entered into an agreement with the Alabama Power Company for the purchase at more than $1,000,000 of some of its transmission lines and substations, for the purchase of some of its real estate, for the sale to the Power Company of "surplus power" of the Authority, and for (what used to be reprehensible) the division of territory between them.
Holders of preferred stock in the Alabama Power Company, believing the contract to be injurious to the company and also invalid, because beyond the power of the Federal Government, brought suit to have the performance of the contract enjoined, and thus save their property.
The United States District Court which heard the case granted an injunction on the ground that Congress had no constitutional power to engage in a permanent utility system.
The Circuit Court of Appeals reversed that decision. On appeal by the stockholders to the Supreme Court of the United States the latter decision was affirmed (297 U. S. 288) on February 17, 1936, Justice McReynolds writing a vigorous dissent.
Very pertinent to the holding of the trial court that the action of Congress was unconstitutional is this language of the opinion of the Supreme Court, written by Chief Justice Hughes:
"And the Government rightly conceded at the bar, in substance, that it was without constitutional authority to acquire or dispose of such energy except as it comes into being in the operation of works constructed in the exercise of some power delegated to the United States."
That is, it could not, independently of flood control or improvement of navigation in the interstate river, use the dam and the machinery connected with it for the sole purpose of manufacturing electric power for sale. In the control of floods and in improving navigation, the machinery might generate more power than was needed for the purposes stated. It would be unreasonable to let that go to waste. It could be legally sold, as the general purpose of the operations was not to manufacture power for commercial sale.
But the act of 1916, the beginning of the Wilson Dam, contemplated not only the manufacture of nitrates for war, a constitutional activity, but also the production of things "useful in the manufacture of fertilizers and other useful products," an unconstitutional activity. And the act of 1933, creating the Authority to take over the Wilson Dam, said that it was for "national defense," a constitutional activity, and also "for agricultural and industrial development," an unconstitutional activity.
The Supreme Court viewed the case through a narrow slit and treated it as though it stood alone, whereas the record, as exhibited by Justice McReynolds, quoting from the pronouncements of the promoters, showed "no less a goal than the electrification of America," Since then the "goal" has been considerably attained.
In a dissenting opinion Justice McReynolds said that on the record the Court should have considered the truth of petitioner's charge that, while pretending to act within its powers to improve navigation, the United States, through corporate agencies, was really seeking to accomplish what it had no right to undertake "the business of developing, distributing and selling electric power."
Justice McReynolds said, "Public service corporations were to be brought to terms or put out of business."
The Justice quoted from the report of the Authority for 1934:
"'When we carry this program into every town and city and village, and every farm throughout the country, we will have written the greatest chapter in the economic, industrial, and social development of America.'"
That made plain how little were flood control and navigation involved in the adventure. Of course, that development was not the business of the United States, any more than the development of the country in the past has been.
On the findings of fact made by the trial court, which Justice McReynolds said were not controverted, he called the act of the Government "a deliberate step into a forbidden field, taken with definite purpose to continue the trespass."
Precisely what Justice McReynolds stated of the purpose to continue a trespass in a forbidden field was admitted by President Roosevelt in a Press conference on November 14, 1944, shortly after he had been elected for the fourth time. This came in the dispatches from Washington (italics inserted):
"Of his seven water shed developments, Mr. Roosevelt said that the areas would center about a basic stream for each district. Water control would be a minor phase of activity compared to power development."
The need for secrecy and deception having passed, seemingly, the President let the cat out of the bag.
But there had been no cat in a bag except to the majority of the justices of the Supreme Court.
And on May 11, 1948, the House of Representatives of the 80th Congress killed by a vote of 192 to 152 a bill of the bureau for the construction of a steam power plant in the Tennessee Valley to cost ultimately 84 million dollars.
Those facts go even further than President Roosevelt did when he admitted that the whole scheme was from the beginning for the manufacture of power by Fascist corporations aided by the money of the taxpayers. Of course, a steam plant manufacturing electric power is absolutely unrelated to flood control and the promotion of interstate navigation.
And the Supreme Court, notwithstanding what Justice McReynolds disclosed from the record, permitted itself to be taken in by the fraudulent pretenses of the promoters of Fascism!
In addition to that stupendous nongovernmental project, which has cost the taxpayers heavily every year $41,839,062 in 1939, for instance there are the Grand Coulee Dam Project of August 30, 1935, the Bonneville Project of August 20, 1937, on the Columbia River; the Fort Peck Project of May 18,1938, on the Missouri River, and numerous other projects covering the map all illegal power projects.
We were suffering from what General Eisenhower called "creeping paralysis" when those projects were pushed through!
The Federal Power Act of August 26, 1935, for the acquisition of power sites, plainly evidenced a comprehensive purpose of Government to manufacture and sell electric power, through Fascist corporations and with the money of the taxpayers, in competition with private investors and manufacturers and in violation of the Constitution.
The record raising the question whether the Government of the United States was bent on controlling floods in navigable rivers and promoting navigation in them, or whether it was in reality on an adventure in Socialism should have given pause to the Supreme Court.
The question was for the Ultimate Court. It was for the Constituent Assembly, the people acting in their capacity as constitution makers, to say whether that business, stopped by the sound injunctive order of the United States District Court, should go further. It was the right of the people, passing on a proposal to amend the Constitution, to say whether they wanted their Government in the business of manufacturing and selling electric power, or in any other business. The departure from the law respecting the carrying on of business since the time of Magna Carta, 721 years before, was so radical that it was the duty of the Judiciary to stop it, as the trial court did, until the question could be carried to the people for decision.
That is what the court of Chief Justice Fuller did in 1895 with an income-tax law in disregard of a limitation stated in the Constitution. It told the proponents of the income-tax idea to take it to the people, as the Court would not try to rewrite the Fundamental Law.
And in a concurring opinion holding (298 U. S. 238) the Bituminous Coal Act of 1935 in conflict with the Constitution, this was said by Chief Justice Hughes:
"If the people desire to give Congress the power to regulate industries within the State, and the relation of employers and employees in those industries, they are at liberty to declare their will in the appropriate manner; but it is not for the Court to amend the Constitution by judicial decision."
It is lamentable that that principle was not applied by the Supreme Court respecting the Tennessee Valley Authority. For the time must come when the people will refuse to submit to taxation for money to be used in such ways. And it is fully as important that the tremendous and malign influences of such bureaus in the Government as propagandists be brought to an end.
With such forces pouring out "information" to the public all the time in torrents, it is, of course, impossible for the public to be rightly informed.
The Tennessee Valley Authority has been a powerful and dangerous propagandist. The United States Government Printing Office put out "Progress in the Valley: T V A, 1947" an 82-page book printed on heavy paper, with 7 costly pictures of the wonders accomplished for man, woman, and child in the Valley, and for invention, manufacture, and recreation.
On page 74 the book says that the average rate paid by "large industrial consumers" during the past year was 0.64 cents per kilowatt hour, in comparison with "0.93 paid by industrial consumers throughout the United States."
First, why should "large industrial consumers" be cared for by the American taxpayers?
Promptly upon the turning of machinery by the Tennessee Valley Authority, the Aluminum Company of America and the Monsanto Chemical Company, two of the largest manufacturers in the country, went down from the North and began business in the Valley under long-time contracts for cheap power at the cost of the taxpayers! They recognized a golden "yardstick" when it appeared.
Second, it is manifest that a rate by Government of 0.64 must drive out of business companies charging 0.93. Justice McReynolds found that to be the grand purpose.
On page 79 the book reveals that through the fiscal year 1945 the Authority purchased "facilities totaling $125,000,000." Those acquisitions brought in "some 345,000 consumers, or about half of those now served."
If that is not swallowing competitors alive, what expression would describe it?
The Supreme Court held that as the Constitution provides (Art. IV, Sec. 3) that "the Congress shall have power to dispose of ... the territory or other property belonging to the United States," it could convert the water of the River into power and sell it as it disposes of coal or other minerals in the lands which it owns. But it does not own the water in the river. Besides, it sells from the public lands the coal or other mineral in its natural state. It does not, in competition with other manufacturers, convert potential into actual power. On that, Justice McReynolds said that the ownership of an iron mine by the United States would not "permit the construction of smelting works followed by entry into the business of manufacturing and selling hardware, albeit the ore could be thus disposed of, private dealers discomfited, and artificial prices publicized."
This decision upholding the Act of Congress creating the Tennessee Valley Authority, and the decision sustaining the National Labor Relations Act, and the decision sanctioning the Packers and Stockyards Act, bring to mind a passage from one of the lectures fifty years ago to the law students at Yale by John F. Dillon, who had sat on the Supreme Court of Iowa and on a Federal Bench, a great figure of that day. Dealing with the barriers set in the Constitution to keep Congress in its place to keep it out of "a boundless field of power no longer susceptible of any definition" with the barriers to keep a vaulting Chief Executive in his place, that great constitutionalist said:
"The value, however, of these constitutional guarantees wholly depends upon whether they are fairly interpreted, and justly and with even hand fully and fearlessly enforced by the courts. . . .
"If there is any problem which can be said to be yet unsettled, it is whether the Bench of this country, State and Federal, is able to bear the burden of supporting under all circumstances the Fundamental Law against popular, or supposed popular, demands for enactments in conflict with it."
The Judiciary, respecting which Judge Dillon had misgivings half a century ago, has certainly not grown stronger.
What overpowering necessity called for the drowning of 500,000 acres of cultivated land which the Farm Bureau of Tennessee found in 1941 to be producing each year crops valued at $14,415,300? Could the furnishing of cheap electric power by the President's new "yardstick" to powerful patrons of the Tennessee Valley Authority justify the destruction of this natural value of the Earth? When the Salt River Valley had recently been reclaimed by irrigation from the desert and made immensely fertile and productive, and when other reclamation projects had been carried out and more were in prospect, by what line of reasoning could any "planner" have concluded that it was desirable to submerge forever more than half a million acres of the rich bottom lands along the Tennessee River?
But that destruction of fertile lands displaced 13,433 families, or 56,000 persons, and sent them adrift, as the war in Europe displaced persons and sent them wandering. For those in Europe we have expressed much compassion and to them we have given much help; but there has been no sorrowing over the displaced persons in the Tennessee Valley. True, those who were displaced in that Valley were paid for their lands, so far as money can compensate for the loss of homes sanctified by long living and clustered with the memories of generations.
Yet, even if the compensation had been sufficient to cover every element of value entering into the worth of a long-established home, there still remained, and will forever remain, unpaid for, the yearly production of $14,415,300 of foodstuffs and other products given by the land and needed and consumed by the American people. And even if the displaced persons found employment in the electric power plants which the Government set up without authority from the Constitution, who on earth had authority to determine that it was better for those persons to exchange the independence and security of life on their lands for the uncertainty of subsistence from a pay roll which is liable to be suspended at any time without any explanation to them?
As previously indicated, the people of the Tennessee Valley did not ask for the submergence of their lands.
Those adventures by means of Fascist corporations are probably the worst aggressions by Congress and the President upon the liberty and the property rights of the Americans.
All who have become enthusiastic over the "success" of the Tennessee Valley Authority, and of the other projects of Government for manufacturing electric power for the commercial market by using the money of the taxpayers without asking their permission, should think again and carefully consider the warning given centuries ago by Authority, namely, that men may gain the whole world and still be heavy losers.
1. An advertisement by the Electric Light and Power Companies in United States News and World Report of March 3, 1950, shows a map of the United States in which are stuck 209 pins with white heads and 491 with black heads, over 44 of the 48 States. The white heads show where electric power plants are now operated or financed by the Federal Government, and the black pins mark the places where electric plants are under construction with taxpayers' money. The map presents a frightening picture. It goes to prove what Justice McReynolds said the record in this case established, that the Fascists had "no less a goal than the electrification of America." The United States is becoming Socialistic at top speed.
2. A dispatch from Washington on April 5, 1949, showed that "big business" has taken over heavily the benefits of the cheap power provided by the taxpayers. In the Tennessee Valley are the Aluminum Company of America, the Monsanto Chemical Company, the Reynolds Metals Company, the Electro Metallurgical Company, the Victor Chemical Company, the Tennessee Copper Company, and the Reynolds Alloys, taking over 28 per cent of the total output.
In the Northwest the power generated at the Bonneville and Grand Coulee dams on the Columbia River by the taxpayers was taken by the Aluminum Company of America, the Pemamente Metals Corporation, the Reynolds Company, the Electro Metallurgical Co., the Pacific Carbide Company, and the Pennsylvania Salt Manufacturing Company, among others.
The "yardstick" which the President was so desirous of providing to show what rates to the consumer should be charged was evidently of the highest satisfaction to large corporations. Now the complaint at Washington is that the consumers in the homes and other small users are threatened with a shortage unless Congress will authorize the construction of steam plants thus casting off altogether the cloak of navigation and flood control which Congress wore when it entered on this stage!
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