ZERO CUT

A Free Market Analysis of How Americans Will Benefit Economically by Stopping the Logging of National Forests

The Native Forest Council
P.O. Box 2190
Eugene, Oregon 97402

Executive Summary

This white paper is the first comprehensive study of the economic effects of eliminating all timber cutting in the country's National Forests. The paper demonstrates how current policy for the publicly-owned National Forests is divorced from economic reality, and has the American people subsidizing wholesale destruction of irreplaceable natural resources.

Only five percent of the forest that covered North America when the first Europeans arrived remains. Only one percent is protected, while the remainder, mainly in the National Forests, is falling at the rate of a million acres a year -- twice as fast as Brazil's rainforest. As this white paper proves, the nation could easily stop all timber cutting in the National Forests without sacrificing timber supplies and without significant price increases. Moreover, taxpayers would save millions every year and ecosystems of enormous value would be protected.

The white paper findings include:

Critics of the federal government frequently maintain that government should be run more like business, and that federal programs are replete with waste. Nowhere is this more true than at the U.S. Forest Service. A fully calculated cost-benefit analysis would show that the Forest Service is liquidating trillions of dollars in public assets for a fractional return. It is an agency that purports to run like a business, but any business operated like the Forest Service would be bankrupt in a year -- and its top executives might even land in jail!

The Republicans who now control Congress for the first time in 40 years have pledged to eliminate waste in government, end programs that don't work, and balance the federal budget with spending cuts. They need look no further than the budget for the U.S. Forest Service -- the most wasteful and destructive federal program of all.

Chapter 1: Selling the Public's Forests For a Loss

Most Americans encounter their National Forests only when driving through them. Viewing the carved wooden sign announcing the Forest and the scenic vistas that follow, they assume that their federal government is protecting these beautiful natural landscapes. Most would be outraged if they knew the extent to which their publicly-owned forests were exploited and devastated to protect an entrenched bureaucracy and to enrich private timber companies.

They would be further outraged to learn that in most cases, the federal government doesn't even earn money by selling the public's trees. In fact, in most cases, the government actually loses money from timber sales -- more than $7 billion in the 1980's. Not only is the government permitting the destruction of the public's forests, but the taxpayer is footing the bill.

In the Beginning: No Commercial Cutting

The National Forest system today consists of 122 National Forests in 40 states from New Hampshire to California. Over time, government and industry have come to view the Forests as resource banks of lumber, minerals, oil and gas, and grazing lands, open for exploitation on a theoretically "sustained" basis. In the beginning, however, the government had an entirely different view of the Forests, and it had nothing to do with the commercial extraction of timber. In fact, a leading argument in favor of creating Forest Reserves in 1891 was to prevent downstream flooding. (This fact carries considerable irony today, as clearcuts in National Forests are implicated in damaging floods, particularly in the Pacific Northwest.)

In 1897 The Organic Act establishing the Forest Service authorized timber cutting in the Forests, but mainly to provide settlers and small-scale miners access to wood. Congressional debates over a 1911 law authorizing the Forest Service to acquire lands in the East also included flood prevention as an argument for protecting forests.

Under pioneering forester Gifford Pinchot, the Forests turned in the direction of commercial cutting of timber, although Pinchot and his immediate successors were clear that the Forests should be managed on a sustainable basis, and the government should not sell timber at a loss. In 1907, testifying before Congress on a budget request, Pinchot said, "We recommend no cutting that does not pay for itself." In 1912, Pinchot's successor reaffirmed that his goal was "making the receipts ... meet the expenses." And in 1928 the third Chief Forester, William Greeley, said, "A great property like the National Forests with vast industrial resources should, as a matter of business, pay its own way."1

Until World War II, private timberlands produced most of the nation's timber, and the National Forests were managed in a largely custodial manner. As private timber inventories declined, however, demand for publicly owned timber grew in the early 1950s with the postwar housing boom. Congress increased funding for the Forest Service, and the agency moved to expand logging across the country. The expansion was aided by a pricing policy that often failed to recover the costs of preparing timber for sale, including administrative costs and road building.2

Logging the National Forests increased from 2.5 billion board feet to 7 billion board feet less than 10 years later, and growth continued throughout the 1960s, when the annual cut reached 12 billion board feet. In 1989 the total cut was approximately 11.95 billion board feet.3 By 1994, the cut was much smaller, in part because of restrictions on cutting in the Pacific Northwest.

Over the past 20 years, the Forest Service has come under increasing attack from environmentalists as timber cutting in the forests steadily escalated, the remnants of the country's native old-growth forests dwindled, and forest environments in general around the country declined. During the early years of the Reagan Administration conservative idealogues like Interior Secretary James Watt were appointed to natural resource management positions throughout the Reagan Administration. Forest Service oversight positions at the Agriculture Department went to new appointees like Louisiana-Pacific executive John Crowell, who pledged to accelerate timber cutting, even though environmentalists considered current levels already unacceptably high.

Studies Reveal the Real Costs

During this period, environmentalists also began to look more closely at the economics of timber cutting in the national forests. And in response to criticism from environmental groups and citizens, members of Congress began to demand independent economic analysis of Forest Service timber cutting.

These studies revealed that timber sales in the majority of National Forests are money losers and are costing U.S. taxpayers millions of dollars every year. A zero-cut policy in these forests would not only protect these forests for future generations but would return substantial revenues to the Treasury.

When the Forest Service offers trees for sale, the company with the winning bid proceeds with the timber harvest and the proceeds are returned to the Forest Service. It seems like a straightforward transaction, with the taxpayer as the beneficiary. The economics of national forest timber cutting, however, are cloudier than they initially appear. For example, a host of expenses that a private timber company would normally pay for before proceeding with a timber cut are actually paid for by the Forest Service. These include: sale preparation, harvest administration, timber inventory, reforestation, road maintenance, and other expenses.

"The World's Largest Socialized Road-Building Company"

By far the greatest concealed expense, however, is the Forest Service's road building program. When the Forest Service builds a road to provide access to federal timber for a private logging company, the taxpayer pays for the road. If the company were cutting trees on its own land, however, the logging company -- not taxpayers -- would pay for the road.

Through this policy, the Forest Service has become, in the words of Forbes magazine, "the world's largest socialized road-building company."4 The second largest professional group in the Forest Service consists of engineers who build and oversee the agency's road network.5 The national forests, in fact, now contain nearly 360,000 miles of roads, a network eight times the size of the entire interstate highway system, which is approximately 50,000 miles. By the year 2040 the Forest Service plans to build another 262,000 miles of new roads, and to rebuild 319,000 miles of existing roads. The total mileage would go to the moon and back, and then circle the earth four times.

The Forest Service justifies the road building program in part by arguing that roads open remote areas to recreation and hiking. But the constituency that would purportedly benefit from additional opportunities for recreation in the national forests -- outdoor enthusiasts, environmentalists, and the fish and wildlife agencies in the states affected -- are the precise constituencies that have most passionately opposed road building and associated timber cutting in the forests.

The Forest Service also makes its roads appear more economically sound by amortizing them over an unrealistically long period of time. Dirt and gravel logging roads normally last about 25 years, but the Forest Service uses "cut rotation per forest" formulas that spread the costs over 100 years or more. In the Chugach Forest in Alaska, road costs were spread out over 1,800 years! A Congressional staffer on the House subcommittee that held hearings on the Forest Service's timber sales program said, "It's as if the current Italian government was still paying for the Appian Way." 6

Most Timber Sales Lose Money

In-depth studies since the early 1980's have repeatedly shown that most timber sold off the National Forests are money losers. In 1984 the General Accounting Office, a nonpartisan research arm of Congress, published a study examining data on more than 3,000 individual timber sales in 1981 and 1982 for Forest Service regions 1,2, 4, and 6. (Northern, Rocky Mountain, Intermountain, and Pacific Northwest Regions). The study found that over 90 percent of the timber sales in regions 2 and 4 failed to generate enough revenue to recover the direct costs to the taxpayer. In region 1, 60 percent of the sales over the two year period lost money. And even in region 6, the much-vaunted money making region for the Forest Service where irreplaceable stands of old growth are logged, a sizeable proportion of the timber sales lost money for taxpayers.7

The GAO findings were mirrored in a 1984 study by the Congressional Research Service (CRS), a nonpartisan branch of the Library of Congress. This study examined all timber sales in six western Forest Service regions in 1981 and 1982 (Northern, Rocky Mountain, Intermountain, and Pacific Northwest, Pacific Southwest, and Southwestern Regions). In the Rocky Mountain and Intermountain regions, timber operations failed to recover the costs to the taxpayer of preparing the sales, even if road costs were omitted. In the Northern and Southwestern regions, revenues marginally exceeded costs, and only the Pacific Southwest and Northwest regions showed strong revenues.

Even timber sales that appear to return revenues to the Forest Service are deceptive. According to a report prepared by The Wilderness Society:

"...the Forest Service routinely combines low-valued timber that could not be sold if offered alone with more valuable timber in the same sale. Rates charges for the more valuable stands are then lowered to compensate for what would otherwise be purchaser losses. In effect, the Forest Service pays purchasers to cut worthless timber."8

According to one forest economist, in 1983 the Forest Service used this technique to "cross-subsidize 40 percent of the timber sold on the National Forests.9

Red-Ink Hemorrhage

In testifying before Congress in 1992, a professional forester on the staff of CRS and the author of another CRS study on National Forest economics reported that for 12 straight years, from 1980 to 1991, the Forest Service timber program lost $7.3 billion. 10 In his testimony, Robert Wolf also discussed a detailed, forest-by forest, nine-year analysis of National Forest economics (1983-91):

"Over 65 percent of the cut for these nine years has prices so low that cost simply can't be recovered. For nine percent of the cut, an average of a billion board feet a year on 31 forests, the timber receipts earmarked for road credits, reforestation, salvage and county payments exceed 100 percent of the receipts [from the timber sale].

"It doesn't take a CPA or an accounting system to see that on these 31 forests the only way to run a timber program is to subsidize it by over 100 percent of the cost.

"For the next 21 percent of the cut, $2.4 billion on 42 forests, after earmarking, only $4.69 a thousand board feet of cut was left to cover timber program expenses [such as Forest Service operating expenses appropriated by Congress]. In 1991, only 59 cents a thousand was left after earmarking. Again, you don't need a CPA to tell you there is 'red-ink hemorrhage' of the worst type.

Bear in mind, these are not one year pictures. These are situations that have prevailed for a decade. And the only reason I left out 1982 is it would make the 'red-ink' flow look like a gusher. Thirty of the next 31 forests, which are laid out in my paper, are also financial basket cases."

Wolf had analyzed the Forest Service's timber accounting system at the request of former Representative Mike Synar, chairman of the House Subcommittee on Environment, Energy, and Natural Resources. His original intention was to show that sales of National Forest timber were profitable and beneficial. Instead, he found that most of the country's 122 Forests never earned a dime on timber.11

There is a simple reason why the government cannot recover costs when selling National Forest wood. The National Forests were created on land that homesteaders, settlers, and the railroads did not want. The Forests are usually mountainous, dry, and cold, with thin and rocky soils. Trees grow neither large nor quickly on these lands, which are largely inaccessible. This is one reason why large timber companies have been shifting their operations to the Southeast, where trees grow quickly.

Old Growth: The Biggest Money Losers of All?

According to Wolf, only 15 National Forests actually operate in the black, and 14 of those are in the Pacific Northwest. But if the Forest Service were in fact operated like a business, the Forests in the Northwest would be the biggest money losers of all. The Forest Service claims enormous revenues off these old growth forests because the agency begins with the assumption that the trees have no value -- a variation of the economic theory that any asset whose value cannot be precisely measured is defaulted to zero value.

If one follows this assumption, it becomes simple to demonstrate a healthy revenue stream. Take a worthless asset, sell it for $10,000, and under Forest Service accounting you've made a $10,000 profit, before subtracting the cost of preparing the sale and building the roads, and then claim the rest as a profit.

In private industry, any accountant who so drastically undervalues his company's assets would be immediately dismissed, and might even go to jail. And when a timber company like Georgia Pacific or Weyerhaeuser sells 1,000 acres of forested land, the commercial value of the trees is calculated to the last dollar and figured into the sales price. Likewise, a 40-year old tree farm is an asset into which a private company has poured a considerable investment. The company measures its profit after it has deducted the total cost of the investment.

The Forest Service, however, doesn't even begin to reckon the value of the forests that it clearcuts: the value of the recreation economy that is ruined, or the value of the fishery that is destroyed, or the value flood protection that the forest provides -- or the cost of replanting an equivalent amount of harvestable trees. If all these values were factored in and the old growth trees were assigned their true value, timber cutting in the Northwest wouldn't become just less profitable -- it would become completely unprofitable. At present, however, the Forest Service is steadily liquidating trillions of dollars in assets belonging to the public, with a certainty that these assets cannot be replaced in the lifetime of any person alive today. There is even a valid scientific uncertainty as to whether they can ever be replaced at all.

Chapter 2: The Only Honest Solution: Zero Cut

Given that most timber sales are money-losers for the Treasury, it follows that a zero-cut policy for the National Forests, in most instances, would provide immediate benefits to taxpayers. Moreover, even on those forests where revenues from timber sales consistently exceed the costs of the sale to taxpayers, the revenues are not returned to the Treasury. In fact, almost all timber sale revenues are used to fund other Forest Service programs or meet operating expenses. (This process, authorized in the 1930s, creates an economic disincentive for forest managers to protect the forests under their charge, as sometimes the only means they have for funding a program comes from timber sales. This has led to perverse effects. For example, when Gallatin National Forest managers needed funds to close roads to protect grizzly bear habitat, they held a timber sale and built roads in other prime grizzly bear habitat. Similarly, when the Bighorn National Forest managers needed money for an inventory of ancient Indian artifacts, they conducted a timber sale that destroyed some of the artifacts.12 There are many other examples.)

What would be the economic effects of a zero-cut policy on the National Forests? Currently, the National Forests provide 12.3 percent of all hardwood and softwood timber cut annually in the U.S.13 The hardwood cut from the National Forests is only 4 percent of the national total14, and the hardwood cut could be eliminated with little national impact.15 (Only the Allegheny National Forest has significant hardwood resources. The cherry trees cut from the forest provide wood for furniture makers.)16

Depressing Timber Prices

Some economists also believe that Forest Service policies keep millions of acres of trees from privately owned woodlots off the market, and that a zero-cut policy would bring economic benefits to private tree growers. As former Natural Resources Defense Council economist and member of Congress Tom Barlow wrote in 1979:

"Unlike the Forest Service, these owners must recover costs on their sales if they are to continue sustained-yield management. As the lure of below-cost sales pulls timber companies to the national forests, private forest owners are the losers. It's as if the government decided to go into the cattle business and flooded the markets with beef at 10 cents a pound, thus pushing private ranchers out of active cattle raising as prices sagged below cost-recovery price levels that were 45 cents a pound."17

In short, by flooding the market with federally subsidized timber, prices are kept artificially low. As a result, wood today sells for less than it did in the 1970s. Lower prices discourage private timber companies and owners from managing and marketing their own forests. Moreover, low-priced National Forest timber could also be inhibiting more recycling of paper and the commercial development of wood substitutes, although no research has been conducted on this possibility. In 1991, former EPA Administrator William Ruckleshaus, now CEO of Browning-Ferris Industries, asserted in a speech that the continued sale of National Forest timber at prices far below their actual value was choking off the recycling of newsprint by artificially lowering the market value of wood pulp.18

Finally, even Forest Service research shows that if their timber were removed from the market, half the loss would be replaced by wood from private tree farms and half by wood substitutes that are already on the market.19

The Wood Shortage Myth

Although supporters of the Forest Service's timber cutting program maintain that a zero-cut policy will cause a shortage of timber, this claim does not withstand close examination. In fact, it is believed that there are more trees standing in the U.S. today than there were in 1920, although population has increased from 106 million to today's population of 261.7 million. Several historic changes, however, have occurred. First, oil and gas heat has replaced wood stoves and fireplaces -- at one time stoves and fireplaces consumed 400 cubic feet of wood per American each year. Also, cars and trucks have replaced horses as a primary transportation vehicle. One-third of all U.S. agricultural land was once devoted to growing hay and grain for feeding the nation's 50 million horses. Finally, advances in fertilizers and seed mean that we can grow larger crops on smaller tracts of land. The nation's crops are grown on 400 million acres today -- the same amount of land under cultivation in 1920. Much of the agricultural lands taken out of cultivation since 1920 have since grown into new forests.20

Moreover, the trend continues. Net timber growth exceeded harvest by 54 percent in 1976, 38 percent in 1986, and 33 percent in 1991. In 1991, growth was greater than harvest in all regions of the country: in the North by 92 percent, in the South by 10 percent, in the Rocky Mountains by 163 percent, and even in the Pacific Northwest and Pacific Southwest by 14 percent.21

These figures clearly demonstrate that the nation does not face any timber shortage, and that private lands around the country are growing enough timber to meet the market demands without cutting trees on the National Forests.

America Joins the Third World

Although timber shortages from a zero-cut policy are highly improbable, any supply problems could be resolved by banning exports of raw logs. Each year 4.2 billion feet of raw logs are exported from the U.S..22 By contrast, for fiscal year October 1993 through September 1994, the total cut on all U.S. National Forests was 4.8 billion board feet.23 (Although Congress has forbidden the export of raw logs cut in National Forests, timber companies have circumvented the law by exporting partially milled slabs such as two-sided "merches" and four-sided "cants.") By becoming an exporter of a valuable raw material like wood, the U.S. has joined Third World countries that have been traditionally exploited for their rich natural resources.

The largest exporter of raw logs in the U.S. is Weyerhaeuser,24 which sells 25 percent of its harvest overseas, with Japan as the biggest customer.25 In 1993 a Weyerhaeuser spokesman said the reason for the export of raw logs is that "overseas customers are willing to pay more." In the meantime, the company, like other timber firms in the Northwest, has been closing sawmills, plywood mills, and veneer mills throughout the region. In Oregon alone, 90 mills were closed in the 1980's.26 In the Pacific Northwest as a whole, the number was over 200.27 The export of raw logs, however, represents the export of many jobs. Getting one million board feet of timber to the export docks employs 4 workers domestically, while Japan employs 60 to 80 people making finished goods with the same material. In Washington state, every million board feet shipped overseas takes at least seven direct jobs and 14 more indirect jobs with it.28

How the Timber Market Really Works

Although there are clearly enough trees in the country to meet the nation's needs for lumber, plywood, and other wood products, removing 12.3 percent of the nation's current wood supply from the market will clearly have an economic impact.

To understand how withdrawal of National Forest lumber would affect prices, it's important to understand how the market for lumber and plywood work. As in all markets, supply and demand are significant factors. In the market for forest products, however, other powerful forces affect price.

Construction accounted for 80 percent of the softwood lumber used in the U.S. in 1992. (Between 60 and 70 percent of the nation's wood is used for the production of wood pulp for paper.) Fluctuations in the housing market and construction therefore greatly influence lumber prices. On the other hand, lumber prices have little influence on the price of a new house, since structural wood products account for only 5 percent of the price of a new home.29

In addition to housing and construction demand, other forces affecting the housing market are international trade and market volatility. The recent recession in the Japanese economy has lowered demand for U.S. log and lumber exports, but a strong recovery in Japan would probably add pressure to raise prices. Also, trade disputes with Canada over softwood lumber imports create speculative pressures in the U.S. lumber market.

Finally, market volatility is a major factor in lumber prices. Because lumber is a critical component in construction, buyers often respond quickly to perceived changes or concerns about future supplies or demands for lumber.30 Market overreaction has been cited as a major factor in many "price bubbles."31

Lumber prices are thus subject to several forces, and even if a zero-cut policy leads to higher prices for plywood and lumber, adverse effects on the housing market and the economy do not necessarily follow. Lumber prices rose by 73 percent between 1973 and 1978, but at the same time housing starts rose by 74 percent, from 1.06 million in 1975 to 2.02 million in 1978. Likewise, lumber prices rose by 31 percent between 1982 and 1983, but housing starts rose by 60 percent, from 1.06 million starts in 1982 to 1.70 million in 1983.32

Further, although higher lumber prices are good for all private land owners who sell their wood, higher lumber prices play an infinitesimal role in the rise and fall of housing prices. Construction wood accounts for less than 5 percent of the price of a new home. Even if lumber prices are doubled, the price of a home therefore only rises five percent -- $5,000 on a $100,000 house. The increase in the interest rate of one point on a 30-year home mortgage has a greater affect on a homeowner's monthly payment.33

No Pain for Homeowners

The only serious effort to examine the specific economic effects of a zero-cut policy comes from forest economists Darius Adams and Richard Haynes. The sophisticated computer model that they designed, TAMM (Timber Assessment Market Model), shows clearly that the economic effects of a zero-cut policy would be minimal.34 The model shows that under projected Forest Service cutting levels, the price for one thousand board feet of lumber averaged over all regions of the country would be $337 in the year 2000. If all timber cutting in the National Forests were stopped, however, the price would be $353, an increase of only 4.7 percent. The figures for 2010 are $358 for current cutting levels and $371 for zero cut, an increase of only 3.6 percent. For the year 2020, the figures are $387 for current levels and $416 for zero cut, an increase of 7.5 percent.

The projected prices for plywood also show only small price increases. For 2000, the price would be $135 per thousand square feet, and the zero-cut price would be $139, an increase of only 3 percent. For 2010, the current cut figure is $137 and the zero-cut figure is $148, an increase of 8 percent. For 2020, the current cut figure is $155, and the zero-cut figure is $161, an increase of 4 percent.

As structural wood products account for only five percent of the price of a new home (as noted earlier), the effect of these tiny increases on the cost of new housing would be negligible. Increases in lumber and plywood prices projected by TAMM would raise the price of a 2085-square foot single family home by less than $420 in 2020.35 Over a 30-year mortgage at a nine percent interest rate, this would add $3.38 to a homeowners monthly payment.

This economic model does not measure the considerable benefits from a zero-cut policy that taxpayers would receive as wood production shifts to private lands and the value of wood on private land rises. These private landowners would have higher incomes and would also generate additional revenues in the form of increased property taxes, severance taxes, and corporate income taxes that would pour into local, state, and federal treasuries. And, of course, taxpayers would also save money because federal subsidies to the Forest Service timber program would end.

Chapter 3: How Cutting Plays Havoc

Three dollars and thirty-eight cents a month seems a small price to pay for protecting the National Forests, especially considering the amount of harm, economic and otherwise, that timber cutting in the Forests causes. For example, in the Pacific Northwest, the commercial and recreational salmon, steelhead, and trout fisheries combine to produce over $1 billion in personal income annually and support more that 60,000 jobs.36 But 103 salmon species are already extinct and 214 native salmon stocks at risk of extinction in the Northwest, and research has consistently shown that clearcuts and logging roads have catastrophic consequences for our native fish populations.37

Trout and salmon require near-pristine forest and watershed conditions to thrive. They need cool, well-oxygenated water, and the cover provided by undercut banks and streamside vegetation to survive at all. To reproduce successfully, trout and salmon need clean gravel and cobble stream beds. In the native and ancient forests of the Northwest, trees that fall over streams form pools that shelter fish and protect them from drought and runoff and temperature fluctuations.38

"The Salmon May Never Recover"

One of the many dramatic examples of how road building and clearcutting devastates fish populations occurred on the South Fork of the Salmon River on the Payette National Forest in central Idaho. This river was once the most important steelhead and salmon stream in Idaho and supported more than half the entire summer Chinook salmon population in the Columbia River Basin.39 In the 1960s, massive clearcutting and road building in the river's watershed severely damaged spawning habitat for the fish. The cash value of the timber was $14 million, but both the state and the Forest Service fixed the cash value of the lost steelhead and salmon at $100 million.40 According to the Idaho Department of Fish and Game, "(T)he Chinook salmon runs of the South Fork ... may never fully recover from the impacts of timber sales in that drainage."41

Another example is the Smith River in Six Rivers National Forest in California. When the Forest Service evaluated 33 logging sites along the river, it found that landsliding and soil loss had increased 500 to 2,000 percent above natural levels. Fish spawning and rearing sites had been devastated. The remaining Smith River fishery was estimated to have an annual worth of $7.8 million, which was probably more than the value of the logs cut from the logging sites. Over the next 140 years, the time needed to produce another harvestable crop of trees, the river -- even in its damaged condition -- could produce $1 billion worth of salmonid fish.42

The long-term environmental consequences of stripping the National Forests of their trees could be profound, and they reach far beyond destroying the salmon industry of the Northwest. Biologists are just beginning to learn about the complexity of forest ecosystems, which are intricate webs encompassing life forms from fungi and bacteria to insects, wolves, and grizzly bears. In the Northwest, the much-publicized Northern Spotted Owl is only one of at least 160 species -- from tiny redback voles to Roosevelt elks and pileated woodpeckers -- that depend on old growth forests. Biologists are uncertain, however, whether the increasingly fragmented forests of the Northwest, surviving only in checkerboard patterns of clearcut and protected patches, can survive.

The full economic value of the forests, watersheds, and wildlife in National Forests is unknown, but the example of the Pacific yew tree hints at the possibilities. Until recently the Pacific yew was regarded as a useless weed and routinely cut and burned as slash in commercial logging operations. The tree was discovered to be the source of an important cancer-curing drug, taxol. Today, an estimated 90 percent of Pacific yews are gone, and if they had been allowed to become extinct, the drug would have remained unknown to medicine.

Flooding and Water Filtration

Another uncounted cost of logging National Forests is flooding. In recent years there has been record flooding in Oregon and Washington, exacerbated by clearcutting of upper reaches of the watersheds in National Forests in the Cascades. Every river in western Washington -- except the Nisqually -- flooded in the 1990-91 season. The only exception was the one watershed where no logging occurred.

In the late 11980's Dennis Harr, a hydrologist at the University of Washington, studied snowmelt along tributaries of the Stillaguamish and Skagit rivers in the North Cascades. During two periods of heavy rain and warm winds, he found snowmelt runoff from plots on clear-cut areas produced 90 percent more water than plots in nearby mature forests. Even young replanted forests produced up to 40 percent more runoff than older forests.43

Also uncounted when considering the economics of National Forest logging is the cost to public water supplies of filtering sediment from rivers whose watersheds lie within National Forests. In the 1890s Oregon's Bull Run watershed was placed off limits to all entry, including logging, because it was to become part of the public water supply for the City of Portland. In 1958 logging started in the watershed, and only 11 years later the federal Public Health Service recommended the water be filtered to remove sediment.

Today Portland is considering installation of filtration equipment at a cost of $200 million to remove sediment from its water supply. (The true cost, of course, would be much greater, because it would include operating the filtration equipment and its upkeep.) Because of sediment problems, the city also passed a resolution in 1993 urging an end to timber cutting in the Bull Run watershed.

Chapter 4: The Jobs Myth

Defenders of the timber status quo often point to communities and jobs that depend on National Forest logging, but although a zero-cut policy would entail some pain and economic dislocations, the picture is far less bleak than the Forest Service and timber companies would have the public believe. For example, a timber industry study predicted the loss of 100,000 jobs in the Northwest because of restrictions to protect the spotted owl. But a Forest Service assessment written for other purposes found that the true number is closer to 6,000.44 Three years after a sharp reduction in logging in the Forests in the Northwest, Oregon is showing an unemployment rate of just over five percent, the lowest rate in years. In the past year alone, the state's growing economy has added nearly 100,000 jobs. Even the most timber-dependent counties in the state are reporting increases in property values and a net increase in jobs.45

The New Jobs Are Good Jobs

Moreover, displaced loggers and millworkers haven't become hamburger flippers, as some predicted. At Lane Community College, the nation's largest re-training center for woodworkers, almost nine of every 10 people going through the program have found new jobs with an average wage of $9.02 an hour -- about $1 less an hour than the average timber industry wage. The retrained workers are becoming health care workers, auto mechanics, accountants, and cabinetmakers. Many are receiving benefits like health insurance that they never received in the timber industry. According to the New York Times, "economic calamity has never looked so good."46

The findings underscore the thesis of many economists that a clean, pristine environment has become a significant factor in attracting new business to a region. That was one reason why Sony decided to build a new factory in Springfield, Oregon, to manufacture compact discs. The factory may employ 1,500 people within five years.47

A study released recently by the Institute for Southern Studies in Durham, North Carolina, found that the states with the best environmental record also offer the best job opportunities and climate for long-term economic development. Louisiana ranked last for jobs and environmental quality, while Hawaii, Vermont, and New Hampshire were in the top 10 in environmental protection and economic opportunity.48 The findings confirm earlier research by Dr. Stephen Meyer of the Massachusetts Institute of Technology, who tracked 20 years of economic performance by state. Meyer concluded that states with strong environmental standards tend to have higher growth in gross state products and higher growth in total employment.49

"A Prescription for Economic Decline"

These findings are supported by the recent research of University of Montana economist Thomas Power, who studied the relationship between resource extraction, including logging, and economic health in the Northern Rockies region of Idaho, Montana, Oregon, Washington, and Wyoming. Power noted that extractive industries have been a declining source of jobs and income in the region in the 1980's, and concluded, "The remaining roadless areas of the Northern Rockies are far more important to the region's economy left in their natural state than they are as sources of raw materials."50

Power added:

"This is not merely wishful thinking or an academic hypothesis. The centers of vitality in the economies of the Northern Rockies region have been the areas known for their high quality natural landscapes and recreational opportunities ...These areas have shown substantial economic vitality while their extractive economic bases have contracted. Clearly their economic vitality is not tied to extractive industry but, rather, to their attractiveness as places to live, work, and do business. It is these attractive natural amenities that need to be protected if the regions' economic vitality is to be enhanced. Sacrificing these economically important natural amenities in order to temporarily support an extractive industry in decline is the opposite of economic development. It is a prescription for ongoing economic decline." 51

Power concluded that if all the roadless areas in the National Forests of the Northern Rockies region were designated wilderness, the total number of jobs that would be directly or indirectly threatened would be approximately 1,400. With normal job growth in the region, the job loss would be made up in about three weeks.

Finally, according to University of Oregon economist Ed Whitelaw, business in Oregon benefits in a significant way never counted in Forest Service economics: businesses in the state can offer salaries 10-15 percent less than their counterparts elsewhere because employees get a "second paycheck" in the form of proximity to unique recreation and environmental opportunities.52

Chapter 5: The Public's View

In a highly credible opinion survey conducted for the Forest Service in April 1994, the public expressed a strong desire for protection of the National Forests. The survey results reveal that the public is far more concerned with the environmental health of the forests than with timber cutting and other resource extractions -- which perhaps explains why the Forest Service was reluctant to release the survey's raw data.

By a margin of 47 to 36 percent, with 17 percent expressing no opinion, the people surveyed believed that natural resources in public forests should not be made available to produce consumer goods. Only 18 percent believed that "sustaining the harvesting of natural resources" was the highest priority in managing public forests; an overwhelming 65 percent said that "improving the health of these lands was the highest priority." Sixty-five percent also agreed that "federal government organizations like the Forest Service should increase the regulation of commercial use of public forests."

Public support for protection of irreplaceable resources in National Forests, like old growth, was even more dramatic. Four in five Americans (79 percent) agreed that "the long term health of the public forest land should not be compromised by the short term need for natural resources." Only nine percent disagreed. Almost three-fourths (73 percent) disagreed with the statement, "The consumer needs of the American public should be satisfied even if the natural resources on public forests are eventually depleted." Finally, 61 percent agreed that "threatened and endangered species in American public forests and grasslands should be protected even if it has a negative economic impact on U.S. citizens."53

Chapter 5: Conclusion

As the United States enters a new era of slower economic growth and budget restrictions, continued timber cutting on the public's National Forests is irrational public policy that makes no economic sense. National Forest lands are generally inaccessible by road or rail, with trees growing on steep slopes, in thin soils and at high altitude. This is why National Forest trees cannot be logged economically. (These same characteristics of remoteness and mountainous scenery make the National Forests ideally suited for wilderness designation and outdoor recreation.)

Also, research demonstrates that the nation has a plentiful wood supply and does not need to cut National Forest trees. The timber industry now has more trees growing on more land than at any time since the Great Depression. Moreover, economic studies have proved that ending all timber cutting in the Forests would lead to only modest price increases for lumber and plywood, adding an insignificant amount -- about $3 a month on average -- to the price of a new home.

In the meantime, having exhausted 95 percent of the old forests that once covered the continent, private timber companies in collaboration with the U.S. Forest Service are rapidly destroying what little remains, eliminating entire ecosystems before scientists even have learned what they contain or measured their true value. Using a deceptive accounting technique that puts the value of a 500-year old tree at zero, the Forest Service artificially inflates its revenues from logging. The higher revenues are useful to the agency when it returns to Congress for its annual appropriations and builds political support for the agency's programs. Even when the Forest Service assigns a value of zero to its trees, most of the country's 122 Forests actually lose money for taxpayers, a proven fact that the agency struggles year after year to conceal.

While the cutting of the forests continues, the damage that clearcuts do to the environment builds. More than 200 native salmon stocks are facing the risk of extinction in the Northwest, and research has consistently shown that clearcuts and logging roads have catastrophic consequences for native fish populations. The salmon industry in the Northwest may never recover from the clearcutting on the Forests. Research also shows that an intact environment has far greater economic value that any short-term benefit from timber cutting. The Forest Service, however, fails to calculate the economic value of a standing forest for the commercial fishing industry, recreation, flood control, or protection against global warming.

The new Republican Congress, by promising in the "Contract With America" to cut taxes and balance the federal budget, will be looking for federal programs to eliminate. Timber cutting on the National Forests is the right place to begin.