This year is the centennial of the National Forest System. Its custodian, the U.S. Forest Service, manages 191 million acres of national forest and rangeland. That’s equal to Texas and Louisiana combined.

When founded the Forest Service was intended to be a model of good government in the old progressive model of benevolent despotism—rule by the enlightened according to scientific principles. It would be pleasant to report that the experiment has been a success. It hasn't been. It has turned out just about like any other organization where decisions are made by bureaucratic entrepreneurs. Socialism by any other name is still socialism and it still doesn't work.

Yet this is big business. Under the Forest Service’s control are marketable assets estimated to be worth over $50 billion, and its revenues from timber sales last year were some $1.4 billion. Profits? According to Oak Grove, Ore.’s well-known forest economist Randal O’Toole, money-losing timber sales cost U.S. taxpayers nearly $400 million last year alone.

What’s wrong? Why can’t the taxpayer at least break even on a resource of this quality? The problem is that, outside of the Pacific Northwest and the Deep South, most of the national forests are poorly suited for timber harvesting. Forest Service timber sales in Alaska, the Rocky Mountains, the Appalachian and Ozark Mountains, the Midwest and New England often amount to far less than the cost of simply arranging the sales. Essentially, forests that are warm, wet and low subsidize those in the Rockies that are cold, dry and high.

So why log the inefficient forests? The answer makes sense only in a bureaucracy: The inefficient logging continues because the local supervisors need the money. The Forest Service’s budget, $3.6 billion last year, gets most of its money from selling timber on land it manages (over 1.4 billion; the taxpayer kicks in $1.7 billion). The numbers would be far different if businesslike accounting methods were used, but they are not.

Timber sales are clearly the chief source of revenues, but the way the forests are managed, there is no true cost accounting. Under a series of laws passed between 1916 and 1976, forest managers are allowed to spend a share of timber receipts on forest management; the more timber they cut, the more money they get to keep.

The most important of these laws is the Knutson-Vandenberg Act, passed in 1930 to provide funding for reforestation. In 1976 congress expanded the law to let managers use timber receipts on wildlife, recreation, watershed and other forest improvements.

The incentive, clearly, is to cut. A key flaw in the Knutson-Vandenberg Act is that it allows the USFS to keep a nearly unlimited percentage of gross revenues from timber sales, and does not require forest managers to return the full economic costs of timber sales to the Treasury. When the act was passed, the cost to taxpayers of arranging these sales averaged 50 cents per thousand board feet. At that time the Forest Service wrote rules requiring managers to return at least that amount to the U.S. treasury.

Since then, inflation has driven the cost of timber sales up to $50 per thousand board feet. But Forest Service managers are still required to return only 50 cents per thousand to the Treasury. It’s almost as if General Motors’ Chevrolet division were allowed to buy cars from General Motors at 1930s prices, sell them at 1991 prices, and keep the difference.

Here’s an example. In 1990 the Caribou National Forest in southeastern Idaho spent over $300,000 arranging timber sales and over $100,000 building roads to the timber sites—all of the money came out of taxpayers’ pockets. The Caribou forest’s managers collected $814,000 from timber purchasers. But of this amount, only $757 made it back to the U.S., Treasury; the rest was kept within the Forest Service’s budget.

To open its often remote forests to logging, the Forest Service has become the world’s largest socialized road-building company. Of the 47,000 full time workers on the Forest Service payroll, fewer than half are foresters. The second-largest professional group consists of engineers who oversee almost 342,000 miles of logging roads that the Service has pushed into some of the world’s most beautiful wilderness areas. The U.S. Interstate Highway System, by contrast is some 50,000 miles. By the year 2040 the Forest Service plans to build another 262,00 miles of new roads, and rebuild 319,000 miles of existing roads—at an estimated cost of $15 billion in today’s dollars. The total mileage would go to the moon and back and then circle the earth four times.

Remember: The cost of this road construction is not factored into the cost of the timber the Forest Service auctions off. In other words, the Forest Service subsidizes logging operations by providing logging companies free access, with increasingly expensive roads built on more remote and steep mountain slopes, to reach increasingly poor quality timber. Nor are the indirect costs of ravaging the environment included.

I have worked in the woods as both a logger and professor of forestry, and I’ve cut timber on road right-of-ways. It is necessary to strip a road of its trees and then remove vast quantities of earth in order to make the cuts, fills and switchbacks, and to install drainage pipes and culverts. Disturbing soil, sand and rock destroys the network of vegetation that holds the soil in place, making the area prone to erosion. Massive erosion and siltation from USFS roads adversely affect trout and salmon fisheries, farmers’ and ranchers’ irrigation systems and the general quality of water. Efforts to reduce erosion are often expensive.

Private firms build roads to lower standards—especially if they have to pay the full cost. To log publicly owned forests, the USFS classifies land as “commercial forest” if it produces 20 or more cubic feet of wood fiber per acre per year. The standard for private firms is typically three to five times that. As a consequence of the incentives this low standard provides, the Forest Service consistently underinvests in its most productive sites, and overinvests in money losing, environmentally fragile areas.

In the northern Rockies some of America’s finest trout and salmon rivers have been severely damaged by more than 10 feet of siltation from Forest Service road building and logging in the mid-1960s. As the timber at lower elevations and in easily accessible valleys is harvested, the Forest Service builds its roads farther into the backcountry and on higher and steeper slopes. Generally, the steeper the slope, the greater the danger of landslides, slumps, sloughs and earth flows from logging and road-building activities—all in the name of increasing revenues from timber sales.

This increased road access effectively displaces many wildlife species. Although the Forest Service claims to close roads except when they’re used for management or logging, they usually do so by placing a green steel gate across the road. Often this is a symbolic action, offering a challenge to four-wheel drive enthusiasts and providing no significant impediment to motorcycles, snowmobiles and all terrain vehicles.

The roads and logging activities have also displaced trails. For example, in the 1940s the U.S. National forest had 144,000 miles of trails. Today there are only 114,000 miles. This has occurred despite the fact that the number of backpackers and other recreationists using the forests has increased form some 6 million per year to more than 200 million. Backpackers, however, contribute little to Forest Service budgets.

Little wonder it costs the Forest Service much more to harvest timber than it costs private forestry owners.

For an idea of the high cost and destructive potential of the Forest Service system, consider the decision a few years ago by California’s Sequoia National Forest managers to clear-cut in its giant sequoia groves, where many trees are over 20 feet in diameter, over 200 feet tall and over 2,000 years old. To provide funds for prescribed burning, Forest Service officials decided to sell all of the timber in the heart of their sequoia groves except for the sequoia trees that were over 8 feet in diameter. Other species of trees that mingled with the sequoia—ponderosa pine, sugar pine, incense-cedar and white fir, many of them giants in their own right—were all cut down and removed.

The USFS called this practice “sequoia grove enhancement.” But according to forest ecologists, a more accurate term would be “sequoia grove destruction.” A lawsuit filed by local environmentalists stopped the destruction, but not before the agency had logged several groves.

In essence, then, taxpayers are subsidizing environmentally destructive behavior that no private timber company or landowner could afford.

It is important to note that the bureaucrats who act in this manner are neither evil nor stupid. They are simply responding to the incentives put in place for them. The political logic of below-cost timber sales is straightforward. National forests are situated in 43 states and in many congressional districts. In these districts, logging and road building directly provide jobs and income to the local communities.

To enhance its budget and its goodwill with congressmen, the Forest Service provides a timber-cutting program in virtually every national forest, regardless of efficiency considerations. Many senators and representatives find it in their interest to vote for expanding Forest Service road building, logging and timber management. Scores of communities have become dependent upon the Forest Service’s subsidized logging.

The Gallatin National Forest is near Bozeman, Mont. There, recreation provides more than 16 jobs for every one job produced by the timber industry, which employs only 2% of the local work force. Yet there are plans for a massive road-building project in the Gallatin Forest to maintain 71 timber-related jobs. Little attention is given to the impact upon 1,170 workers in the recreation industry whose jobs are partially dependent upon a relatively pristine environment.

On the other hand, most recreational activities produce no budgetary reward for managers because Congress permits fee collection only for developed campgrounds.

What is to be done to stop the Forest Service’s destruction of the forests? Many of America’s environmentalists support a coercive, command-and-control approach to environmental management. But this is merely applying stronger doses of a medicine that clearly does not work.

There is a better way. We should auction commercially viable forests to private parties that will mange them better and will not build roads and other facilities that cannot justify their cost. The best managers of commercial timberlands are private timber companies and institutional investors with long time horizons, such as pension funds and insurance companies. Successful bidders would have to accept constraints on herbicide and pesticide use, restrictions on the cutting of old growth timber, recreational easements and protective buffers along watercourses.

Environmentalists often decry private timber companies as environmental plunderers. Yet as the forest Service shows, it is the logic of bureaucracy that leads to waste and plunder. Unlike the U.S. Forest Service, private firms cannot force taxpayers to subsidize their operations. Those that lose money on timber sales will go bankrupt. The U.S. Forest Service, like any state-owned company, cannot go bankrupt.

Private companies manage their land for marketable products. If a private company owns marginal timberland that is de facto wilderness, it is normally in its interest o leave it alone, or transfer it to a conservation group such as the Nature Conservancy and take a tax deduction. Alternatively, the company may mange it for recreation; this may not be as profitable as logging, but it is more profitable than logging at a loss.

A good example of how private management can benefit wildlife and timber management involves part of the Champion International forestlands of western Washington. In the late 1970’s Champion and the Washington Department of Wildlife began a cooperative management program to increase the quality of their forestlands for deer. Champion limited the size of its new clear-cuts and distributed them across the forest to maintain deer habitat potential.

Initially, the forest management activities did not produce the desired effect. There was an explosion of the deer population, resulting in widespread damage to conifer seedlings. And because of high deer densities, the reproductive rates of does declined and survival of fawns was low.

The public blamed Champion’s clear-cutting for the decline. In response to this criticism, the Washington Department of Wildlife agreed to alter the management of the deer herd on Champion lands by designing special hunting seasons to reduce the deer population. This in turn lessened the deer damage to seedlings and allowed increase fawn survival.

In 1987 Champion began a fee-access program. Hunters were charged a modest fee for the right to hunt on champion lands. Not only was the response of hunters greater than expected, but nearly one-third of the access permits in the first two years were purchased by mushroom and berry pickers, hikers, mountain bike-riders, fishermen and others.

In 1988 the Champion tree farm had the highest hunter success rate of any forestlands in the state. And for Champion, the deer were converted from an impediment to forest management to an economic resource.

Environmentalists recognize the present system is unsatisfactory. Now they should make a leap of the imagination and see that management by the state is the real problem.