Steve H. Hanke: Follow the Founders and Privatize Public Lands

2017-12-25 IMI

This article appeared on Forbes.com on December 17, 2017 Steve H. Hanke, Member of IMI International Advisory Board, Professor of Applied Economics at The Johns Hopkins University. The New York Times recently published an editorial headlined “The Looting of America’s Public Lands” (Dec. 9), expressing outrage over President Trump’s withdrawal of “some two million acres of spectacular landscape from two national monuments in Utah designated by his Democratic predecessors.” In addition, The Times defended the retention of public lands by the federal government, rejecting the idea that any of the federal government’s treasure should be transferred to the states. The Times did not spill any ink over the idea that federal lands should be transferred into private ownership (read: privatization). The last time the privatization of public lands was seriously considered was in 1981. That’s when I, as senior economist on President Reagan’s Council of Economic Advisers, proposed privatizingcommercial grazing lands and timberlands. The president backed my proposals, which were subsequently contained in the president’s Budget Message for fiscal-year 1983: “Some of this property is not in use and would be of greater value to society if transferred to the private sector. In the next three years we would save $9 billion by shedding these unnecessary properties, while fully protecting and preserving our national parks, forests, wilderness and scenic areas.” President Reagan’s position, which was enunciated in his 1983 Budget Message, was contrary to the position embraced by the so-called Sagebrush Rebels. The Sagebrush Rebels advocate a transfer of lands owned by the federal government to the states, a position adopted today by President Trump and his secretary of the interior, Ryan Zinke. While Reagan originally supported the Rebels and its leader, his own Interior Secretary James Watt, the president changed his position after my initial privatization speech, which I delivered at the 1981 meeting of the Public Lands Council in Reno. At the end of the day, President Reagan realized that a transfer of federal lands to the states would still leave them in the hands of government, not private people or private enterprises. In taking this position, Reagan was following the footsteps of our nation’s founders. Although the founders differed on the modalities of land privatization, they agreed that land held by government should be privatized as rapidly as possible. Indeed, the founders believed that lands should be privately owned and that this would promote economic development and strengthen the nation. In the 1800s, many laws were passed to implement the founders’ ideas and to accelerate the settlement of the West. The Founders understood that the way land was owned would affect all else. As a result of the foundation laid by the founders and subsequent legislation in the 19^th century, about 816 million acres of public domain land was privatized between 1781 and 2015, with 97% of the privatization taking place before 1940. But in the 20^th century, attitudes toward private land ownership and laissez faire economics in the U.S. began to change. Public land ownership and nonmarket decision making by politicians and bureaucrats began to be viewed in a favorable light. In consequence, public land use became politicized, and its disposal came to a halt. As a result, the U.S. has been left with a huge inventory of lands owned by the federal government. These public lands amount to roughly 640 million acres, an area over seven times larger than Germany. The table below shows the distribution of federal lands among the states. Most of these lands are in the 11 western states and Alaska. Alaska, which became a state in 1959, has by far the largest acreage of federal lands, about 35% of the total. With less than one percent of the land in Alaska privately owned, the state reminds me of the Beatles hit song “Back in the U.S.S.R.” But Alaska is in the good old U.S.A.

It’s time to embrace the Founders’ principles and vision for land ownership in the United States. The federal government’s commercial grazing lands and timberlands should be privatized. We are not talking about national parks, wildlife refuges, national conservation areas, national monuments, wilderness areas, national historic sites, national memorials, national battlefields, national recreational areas, wild and scenic rivers, national seashores and lake shores, and national trails. These lands would be excluded from privatization. But, the lands managed by the Department of Defense (DOD), which amount to some 11.4 million acres, are in a separate category. Some of the DOD managed property is clearly “surplus” and should be included in any privatization initiative. Not only would such a privatization program be desirable in principle, but it would generate significant benefits.

The productivity of privatized lands would increase. With private ownership, it would be possible to obtain more commercial, recreational, and environmental outputs than with federal ownership. For example, in a study of timberlands in Western Oregon, I found that the value of those public lands would increase 13-fold if they were privately owned.
With increased productivity, not only would the value of lands be increased, but employment and economic activity would also be enhanced with private ownership.
Consumers would be served more effectively, and lands would be allocated to their most highly valued uses. After all, the only way that private-land owners can profit from their property is to employ it for the satisfaction of other people’s wants. Serving consumers, of course, is the social function of private property. Private consumers and producers, not politicians and bureaucrats, would call the tune. The politicization of land use would be swept aside, and the political controversies that accompany public land ownership would be swept aside, too.
Land sales would generate revenues for the federal government. These could be earmarked to pay down the federal debt of $20.2 trillion. To give some idea of the magnitude of a potential debt write down, consider that federal lands, excluding mineral rights and oil and gas, have been estimated by theS. Office of Management and Budget to be as high as $1.04 trillion.
The annual federal costs (which incorrectly omit capital carrying charges) exceed the annual revenues generated from federal lands by a wide margin. Indeed, excluding mineral and oil and gas income, the revenues from public lands are $1.1 billion. These revenues are swamped by costs of $14.6 billion. Talk about a negative cash flow. Privatization would eliminate this negative cash flow for the federal government. This would benefit all United States taxpayers, who must now pay taxes to support the federal government’s retention of federal lands.
A state and local tax base would be created, and in-lieu transfer payments from Washington would be reduced.
Land-use decisions would become less politicized. Both commercial and non-commercial land users would spend less of their time and money attempting to obtain land-use rights through political and bureaucratic processes.

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Steve H. Hanke: Follow the Founders and Privatize Public Lands

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