A History of US Economic Law Part 5: Public Works

Beyond Saving's picture

 With the death of President McKinley on September 14th, 1901 Theodore Roosevelt was sworn in at only 42 years old- he remains the youngest president we have ever had. President Roosevelt was very ambitious and had the perfect conditions to push through much of his agenda. He took over after the death of a popular president in an economy that was booming and both the House and Senate were held by comfortable republican majorities. President Theodore Roosevelt was able to effectively spend his political capital to promote a variety of progressive policies. He promoted his policies under the moniker of the "Square Deal" claiming that they did favor any particular group but were fair to all.   

 

I want to start by discussing two massive public works projects that were initiated early in Roosevelt's presidency. The Newlands Reclamation Act and the Isthmian Canal Act (what we now call the Panama Canal).

 

The Newlands Reclamation Act was a law that federalized irrigation projects in the desert areas of the west. It gave substantial control to the Secretary of the Interior to irrigate public lands (most of the west was publicly owned at the time) and then sell those lands to people with the requirement that at least half of the land is farmed. The proceeds from the sale would then be spent on more irrigation projects. 

From the Congressional Record we can see the main arguments in favor of the law.

Senator Hansbrough wrote:

Mr. President, a well-known irrigation expert declares that the necessity of immediately adopting some definite policy with respect to irrigation arises from the fact that, under existing land laws, sources of water supply are being seized upon with great rapidity, largely by men who are not able to utilize them and who are holding them for speculative purpoes. For example, a man may secure control of a spring or locality where water might be held to irrigate 10,000 acres. He holds this for his cattle or for raising forage. He has not the means to conserve the water, nor could he do this profitably. It is of no particular interest to him whether 50 or 100 families or more might make homes upon the vacant land adjoining. If he could build the works, and if he could get the people there, and if, having them there, he could exercise governmental control over them, he could make a fortune. But he can not do it, and so these public lands around him lie idle.

There are thousands of such instance. In one way or another control of the situation is rapidly passing away from the people, and vested rights are growing up. This absence of wise control, if continued, must result in the arid West remaining thinly populated., instead of furnishing opportunities for millions of people. Nothing less than prompt action on the part of Congress can prevent this calamity...

The people of the country, as personified by the Government, are the great landowners. They, as a whole, are benefited by the disposal of the vacant lands, the settlement of the waste places, and the consequent increase of the manufacturing and transportation. They can afford to disregard questions of immediate profit in favor of the ultimate settlement of the arid region. 

Opponents of the law argued that the Constitution did not provide the authority for the federal government to intervene and that these issues should be handled by states. There were concerns that water could be channeled from one state to another and objections from the east because they didn't think federal funds should be used to help out one region. 

The result of the law was several irrigation projects and over 300 dams throughout the west. While it didn't lead to the 50 million acres of irrigated land that the proponents were promising it did lead to the eventual irrigation of 10 million acres today. It provides 140,000 farmers and 31 million people with water as well as operates 58 hydroelectric plants producing 40 billion kilowatt hours annually. While the program doesn't make the promised profit it is only operating at a $100 million loss today.  http://www.usbr.gov/facts.html

 

The Isthmian Canal Act was the official authorization to purchase the abandoned equipment and work that had been started on the Panama Canal. A French company had started building the canal in 1880 but abandoned the project in 1889 but the project was abandoned when the company experienced a financial collapse. Congress authorized the purchase for $40 million. 

Columbia, the owner of the land at the time, refused to agree to the treaty. Roosevelt responded by supporting the Panamanian rebels, a group seeking to separate Panama from Columbia. US naval power was instrumental in preventing Columbian troops from attacking by sea. Marching on Panama by land was nearly impossible due to the dense jungle. The result was that the handful of Columbian troops in Panama quickly surrendered and the US recognized Panama as a country. Panama immediately approved the treaty and by 1904 work on the Panama Canal had begun.

Construction of the canal was completed on July 1st 1914. The total cost of the project was $375 million and 5,609 workers died during the construction, mostly due to malaria and yellow fever. Adjusted for inflation it remains the largest and most expensive single construction project undertaken by our government.  http://www.pancanal.com/eng/history/history/end.html

 

Together, the Newlands Reclamation and the Panama Canal were the start of the federal government being more willing to invest in and manage large infrastructure projects.

 

 

 

 

EXC's picture

And still there is water

And still there is water shortages in the west. The irrigation projects did allow more food to grow. It created the sprawling cities of the west, environmental damage.

Today, I'm not really sure the government needs to finance any public works projects. Government can facillitate the selling of bonds for private investors to build infrastrure and then charge tolls. Beyond some space exporation  or military projects, I can't think of any project that requires public financing. It's really welfare for corporations that can't raise private capital on their own.

“Religion is regarded by the common people as true, by the wise as false, and by the rulers as useful.” Seneca