Wednesday, December 09, 2009

More on Cobell

First of all, good for the Obama administration for conducting serious settlement talks and not stonewalling in the way the Clinton and Bush administrations did so relentlessly.

Second: the $3.4 billion headline figure for the settlement is misleading.

$1.4 billion will go to the plaintiffs. I think this is on the low end of conscionability: better than nothing, but nothing to be especially proud of on the government's part. I do think that the Clinton and Bush administrations bequeathed the Obama administration an exhausted plaintiff and plaintiff class, willing to settle for much less than they should have received.

$2 billion will go to a related cause: cleaning up the inalienable fractionated property holdings that plague Indian Country. Those fractionated interests contributed to the Individual Indian Monies accounts problem-- the accounting becomes more of an administrative nightmare with every generation. And buying up the fractionated interests will put some cash into the pockets of many of the people whose IIM accounts were mishandled. But it's not compensation or restitution; it doesn't make whole the past losses.

Third: that repurchase fund is nonetheless a very good thing, and may carry economic benefits for Indian Country far beyond its cost. The insane regime of property law imposed on Indian Country during allotment and its aftermath is extremely inefficient, and makes it very hard to put a lot of land to economically productive use. The costs of the status quo aren't just the administrative costs mentioned by the Times:

For example, one 40-acre parcel today has 439 owners, most of whom receive less than $1 a year in income from it, Mr. Haynes said. The parcel is valued at about $20,000, but it costs the government more than $40,000 a year to administer those trusts.

That system also results in astronomical transaction costs that interfere with anything that anyone might want to do with that land. It can't be developed beyond the resource-extraction that generates a couple of hundred dollars per year in revenue. It can't be built on without the consent of 400+ owners; can't be consolidated into large parcels that are more efficient for farming or ranching; can't be subdivided into smaller parcels that are more efficient for housing. (And, just to emphasize the point: the interests are inalienable. No one owner can buy out the other 438.) It's economically dead land, and the foregone development possibilities are huge.

There's no reason the repurchase of fractionated interests had to be tied to the Cobell settlement, and it shouldn't really count as part of the settlement. But it's well worth doing, and in the long term could pay significant dividends.

1 comment:

Russell Arben Fox said...

I was expecting/hoping to read some commentary from you on this, Jacob; thanks much for obliging.