Depression Decisions: Bad Decision Driver?
Written by Brad Walker, Rivers Director November 26, 2013
Ever since the “Great Recession” began in 2009 I have wondered whether it might affect the making of important policy decisions. There is some precedence for concern when we look back on some decisions made during the Great Depression, especially regarding large-scale projects. Dams built on the Columbia River (Grand Coulee Dam), Colorado River (Hoover and Parker Dams), the upper Missouri River (Fort Peck Dam), the Upper Mississippi River (UMR) and the Illinois River (the majority for each) were products of that era’s desperate need to generate jobs and rebuild the country’s economy. But in retrospect, were they good deals?
In reality, this is a difficult question to answer because Congress does not have a process for fully evaluating the actual benefits and impacts resulting from these facilities, so we really do not know if they were worth the costs. We are placed in the uncomfortable position of trusting Congress and assuming, without evidence, that these projects were worth it. However, we do know that far too often the U.S. Army Corps of Engineers (Corps) who plans, designs and manages the construction of many of these projects, exaggerates benefits, underestimates the costs, and does not adequately, or at all, include the cost of the damage, especially lost ecosystem services.
On the UMR and the Illinois Rivers, Great Depression-motivated work involved the construction of a series of navigation dams that created pools behind each dam to permit a 9-foot deep channel for barges. The dams raised the elevation of the river upstream by varying heights while submerging thousands of acres of floodplain forest and wetlands which provided waterfowl and wildlife habitat, flood storage, and filtration. The 9-foot channel requires the use of locks at the dams to allow much larger barges to travel between the pools to transport primarily grains, fossil fuels, and chemicals. Maintenance of the 9-foot channel also creates a higher water height or head for water supply inlets providing less expensive systems and, in some places, more reliable service for public drinking water supplies.
Some benefits are apparent. However, nowhere is there an in-depth analysis of the actual monetary benefit that this infrastructure has provided the public. By the public, we do not mean the barge industry, large corporations or those who use the river to export commodities that would otherwise be shipped by road or rail. We mean the general U.S. taxpayer.
One might assume that the construction of the locks and dams on the UMR and Illinois River faced no opposition. Indeed, those who would benefit, primarily agricultural and barge transport interests, were very vocal in support of the dams and lobbied Congress for navigation improvements for decades. In reality, the projects generated considerable opposition that included conservation groups, newspapers, economists and, believe it or not, in the beginning, the Corps of Engineers. Between 1926 and 1929 the Corps’ Rock Island District Engineer and two successive Chief Engineers stated that the project was not advisable. Per the Corps’ Rock Island District history document, the District Engineer’s opinion was that the 9-foot channel proposal “was economically unadvisable” and “would have disastrous environmental impacts” and the Chief Engineer’s agreed. This was consistent with the reasons others opposed the project.
The Great Depression changed the minds of both Congress and President Franklin Roosevelt. The desperate need for jobs and special interest lobbying pressure combined to undermine both rational economic thought and ecological common sense creating the atmosphere to improve the short-term economic situation but obligating the U.S. taxpayer to both perpetual operation and maintenance costs of the barge infrastructure, as well as the then inestimable environmental damage to the river that the locks and dams have caused.
Harold G. Moulton, a well-respected economist, predicted the future subsidy reality of the Upper Mississippi River navigation system in his 1912 dissertation:
In order to prevent the almost complete diversion of traffic from the waterways it has been necessary for Governments to assume all, or nearly all, the fixed charges connected with water transportation, to pay for building, equipping, and maintaining the water routes, and to furnish free of charge to the water carriers. When thus relieved of all save the mere direct cost of operating the boats, it is usually, though not always, possible for the water carriers to offer rates which enable them to compete with railways, which are entirely self-supporting.
Up until 1986 every cent expended keeping the river barge system functioning, which equates to billions of dollars, came out of the pocket of the American taxpayers. Since 1986 a paltry 10%, currently about $80 million, has been provided by the barge industry to construct, operate and maintain the infrastructure they completely depend on. This minimal industry contribution has been a major reason the Olmsted Locks & Dam on the Ohio River has been delayed in completion and its cost has more than tripled. Ironically, the primary reason barge promoters use to justify this huge public subsidy is to keep the railroads from gouging the public. In 2012 the railroads paid out of their own pocket about $18 billion to keep their infrastructure operational and efficient. Imagine what the railroads could do with a 90% subsidy.
The environmental restoration costs have exceeded $400 million thus far on the UMR and will ultimately require billions more. Again it seems, all is to be provided by the taxpayers. As mentioned above, one cost category that has never been properly included in the Benefit-Cost Analysis by the Corps is the loss of ecosystem services. A reasonable rough estimate for the loss of floodplains or wetlands is $10,000 per acre every year, which equates to many billions of dollars in lost and unaccounted for public services over the life of these projects.
The economic benefit of the river barge system is its alleged cost savings for those shipping on it. However, because of the system’s huge public subsidy the system users never pay a fair price and the taxpayers are required to make up the difference. [Read more about the UMR barge system’s history and its impacts here.]
Sadly, Mr. Moulton and the lock and dam opponents were correct. The nation’s river barge system exemplifies the current American economic model – privatize the benefits (the profits go to corporations) and socialize the impacts (the costs are for the taxpayer).
Despite only appropriating a few billion dollars each year for construction, Congress has authorized more than $60 billion to build additional Corps projects that will affect our rivers. Regrettably and unsurprisingly, many of them are in the boondoggle category yet enjoy enough special interest pressure that some could be funded and built. One in our region is a proposed $2 billion expansion of the UMR locks (yes, the very same locks mentioned above) that the Corps own economic analysis indicates has a negative public benefit. Another is a more than $100 million project to completely close-off the New Madrid Floodway; part of the Mississippi River flood reduction system used in 2011 to reduce flood levels when the Ohio and Mississippi River were flooding. The only beneficiaries of this project will be a small group of already well off landowners who farm within the floodway and will pay virtually nothing for the project.
Many of these projects have come through a perverse Congressional pork barrel process called the Water Resources Development Act (WRDA) that allows legislators who know little about rivers and are constantly lobbied by special interests to draft laws that commit billions of our hard-earned dollars to build unnecessary and outrageously expensive projects.
Both the Senate and House have new versions of WRDA that are currently setting the stage for more bad decisions. Indeed, the “desperate” times seem to have returned. The House actually calls their version of WRDA a reform of the process, by which they must define reform as: to make things even worse for the taxpayers. Both of these industry-influenced bills were passed with little debate, no public input, and by wide margins. Bill fast-tracking such as this is typically reserved for either putting the name of one of their own on a public facility or for an alleged jobs bill that will benefit corporations. Contrast this with the heated debates occurring over reducing Social Security and Medicare benefits.
As we have previously outlined, we would like to see two major changes to this process:
Require post-construction evaluations of the major projects to determine their actual public benefits and costs. This would provide lessons learned to help minimizing the construction of future bad projects.
Develop a watershed approach for selecting river projects that is not influenced by special interests or made exclusively by Congress. The selection of projects should be made more objectively at a watershed level through a fact-based criteria process, not one focused upon improving the likelihood of a politician getting re-elected.
Both WRDA bills need to die. Congress needs to stop mucking up our rivers with special interest-driven destructive legislation that do not serve the public’s interest.