1997 marks the centennial of the National Forest System. This is America's best example of centralized government planning and management, our glorious experiment in "sylvan socialism."

In the Federalist Papers, America's founders urged us to consider each law and policy as an experiment to be evaluated and perhaps modified. The end of a century's experiment is an appropriate time to review and evaluate the National Forest System. The agency that manages it, the U.S. Forest Service, is the paradigm case of Progressive Era thinking. The Progressive Era creations, the Forest Service, the Bureau of Reclamation (1902), and the Park Service (1916), provided models for environmental management by bureaucrats.

The end of the nineteenth century was marked by enthusiastic Progressive Era reformers, people who harnessed the power of government to achieve positive ends. According to Robert Nelson , in his book Public Lands and Private Rights, "The progressives sought to curb the subservience to special interest that in their view had all too often corrupted the activities of the federal government." The Forest Service was supposed to serve as an example of government promoting efficiency and innovation.

Unfortunately, Progressive Era reformers' political economy was far less sophisticated than the Founding Fathers'. Lacking understanding of how the world works, they blended hopes with expectations. Ideally, their bureaucracies would foster efficiency and innovation. But, did they?

The term "bureaucrat" carries a crust of derision in every known language. This is no accident. Regardless of their mission, over the long term, bureaucracies tend to be run for the people in them, and the clientele they benefit. The Forest Service has followed this pattern and regressed to normal bureaucratic behavior.

The Forest Service was to use scientific information to maximize long term productivity of forested lands. In the beginning, before the Forest Service focused on timber harvest, it was custodial, e.g. building trails and fighting fires. They largely succeeded and the agency quickly gained a reputation as a no-nonsense, white hat operating in an untamed region. In Norman Maclean's acclaimed novel A River Runs Through It , the Forest Service is portrayed as a tough, down to business agency that succeeded. However, much has changed since the Forest Service exemplified efficiency and community well-being.

Following the Money

In 1995 the U.S. Treasury spent over $499 million tax on national forest timber sales. The Forest Service retained over $345 million from the sales. After deducting cost of constructing logging roads and making payments to the counties where logging occurred, the Treasury only saw a $44 million return from the sales. This made the logging of federal forests in 1995 a $455 million net loser for taxpayers.

What happened in 1996 is not the exception but the norm. In 1993 and 1994 the Forest Service claims that timber sales made roughly $600 million. But actual returns to the Treasury were $800 million less than cost of funding the sales. Since the Forest Service has gone into the business of offering timber for sale, it has routinely lost money.

Overdue Exposure

Although the Forest Service continuously losses taxpayers' money, mainstream media has generally failed to criticize this agency. At least until recently. The cover story of the June 1997 issue of Harper's is Seattle based journalist Paul Roberts. His article exposes the Forest Service as an inefficient and corrupt agency. Harper's is a magazine with circulation over 216,000 with such well known readers as Bill Clinton. This article marks one of the few times that an upscale, mainstream publication has focused upon Forest Service deficiencies.

The elite media is beginning to recognize what economists and policy analysts have long realized: government bureaucracies are inefficient and insensitive managers of environmental resources. Harper's benchmarks the elite media's awakening to the malfeasance and crass incompetence of a "model" government agency.

A Growing Bureaucracy

Conventional wisdom long held that the Forest Service was an institution worthy of emulation. Gifford Pinchot, the founder of the Forest Service, thought the agency would be run by experts and not politicians. Prior to World War II the Forest Service was highly acclaimed, according to Herbert Kaufman author of The Forest Ranger: A Study in Administrative Behavior, as being "a model of public-spirited bureaucratic efficiency." Although it was isolated from Presidential whims, it was not immune to overzealous Congressional appropriations committees. Randall O'Toole, a forest economist with the Oregon based Thoreau Institutes, states that "for the last 50 years, appropriators have funded the national forests mainly as pork."

Until the post-World War II housing boom, the Forest Service acted primarily as custodian of the national forests. The housing boom of course required timber. Delighted to oblige the timber demands of a sprawling country, peddling timber became the new focus of the agency. Offering timber for sale allowed the agency to rapidly expand, neglecting other management objectives. The first postwar budget (1947) saw a scant 25 percent increase in "forest protection and management" while funding for roads and trails jumped 250 percent, most of which was allocated to building timber access roads. As the agency grew, it strayed from its idealistic beginnings into a typical bureaucratic agency. This transformation occurred unbeknownst to the vast majority of Americans.

In the 1970's, a few scholarly mavericks realized that the Forest Service had grown to be a grossly inefficient organization. Management decisions were pathologically based on increasing the agency budget. Selling timber was the means to expand budgets while ignoring taxpayers. It was apparent that the agency had shifted its focus from benefiting the American people, to benefiting its own.

Over the years forest managers gradually increased the amount of timber offered for sale. Higher production meant greater budgetary allotments. Typically the Forest Service receives 99 percent of the requested timber funding while wildlife funding is less than 80 percent of requested; and recreation, watershed or reforestation receives less than 70 percent of what is requested. In a recent speech Secretary of the Interior, Bruce Babbit, stated that tying the Forest Service budget to the level of timber sale contracts is "effectively instructing foresters to work on a commission basis." The incentives to focus on timber production while neglecting other forest resources.

Salvage Sales Savage Forests

But growing environmental concern produced environmental rules and regulations that threaten timber sales, the core of the Forest Service. With increasing environmental constraints, the Forest Service sought new ways to justify ecologically destructive timber sales. The 1976 National Forest Management Act allowed the Forest Service to sell burned or diseased trees under the title of "salvage sales." The "Salvage Act" gave the Forest Service license to both sell timber, which secures the Forest Service budget; and appease the public by claiming the sales as "sound ecosystem management."

The Forest Service budget benefits in several ways from salvage sales. All receipts from salvage sales are kept in a fund to be used for future salvage operations. This effectively makes salvage sale funding immune to reductions in the Federal budget. In addition, because salvage sales are exempt from irksome environmental restrictions, the timber harvest can be increased.

And, Since salvage sales qualify as "emergencies" they can exceed the 40 acre clear-cut limit. Although clear-cuts can quickly denude a forest, they greatly increase the amount of timber available for sale in an area. In addition to increased clear-cutting, logging is allowed on previously off limit environmentally or geologically fragile forests. These salvage sales are a temporary salvation for a timber hungry Forest Service. A 1992 Forest Service memo, stated "Even if a sale is totally green, as long as one board comes off that would qualify as salvage on the Salvage Sale Fund Plan, it should be called salvage."

For a generation, Forest Service inefficiency and corruption has been recognized by economists and policy analysts studying the agency. Harper's introduction of Forest Service deficiencies into mainstream publication is timely indeed. The centennial of an experiment in centralized planning is clearly a failure.

What To Do

The time has come to turn management of national forest over to more responsible and responsive organizations. The Progressives' beliefs in expert management makes sense. The fatal flaw of the Progressive system was the assumption that federal experts would be insulated from pork barrel politics. But this is not how it works.

Private tree farms are forced to optimize production since they are responsive to market forces and do not receive financial backing from the government. Port Blakely Tree Farms, established in 1864, is a glowing example of durability in the timber industry. Port Blakely can attribute much of their longevity to properly managing their resources. But optimizing natural resources means far more than just focusing on timber production. It includes management practices that allow for additional land uses that respond to the demands of recreationists and wildlife enthusiasts. Better ecosystem management fosters profits and a diverse collection of marketable items.

Private tree farms do not hold all the answers to reform. Often, the highest economic use of national forests lies in recreation, watershed and habitat protection rather than commodity production. Obviously, when a company can only capture revenue from timber, it will slight other values.

Existing commercial forest lands should be auctioned off, with environmental constraints (such as riparian area protection), to the highest bidder. The bidding would be open to timber companies and environmental groups alike. Market forces would ensure that the land would go to the highest valued user, and together with environmental constraints on harvest, assure responsible stewardship.

To ensure that noncommerical areas are properly managed, a public, nongovernment trust should be established. Endowment boards, like those running museums, hospitals, and private schools, would operate under a legal charter to steward individual forest. After receiving a one-time Congressional endowment, each forest's individual trust would be "on it's own". The board, established by local environmental groups, business leaders, and citizens, would be charged with promoting ecologically sensitive economic activities as part of their trustee responsibility.

With media delving into the bureaucratic shortcomings of the Forest Service, a new era is upon us. The Harper's article marks a milestone in the way the public views inefficient bureaucracies. Previously, only a few mavericks realized such inefficiencies, but as the attentive public increases their scrutiny of the Forest Service, the agency will squirm. It will require political entrepreneurship to devise institutions that will eliminate activities harmful to both taxpayers and ecosystems.

This article originally appeared in The Freeman, October, 1997. The Freeman is published by the Foundation For Economic Education (FREE). Find out how to get a free sample copy of this award winning monthly journal and the 1997 FEE Book Catalogue.