Congress established a Division of Forestry in the Department of Agriculture in 1881.1 The division focused on research and the provision of information; it did not actively manage forest lands. The agency's name was later changed to the Bureau of Forestry.
The Forest Reserve Act (also known as the Creative Act) of 1891 allowed presidents to set aside forest reserves out of public lands by executive order. Those reserves were managed by the Department of the Interior. By 1897, 40 million acres had been set aside.
The Federal Forest Transfer Act of 1905, signed into law by President Theodore Roosevelt, moved control of the forest reserves from the Department of the Interior to the Department of Agriculture’s Bureau of Forestry, which was renamed the Forest Service. The new Forest Service grew quickly—by 1908, it had 1,500 employees and controlled 150 million acres of land.2
The Weeks Act of 1911 was an important early law that expanded the powers of the Forest Service. The law authorized federal subsidies to the states for forest fire prevention, and it allowed the Forest Service to purchase private lands for the creation of national forests.
The Forest Service was heavily influenced by its charismatic first chief, Gifford Pinchot, a close friend of Roosevelt’s. Pinchot was a progressive who believed that professional forest managers employed by the government could manage forests better than private owners. He made no secret of the fact that his eventual goal was for the Forest Service to gain authority over all public and private forest lands in the nation, a goal that was the policy of the agency until 1953.
Pinchot and others also believed that the nation was about to experience a timber famine that could be relieved only by huge investments in forest management. The reality turned out to be far different. U.S. timber consumption peaked in 1910 as the use of wood for fuel declined and as wood products manufacturers greatly increased the amount of useful wood they produced from each log.
Because of the continued availability of private supplies, Forest Service lands accounted for just two percent of the nation’s lumber supply by the early 1940s.3 The “national wood famine” that the Forest Service had predicted never happened4 Indeed, the United States had a glut of wood on the market from the time the Forest Service was created through at least the 1980s.
Despite its flawed projections, the Forest Service was one of the most popular agencies in government in the 1950s. "No one can deny that the Forest Service is one of Uncle Sam's soundest and most businesslike investments," gushed Newsweek in 1952. "It is the only major government branch showing a cash profit."5 The magazine also lauded the agency’s contribution to the value of recreation, wildlife management, timber stands, and pure and abundant water. The Newsweek issue, which featured Smokey the Bear on its cover, ascribed the agency's success to decentralized management.
Incentives to Cut
The popularity of the Forest Service did not last. Incentives built into the agency’s budget by well-intentioned but poorly conceived laws effectively rewarded forest managers for losing money on environmentally questionable practices.6 At the same time, managers were penalized for earning a positive return for following environmentally sound practices.
Congress gave the Forest Service funding to arrange timber sales, but it directed the agency to fund reforestation and other post-sale activities out of the timber receipts. Agency managers soon learned to maximize timber sales in order to fund an array of programs. The budgetary system created perverse incentives. Because extra funds could be spent on restoration, the more damage timber sales created the larger were the budgets that managers got to control. Every level of the agency’s hierarchy had a stake in the below-cost timber sale program because as much as a third of the funds went for agency overhead.
Forest Service cutting practices were also problematic. At the time of the 1952 Newsweek story, most national forest timber was managed using selection cutting: individual trees were cut when they were mature, leaving behind beautiful stands of younger trees. When done right, a selection cut forest is hard to distinguish from wilderness.
Clearcutting, in which all trees on 20 to 100 acres or more are cut regardless of maturity, imposes higher reforestation and rehabilitation costs. But since agency managers got to keep those costs out of timber receipts, they had an incentive to clearcut even when other cutting techniques were more compatible with recreation and other uses. From a timber industry point of view, clearcutting sometimes makes sense. But when considering recreation, wildlife, and watershed, it was often devastating. The cash profits of the 1950s also vanished, and by the 1980s the Forest Service was losing billions of dollars a year on the timber program and other activities.
By 1970, the Forest Service was cutting almost four times as much timber as it did in 1952, almost all of it clearcut. The resulting controversies over both clearcutting and the large amount of timber being cut rocked the agency and led to lawsuits, congressional hearings, and tree-sitting protests. Ironically, agency leaders responded to the controversies by becoming more centralized in their management, which only made the Forest Service more vulnerable to criticism.
In 1976, Congress tried to resolve Forest Service problems by instituting a comprehensive forest planning process. But the resulting plans proved to be a costly mistake: the agency spent more than a billion dollars planning the national forests, but the plans were often based on fabricated data, and they did not resolve any debates.
The Forest Service’s legacy of poor management continues today. A 2003 report by the Government Accountability Office concluded: “Historically, the Forest Service has not been able to provide Congress or the public with a clear understanding of what the Forest Service’s 30,000 employees accomplish with the approximately $5 billion the agency receives each year. Since 1990, the GAO has reported seven times on performance accountability weaknesses at the Forest Service.”7 The agency’s financial operations were on the GAO’s “high-risk” list for waste between 1999 and 2005.8
The timber program continues to be subject to inefficiency and scandal. The Washington Post reported in 2004 that a large area of the Tongass National Forest in Alaska was clearcut and the trees left to rot because of inept planning by the Forest Service.9 U.S. taxpayers lost millions of dollars in Tongass. The agency’s costs of selling timber from Tongass have substantially exceeded fees collected from timber companies. In 1992, a quirk in timber sale contracts even caused the Forest Service to pay timber companies $14 million to cut Tongass timber, which was a cost to taxpayers on top of the $40 million that the agency spent to manage the timber.10
Nonetheless, big changes have come to the agency despite its poor planning and management. Starting in 1990, a new generation of national forest managers began to wind down the agency's timber program. Within six years, timber sales had fallen by 85 percent, and they remain at fairly low levels today. This relieved the controversies about overcutting, but it led many to wonder where the agency would shift its focus after timber: Recreation? Wildlife management?
Fires Are the New Cash Cow
The answer came in 2000, when a fire burned more than a billion dollars worth of homes in Los Alamos, New Mexico. Congress responded by giving the Forest Service a whopping 38 percent increase in its 2001 budget, mostly for fire activities. Total national forest fire expenditures have more than quadrupled in the last 15 years.11 Fire expenditures have grown from about 10 percent of the Forest Service budget in the early 1990s to more than 40 percent today.
Much of this money is being spent reducing hazardous fuels within the forests. Far more is spent preparing for and suppressing fires. Yet much of the spending on fire activities is as questionable as the Forest Service's earlier timber programs. National forest fire problems are not as bad as the Forest Service claims; hazardous fuels are only a major issue on about 15 percent of federal lands in the West.
Forest managers have known for decades that some fires should be allowed to burn for the good of forest ecosystems. But from the beginning, Congress has given a virtual blank check to the Forest Service for fire suppression activities, and much of the spending has been of dubious value. The agency has made poor management decisions regarding prescribed burnings over many decades.12
Agency leaders are taking advantage of Congress's willingness to throw money at the fire issue. With an increasingly large share of the Forest Service bureaucracy dependent on the extra funding that comes around each fire season, the agency blindly puts out almost all fires. Even people within the Forest Service fear that the agency's traditional commitment to conservation is being lost in an orgy of spending on fire-related activities.13
Today, the Forest Service controls 193 million acres of land, has a budget of $5 billion, and employs more than 30,000 workers.14 The Forest Service is in need of serious reforms. The services provided by the agency should be restructured to reduce taxpayer costs and to improve forest management practices.
One option is for Congress to allow the agency to charge fair market value for recreation and other uses of Forest Service land. That would probably raise enough revenue to cover all of the agency’s costs. Taxpayers would save about $5 billion annually if the Forest Service was shifted to a self-funding structure.
If Forest Service activities were self-funded, it would force the agency to be more efficient in its operations and more responsive to forest land users. Self-funding would create incentives for the agency to decentralize its operations, allowing managers to respond to local conditions instead of being controlled by top-down plans from Washington.
Another reform step would be to revive federalism by eliminating federal forest subsidies to the states and turning portions of the national forests over to the states. Other activities could be privatized. It might be possible, for example, for some national forests to buy private insurance, as Oregon did until recently.
Some experts have proposed full privatization of the national forests.15 Alternately, the national forests could be structured as independent trusts that would be owned by the federal government, but managed by a board of directors and funded out of forest-related receipts. The trusts would have special obligations to promote conservation, while still producing many valuable resources.
For decades, the Forest Service has been plagued by mismanagement and subject to perverse and damaging incentives. In the coming years, policymakers should focus on the goal of reforming the Forest Service to reduce taxpayer costs, while improving the sound and ecological management of forest lands.