While the rest of the country still has reasonable hope that an economic recovery is possible and laid-off workers will again have jobs, no similar optimism is found here. Too much of the economy has been tied to the fortunes of the timber and wood-product industries. For many workers, those fortunes are poor and getting poorer.

The housing slump was one part of the decline. But even if housing unslumps, the economic base of commercial forestry has been irreversibly shifting to the South.

Trees are faster-growing in southern woodlands, because sun and water are more abundant. Labor is cheaper, unions weaker. More of the land is privately owned, which removes timbering regulations that prevail in federal forests. Corporate taxes are low.

The South is the timber industry's Promised Land. The Conservation Foundation, citing an industry study, notes that nearly 70 percent of the "profitable opportunities nationwide for future timber management" are in the South.

In Depression-like Oregon, where mills and logging operations have been closing or curtailed at record rates, unmistakable evidence of social disintegration has been seen. The high unemployment has been linked by police and public-health officials with rising crime rates and increasing domestic violence. In one rural mill town in 1980, 470 workers lost their jobs in three layoffs. Each time, alcohol sales in the town rose by 20 percent. An official of the International Woodworkers union stated the obvious: "As unemployment rises, there is a corresponding increase in the need for social services, but the terrible irony is that, as community tax receipts shrink, many of these services are cut back."

What should be done?

A partial answer is found in some of the provisions of proposed timber-relief legislation. Sens. Mark Hatfield (R-Ore.) and James McClure (R-Idaho) are attempting to bring to a vote before adjournment a bill that would allow companies to terminate a portion of their timber contracts that were made at high prices before the recession. The prices that companies can get for the wood today are much lower than what they originally contracted to buy it for.

"In Oregon and Washington," according to Hatfield, "there is about 20 billion board feet of government timber under contract. As much as 75 percent of the volume under contract bid as of Jan. 1, 1982, cannot be economically harvested, resulting in a potential default situation of drastic proportions."

The knotty problem in this relief legislation is much like giving to charity: Will the money get to the people who need it the most? The small and medium-sized companies, including family-owned operations, have reasonable claims for federal help. They easily meet anyone's hardship tests. But the large and economically healthy companies don't. They can ride out the tough times.

Sen. Howard Metzenbaum (D-Ohio) wants to put a chain saw to the idea of federal largesse to the high-rollers. "The federal government should not allow these companies to totally escape the terms of the contracts they signed, at the expense of the taxpayers and the companies' competitors. Yet that is exactly what (Hatfield-McClure) does."

The legislation gets worse. Timber companies, under existing law, are allowed financial credit for building roads to get at the timber. For a road into a timber stand worth, say, $50,000, a credit up to $50,000 is given for the road costs. Under Hatfield-McClure, the credit could be fatter. A company could be reimbursed double, even triple, the value of the timber: $150,000 in road costs for $50,000 in wood. As Peter Kirby, an environmental lawyer for the Wilderness Society, testified before Congress, "The Treasury would, in effect, be paying timber companies to take federal timber for free."

McClure sides regularly with the large timber companies. The real need in Oregon and Washington is to have more work on reforestation and timber-stand improvement to better long-run productivity of the land, which, in turn, would benefit the nation. This bill is weak on those issues.

It's regrettable that Hatfield, a politician of conscience, has aligned himself with McClure to back legislation with so many flaws. Hatfield, of all people, ought to know how to get compassionate help to the citizens who truly need it, while telling the well-off companies to absorb their losses as part of the free-enterprise game.