This week marks two significant events in Montana: Smurfit-Stone announced the shutdown of its Frenchtown mill on Monday and Sen. Jon Tester's logging bill gets a hearing in the U.S. Senate on Thursday. While these may seem disparate to many, the connection between them is obvious and painful: a receding economy means there's simply no market for either the products of the plant or the legislation.
While many are gnashing their teeth over the announced shutdown of Smurfit-Stone, the reality is that it's been coming for a long time. The company, which produces a variety of paper and packaging products, announced that it would seek re-organization under bankruptcy laws in late January 2009 due to what its CEO said were high operating costs, the debt burden from prior mergers and weakened demand for packaging caused by a global economic recession.
Much like Montana's unfortunate experience with the former Montana Power Company, none of these conditions can or should be attributed to the hard-working employees of the company. The decision for the shutdown comes from far away, in the board room of a far-flung company that has, like so many others, fallen prey to the economic exigencies of the time. Ironically, Smurfit-Stone's stock, which had fallen 83 percent when the bankruptcy proceedings were announced, came roaring back this week after the plant closures were reported. Once again, Wall Street profits while the "little people" bear the heavy burdens of its investment decisions.
Montanans have seen unused rail cars stored along our rivers and byways for a couple years now as the demand for the products they once carried disappeared. If those rail cars haven't been filled for that long, it should come as little surprise that eventually those who produce what once filled those cars will likewise be relegated to unused spur lines.
Some might argue that timber supply is the culprit, not demand, but in light of the economic reality in the nation and world right now, that's a feeble line of reasoning.
Take this week's Ravalli Republic article about the effect the Smurfit-Stone shutdown has on local logging operations as an example. After spending two years developing the project in the East Fork of the Bitterroot, there were no takers for the logs when they were offered for sale six months ago. "With Smurfit closing, there will be no place to go with some of this material," the Forest Service's Chuck Oliver told reporter Perry Backus. "Without a market for this smaller material, all of that stuff is going to go up in smoke," Community Forester Byron Bonney added. "There's nothing to do with it."
Jump now to Tester's controversial Forest Jobs and Recreation Act, S. 1470. Although lacking the integrity to honestly identify the measure in its title, the bill actually creates 680,000 acres of new wilderness. But the wilderness comes at a price that many say is environmentally too high and economically unrealistic.
On the environmental side, critics say the collaborators, who put the deal together largely in secret meetings, gave away far too many acres of roadless lands, released existing Wilderness Study Areas protected since the '70s by Montana's late Sen. Lee Metcalf, and allow such onerous provisions as military landings in wilderness, motorized sheep herding and permanently opening forest lands to off-road ATV use.
Proponents counter that the measure also contains provisions for restoration of damaged watersheds funded by anticipated revenues from the mandated logging of about 100,000 acres of national forest lands. But there's the rub. Besides the very bad idea of putting logging decisions on publicly owned national forests in local hands, how do you derive revenue from logging if there's no market for the timber? And as the closing of Smurfit-Stone so grimly illustrates, there is no market for the logs, the chips, or the products made from them. Adding to the problem is that the Forest Service already has hundreds of millions of dollars in restoration projects that remain unfunded—and are likely to remain unfunded in the foreseeable future.
Somehow this economic reality has escaped Tester, who like so many in Washington, D.C., these days, seems to have succumbed to the opiate of power rather than the sometimes harsh tenets of reality. As he has said repeatedly in defense of his logging mandates, "the housing market will bounce back." But a closer look reveals that foreclosures continue to pile up, not just creating the tragedy of driving people from their homes, but also ensuring that the existing glut of excess houses on the market is growing, not shrinking, every day. Then consider that 70 million Americans are baby boomers who are now entering retirement. That means, in almost all cases, that their consumption will go down along with their revenue, their health costs will rise, and their need for more homes will disappear, not grow.
Some may hold out hope that the federal government will come riding to the rescue with "stimulus funds" to pay for the logging projects. But again, the harsh reality is that even with such funding, there's still no market for the logs. Plus, our nation is already over $12 trillion in debt and Congress will now vote to raise the debt ceiling to $14 trillion, which they hope will suffice until after the next election cycle. Unfortunately, much of the new debt will go to the outrageously expensive military budget and the wars George W. Bush started and Barack Obama is continuing. Toss in the expensive but almost useless "health care reform" bill and spending hundreds of millions on forest restoration activities will likely, as it has in the past, come in very low on congressional priority lists.
Smurfit-Stone's corporate-mandated closure is a grim reality about which Montanans can do little except try to help the former workers. But Tester's bill, based on economic fantasies, is another matter. You can submit testimony to the "Public Lands and Forest Subcommittee" online at energy.senate.gov.
Helena's George Ochenski rattles the cage of the political establishment as a political analyst for the Independent. Contact Ochenski at email@example.com.