The MacNeil/Lehrer Report; Cutting Down Inflation By Cutting Down More Trees

ROBERT MacNEIL: President Carter hopes to cut down inflation by cutting down more trees in the national forests, the nation`s tree bank. But that`s a lot easier said ... than done. Good evening. The government`s inflation figures are being watched a lot more anxiously these days than they were a few months ago. The latest came out today, and it was bad news again. Wholesale prices went up 1.3 percent in the month of April, the largest increase in three and a half years. By coincidence, the price of wholesale lumber went up by exactly the same rate, 1.3 percent. Since the price of wood accounts for twenty-five to thirty percent of the cost of new housing and new housing costs are soaring, President Carter wants to fight inflation by getting lumber costs down. To do that, he proposes cutting more timber in the nation`s forests.

(April 11, 1978.)

PRESIDENT CARTER: Therefore, I`ve instructed the Departments of Agriculture and Interior, the Council on Environmental Quality, and also my economic advisers to re port to me within thirty days on the best ways to sustain expanded timber harvest from federal, state and private lands, and other means of increasing lumber yields in ways that would be environmentally acceptable, economically efficient, and consistent with sound budget policy.

MacNEIL: A President`s job is to make things sound simple so that we can understand them, and say them in a way that makes us think he does. Tonight we take that apparently simple suggestion and show how very un-simple it is. Jim?

JIM LEHRER: Robin, most of the attention thus far has centered on the trees over which President Carter has the most control, those on federally owned land in the national forests. There are 154 officially designated national forests scattered around the country; forty of the fifty states have at least one. Together they cover 187 million acres of land and hold more than half of the commercial grade timber in this country. The national forest system was created in the early 1900s by Teddy Roosevelt to protect the country`s timber resources. The Forest Service was set up to administer it all. It`s an agency of the Agriculture Department and has the job of maintaining the forests for wildlife and wilderness purposes as well as managing and selling and harvesting trees for timber. For the record, some people tend to confuse national forests with national parks; well, don`t do it. They`re separately run under different mandates by different branches of government. Robin?

MacNEIL: Turning those trees into timber which makes houses is big business. For more than twenty-eight years Paul Ehinger has run the Pacific Northwest timber operations for the Edward Hines Lumber Company. He holds a degree in forestry and is on the Executive Committee of the National Forest Products Association, a trade group which represents many lumber companies. Mr. Ehinger joins us tonight in the studios of the Oregon Educational and Public Broadcasting Service in Portland. Mr. Ehinger, what do you think of the President`s proposal?

PAUL EHINGER: Well, the President properly identified the relationship between the price of lumber and plywood to timber supply, which ultimately affects the cost of housing. And if we look at the country, there are really three separate sources of timber. First, we get it from the industrial forest lands of the country, run by the timber companies; the small, private woodlands; and the federal lands, of which the primary source is the national forest system. And in this context the private lands, both industrial and small wood lot, are producing at a much higher rate of growth potential than are the national forest lands. For instance, the industrial lands are producing at about sixty-three percent of their growth potential; the small wood lots at fifty percent; and the national forest, which is more or less our bank, is only producing at thirty-nine percent. Thus it`s easy to see that the opportunity lies in managing the national forests to get at this problem.

MacNEIL: I see. Now, if we did start cutting the national forests more heavily, would that quickly show up in lower timber prices and, therefore, in lower housing costs?

EHINGER: Well, it would very definitely show up in lower timber prices. We used to be cutting the national forests in the early part of this decade at a much faster rate, but because of lack of funding of the timber sale programs and lack of timber sale offerings, the interference by the Roadless Area Review Program, which helped reduce the funding, we find ourselves in a position where not enough timber is being offered to sustain existing mills and the existing communities where national forest timber is the base of their operations.

MacNEIL: Can we go back over some of those things just for a second? The Roadless Area Program -- what is that and why is it holding up timber production?

EHINGER: Well, the Roadless Area Program was instituted by Assistant Secretary Rupert Cutler here last year in response to industry`s plea to get the first Roadless Area Review done in an expeditious manner. He instituted Roadless Area Review number two, which has at the present time 66 million acres of national forest land frozen from any activity until this review is completed. That`s one third of the national forests.

MacNEIL: The Roadless Area Review is literally a review of areas where there`s forest timber but there are no roads going through that you could go in on to cut the timber, is that it?

EHINGER: That is correct, and about 25, 26 million acres is commercial timberland, which represents something over thirty percent of the commercial timberlands on the national forest system.

MacNEIL: That`s what`s holding up much more heavy cutting of the national forest right now.

EHINGER: That is one aspect. Funding by the Congress, of course, is the other important one. Congress and the administration have failed to fund the full allowable cut in any of the past half a dozen years. And the decreased timber sale offerings have made every mill operator and mill owner concerned that the timber funding will continue at this lower level and he will no longer have adequate amounts of timber to process through his mill. Therefore, even in times of good market, there`s not a surge to put more timber in the marketplace and cut it; he guards it so that he can have the longevity of the mill. Now, if we return to a more aggressive program of selling national forest timber, immediately the operators would know that there would be more timber forthcoming, and they would be more willing to meet the demands of the marketplace. We simply have inflation through scarcity at the moment, which is the worst kind; and anybody who knows oil and coffee knows exactly what that does to us.

MacNEIL: Okay, sir; we`ll come back. Thank you. Jim?

LEHRER: As I said earlier, managing the selling and the harvesting of timber on national forest land is the job of the Forest Service, and John R. McGuire is Chief of the service. He`s a career Forest Service man who has been involved heavily in both forestry economics and research. First, you heard what Mr. Ehinger said, that your agency cuts timber at a much slower rate than it is cut in the industrial and private forests. Is that an intentional thing?

JOHN McGUIRE: Yes, indeed. The national forests are managed for many resources other than timber. For example, of the 187 million acres only about 90 million acres is even available for commercial timber production. The balance is in wilderness, some of it is range, some of it is Rocky Mountain areas, and so forth. There are many species of wildlife that live in these forests, and they must be protected. Recreation is provided of all kinds, for all kinds of people; probably the national forests provide about half of all the visitor days of recreation provided by the federal government. Water is also very important.

LEHRER: All right. Now to the question: the President is requesting that you increase the amount of timber that is cut in the national forests. Can you do that without seriously hurting the various wilderness and wildlife responsibilities and environmental concerns that you also must be involved in?

McGUIRE: There would b e some tradeoffs, of course, Jim, but we have prepared a long-range plan for the management of these forests and have submitted this plan to the President and to Congress, and each year we base our annual programs on the long-range plan itself. The plan provides for an increase in timber production over a period of time.

LEHRER: A big increase?

McGUIRE: Yes; if markets were available and if costs could be surmounted, we could probably go up as high as 14 to 16 billion feet, compared to the harvest last year of only about ten billion.

LEHRER: All right. Do you personally favor increasing along those lines?

McGUIRE: I don`t think we can go that far. I think the environmental impacts would be too great if we tried to go fast in that direction. Over a period of time I think probably we could get up in the neighbor hood of 14 billion board feet, perhaps.

LEHRER: But if you go beyond that you`re going to do some serious damage?

McGUIRE: I think we`re going to do some serious damage in places until we find more -- or safer ways of getting into steep areas where soils are unstable and where roads cannot be built very safely.

LEHRER: Is Mr. Ehinger correct when he says that your service doesn`t have the staff or the funding to even meet the allowable cut that you have now?

McGUIRE: No. The allowable cut is a ceiling. The amount that we sell each year is always less than the allowable cut nationwide, and we have sufficient staff to meet that programmed volume, so to speak.

LEHRER: What`s it going to take to increase it, say, to the 14 billion level?

McGUIRE: Well, it would depend on the particular forest that one goes into. The principal expense is road building. Many of these areas are relatively inaccessible. Just to put on a market, perhaps, another three quarters of a billion feet would run around $77 million; so a billion feet more as a rough estimate would require perhaps $100 million.

LEHRER: Have you passed that message on to the boys at the Office of Management and Budget that if they want this timber they`re going to have to pay for it?

McGUIRE: Yes. As a matter of fact, we usually request what we have in our long-range program when we begin the budget process, and the people in the budget offices consider this request in relation to other priorities.

LEHRER: Finally, as a pro let me ask you the nut question here: do you feel that the ultimate answer to the timber shortage as it`s projected up through the `80s -- and that`s the big concern -- do you think the an swer lies in increasing the cut on the national forest lands?

McGUIRE: Not entirely. I feel that several things must be done. First we must also look to the private lands, because it`s the non-industrial private lands of the nation that are most extensive in area. Second, we must look to better utilization of the tree and of the log to see if we can get more lumber out of each tree that is cut down, out of each log that goes to the sawmill. Third, I think we must look for better ways of building houses that are structurally as good as the houses we have today but that require less lumber in their construction. And that can be done.

LEHRER: All right, thank you. Robin?

MacNEIL: The last time an administration tried to increase the cut in the national forests was 1974, when the Nixon administration saw inflationary pressure coming from the cost of timber then. But the action was met by a lawsuit from the Natural Resources Defense Council, an environmental organization, and in the end prices went down -- by themselves -- and the additional cutting idea was dropped. Tom Barlow is a senior research associate with the NRDC and was involved in that 1974 lawsuit. Mr. Barlow, are you against increased cutting this time?

TOM BARLOW: Yes. We think that before any increased cutting is authorized by the federal government they should explore very carefully the alternatives -- private forests, mill efficiencies -- which Mr. McGuire has currently outlined.

MacNEIL: Could just taking it out of the private forests actually provide enough timber to ease the price pressure and bring the price down?

BARLOW: There are three times the acreage in private forests that there are in national forests.

MacNEIL: But we`ve heard already from Mr. Ehinger the private forests are being much more heavily cut in percentage terms than the national forests.

BARLOW: By the Forest Service`s figures, there`s 100 million acres with mature saw timber on them. This is equal to the 90 million acres that Chief McGuire has in his forest system, much of which has been cut over already.

MacNEIL: Are environmentalists, incidentally, as concerned about the environmental protection of private forests as they are about the national forests?

BARLOW: We`re concerned that they be wisely cut, for a number of reasons: so that there isn`t erosion, so that the forests regenerate properly -- there are those concerns. But the national forests need to be managed even more conservatively than the private forests because they have a multiple public resource value -- recreation which is going to double by the end of the century, according to National Forest Service projections.

MacNEIL: Do you agree that increased cutting of the national forests could be safely done if the Forest Service could get the sort of sums of money from the Congress that we`ve just heard are necessary, $77-100 million, so that they could monitor it effectively, build the roads safely, and also reforest, or plant new trees?

BARLOW: We`re not sure that that can be accomplished safely. The General Accounting Office, which is the investigative arm of Congress, has been looking at the Forest Service inventory figures for timber in western national forests and it`s found over cutting in a number of forests, cutting at a rate greater than the forests can regenerate at.

MacNEIL: What is your evidence that increased cutting, particularly in the areas that are already authorized for cutting, would actually hurt the environment? In what way would it hurt it, literally? What would it do to it?

BARLOW: Well, you have a large volume of old-growth forests; these are forests 300-400 years old, some 200 years old. The wildlife species, the recreation values are intertwined with these old forests. You cut them, and it`s going to be many years before you replace that basic resource to support your recreation and your wildlife.

MacNEIL: But some of these areas have already been authorized, isn`t that right, for cutting, and it`s just that they`re a bit slow in getting them out for the reasons we`ve heard.

BARLOW: It`s the pace at which they move that we`re talking about. They`ve got to be cut at a slow enough pace so that the regrowing forest can come in and offset the losses that you`re taking out in timber.

MacNEIL: Well, are you actually suggesting that the government should take back some of the permission that`s already been given?

BARLOW: In some cases, in some individual national forests, they probably have -- and this goes back to the General Accounting Office report -- they probably have scheduled more timber than they should be scheduling.

MacNEIL: Well, let`s bring the other gentlemen back in. Mr. Ehinger in Portland, listening to this, do you think that faster cutting could be done without hurting the environment?

EHINGER: Very much so. Let`s put it this way: by the Forest Service`s own estimate, six billion feet of timber die annually in the national forest system. That`s close to a national disgrace that we`re wasting that kind of timber. That can all be moved out -- not all of it, but it will take some roading and some other activities on the part of the Forest Service. Mr. McGuire suggests that we should improve the utilization in the mill. How do you make an investment in a mill which now becomes a million- dollar investment on almost a minimal basis when you`re totally uncertain of whether you`re going to have timber a year or two years from now? We have the technology, and in areas where our supply is assured, we`re moving ahead very rapidly in this area, extremely rapidly.

MacNEIL: In other words, you agree that given the right incentive, mill efficiency could be increased and better use of the tree made, as Mr. McGuire suggested?

EHINGER: Very much so. It`s being done in many, many places today. We`re doing it all the time. But we have other areas where the supply is so uncertain that we dare not go and make major investments. And certainly the growth potential of the national forest system has not been developed anywhere near to the capacity which can be done with completely safe, environmentally sound methods. And frankly, if we were growing food with the technology that we`re growing our wood fiber with today and at the same rate, we`d be starving the nation to death instead of living as well as we are and exporting tremendous volumes of food. We just have to do a better job.

MacNEIL: Thank you. Mr. McGuire, do you agree that there are six billion board feet a year which are just dying in the forests and being wasted, therefore?

McGUIRE: I think that`s a pretty good estimate. However, many of these trees are found in scattered locations; it would not be economically possible, as Mr. Ehinger said, to harvest all of that volume. But certainly more volume could be harvested through the salvage of dead trees if we had the road system to get to the trees; and that is the principal obstacle to increasing the sale of salvaged timber.

MacNEIL: What do you think about the amount of timber that`s there just dying because it`s not being gotten out?

BARLOW: Well, I`d like to underscore what the Chief said about the un- economics of doing this. In many, many national forests in their timber sale program now, they`re selling it less than it costs to bring this timber on the market, and this is an unfair competitive situation when you`re looking at the private timberlands, where your owners must recover their costs.

MacNEIL: Less than the cost to the government of making the roads and the other protections to get the timber out?

BARLOW: Less than the cost to the taxpayer for building the roads, watching over the timber, fire protection, thinning, preparing the sale, reforesting, and so forth.

MacNEIL: Mr. McGuire, is that true?

McGUIRE: Well, I think I would argue with Tom that it depends on what costs you count. Many of the costs in preparing a timber sale are in the nature of capital investments. The roads are going to be used for other purposes, other timber sales; many sales are made to improve wildlife habitat or to hold down the spread of a pest, and that sort of thing. In general I would say that very few sales, if any, are not justified on the basis of cost comparisons if you consider all the benefits and all the costs.

MacNEIL: Thank you. Jim?

LEHRER: Another solution to the timber shortage problem has been offered by a Congressman from the Northwest, Democrat Don Bonker of the State of Washington. He wants to permanently ban the export of logs cut from the government`s national forests. Congressman, the exporting of national forest cut logs is already prohibited to a large degree. What more do you want done?

Rep. DON BONKER: Well, if President Carter wants to increase the allowable cut to alleviate inflationary pressures on lumber and housing costs it`s going to do no good if that increase ends up in Japan. And presently we`re exporting three billion board feet a year, unprocessed logs, to Japan, and our small mill owners are forced to compete against Japanese for available timber.

LEHRER: Are you talking about national forest timber being exported at that rate?

BONKER: No, that`s all of our exports. But what I`m saying is that we ought to make available national forest lands for domestic consumption, and not force our local mill owners to compete against the Japanese. Now, we do have a ban that`s renewed from year to year, but there are loopholes in that ban that allow the export practice to continue.

LEHRER: For instance?

BONKER: Well, the practice of substitution, where a company can bid on federal lands for their own consumption while exporting their private timberlands; so they substitute one set of logs for another. The practice of shipping out waney cants, and that`s just when they knock off the ends of a log and thereby qualify those logs as processed timber. But it makes no sense to export our raw logs to Japan while we`re importing large volumes of finished products from Canada. We`re losing the resource and we`re being robbed of the jobs in the process.

LEHRER: Would you be in favor of banning the export of all American logs?

BONKER: No, I wouldn`t. I don`t think that we ought to get into the management of private timberlands, but I do think that when it comes to public lands, particularly federal lands, that we ought to reserve those for local consumption, particularly at times when we have increase in housing starts and a lack of availability of timber.

LEHRER:I think you lost me a moment ago, as I was thinking about it. How national forests cut timber -- are you suggesting that it is now illegally exported?

BONKER: No. There are loopholes in that ban that allow the practice to continue, and this was purposefully placed into the law so that some companies who were exporting at the time would be allowed to continue. And my bill would make permanent the ban and would plug those loopholes over a period of time so that we would have guarantee of the federal logs being made available to domestic production.

LEHRER: But how would that actually result in more timber -- totally, more timber -- being available on the market here in the United States?

BONKER: Well, it would have several results. One is that we would guarantee that those logs would be made available domestically. Secondly, we would allow the mill owners to compete for available federal logs without having to compete with Japanese brokers for those logs. Right now the real problem is high stumpage price, which is brought about because the Japanese are bidding for those logs, and they`re prepared to pay the highest price. And we have a growing problem between the timber owners, who want the highest stumpage price, and the timber purchasers, who will process those logs for housing. And the higher the stumpage price, the greater the inflation. And that`s why the Canadians have such a great market here: they emphasize a lower stumpage price so that they can manufacture the product and sell it to both the United States and Japan.

LEHRER: Mr. McGuire, what do you think of that plan? Do you think that would result in more timber being available if the Congressman`s bill should pass?

McGUIRE: Well, it`s a little hard to tell; it`s a complicated situation. The present arrangement is that federal logs may not be exported, and the purchaser of federal logs may not substitute federal logs for logs that he does export. We try to police that process -- maybe not always successfully -- and if we catch a purchaser exporting or substituting, we can ban him from future auctions.

LEHRER: But you do concede that a lot of that does go on that you don`t catch?

McGUIRE: No, I`m not ready to do that. In fact, I think it`s very difficult to pin down. We have people at ports, for example, checking to be sure that no logs that are branded with the U.S. mark are on the dock ready to be shipped. Now, the Canadians have a similar arrangement. Logs cut from Crown lands in Canada cannot be exported, and since most of the timber is in Crown lands, it amounts to practically a complete ban.

LEHRER: Mr. Ehinger, from the industry`s standpoint, do you think these loopholes should be closed, or do you think there`s a problem? Do you think there`s too much substituting? What`s your view of it?

EHINGER: The whole issue of substitution on log exports is merely a flyspeck in the whole picture. It really would do practically nothing in the timber supply situation. After all, nine out of twelve of the western states don`t even get involved in the log export issue at all; it really develops largely in Washington State, where the Washington State logs are exported, and that accounts for twenty-five percent of the Washington State exports, or seventeen, eighteen percent of the total. And what we need is the cuts raised to the environmentally sound level in all these other nine states where the mills are shutting down. Inflation is occurring, for example, really in Ponderosa pine millwork, and the inflation for better molding in better grades has been 100 percent in the last four months. That`s 100 percent. And the millwork fellow in Philadelphia who is buying that to make window frames or door frames for housing or brick molding is not the least bit interested in log exports or the substitution, which is only just a small thing on the whole log export issue; and what he`s really concerned about is the government supply of timber, and the Forest Service controls eighty percent of the Ponderosa pine, which is primarily the millwork molding lumber item. And we need to get at the heart of where the problem is and do something about it. I had one forest supervisor who was in the Ponderosa pine region say to me, "I have enough money to do all jobs I`m required to do except timber management and timber sale offering." That`s the problem we`ve got to solve.

LEHRER: All right. Mr. McGuire, the President`s deadline is up next week for his advisers to tell him what to do about this problem. What do you think he`s going to be told and what do you think he`s liable to do?

McGUIRE: Well, I don`t know what he`s liable to do, but I think that he will be offered a series of options....

LEHRER: We have five seconds.

McGUIRE: More timber from public lands, more timber from private lands, better utilization; and also some prospects for the longer run.

LEHRER: All right, thank you. Robin?

MacNEIL: Sorry that that`s all the time for tonight. Thank you, Mr. Ehinger, for joining us in Portland. Thank you, gentlemen in Washington. Good night, Jim.

LEHRER: Good night, Robin.

MacNEIL: Thank you, Mr. Barlow. That`s all for tonight. We`ll be back tomorrow night. I`m Robert MacNeil. Good night.