Real World Economics

Ed Lotterman: Nevada grazing dispute replete with irony

May 2, 2014 

The brouhaha over Nevada scofflaw rancher Cliven Bundy is chilling in revealing the degree of support that do-it-yourself constitutional interpretation has gained in our country and in the number of people willing to take up arms to defy the rule of law.

But the case also raises the issue of why the federal government owns large portions of land in some states while holding only minuscule amounts in others. Are there any important reasons why the government still owns 81 percent of the land in Nevada? If federal lands constitute only about 6 percent and 3 percent of South Dakota and North Dakota, respectively, why should 29 percent of neighboring Montana be designated federal land?

And what is it about Idaho, with more than 50 percent government owned? Why should Washington be 28 percent while Oregon is 53 percent?

SERENDIPITY?

Is all of this an accident of history, or are there underlying reasons for the common good?

If the former, then should we sell off federal lands in Alaska and the 11 contiguous Western states where federal lands constitute nearly half of the total? Should we perhaps use the proceeds to buy land in Connecticut and Rhode Island, where federal property is a minuscule 0.4 percent of all land?

Those of us older than 40 may remember this issue gained national prominence in the early years of the Reagan administration, when an outspoken secretary of the interior, James Watt, supported many of the themes of the "Sagebrush Rebellion"; opposing the hegemony in many communities of federal land-management agencies and their often apparently pointless policies.

NOT MUCH PROGRESS

Despite the attention Watt and his policy initiatives received, surprisingly little changed. And the environmental movement, which is an important, vocal lobby against privatization or transfer to state control, has gained strength in the intervening third of a century. So don't expect any wholesale privatization of public lands.

As usual, a little history is helpful. So much of the West belongs to the federal government either because it was part of the Louisiana Purchase from Napoleonic France or was seized from Mexico in war.

That explains why Texas, which is only 1.9 percent federal or a third of that for Minnesota or Wisconsin, is a seeming anomaly. It wrested its own independence from Mexico and existed as an independent nation prior to joining the United States. So the federal government never had legal title to it.

When land had high value and smaller acreages could support a household, much was transferred to individual ownership early on. That is why Minnesota and North Dakota, both part of the Louisiana Purchase, are 5.6 and 2.7 percent federal, respectively, while the proportions for Idaho and Oregon, also part of that deal, remain more than 50 percent.

A series of Homestead Acts, starting in 1862, gave ownership of one-quarter-square-mile tracts to individuals who met certain criteria, such as living on the land for five years and cultivating it or planting trees. Homesteaders naturally went for the best land first. Over time, the government had to sweeten the pot to get people to places such as western Nebraska.

In many cases, effective use of the land took place without ownership. The family of Nevada rancher Cliven Bundy, now in the news, reportedly has run cattle on some of the land in question since 1870. That almost certainly started with the family unilaterally putting cattle on open land unused by anyone else, rather than by their seeking formal federal permission. Agencies to manage federal lands, such as the Bureau of Land Management and the Forest Service, came along decades later.

WE THE PEOPLE

The legal situation in the Bundy case is clear. The land in question belongs to the people of the United States, and Bundy must pay for its use. No one who claims to be for constitutionality or the rule of law has any ground to dispute that.

The government has always asserted its ownership of the land and has charged for its use for a century, so ranchers cannot claim ownership via the old common law doctrine of "adverse possession." But the federal government has "suffered" owners to treat it as their own on a day-to-day and year-to-year basis.

Note also that this worked to the great economic advantage of the initial permit holders. There was no rebellion as long as the system involved a one-way transfer of wealth from government to private individuals.

VESTED RIGHT

The very fact that the government allows permit holders to transfer these rights when they sell their operations represents an implicitly vested property right. The Bundys reportedly own only 160 acres outright. That is smaller than my hobby acreage in Murray County, Minn. But the Bundys have a multimillion-dollar business.

The feds are not profit-maximizing landowners. Federal grazing permits have taken on a capitalized value because the amount charged is so far below market rates. States charge up to nine times as much for permitting grazing on their lands as ranchers pay to use comparable federal land.

Yet despite the quasi-ownership that has developed over time, federally permitted grazing lands often are not well-managed and are overgrazed.

Of course, these lands provide value to society as a whole beyond private grazing. They serve as wildlife habitat and to preserve increasingly rare plant and animal species. Increasing federal restrictions to further this, at the expense of profit-maximizing grazing, is at the heart of Bundy's rebellion.

This dispute is not likely to result in any big policy changes. Expect the issue to smolder for a long time.

Economist Edward Lotterman writes in St. Paul, Minn. Write him at boise@edlotterman.com.

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