Archive for March 23rd, 2015

by William Skink

There is this quaint notion we get from Economics 101 that supply and demand drive the markets. If you want to pass some standardized test, stick with 101. If you want to grapple with what actually happens in the real world, toss the text book out of the first available window.

It’s not that supply and demand don’t matter. They do. Take, for example, the demand for houses. Most people want to live in one, so there’s demand. For supply, there are plenty of laborers and resources to make use of. But we’re talking some big numbers if you want to play the home buying game. So you need financing.

Well, a few years ago we saw what happens when supply and demand takes a back seat to greed. Perverse incentives fueled an orgy of sub-prime lending, and the contagion went global.

For Montana, the collapse of the inflated housing boom hit labor hard. Mills closed and construction slowed. But despite the pesky constraints of reality, a bipartisan effort from Jon Tester and Steve Daines aims at using big government to shelter an industry from the impacts of Economics 101. And always happy to oblige, the Missoulian is more than willing to stack the story for panhandling loggers:

The U.S. Forest Service needs to quadruple forest restoration acres, while logging could reasonably triple over current levels in Montana, Chief Tom Tidwell said under questioning from Montana’s senators.

Tidwell was before the Senate Appropriations Interior Subcommittee on Wednesday lobbying for a nearly $5 billion budget in fiscal year 2016. Democratic Sen. Jon Tester and Republican Sen. Steve Daines questioned the chief on goals for Montana, pushing for increases in timber production to saw mills and other wood products.

“I don’t need to tell you how important saw mills are as a partner to the Forest Service. We don’t need to drive these folks out of business, and it becomes a taxpayer-funded problem as far as forest management,” Tester said.

Forest restoration, including logging, produced 113 million board feet (see info box) of saw logs, posts and poles and firewood on 9,000 acres in Montana during FY2014. Tester asked if current work was adequate to properly manage 17 million acres of forests.

“It’s not near enough of what we need to be doing to change the conditions on the landscape, to restore the resiliency of those forests and reduce the wildland fire threat to our communities,” Tidwell said, citing workforce reductions and shifting funds to fire budgets. “I’ve tried to be really clear about the challenge we have in front of us, and the need for us to increase the pace and scale of restoration of our nation’s forests.”

Tidwell went on to say that the number of restored acres needed to increase at least four times. He added that individual project size, with authorities granted under the 2014 Farm Bill, needed to significantly expand.

“Especially in your state, we need to be able to move forward with some larger landscape projects similar to what we’ve done in some neighboring states where we can look at not thousands but tens of thousands to hundreds of thousands of acres with one environmental assessment,” Tidwell told Tester.

Daines echoed the frustrations of Montana timber mill owners, many running at two-thirds capacity. Many mills are facing layoffs due to lack of logs while surrounded by millions of acres of available timber, he said.

“They’re healthier forests; environmentally the best thing we can do are responsible timber practices,” he said.

Sustainable timber harvest figures are much higher than the 113 million board feet cut in Montana, Daines said. He then asked Tidwell if 300 million board feet was a reasonable goal.

“Three hundred million board feet is very reasonable,” Tidwell replied.

Reasonable? Based on what? Certainly not market fundamentals.

Here are some numbers worth considering, reported on five years ago:

About 3.5 million US residents (about 1% of the population), including 1.35 million children, have been homeless for a significant period of time. Over 37,000 homeless individuals (including 16,000 children) stay in shelters in New York every night. This information was gathered by the Urban Institute, but actual numbers might be higher.

Fox Business estimates, there are 18.9 million vacant homes across the country.

3.5 million people without homes; 18.9 million homes without residents.

And don’t you know, it ain’t all about subprime:

While subprime loans have justly captured much of the ink as the culprit, overdevelopment is a major factor in the dramatic number of vacancies there are today. These are not just the homes of people who took on a mortgage they couldn’t afford; these are newly constructed houses without a buyer on the horizon. It’s not about taking a residence from someone who can’t pay his or her bills and giving it to another person who can’t make payments either, it’s about using resources we have in excess.

If environmentalists weren’t so easily scapegoated, one wonders how the tag-team effort from a Democrat and a Republican to push through big government logging subsidies, while absconding from the principals for free market Capitalism, would be accepted.

The article quoted at length above is fascinating because it tries to acknowledge reality, via quotes from Mike Garrity, but still drifts toward industry propaganda:

The dip in timber for mills came with the downturn in housing demand of the Great Recession, said Garrity, an economist. The downturn was coupled with cheaper logs from Canada via NAFTA, he added.

Whether a 300 million board feet target was attainable would simply depend on where the logs came from and challenges were likely if it harmed fish and wildlife, Garrity said.

Timber-dependent industries in Montana spoke favorably of the potential for increased harvest.

“The exchange between the senators and chief is encouraging,” said Keith Olson, executive director of the Montana Logging Association. “The ability of industry to ramp up will be dependent upon certainty of access to increasing harvest levels.”

“The mills can handle it,” said Julia Altemus, executive vice president of the Montana Wood Products Association. “The mills are running at 60 percent capacity. All the mills would love an opportunity to run at 100 percent.”

Altemus cautioned that the Forest Service in the short term may not have enough current projects in the pipeline to meet a 300 million board feet goal as the cut is typically closer to 100 million board feet.

Public sentiment had largely turned to support for increasing timber harvest and other forest restoration, Daines said. Collaborative based forest projects have the greatest chance of success, and the number of diverse groups agreeing that responsible forest management would have positive economic and environmental impacts was encouraging, he added.

“The level of agreement we have is greater today than it’s ever been in my career,” Tidwell said of collaborative pushes for increased forest restoration.

Restoration? What a joke. The push to “restore” Montana forests is happening despite a lack of demand for home construction, and that’s problematic from several different political angles. For Steve Daines, he’s aiding and abetting Big Government’s intrusion on the Free Market. For Jon Tester, he’s continuing to alienate the people he expects to help reelect him in a few years.

Both politicians will blab about jobs, as if cutting trees is the only kind of work possible in our forests. Instead of government subsidized logging, why not invest in trail maintenance? Well-kept trails would be good for our tourism industry, right?

But that would make too much sense, so don’t expect it to happen. Instead we will be treated to more shill-reporting and deceitful rhetoric from our elected officials.

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