Faddish Planning Fantasies
by Donald Devine
Issue 113 - August 6, 2008

Once upon a time, a young idealist was moved by the first Earth Day to devote his life to saving America’s land. He went to forestry school and joined the U.S. Forest Service ready to serve. The young man soon learned the government – supposed to be its protector - was in fact a major despoiler of the nation’s environment.

Randal O’Toole saw the Service was cutting vastly more timber than was prudent according to private forest management practice. The incentives set by Congress in a 1930 law allowed receipts from such sales to go directly to pay FS administrative costs rather than be approved through the appropriations process. So, to control this waste, in 1976 Congress required each of 120 national forests to create timber management, land-use and herbicide-spray and wilderness plans that had to be integrated into regional and finally a national program supposedly to rationally allocate timber and other resources and protect the environment.

The problem, as O’Toole explains in his wonderful new book The Best Laid Plans, is the plans took 18 years to complete, cost one billion dollars, and made no sense. One FS planner explained the delay: “There is never enough time to do it right but always enough time to do it twice.” The size and composition of the forests were so large and complex only guesses could be made. Many plans calculated timber at values 50 to 100 times what private companies were actually paying for it, and/or estimated tree growth at faster rates than possible, and/or planned for trees as tall as 650 feet – nearly twice the height of the world’s tallest. The plans did lower timber harvests since many forests held only three-quarters or even two-thirds of the plan’s fantastic yields but now most of it was sold well below cost.

Intrigued by the results at his own agency, O’Toole expanded his study to all government land-planning. He found the same results in parks, transportation, energy, urban renewal and land-use generally. Government bureaucrats do what they are given incentives to do. If the real incentives are to cut trees, they will cut and cut until there is nothing left. If after that abuse, Congress gives them incentives to conserve they will let trees grow and grow until fires break out everywhere and Congress turns these bureaucrats into firemen uninterested in timber cutting or conservation. Then politics will push them back to selling trees and the cycle starts again.

If the politicians try to force the bureaucrats to balance two, three or more goals, the bureaucrats become immobilized by the complexity so they plan and plan and plan – until nothing happens at all. It is the same for overbuilding highways and then trying to get rid of the automobile, increasing costs of energy to reduce use and then increasing use to reduce consumer costs, or planning for whatever the land-use flavor of the day might be. O’Toole came to the conclusion that national planning is impossible - no one can deal with such vast complexity. Like the Forest Service, the government planners have to make up the data – and garbage in, garbage out, as the computer guys put it.

The only planning possible is localized – and optimally is private. Only economic markets (where the planner loses his money rather than ours) or a market of localized governments (where adjoining units or neighbors are able to guard their interests) keep the complexity manageable. The world learned this from the collapse of the Soviet Union’s sophisticated national planning but many in the U.S. now miss the message.

A recent newspaper headline tells the tale: “Unraveling Reagan: Amid Turmoil, U.S. Turns Away From Decades of Deregulation.” The recent mortgage crisis and economic slowdown are said to have led to loss of confidence in the market and decentralized decision-making and to a sharp turn to national economic planning.

For the first time in ages a new economic regulatory body has been created. A new Federal Housing Finance Agency will regulate mortgage lenders Fannie Mae, Freddie Mac and the Federal Home Loan banks. The Federal Reserve and the Securities and Exchange Commission will gain vast new powers over investment banks, the heart of capitalism. Moreover, the news story correctly reported that much of this came at the instigation of “Republican heirs to the legacy of President Reagan.” The chairman of the SEC who testified before Congress requesting more power was none other than Christopher Cox, a former White House advisor to Mr. Reagan!

Somehow, no one notices that it is the Fed, the SEC, Fannie and Freddie and the rest who have been in charge during the whole crisis, indeed leading the charge. Fannie and Freddie are government-sponsored lenders long criticized by Reagan’s true heirs because they had an implied government guarantee not to fail. Their overly liberal lending policies backed with inadequate reserves initiated the crisis. Fed-created inflation and the SEC’s heavy hand fed it and Congressional panic guaranteed the slowdown would deepen. Rather than letting the market adjust bank-by-bank, locality-by-locality, and bottom out to end the panic, the politicians fueled it and turned the implied guarantee into an actual one, creating new laws that will assure additional inflexibility in some future crisis.

O’Toole not only points to the real problem, he presents real solutions.

• Give government agencies only a single, precisely defined mission
• Design incentives to complement the mission, not conflict with it
• Set performance criteria to evaluate agency progress
• Open agencies to competition - government, local and private
• Fund revenue-producing agencies only from user fees
• Create a competitive setting for bureaus that do not produce revenue

All of these criteria recognize the reality of how government really works. Government lacks the risk-reward signals of the price system that allow the market to sort out complex phenomena and respond to it. Government decision-making must be kept simple and create market proxies if they are to perform even reasonably well. Soviet or even New Deal planning expects far more than government can deliver. That is why it keeps breaking down.

O’Toole is at his best on land use planning, especially as we now face a “housing crisis.” Yet, the first housing crisis was declared way back in the 1930’s. The initial fashion was to create perfect cities, starting with Greenbelt Maryland, and to construct quality public housing for the poor. After giving up on greenbelts and becoming dissatisfied with “slum creation” housing, in the 1950-60’s the next fashion was to perform “urban renewal” of devastated central city areas. After destroying four times as many homes as it built and evicting a million people, 90 percent of whom paid higher rents in substandard housing, in 1991 federal planners turned to regional planning bodies for a larger focus – ultimately deciding on a policy of “smart growth” – i.e., concentrating people in urban areas of higher density rather than open suburbs – in some respects back to the original ideal.

As O’Toole emphasizes, planning is by its nature faddish. Without market signals, it is all guesswork. The great critic of city planning Jane Jacobs had so successfully undermined urban renewal planners for destroying city neighborhoods that were poor but socially vibrant, some new direction was required. Rather than letting city social life build spontaneously as Jacobs implied, the next set of planners tried to force Jacobs’ high-density vibrancy on the suburbs, only allowing development along urban transit lines. The only problem is that people did not want to give up their cars and would not live or shop there. They wanted private housing, grass and parking space. O’Toole lives near trendy Portland Oregon where smart growth has developed the furthest and he provides all the evidence anyone interested in the facts could desire that people choose suburban openness even when the government places all the incentives on living in higher urban density.

Zoning, O’Toole notes, was devised in 1910 to protect single family homes from conflicting uses of property but planners later turned it upside-down to restrict the number of private homes that could be built and to promote apartments and town houses instead, to force “smart growth.” To some extent planners have been successful - U.S. homeownership is at about 60 percent, compared to 80 percent in much of Europe, with much less space. Before zoning, property owners successfully used covenants to protect residential land use and it is still enormously popular today, once racial abuses were outlawed. Zoning also greatly increases the cost of living for the poor, as the late Bernard Siegan proved conclusively in his several superb books on zoning.

Today, 50 million Americans rely on private covenants enforceable through the courts - mostly governed by themselves through homeowners associations that can modify provisions when a consensus exists that change is needed. Towns and cities of course could continue to have building codes involving safety and so on. People become their own planners, able to know precisely what is expected before they buy. All national, state and local “planners” need do is remove rules that restrict their broader usage and people will more rationally plan for themselves. Creative local governments could allow urban areas now under zoning to petition to come under covenant and associational governance to allow the flexibility and local control now mostly only available in the suburbs and rural areas.

Despite the recent trends, it is apparent that things are very different today than in the 1950’s heyday of U.S. planning. The Fannie/Freddie news story did report that current pro-regulatory activism “doesn’t mean a rollback of decades of deregulation of business, ranging from airlines to telecommunication.” Moreover, they wrote that many of the new regulations are designated as temporary.

The long-term movement away from socialist-style central planning will endure. Why? The reporters themselves recognized that it was the Kennedy era “best and brightest” planning that produced the debilitating Vietnam defeat and that today’s planners “still haven’t rebuilt New Orleans and the surrounding area three years after the hurricane struck.” The failures of government planning are so obvious today even the media cannot miss them.

Donald Devine, the editor of Conservative Battleline Online, was the director of the U.S. Office of Personnel Management from 1981 to 1985 and is the director of the Federalist Leadership Center at Bellevue University.