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FEDERAL EXPENDITURES FOR NATURAL RESOURCE DEVELOPMENT F E D E R A L E X P E N D IT U R E S A N D P R O G R A M S F O R T H E D E V E LO PM EN T OF N A TU R A L RESOURCES D EPA R T M E N T OF T H E IN T E R IO R Statement submitted by Fred A. Seaton, Secretary o f the Interior This statement addresses itself to the follow ing questions which have been formulated by the Subcommittee on Fiscal P olicy: ( 1 ) The relationship o f Federal expenditures and programs for the development o f natural resources and for regional development to the processes o f economic growth in the private sectors o f the economy; ( 2 ) the usefulness or limitations o f such programs for purposes o f stabilization; and (3) the standards employed by the Department o f the Interior in determining the kind and size o f such programs requested. W hile the Department o f the Interior is the principal natural re sources agency in the Federal Government, it is not the sole Federal agency in this field. The total expenditures o f the Department which amounted to $572 million during the fiscal year 1957 comprised only one-third o f the estimated total Federal expenditures on the conservation and development o f natural resources. The Depart ment o f Agriculture, the Tennessee Valley Authority, and the Corps o f Engineers o f the Department o f the Arm y accounted fo r most of the remaining two-thirds. This statement does not purport to cover the activities o f all these agencies, but is limited to the expenditures and programs o f the Department o f the Interior. Before discussing the various programs o f the Department in con nection with the issues raised by the subcommittee, it would be help fu l to set forth certain considerations which are associated with Fed eral expenditures on natural resources development. Under our free enterprise economy, the basic responsibility for the development and use o f our natural resources rests with private groups and individuals. The expenditures o f the Federal Govern ment on the conservation and development o f water, land, forest, mineral, fish and w ildlife, and outdoor recreation resources are small in relation to the total expenditures on these activities by State and local governments and private enterprise. The role o f the Federal Government is limited to supplementing and strengthening the efforts o f other governmental units and private enterprise. Thus, even the most comprehensive analysis o f Federal expenditures on natural resources development is inevitably only a partial analysis. Federal programs for the development o f natural resources are almost entirely long range in two respects. First, the full economic effects o f many o f these programs may not be felt for several decades, 645 646 ECONOMIC GROWTH AND STABILITY and second, the projects themselves, notably in the field of waiter resources development, may require years and perhaps decades to complete because of their complexity. Because of the long-range nature of many of these projects, private enterprise would be reluctant to undertake them in the face of the great uncertainty inherent in any long-term investment. Another consequence of this aspect of natural resources projects is the diffi culty of making precise economic evaluations of such projects. The analysis of expenditures whose major effects occur in the future must be based on the underdeveloped art of economic forecasting. Because of the limited magnitude and long-range character of F ed eral expenditures for natural resources development, the greatest eco nomic impact of these expenditures will come from the results of the expenditures in the form of increased productive capacity, rather than from their immediate contribution to aggregate demand. This imposes a severe limitation on the usefulness of these expenditures as an instrument for counteracting cyclical fluctuations in the economy. Many of the results of these expenditures, though they are tangible, cannot be accurately measured in monetary terms. This is true of ex penditures on research, on certain types of conservation, and on the development of recreation resources which are freely available to the public. A measure of the total contribution of Federal expenditures on natural resources development to the growth of the private sectors of the economy would have to take account not only of the direct effects of these expenditures on the productive capacity of the economy, but also of the indirect effects on private investment which can be attrib uted to the initial Federal expenditure. F or example, an irrigation project which brings arid land into production may stimulate a volume of private investment well in excess of the amount of the Gov ernment expenditure. The development of a quantitative measure of the total economic effects of Federal expenditures 0 11 natural resources development would require highly involved statistical techniques which cannot be attempted here. The economic effects of Federal expenditures on natural resources development are frequently expressed in terms of their direct and in direct contribution to the gross national product, which includes not only the effect on the economy’s productive capacity, but also the total demand induced by the utilization of the additional productive ca pacity. In this paper, however, we are concerned prim arily with the contribution of Federal expenditures to the growth of the economy. W hether the increase in productive capacity is used will depend upon the level and composition of demand throughout the entire economy. The most direct economic impact of many types of Federal ex penditures for natural resources development 'is local or regional. This arises from the fact th at some resources cannot be transported over long distances. In addition, there are 'Statutory limitations on the geographical scope of certain programs. The activities of the Bureau of Reclamation, for example, are confined to the 17 Western States. This factor imposes a serious limitation on the usefulness of the Department of the Interior’s expenditures as an instrument of national fiscal policy. The basic objectives of the Department of the Interior are to foster the development and conservation of our natural resources so th a t we ECONOMIC GROWTH AND STABILITY 647 can produce, a t the lowest possible cost, the food, fiber, and raw ma terials needed by our growing population and expanding economy; and to protect and enlarge the opportunities for outdoor recreational activities such 'as fishing, hunting, and camping. As the economy grows, the demands on our natural resources will continue to increase. According to the most authoritative estimates, our 1975 population will need about 453 billion gallons of water a day—nearly twice as much as we need now. Our electric power gen erating capacity will have to increase from 123 million kilowatts in 1956 to about 321 million kilowatts in 1975. Our requirements for minerals and fuels in 1975 have been estimated at more than double our present consumption. The most serious problems confronting our natural resources in dustries arise, paradoxically, as a result or our high level of economic activity. The unprecedented output of our farms, factories, and mines is causing tremendous drains on some of our resources. In the field of electric power, for example, we have reached a stage where most of the economically feasible hydro sites have been de veloped. I t has been estimated that during the next 20 years, falling water can provide no more than 8 percent of our new generating ca pacity, unless we are prepared to pay a substantially higher price for our electrical energy. I t is clear that we must continue our unre mitting search for new sources of relatively lower-cost energy if we are to meet our growing needs. Our increasing consumption of minerals is causing heavy depletion of known deposits of our high-grade ores. To counteract this trend, we must find ways of using economically our low-grade ores, and mak ing greater use of those minerals that are still abundant, such as magnesium. The economic forces which are exerting an upward pressure on the costs of producing electric power and minerals are also making them selves felt in the development and use of our water resources. Unless we do a more effective job in the conservation and use of our water supply, some regions of the country face the prospect of paying a sub stantially higher price for water. Our rapid economic growth is having a profound impact not only on energy, mineral, and water resources, but also on our great scenic, wilderness, and historic areas, and on fish and wildlife resources. W ith higher incomes, more spare time, and more and better highways, more people than ever are visiting the national parks and other recrea tion areas. W ithin the past 6 years, the number of visits to the na tional park system has increased by two-thirds. To accommodate the rapidly growing number of visitors, we must improve and expand the facilities in our national park system and other outdoor recreation resources. The sections of this paper which follow describe the programs of the Department of the Interior for the conservation and development of our natural resources and the relationship of these programs to economic growth and stability. The annual expenditures on the various programs of the Depart ment of the Interior during the past 4 years are shown in table 1. 648 ECONOMIC GROWTH AND STABILITY T a b l e 1 .— E x p e n d itu r e s 1 o f th e D ep a r tm en t o f th e I n te r io r on th e co n serv a tio n and d evelop m en t o f n a tu ra l reso u rces [Fiscal years. In thousands of dollars] 1954 B ureau of Reclam ation: General investigations__________ Construction and rehabilitation. _ Operation and m aintenance_____ General adm inistrative expenses. Em ergency fu n d _______________ All other fu n d s.......................... ....... T o tal 2_ B ureau of L an d M an ag em en t: M anagem ent of lands and resources. C onstruction___________________ All other fu n d s___ _______________ T o tal . B ureau of Mines: C onservation an d developm ent of m ineral resourccsH ealth and safety_______________________________ C onstru ctio n ____________________________________ General ad m inistrative expenses____ _____________ All other fu n d s__________________________________ T o tal. Geological Survey: Surveys, investigations, an d research. All other funds____________ ________ T o talN ational P a rk Service: M anagem ent and protection___________ ______ ____ M aintenance and rehabilitation of physical facilities.. C onstruction________ ___________________________ General adm inistrative expenses......... ............................. T o tal. Fish an d W ildlife Service: M anagem ent of resources___ _____ ____ ___________ ____ _ Investigations of resources___ ________________ _________ C onstruction......... ............................. ......................... ................... Fish restoration and m anagem ent_______________________ Wildlife restoration_____ _______________________________ M igratory bird conservation______________________ _____ Prom otion and developm ent of fishery products and research_________________ ____ ____ ________ _________ General adm inistrative expenses__ ________ _____________ All other fu n d s________________________________________ T o tal, B ureau of In d ian Affairs: Education and welfare services___________________ ______ Resources m anagem ent........................................ -.............J____ C onstruction (buildings, utilities, an d land and w ater rights acquisition)____________________________________ ____ _ R oad construction and m aintenance (C A )_____ _________ G eneral adm inistrative expenses____ ___________________ All other fu n d s____ __________________________ _________ 1955 $3,167 167,602 18,348 4,416 177 2,693 $3, 755 130, 753 19, 683 3, 684 264 2, 554 $4, 754 127, 409 21,831 3,771 245 3,016 $5,350 126,324 21,387 3,651 57 14,024 196,403 160, 693 161,026 165,978 11, 464 1,427 25,988 12,160 1,970 35,073 14,157 4, 367 33, 526 17, 586 4, 310 38,683 38,878 49,203 52,050 60, 579 15,458 4,627 1,009 1,150 1,644 13,832 5,129 276 982 -943 13,982 5,431 443 1,109 -1,400 13,857 4,894 4,131 954 -541 23, 888 20,219 20, 965 26,710 241 27,390 27, 852 33 29,992 -324 26,951 27,081 27, 885 29,668 8,965 7,978 15,016 1,236 9,191 8,624 15,861 1, 060 10,410 9,128 23,134 1,241 11,406 9,941 35,852 1,265 33,195 34, 726 43, 913 58, 464 7, 939 4, 345 560 2, 461 13, 450 4, 477 7, 208 4, 371 383 3, 787 13, 791 6, 455 7, 858 4, 820 536 4, 260 13,193 5,187 10,132 4, 546 1,115 4,324 13, 669 4,242 1, 170 720 4, 351 3, 581 810 3, 949 4, 009 824 6, 486 44,194 49, 347 37,888 1957 49,100 12, 622 61,031 11, 031 45, 603 12,313 45,028 13,780 17, 087 14, 526 5,095 2, 644 2,428 10, 553 8,999 2,798 8,151 9,951 9, 789 2,938 9, 685 91,171 3, 047 2,023 T o ta l_______________ 83,880 96, 756 8,418 T o tal for D epartm ent- 535,140 515, 299 511, 790 1 Exclusive of tru s t funds. 2 D iscrepancy in totals are due to rounding. N o t e .—General departm ental ad m in istrativ e an d other expenditures are not shown separately. N a t u r a l R e so u r c e s E x p e n d it u r e s a n d E c o n o m ic G r o w t h W ater resources One of the Department’s most important programs for expanding our resource base is the reclamation of arid and semiarid lands ECONOMIC GROWTH AND STABILITY 649 through the construction and operation of irrigation projects by the Bureau of Reclamation in the 17 Western States. Since 1902, the Bureau has built facilities which furnish a full or supplemental water supply for 7.7 million acres of irrigable land which represents approximately one-quarter of all the irrigated land in the 17 Western States. The crops produced on these lands served by reclamation projects during 1956 were valued at $952 million. The earliest reclamation projects were constructed for irrigation water storage without regard to the flood-control needs of down stream areas and the multiple uses of water. However, Congress soon recognized the need for the multiple-purpose development of water resources and amended and expanded the original Reclamation Act to include not only irrigation and flood control, but also mu nicipal water, hydroelectric power, navigation, fish and wildlife, rec reation, and pollution abatement. As towns adjacent to projects grew, many of them exhausted their initial supply and looked to the water stored for irrigation as a solu tion to their municipal water problem. Out of this, there evolved the practice of developing water for municipal use. As a consequence, reclamation projects have contributed an important part of the water supply of many communities, including the metropolitan area of southern California, Salt Lake City, and several municipalities in the Great Plains States. While the Bureau of Reclamation does not construct projects exclu sively for the generation of hydroelectric power, it has built 18 multi purpose projects with power facilities. These projects have 36 powerplants with a total generating capacity of over 5 million kilowatts. The Federal W ater Power A ct provides for the licensing of power sites by the Federal Power Commission for development by State or local governments and private utilities. However, there are many instances where sites suitable for hydroelectric development are also suitable for the construction of storage dams and reservoirs. In such cases, the Bureau undertakes investigations of the feasibility of multi purpose development and presents its findings to Congress. Irrig a tio n and fa r m surpluses The need for expanding agricultural production through irrigation must be judged in the light of the expected increase in the demand for food and fiber and the means available for meeting this demand. The Department of Agriculture has estimated that the output of our farms will have to increase by one-third by 1975, and that the annual increases will have to be about 20 percent greater than the prodigious gains recorded during the postwar years. Livestick pro duction will have to increase by about 45 percent and farm crops by about 25 percent. The annual increase in feed grains may have to be as much as 5y2 times greater than the rate of increase in recent years. I t has been estimated that the additional output will require the equivalent of 150 million acres of cropland by 1975. There are, of course, many ways in which farm production can be increased through advances in farm technology which increase yields per acre. B ut we will also have to increase the amount of land under cultivation. Our productive farm acreage has been diminishing under the steady pressure of growing suburbs, industrial expansion, and land require ments for new highways and airports. Our new superhighway sys 650 ECONOMIC GROWTH AND STABILITY tem, for example, is expected to require nearly a million additional acres of land. These and other inroads are taking more than a million acres of farmland out of use each year. In contrast with this, recla mation is bringing into production only about 100,000 acres a year. As far as farm surpluses are concerned, irrigation in the West con tributes very little to the production of the 5 principal crops which comprise about 87 percent of our agricultural surpluses. About threequarters of the irrigated land produces forage and grain crops which are fed to livestock in the dry grazing areas of the West. Federal reclamation projects accounted for 0.4 percent of our total corn production, less than 2 percent of our wheat production, 2.8 per cent of our rice production, 5.8 percent of our production of upland cotton, and no tobacco. Table 2 summarizes for the principal crops, the relationship of the production on these projects to total United States production and the total amount under crop support in 1956. T a b l e 2. — The production on Federal reclamation projects of principal crops under the Federal price-support program as related to United States produc tion and total amounts under price supports— 1956 U. S. Bureau of Reclamation projects Price-support program Crop Produc tion Thou sand Production Assumed support Per Per Per Per cent cent cent cent United United United United Amount States Amount States Am ount1 States States pro pro sup pro duc duc duc port tion tion pro tion gram Thousand Corn.............. ...............bushels . 3,451,292 434,729 Wheat_____ .........— do— 997,207 250,874 Cotton: Upland— ................... bales. . 13,303 3,829 1 American-Egyptian.__do___ 49 bushels . 372,495 76,391 Barley........... Oats.............. ----------------do___ 1,152,652 35,996 Sorghums___ ............ ........ do___ 205,065 42,056 47,402 23,727 Rice............... ............ ........do___ 21,558 3,144 Rye............... ............ ........ do___ Beans............ . .hundredweight. _ 17,114 4,694 Flaxseed.,, , ________ -do-.. 48,712 17,424 Thou sand Thou sand 12.60 25.16 13,931 19,709 0.40 1.98 1,441 4,568 0.33 1.82 0.04 .46 28.78 1.91 20. 51 3.12 20.51 50.05 14.58 27.43 35.77 775 20 28,476 10, 420 4,498 667 84 4, 743 993 5,. 83 41.85 7. 64 .90 2.19 2. 81 .39 27.72 2.04 92 2,993 530 309 365 21 1,023 9,354 2.41 41.99 3.92 1.47 .73 1.54 .65 21.80 .05 .69 .80 .80 .05 .15 .77 .10 5.98 .02 1 Data on amount of any crop under price-support loans and purchase agreements is available on a State basis. The proportion of total State production which is under support is applied to the production on Federal reclamation projects to arrive at a calculated or assumed level of support for crops grown on recla mation projects. The irrigated lands in the Western States produce many of the crops which have become an important p a rt of our diet. They pro duce virtually all of our apricots, almonds, walnuts, filberts, dates, lemons, figs, and prunes. They also supply about 95 percent of the grapes and plums, 90 percent of the lettuce and sweet cherries, 75 percent of the avocados, pears and cantaloups, 65 percent of the as paragus, 50 percent of the peaches, 87 percent of the fresh peas, and more than 50 percent of the commercial truck crops. Many of these crops cannot be grown in any other p art of the country and much of this production takes places during the off season for other producing areas. ECONOMIC GROWTH AND STABILITY 651 The long-term character of reclamation projects relates not only to their long amortization period which extends over 50 years or more, but also to the long period of time required for the investigation, planning, and construction of the projects. These investigations fre quently require many years. A fter Congress authorizes a project, there is an additional delay before appropriations are made and de tailed plans and specifications are complete. Thus, many years usu ally elapse before construction is completed. Farm layout and de velopment and the establishment of an optimum cropping program entail further delays in achieving full production. Depending on size, a period of from 5 to 20 years may be required before an irriga tion project is fully developed and producing. I t is clear that the reclamation program is directed toward the long term objective of developing our agricultural resource base to serve our future needs. The ultimate merits of the program cannot be ap praised on the basis of current conditions. They can be judged only in the light of future developments. Lands and forests Our expanding economy is creating additional demands for the use and development of the public lands and their resources. In addition to private sources of demand, States and counties are showing in creased interest in acquiring or using public lands for such purposes as recreation, wildlife, and forest management. While the programs in the field of lands and forests are primarily management and conservation programs, they do have certain develop mental features. As manager of the public domain which comprises 468 million acres of land in the United States and Alaska, the Department of the In terior through its Bureau of Land Management administers programs concerned with the classification, use, and disposal of public lands and the development, conservation, and use of the natural resources on these lands. The Bureau of Land Management is responsible for the disposal of public lands to private and public organizations and individuals for various uses. The Bureau also issues leases, licenses, or permits for land use. Where conflicts arise in the competing demands for land use, the Bureau resolves such conflicts by a process of land classifica tion which allocates lands to their highest uses in the interest of maxi mum development. The Bureau manages Federal grazing areas totaling 170 million acres. These Federal rangelands provide seasonal or year-round forage for nearly 10 million head of livestock which represent an im portant element m our production of meat, wool, and leather. Through the granting of grazing permits in grazing districts, and grazing leases on public lands outside grazing districts, the Bureau administers grazing and range activities to protect the productivity of lands, permit the highest use of forage, and, at the same time, retard soil erosion and provide watershed areas. Programs are also carried out for the rehabilitation and more effective use of rangelands. The Bureau administers more than 161 million acres of forest and woodland, which consist of 46 million acres of commercial forests and 115 million acres of noncommercial woodlands. I t carries on a pro gram of sustained-yield forest management for the purpose of obtain 652 ECONOMIC GROWTH AND STABILITY ing continuous timber production at the highest possible level. Under this program, timber sales amounted to more than $27 million in 1956. In addition, the Bureau of Indian Affairs manages 6 million acres of commercial forest on Indian trust lands which produce an annual harvest valued at approximately $14 million. M ineral resources Mineral resources, unlike water and timber, cannot be renewed. W ith every ton of ore we take from the earth, we reduce an irreplace* able supply. A t the same time, it should be recognized th at Nature has probably endowed the earth with more bodies of ore than we shall ever need. The problem is to find the concentrations of ore which are necessary to meet the demands of a growing and changing economy. Changes in the composition of the demand for mineral resources arising out of technological advances may be more significant than the overall growth of demand. Minerals and metals which were unknown only a few decades ago have assumed major importance in our indus trial economy. The principal objectives of the Federal Government in the field of mineral resources are (1) to assure an adequate supply of mineral raw materials at the lowest possible cost to meet our security require ments and the needs of an expanding economy; (2) to maintain a mining industry capable of competing in peacetime and which can provide high-level production in the event of w ar; and (3) to bring about an orderly and wise use of our mineral resources. The major contributions of the Federal Government to the develop ment of our mineral resources come from programs of scientific re search and development. The Bureau of Mines and the Geological Survey carry on programs for the collection, interpretation, and dis semination of information concerning m inerals; the development of new prospecting techniques; and research in all types of minerals technology. Since mineral resources are not renewable, the long-range supply problems can be solved through the development of better methods of locating new ore bodies, by improvements in the processing of lower grade deposits, and by searching out and learning how to utilize new materials. A t one time, the mining industry had to rely upon fortuitous outcroppings to locate mineral deposits. But, with the depletion of some of our resources, it has become necessary to reach below the earth’s surface. Although the actual prospecting for minerals is prim arily a task for private industry, the minerals investigations of the Department of the Interior have directly or indirectly resulted in the discovery of significant new deposits. The Yellow pine tungsten deposit in Idaho is a case in point. Another is the San Manuel copper find in Arizona, where the Department’s initiative in investigating a relatively un promising outcrop resulted in the discovery of one of the country’s largest copper deposits. The work of the Bureau of Mines in the beneficiation of ores has complemented the work of the mining industry in the processing of lower grade ores that could not be profitably mined before. Its work in cooperation with the industry to bring into production the lowgrade taconite iron deposits of Minnesota and Michigan is helping to offset the depletion of the high-grade iron ores of the Lake Superior district, and is contributing to the efficiency of blast furnaces by pro viding them with a high-grade feed. ECONOMIC GROWTH AND STABILITY 053 Another of the Department’s outstanding contributions to the strengthening and diversification of the minerals industry has been the development of new mineral products. Titanium, for example, which is light in weight yet strong and highly resistant to corrosion, has given impetus to technological developments where these charac teristics are necessary, as in aircraft-frame construction, marine equip ment, and jet engines. Another example is zirconium, which is con tributing to advances in the technology of atomic energy. The most serious problems confronting the mining industry are the steady decline in the known deposits of higher grade ores, the tendency toward higher costs of mining the low-grade ores, and the cost of searching for and mining deeply buried ore deposits. The Department of the Interior is helping to solve these problems by taking the lead in research for better techniques for finding ore and for the development of better mining methods. Through a program of direct financial, assistance to private industry, the Department also encourages exploration. Under the authority of the Defense Production Act, the Defense Minerals Exploration Administration within the Department of the Interior has since 1951 conducted a program to encourage exploration for strategic and critical materials. While the program has had special appeal for small operators who have been active in exploring for highly strategic minerals which do not occur in sufficiently large deposits to interest large companies, some of the outstanding dis coveries, such as the large zinc deposits in Tennessee, have been made by the large companies. R ecreation resources and com m ercial fisheries W ith rising incomes and more leisure time, the demand for recrea tion can be expected to grow in the years ahead. The Department of the Interior has important responsibilities for the development of outdoor recreation resources to meet these growing needs. Through the National P ark Service, the Department administers 29 national parks and other areas of scenic or historic importance. The Depart ment is also active in the development and conservation of fish and wildlife resources. The number of visits to the national parks is expected to rise from 55 million in 1956 to 80 million in 1966. To accommodate this rapidly growing number of visitors, the National Park Service initiated last year a $900 million, 10-year program of improvement and develop ment. This program, which is known as mission 66, provides for the construction of roads and trails, the expansion of water and sewage systems, and more visitors’ centers, museums, and administrative build ings. Private enterprise will undertake the expansion and improve ment of overnight accommodations, restaurants, shops, service centers, and the like. The task of providing adequate outdoor recreation facilities ex tends beyond the national-park system. Tens of millions of Ameri cans participate in the sports of hunting and fishing. The Depart ment of the Interior, through the United States Fish and Wildlife Service handles the Federal responsibilities for the conservation of fish and wildlife resources. The specific programs of the Service in clude the management of the migratory-bird resource, wildlife con trol, and work in the sports-fisheries field on Federal lands in coop97735— 57------ 43 654 ECONOMIC GROWTH AND STABILITY eration with the States. These programs, like those in lands and for ests, are mainly management and conservation programs. The basic problem concerning fish and wildlife resources is how to expand these resources in the face of a diminution in the amount of land and water available for habitat. P a rt of the solution lies in the multiple use of our land and water resources. The Department’s man agement program also includes the conservation of marshes and wet lands for migratory waterfowl, and land acquisition for wildlife refuges. In addition to its activities in sports fisheries and wildlife, the United States Fish and W ildlife Service also conducts an active pro gram for the conservation and development of our commercial fish eries. The program includes biological and technological research to improve productivity, the restoration of mature fisheries, the develop ment of latent fisheries, and the location of new ones. The Service also provides statistical and marketing services to private industry. N a t u r a l - R e s o t jr c e s E x p e n d it u r e s a n d E c o n o m ic S t a b il it y The relatively small magnitude and long-range character of Fed eral expenditures for natural resources development severely limit the usefulness of these expenditures as an instrument for promoting economic stability. Their principal economic consequences arise out of their effects on the maintenance and expansion of productive ca pacity rather than from their initial impact on demand. The effec tiveness of Federal fiscal policies for promoting economic stability depends prim arily on their ability to stimulate or curtail total de mand. Natural-resources expenditures are simply too small to have a significant effect on total demand, though they may have impor tant local effects. Moreover, their size and character are determined by their expected long-run impact on supply or productive capacity rather than by their short-run income-generating effects. These expenditures are long range, not only with respect to their principal economic effects, but also in terms of the time elapsing be tween the decision to spend and the actual expenditure. This is es pecially characteristic of expenditures on reclamation projects. The long expenditure period makes it difficult to accelerate or curtail these expenditures rapidly enough to counteract short-term fluctuations in the level of economic activity. While the effectiveness of natural-resources expenditures as an instrument of anticyclical policy is very limited, once the projects are completed these expenditures can make a significant contribution to the stability of particular regions, especially in the field of agricul ture. A depression in an agricultural area may be caused not only by a general decline in demand and prices, but also by a contraction of output resulting from natural disasters, such as drought and floods. By providing protection against such disasters, the construction of irrigation and storage dams reduces the vulnerability of certain ag ricultural regions to depressions wrought by Nature. Irrigation projects may also contribute to stability by providing the means for the diversification of crops. Irrigated land can be more readily adapted to new crops than dryland farming. An area which depends on a single crop is more vulnerable to sharp fluctua 655 ECONOMIC GROWTH AND STABILITY tions in demand and prices than one which can grow a variety of crops. Even during a period of general prosperity, a single-crop, dryland area may find itself in a depressed condition as a result of a sharp decline in the price of its crop. However, this is less likely to occur in an irrigated region which is capable of growing a variety of crops. S tandards for D e t e r m in in g S iz e and C haracter of P rogram The level of Federal expenditures on natural-resources develop ment, like all Federal expenditures, is dictated first of all by the size and composition of the national budget. The size of individual pro grams is determined by the estimated long-term needs for particular resources. Since Federal programs for resource development are designed to supplement and strengthen the efforts of State and local overnments and private enterprise, their size and character will also e influenced by the extent to which these efforts are expected to meet future needs. The level of certain programs, notably research in water, mineral, and fishery resources, is also influenced by the avail ability of technical and scientific personnel. In general, the resource-development programs of the Federal Gov ernments do not lend themselves to rigorous evaluation with respect to their economic efficiency because of the almost insuperable diffi culty of measuring the results of these programs. This is especially true of the research programs and other programs whose benefits can not be readily expressed in monetary terms. However, in the field of water-resources development, a serious ef fort is made to calculate the economic costs and benefits of specific projects. Under this procedure, costs and benefits are reduced to mon etary terms. The project is generally considered to be economically justified if total benefits are estimated to exceed total costs, and if the proposed project is the least costly of the alternative means for meet ing the particular needs. The complete analysis of the projects also includes consideration of benefits which cannot be expressed in mone tary terms. Costs can be measured with reasonable accuracy. Benefits are much more difficult to estimate even if the analysis is confined to primary benefits. F or one thing, these benefits occur in the future and their estimation involves a large element of uncertainty. And secondly, certain benefits such as recreation which does not have a market price are incapable of monetary measurement. The analysis therefore in volves a substantial element of judgment. However, despite the con ceptual and statistical limitations of benefit-cost analysis, it does rep resent one of the few serious attempts to evaluate the economic effi ciency of Federal expenditures. f C o n c l u s io n The resource programs of the Department of the Interior that con tribute most directly to economic growth are those which are oriented toward the expansion of the Nation’s resource base. These programs include reclamation which increases the amount of productive land, the supply of usable water for domestic and industrial purposes, and electric power generating capacity; and the development of the na 656 ECONOMIC GROWTH AND STABII/ITT tional-park system and fish and wildlife resources to accommodate greater demands on these outdoor recreation resources. Though their results are more difficult to identify than those of the above programs, the research and data collection activities in water, mineral, and fishery resources conducted by the Geological Survey, Bureau of Mines, and Fish and W ildlife Service, respectively, represent a vital part of the programs of the Department of the Interior for natural-resources development. In addition to the development programs, the Department of the Interior also conducts a number of programs which are aimed at the conservation of our resource base. As manager of the public lands, the Bureau of Land Management is concerned almost exclu sively with this type of program. Indeed, conservation is an integral part of virtually all Federal programs in the field of natural resources. Since this statement deals mainly with programs that contribute to economic growth, conservation has not been emphasized. B ut we should not overlook the simple axiom that in order to achieve maxi mum growth, we must not allow our resources to be wasted.
@FedFRASER