Dr. Power: Mandating Logging Will Not Stabilize Industry

Senator Tester’s “Forest Jobs and Recreation Act,” which seeks to both boost timber harvests and add hundreds of thousands of acres of wilderness in Montana, had its first hearing before a congressional committee late last week. It was not surprising that Montana timber interests testified in favor of the bill.

What was interesting was that wilderness advocates from Montana and national environmental organizations were strongly divided over the merits of Tester’s bill. Tester is attempting to “split the baby” and end the multi-decade paralysis that has both blocked any new wilderness protection for Montana’s six million acres of unprotected wildlands and shrunk timber harvests on federal lands in Montana down to a small fraction of what they were two decades ago.

The Obama Administration, through the Undersecretary in charge of the U.S. Forest Service, weighed in on the side of the critics of Tester’s bill, strongly recommending that key elements of the bill be modified.

In particular, federal officials focused in on Tester’s proposal to have Congress mandate particular levels of timber harvest on some of Montana’s National Forests. They commented that those mandated timber harvests “are likely unachievable and perhaps unsustainable” and “far exceed historic [harvest] levels on these forests, and would require an enormous shift in resources from other forests in Montana and other states to accomplish the [harvest] levels specified in the bill.” That is the same criticism that has come from many Montana critics of the Tester bill.

Tester’s Senate colleague, Ron Wyden of Oregon, sought to support the bill by asking why, if the Federal government can bail out our automobile companies and banks, it cannot support bailing out the timber industry in Montana and elsewhere the Pacific Northwest? Setting aside the question of whether an endless wave of federal bailouts of private businesses is good for our economy, the problem with Tester’s bill is that it will not stabilize the timber industry and timber communities but would do the opposite. Senator Tester’s bill would require the U.S. Forest Service to arrange the commercial harvest of more acres on the Beaverhead-Deerlodge National Forest than have ever been harvested there in the last 50 years except for one year. The Forest Service would have to see that those acres were harvested every year no matter what the demand for timber happens to be. The economically naïve idea behind this timber harvest mandate is that if large volumes of timber are harvested, our lumber mills will operate at a higher level and more Montana workers will be employed. Advocates believe that a constant timber supply will assure constant production and employment at mills.

It might have worked that way back in the old centrally planned Soviet Union, but it does not work that way in a market economy. When the demand for timber products is very low, as it is now because of the collapse of the construction industry, continuing to produce wood products at a constant level only drives down the price of wood products further, threatening the profitability of those mills that have been barely able to continue to operate. Similarly, even if the housing industry were not in the dumps, if total wood products supply exceeds demand because of increased mill production or competition from other parts of the nation and the world, simply churning out the same level of production despite the excess supply will simply assure that lumber prices will continue tanking, forcing more and more mills out of business.

In a market economy, producing a constant level of supply no matter what economic conditions happen to be destabilizes the market, businesses, and communities even more. During periods of excess supply, it drives prices lower than they otherwise would be. During periods of excess demand, it drives prices higher than they otherwise would be. Stable levels of production lead to unstable prices as market conditions fluctuate. Mandating a constant flow of trees into the market does not stabilize communities. It does the opposite.

The mandated harvests in Tester’s bill are also likely to be very costly to taxpayers and to the important non-timber programs run by the Forest Service. In soft timber markets, the skinny lodgepole pine of the Beaverhead-Deerlodge National Forest is likely to have very low commercial value. Yet Tester’s bill would require that the Forest Service harvest the trees nonetheless, even if, as is usually the case on most of Montana’s National Forests, that harvest takes place at a loss to the U.S. Treasury. The Forest Service will have to take money from other projects and/or other forests to subsidize the harvest of those trees that the market does not want or need.

The low value and high cost of those trees is what has kept harvest levels of those trees so low over the last half-century, even during boom times in the timber industry. Yet now harvest-at-a-loss would be mandated by law. Tester likely suspects that this will be the case because while his bill mandates the timber harvest, it does not mandate the forest restoration work that the timber harvest is supposed to pay for. In today’s markets and in many of the market conditions we have faced in the past, the mandated harvest will lose money and fund no restoration work at all.

As the Obama Administration witness said at the Senate hearings, this is a fixable problem with Tester’s bill: Just get rid of the mandated timber harvests and the massive expansion of the part of the forest that is open to commercial timber harvest. That would be better both for Montana’s communities and for Montana’s forests.

Dr. Thomas Michael Power is former Chair of the Economics Department at the University of Montana, where he currently serves as a Research Professor. He is also the author of Lost Landscapes and Failed Economies: the Search for a Value of Place and Post-Cowboy Economics: Pay and Prosperity in the New American West.

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