NCPA - National Center for Policy Analysis


March 6, 2009

The recently enacted $787 billion "stimulus" program appears to be the down payment on a sweeping "new New Deal" that will include many other ambitious government programs.  Given the size and scope of such interventions into the economy, it's important to remember that big government programs often have results that are very different than what was intended, says Jim Powell, senior fellow at the Cato Institute.

Take for example, the experience of FDR's most ambitious infrastructure program, the Tennessee Valley Authority (TVA):

  • Heralded as a program to build dams that would control floods, facilitate navigation, lift people out of poverty and help American recover from the Great Depression, it actually flooded the more land than it protected.
  • The TVA morphed into America's biggest monopoly, dominating an 80,000 square mile region with 8.8 million people.
  • It pays none of the federal, state, and local taxes that private businesses pay; it's estimated that annual cost-of-capital subsidies exceeded $1.2 billion and currently, the TVA has about $26 billion of debt.
  • Moreover, it doesn't have to incur the costs of complying with myriad federal, state, and local laws, and when it wants to acquire more assets, it has the power of eminent domain.

Therefore, as a remedy for the Great Depression, the TVA didn't work.  It created no new wealth and transferred resources from the 98 percent of Americans who didn't live in the Tennessee Valley to the 2 percent who did, says Powell.

And as the TVA's long record illustrates, voters rarely receive what they signed-off on when it comes to massive government programs. Too bad today's advocates of a new New Deal seem determined not to learn from their predecessors' mistakes, concludes Powell.

Source: Jim Powell, "How Big Government Infrastructure Projects Go Wrong," Cato Institute/Reason, March 2, 2009.

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