Subsidies Anonymous #6

January 15, 1996

Table of Contents

  1. National Parks and the Budget Impasse
  2. "National" vs. "Local" Control
  3. Environmental Group High Bidder for Timber Sale
  4. Responses to Forest Principles
  5. Fee Hunting as an Alternative to Livestock Grazing
  6. Animal Damage Control Report from General Accounting Office

1 -- National Parks and the Budget Impasse

A few weeks ago I happened to be driving through northeast Pennsylvania and decided to drop by Steamtown National Historic Park to see the pork. Just a few minutes after I turned off the highway, however, I remembered that the federal government was "shut down" and so the park would be closed.

National parks were one of the central political footballs in the budget debate. Ironically, national forests were considered "essential," so they remained open--all the better for salvage sale loggers. Fortunately for tourists, most of them don't go looking for national parks in the middle of winter.

The debate over the 1996 budget will eventually be settled. But this will only be the first of many such debates over the next few years--each one growing worse and worse.

The Republicans have hardly steered a noble course--focusing mainly on cutting entitlements to the politically weak poor while daring to touch few entitlements for the middle class. But the Democrats hardly smell like roses. Everyone in DC knows that Social Security and Medicare are headed for disaster, but the Democrats act like these programs can be left untouched.

Let's just take a quick look at these programs. Social security is the biggest and one of the fastest growing items in the federal budget. Income from social security taxes currently exceeds outgo to social security recipients. But that is only because there are so many baby boomers. When the boomers start to retire--about a decade from now--the program will start suffering huge annual deficits.

That might be ok if the surplus today were invested in some income-producing activity. But it isn't. By law, social security surpluses must be used only to buy federal Treasury bonds--in other words, to help finance annual federal deficits. Most of those deficits go to non-income producing activities such as defense, welfare, and pork-barrel dams.

When the baby boomers retire, Congress will have no choice but to raise taxes to make up the difference. That will create problems.

According to a recent report from the Congressional Budget Office, the parents of the baby boomers paid a lifetime average of 25 percent of their income in taxes. The baby boomers are paying lifetime averages of 35 percent. To maintain the federal government in the style to which it has become accustomed, the X generation will have to pay more than 50 percent of their lifetime incomes in taxes, and their children will have to pay 78 percent of their incomes in taxes.

Medicare's problems are the same except that they begin sooner: Medicare will start running deficits around 1998. That's why the Republicans decided to tackle it first. And, by the way, so did the Democrats. The 103rd Congress, with the support of the president, voted to increase Medicare premiums by nearly as much as the Republicans. The only difference is that the Democrats wanted to begin the premium hikes after the 1996 election, while the Republicans wanted to do it before the 1996 election. So all the fuss over Medicare has really boiled down to timing, not to "cutting benefits."

The CBO blithely adds that it expects that Congress will fix the problems with social security and medicare, thereby preventing 50 to 78 percent tax. I am not so confident. Baby boomers (of which I am one) outnumber the X generation, so when that generation complains about taxes we will just outvote them. If you think AARP is strong today, watch out in a decade or so.

The CBO report also assumes that people will work just as hard if 78 percent of their income is taxed as they do when 35 percent of their income is taxed. I doubt that too. If they don't, then even if tax rates go to 78 percent, tax revenues will fall far short of those needed to cover social security and other federal obligations.

Social security and Medicare are just more proof that the government can't be trusted with the people's resources. Social security should be treated like a pension fund. But any corporate manager who treated the company's pension fund the way Congress treats social serurity would be thrown in jail. Medicare should be treated like an insurance fund. But any insurance company that treated its assets the way Congress treats medicare would be put out of business by federal and state insurance regulators.

Aside from these larger questions, what implications does this have for federal resource managers and people concerned about federal lands? The most important one is that the federal government is likely to creep closer and closer to bankruptcy for the next two decades. As it does so, federal lands and resource agencies will be treated like political footballs, victims of whichever side happens to be in power at the moment. Eventually, privatization will no longer be an option, but will be mandatory just to pay interest on the federal debt.

One way to save parks and other federal resources from such political uncertainties is to turn them into land trusts today. If the land trusts were given an incentive to produce revenue for the federal Treasury, Congress would view as an asset, not a liability or opportunity for privatization. The land trusts would have an obligation to manage federal resources for the people, not the politicians. And, being independent of Congressional funding, the trusts would be largely above the political debates we are likely to see throughout the next generation.

2 -- "National" vs. "Local" Control

Despite the complete failure of the federal government to efficiently or sensitively manage federal lands, the idea of "local" control remains a hot button guaranteed to raise the ire of environmentalists. In order to understand the Thoreau Institute's proposals to reform federal land agencies, it is important to distinguish between two types of local control.

Congressional proposals to transfer federal lands to the states would result in a change from control by national politicians to control by local politicians. Either way, the key word is "politicians," the implication being that under either federal or state control the lands will be political footballs of the various interest groups trying to get the ear of those politicians.

Ideally, management of a unit of federal land, such as a park or forest, should respond to a combination of local and national interests. That combination would be different for, say, Yellowstone Park than for the Miles City (Montana) District of the Bureau of Land Management.

The Thoreau Institute's proposal meets this ideal. Under this proposal, day-to-day management decisions would be made by "local" (meaning on-site) managers. But those managers would respond to a combination of national and local interests in two different ways, each of which would provide a check on the other.

First, both national and local interests are reflected in the user fees that the land managers would charge. For Yellowstone, those user fees would be mainly charged to people from across the nation. For Miles City, those fees would be mainly charged to users from Montana. But many of those Montana users would be producing goods for sale to users across the country.

Second, national and local interests are reflected in the boards of trustees that the Institute has proposed to oversee the local managers. The boards would be elected by a self-selecting membership in each park, forest, or other trust. The Yellowstone Park Trust would undoubtedly have a broad national membership and this would be reflected in the board. The Miles City Trust would have primarily a local membership which would also be reflected in its board.

Outside of a few resources such as biodiversity, the resouces in the Miles City District are no more "national" in nature than would be reflected by the district's user fees or its trust membership. Similarly, the resources in Yellowstone Park are no more "local" in nature than would be reflected by the park's user fees and trust membership. Biodiversity, of course, would be protected through the Institute's proposed biodiversity trust fund.

3 -- Environmental Group High Bidder for Timber Sale

The Northwest Ecosystem Alliance outbid three timber companies to purchase the Thunder Salvage timber sale on Washington's Okanogan National Forest. The group's high bid, $8.25 per thousand board feet, totalled less than $30,000 for the entire 3.5 million board foot sale.

Mitch Friedman, director of the Northwest Ecosystem Alliance, estimates that the Forest Service spent $200,000 planning the sale. Under the recent timber salvage sale rider passed by Congress, the Forest Service has a powerful incentive to sell salvage sales because it can keep all of the receipts. Even "below-cost" sales such as this one will be sold because the agency can cross-subsidize such sale with the surplus from money-making sales--which surplus would otherwise go to the U.S. Treasury.

The law precludes any legal challenge of salvage sales, so the Northwest Ecosystem Alliance decided to simply outbid other purchasers. Due to the partial shutdown of the federal government, the Forest Service has not yet awarded the sale, but it could award it to a less-than-high bidder if it has reason to believe that the high bidder cannot perform the contract. Since the Alliance has announced that it will not cut the trees, this action is likely.

Because of the sale's low timber values, local mills had asked the Forest Service to not bother selling the timber. But the agency persisted, and a sale offering in October received no bidders other than a bid from the Alliance (which was rejected for other technical reasons). A resale in December led three mills to bid on the sale, but the Alliance's bid was highest.

For more information, contact Mitch Friedman, Executive Director, Northwest Ecosystem Alliance, at

4 -- Responses to Forest Principles

We are starting to get responses to our statement of forest principles. The statement has been endorsed by representatives of several timber companies, including Sierra Pacific, as well as representatives of several environmental groups, including the Environmental Defense Fund (though not necessarily by the companies or groups themselves).

Some of the endorsements come with qualifications. Andy Kerr, of the Oregon Natural Resources Council, for example, would like to ensure that environmentalists will have the opportunity to buy timber sales, grazing leases, or other resources and not use them. This idea for "conservation easements" is important and hopefully can be added in a future refinement of the principles.

We hope to bring together some of the major endorsers in a workshop designed to refine and expand the principles. We welcome further endorsements with qualifications and expect that such qualifications will become a focus for discussion at such a workshop.

We received one rejection of the forest principles from someone who worries that it will be impossible to collect recreation fees from the majority of dispersed recreationists on federal lands. This has long been an assumption behind Congress' decision to forbid the Forest Service and other agencies from charging such fees. Yet there is plenty of evidence that fee collection would be feasible.

The best example is provided by fish and wildlife agencies in all fifty states. These agencies require licenses for sport hunting and fishing. Such hunting and fishing is widely dispersed, yet the costs of enforcement are typically less than a third of the revenues received. (They would be an even smaller fraction if state legislatures did not regulate license fees at rates below-market value.)

Most anglers and many hunters have never been checked by game wardens to see that they have their licenses. Yet the vast majority of hunters and anglers buy licenses, partly because they know that the money goes for a good cause and partly because of peer pressure.

The Thoreau Institute expects that purchasers of dispersed recreation permits on federal lands would be asked to display a visible permit, which would ease enforcement even further. This would allow even more enforcement through peer pressure, since any recreationist could immediately observe who was failing to pay their way.

Another correspondent (not dealing with the forest principles) who opposes recreation fees describes recreation as a "public good." In the sense that public recreation land is owned by the public, it is a public good--but then, so is public timber, and few hestitate to urge that timber purchasers pay their way.

In the strict economic sense, a public good is a good from whose benefits people cannot be excluded if they fail to pay. National defense is the classic example; if you pay for defense of the U.S., I am equally defended whether I pay or not. There is no way to physically allow, say, Iraq to invade me without allowing them to invade you as well.

Recreation is not a public good in this sense. Exclusion is physically possible; the only question is whether the costs of excluding people are prohibitive. The Thoreau Institute believes that they are not.

5 -- Fee Hunting as an Alternative to Livestock Grazing

One public land issue that recreation fees would help solve is grazing. Brian Roach, of the University of California at Davis, recently compared the value of grazing with hunting values in a New Mexico wilderness area and concluded that ranchers would do better by letting the forage go to elk. "In most cases, the elk hunting benefits are more than twice the value" of livestock grazing, says Dr. Roach.

Most states allow private landowners to charge fees to hunters, but few encourage it and many actively discourage it. The problem is even more complicated when it comes to public grazing lands.

Forest Guardians, a New Mexico environmental group, believes it has a solution: The states could grant a number of elk permits to ranchers in exchange for retiring grazing permits on public land. New Mexico already allows ranchers some permits, and a survey shows that a quarter would retire their grazing allotments in exchange for more of the valuable permits. Forest Guardians plans to work with the New Mexico Game and Fish Department to develop a detailed proposal.

For more information or copies of Dr. Roach's report, contact Forest Guardians at or call John Horning of Forest Guardians at 505-988-9126 or Brian Roach at 916-752-6182.

6 -- Animal Damage Control Report from General Accounting Office

At the request of a number of Congressional Democrats, the GAO has prepared a report on the USDA Animal Damage Control program. This program has often been criticized for indiscriminately killing tens of thousands of coyotes and other predators each year in an effort to protect western livestock from predation. The program's defenders note that the agency is making increasing efforts to use "non-lethal" methods, such as guard dogs, to control predators.

The GAO report confirms several of the findings of the Thoreau Institute's 1994 report on the same subject, though the GAO does not go into as much detail. The GAO did, however, make one important point. The authors note that ADC's written policies give preference to non-lethal methods. However, interviews with ADC fieldworkers in four states revealed that these policies are ignored.

"ADC officials believe that the written guidance does not apply to controlling livestock predators," concludes the GAO, "since nonlethal methods such as fencing and guard dogs are more appropriately used by livestock operators, have limited effectiveness, and are not practical for field personnel to use."

The GAO report is numbered RCED-96-3 and can be obtained by calling the GAO at 202-512-6000, by faxing them at 301-258-4066. You can download any GAO report from a Government Printing Office mirror site.

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