What does homeland security spending buy

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Content: What Does Homeland Security Spending Buy? Veronique de Rugy American Enterprise Institute AEI WORKING PAPER #107, OCTOBER 29, 2004 UPDATED April 1, 2005 www.aei.org/workingpapers http://www.aei.org/publication21483/ #18213
Abstract International terrorism is probably the greatest security challenge America faces today. Policymakers have responded in two ways--going after terrorists abroad and improving security against terrorism at home by boosting homeland security funding. Regarding the latter, total spending directed to homeland security activities will be at least $50 billion for FY2006.Yet, the important question is whether America is getting the maximum level of benefit in exchange for this increase in spending. This paper performs a detailed review of homeland security's spending practices. First, it takes a look at the economics of homeland security spending and contrasts that with the politics of decision-making in this area. Second, it examines the state of homeland security spending. Finally, the paper analyzes how homeland security funds are being allocated and asks whether this is conducive to achieving improved security in the United States. This updated version also includes a review of federal spending to bolster port security. We conclude that a large portion of homeland security-spending decisions are made on a political basis rather than on a sound cost-benefit analysis, leading to the traditional public choice failures that plague government spending more generally. As a result, homeland security funding is likely to be misallocated, resulting in a less than optimal level of security in America.
I. Introduction International terrorism is probably the greatest security challenge America faces today. Policy makers have responded in two ways ­ going after terrorists abroad and improving security against terrorism at home by boosting homeland security funding. Regarding the latter, Congress and the administration moved swiftly to create a Department of Homeland Security and increased total funding for homeland security activities by 195 percent between FY2001 and FY2006.1 (All FY2005 and FY2006 figures in this paper are official estimates) Total spending directed to homeland security activities will be at least $49.9 billion for FY 2006, roughly $450 per American household.2 This increase in security spending is part of a significant boost in the overall size of government. Between FY2001 and FY2006, the administration expects total outlays to rise from $1,864 billion to $2,650 billion--a 42 percent increase.3 Clearly, no trade-offs are being made in the budget, as evidenced by non-defense spending increases of 39 percent during the same period that defense and homeland security spending have skyrocketed.4 On the issue of homeland security, the important question is whether America is getting the maximum level of benefit in exchange for this increase in spending. This paper performs a detailed review of homeland security's spending practice. First, it takes a look at the economics of homeland security spending and contrasts that with the politics of decision making in this area. Second, it examines the state of homeland security spending. Finally, the paper analyzes how homeland security funds are being allocated and asks whether this is conducive to achieving improved security in the United States. This paper will show that a substantial portion of new homeland security spending is being used for grants to state and local governments, many of which appear to be applied to questionable purchases. Second, the large increase in spending appears to have occurred without risk and cost benefit analysis, leading to a large amount of wasteful spending. For instance, a significant amount of spending is directed to addressing risks that are possibly obsolete, or fighting yesterday's battle, which is likely not the most efficient use of limited federal resources. To conclude, the absolute amount of money spent on homeland security is not necessarily the issue in this work, but the political process leading to the way the money is spent is. Homeland security is a legitimate function of the federal government, and it is hard to say a priori what the optimal level of spending should be. However, economics suggests that if homeland security spending decisions are made on a political basis rather than on a sound cost benefit analysis, it will lead to the traditional public choice failures that plague government spending more generally. As a result, homeland security funding is likely to be misallocated, resulting in a less than optimal level of security in America. II. The Economics of Homeland Security The terrorist attacks in 2001 stimulated a concerted effort to adopt security measures that would reduce the risks of similar events in the future. This was and is a logical response, as security, by definition, is about prevention of adverse consequences from the intentional actions of others. Economists think about security policies in terms of tradeoffs, formally comparing the costs and the benefits, both pecuniary and non pecuniary.5 1
We all make security tradeoffs. For example, when we lock the door to our house in the morning, we assess the small inconvenience of carrying a key in exchange for a modicum of security against a burglary. People make security decision trade-offs all the time, choosing more or less security as situations change. Optimal security decisions and policies require a good understanding of the risks and tradeoffs we face. The scale of terrorism risk might seem to be small relative to the attention they command. For instance, 3,029 people died in the U.S. from terrorist attacks in 2001. During that same year, 156,005 people died from lung cancer, and 44,091 from automobile accidents.6 While 3,000 deaths is clearly tragic, it is considerably smaller than other mortality risks, at least empirically. Of course, terrorists may hope that their future actions could significantly increase casualties, so the empirical probabilities may be a poor guide to the true risk. But what makes deaths resulting from terrorist attacks different from the deaths from either automobile accidents or cigarette smoking is that these risks contain a voluntary element. Consumers of these products get some benefit from them, which compensates for the associated risks. There is no voluntary market transaction involving terrorism and no form of compensatory benefit. This has important policy implications. Consider what the federal government spends per year to increase automobile safety--$38 million in FY2004--and compare it with the $50 billion spent government wide on homeland security.7 Terrorism is analogous to a flood that might occur, and government spending on terrorism is analogous to flood control. Even presuming that politicians have chosen the level of spending on Homeland Security desired by voters, it is natural to ask whether that level is optimal. It is difficult both for scientists and for citizens to assess risks of events with low probability ­ such as acts of terrorism.8 Through evolution and learning, people learn to handle many of the common risks they face in life. But Americans ­ fortunately ­ do not have extensive experience with terrorism. Even sophisticated assessors of risk--such as insurance companies--have a difficult time, though they do learn from experiences of other low probability risk events such as major natural disasters.9 The economics literature suggests that the media coverage of terrorism risks and the accompanying losses may create circumstances wherein people are likely to severely overestimate risks.10 Viscusi et al (2003) show that the occurrence of such an event creates much uncertainty. More importantly it brings the realization that the future may contain many other severely adverse events than are currently unanticipated.11 This uncertainty is what could greatly magnify the terrorist threat, far beyond the actual damage that any single terrorist strike has historically caused. According to Trajtenberg (2003), it is precisely because of the uncertainty that accompanies the terrorist threat, and the associated costs (e.g. the provision of security at a myriad potential targets, reduced investments because of generalized uncertainty, disruption of travel, tourism, and perhaps also trade), that few terrorists, armed with relatively primitive means, can effectively threaten even a powerful nation. 12 Thus, while the risks are difficult to quantify, there is reason to suspect that individuals may irrationally ratchet up their assessments of terrorist risk, and hence, may ratchet up their demand for homeland security spending. This may induce Congress to invest in projects that would not pass a cost benefit test. Whether that occurs or not is an empirical question. What to invest in? While terrorism is only recently the dominant security issue in the U.S., economists have long studied the optimal provision of security more generally. In Gary Becker's seminal paper on 2
the economics of crime, he uses the tools of economics to think about the incentives of criminals and how to influence their behavior.13 He explains that we can decrease unwanted behaviors by increasing their expected costs or decreasing their expected benefits. This approach applies to terrorism as well. The primary method of discouraging terrorists is to make it more difficult to attack our assets. In effect, this reduces the "benefit" of a terrorist attack--since there presumably will be less damage--and forces terrorists to incur higher "cost" as they seek alternate targets. We install Jersey barriers to keep trucks away from important buildings, screen airline passengers, and employ internet firewalls. But it is important to make sure that the resources used to fight terrorism are being used effectively. This is not always the case. If a certain strategy reduces the threat of terrorism but has very high costs, it may not be the best use of resources if there is another approach that generates similar benefits but has lower costs to society. For traditional criminals, potential incarceration is an important "cost" consideration and an efficient tool in deterring crime. And it is an effective use of resources since imposing stiff jail sentences is cheaper than guarding every house. Unfortunately, this approach is generally not effective against terrorists because they tend to be ideological extremists who give little weight to the personal costs of their actions. Suicide bombers, for example, will not be deterred by jail time. The most serious implication is that the possibility of deterrence is greatly reduced.14 Second, we can combat terrorism by decreasing the expected benefits to terrorists, either by increasing the probability of thwarting an attack or by decreasing the damage from a nonthwarted attack. To thwart attacks, we spend money on the CIA, FBI, and law enforcement to try to detect terrorist plots in advance. To decrease the damage from attack, we spend money on first responders, build fewer skyscrapers, and buy gas masks. One important implication of Becker (1968) is that there are tradeoffs between thwarting attacks and decreasing their damage: the more effective we are at thwarting attacks, the less we presumably should spend on decreasing their damage, and vice versa. Taking the analysis a step further, the most efficient options to combat terrorism tend to be efforts to detect terrorists themselves or to respond effectively to minimize the damage after an attack has occurred. Spending to defend particular targets is generally less efficient. Both results stem from the fact that there are an almost unlimited number of targets, and the terrorist gets to choose where to attack. For example, suppose there are 100 potential targets, that we could perfectly defend for $20,000 a piece, that the damage from un-defended attack would be $500,000, and that we could mitigate one-tenth the damage from attack by spending $50,000 on first responders. If we knew where the terrorists would attack, we could spend $20,000 to save $500,000, which would be a prudent investment. But if don't know the target, we would have to spend $2,000,000 to defend all 100 targets, which outweighs the $500,000 in damage. On the other hand, even if we did not know the target, we could spend $50,000 on first responders to reduce the damage by $250,000, which is an efficient tradeoff. Of course, if we could track down terrorists in advance successfully, that would to prevent attacks on all possible targets, that approach would have similar efficiency properties as spending on first responders. In fact, it is possible that spending more money on intelligence and investigation might be far more cost effective than spending a little on every possible target or even waiting to be attacked and then cleaning up efficiently. This raises again the notion of tradeoffs. Since the number of possible attacks is effectively unlimited and the resources we can devote to the fight against terror are limited, it 3
means that spending should not occur without a careful cost-benefit analysis. It is perfectly reasonable to decide not to implement an antiterrorism measure, not because it has no benefit, but because the tradeoffs are too high. For instance, locking up every Arab-looking person would reduce the potential for terrorism perpetrated by Islamic fundamentalists, but no reasonable person would suggest this approach because the costs (both pecuniary and moral) are too high. In the US, there are laws that prohibit police from profiling by characteristics like race, because we believe that such measures are unacceptable, but not because we believe them to be ineffective. In the same way, some antiterrorist countermeasures might yield very high returns and reduce exposure to attacks tremendously, but the costs of implementing them are extremely high. If we install Jersey barriers around all major buildings and critical assets in the country, our exposure to attacks will be substantially lower, but the costs involved would be astronomically high.
Table 1. Cost Effectiveness of Selected Antiterrorism Expenditures
Wasteful Outlays
Major Sacrifices
High
Cost Screen Every airline
Cost to
passenger
Prevent
Terrorist
Simple Steps
Attack
Low Cost
Store fewer chemicals at watertreatment plants
Surround all critical infrastructure with concrete Jersey barriers Efficient Outlays Place barricades on airplane cockpit doors
Low Benefit
High Benefit
Benefit From Reduced Exposure to Attack
Efficient expenditures concentrate limited resources on the most cost-effective expenditure rather than simply on the effective ones. For example, a cost effective security measure is to let pilot carry guns. Lott (2004) notes that "Terrorists can only enter the cockpit through one narrow entrance, and armed pilots have some time to prepare themselves as hijackers penetrate the strengthened cockpit doors."15 He adds that "the boredom and high attrition rates afflicting air marshals (who fly back and forth on long flight waiting for something to happen) does not apply to pilots." And no extra pay is needed since pilots are volunteering to take time off and travel to the training at their own expense. In addition, 70 percent of the pilots at major American airlines have military backgrounds.16 It reduces the cost of training them and increases the effectiveness of this simple measure. Besides, the fears of bullets damaging planes are greatly exaggerated. Lott (2004) reports that "As Ron Hinderberger, director of aviation safety at boeing testified before Congress: Commercial airplanes structure is designed with sufficient strength, redundancy, and damage tolerance that a single or even multiple handgun holes would not result in loss of an aircraft.""17 Also, attacks of the style of 9/11 could be prevented with simple cockpit barricades, which the airline industry has now installed at relatively low costs.18 According to the Federal Aviation Administration (FAA), the purchase and installation cost of an enhanced cockpit door is estimated at between $30,000 and $50,000. The total cost to airlines is estimated between $300 4
million and $500 million over a 10-year period, including increased fuel consumption costs resulting from heavier doors.19 Congress originally appropriated $100 million to the FAA to distribute to U.S. airlines for aircraft security enhancements, $97 million of which were given to the airlines to help defray the costs of cockpit doors (approximately $13,000 per door). It means that the total government cost was estimated between $92.3 million and $120.7 million over a 10-year period.20 In contrast, the burgeoning U.S. system for screening every bag of every airline passenger has already cost taxpayers $10 billion in the last three years and will cost an addition $4.7 billion in FY2006.21 This system does little to prevent 9/11-style hijacking, which is the largest empirical airline-related risk.22 Furthermore, this checked-bag screening does not necessarily reduce the probability of the destruction of airplanes, since neither carry-on bags nor airfreight are systematically checked for explosives, and terrorists have revealed a propensity to engage in suicidal behavior. Whether this $10 billion is an efficient allocation of resources depends on whether alternative less costly measures have been crowded out by this spending. Last but not least, it is worth noting that federal expenditures are not the only costs associated with homeland security. First, even though successful terrorist attacks can impose significant economic costs, defense and homeland security spending displaces resources from the private sector toward the production of security measures that, while necessary, are not terribly productive in terms of economic growth.23 The Joint Economic Committee (JEC) for instance observe that "increased spending on security will likely be associated with lower economic growth since more capital and labor are diverted toward security production and away from the production of final demand."24 In other words, because security always involves a tradeoff, more security spending does not always mean more security and more security does not always make us better off. Given these factors, then, how can an outside observer evaluate whether spending is excessive and poorly focused? Clearly, two logical possibilities exist. First, one could examine spending that occurs and evaluate whether significant waste exists. Second, one could identify possible additional programs that could accomplish heightened security in a more cost effective manner. For the most part, this study will focus on the former approach, but the latter is an important topic for future research. Who should pay for Homeland Security? Before turning to an evaluation of existing programs, one should also evaluate the economic reasoning behind federal provision of homeland security. National defense is often cited as the archetypal public good, i.e., one person's consumption of the good does not prevent another person from consuming the same good.25 Another characteristic of public goods is that they are non-excludable, i.e., it is hard or impossible to prevent anybody that desires from getting access to and enjoying the public good once it is produced. Private goods have opposite characteristics: they are rival and excludable. Economic theory suggests that it is efficient to have governments provide public goods, but to resort to private markets for the provision of non-public goods, e.g., governments should provide national defense, but markets should produce washing machines. Indeed, national defense is the strongest justification for government, since as Trajtenberg (2003) notes, markets might fail to provide it, whereas other traditional public goods, such as "maintaining law and order," can theoretically be provided by private markets in a decentralized fashion.26 5
As already mentioned, a key feature of terrorism is that the threat is generalized (it can happen anywhere, at any time) and yet any particular attack is "local." By implication, homeland security is a mix of public and private goods. Accordingly, governments should provide some types of homeland security, while other types are best left to private markets. For example, governments should invest in intelligence gathering to track down terrorists, since this is a public good that benefits all citizens. But the protection of private property, such as personal residences, should be left to individuals because it is not a public good.27 A similar logic applies to which aspects of homeland security are public goods at the national versus state level. (See Table 2.) Espionage, intelligence, and immigration control benefit all the states, so the federal government should make these investments. But the benefits of protection of public infrastructure like bridges and water treatment plants are enjoyed by the residents of a particular state, rather than many states, so these investments should be made at the state level. This is not to say that the entire economy might not suffer were a specific bridge to be destroyed, but rather, that the principle economic impact of such an unfortunate event would be felt locally.28
Table 2: Who should be responsible for Homeland Security?
Federal Government
State and Local Government
Private Sector
Espionage Intelligence Immigration Electric grid
Protection of Infrastructure such as: Bridges, Water reservoirs, and Ports First Responders
Protections of Infrastructures such as: Privately owned infrastructures, Stadiums, Skyscrapers and individual houses
A Public Choice Approach to Homeland Security Spending Public choice theory also can be applied to homeland security spending. Many decisions on homeland security come through the political process. According to public choice economics, each participant has an incentive to maximize the political benefits of any particular action. This means that decisions are not always based on an assessment of the common good. Schneier (2003) asks an interesting question to illustrate that point.29 Imagine that after September 11th, all the players involved in airline security were in a room trying to figure out what to do. Some members of the public are scared to fly, others aren't. The airlines are desperate to get more people flying but are wary of security systems that are expensive. They are also worried that increased security might impose great organizational costs on them. The elected officials in the room are concerned about reelection and are concerned that they might be blamed for the attacks. And they need to be seen by voters as doing something to improve security. The FAA is left torn between its friends in the airline industry and its other friends in government. Because everyone in this example is hypothetically looking at the security problem from his own perspective, no one is really trying to figure out what the right security tradeoffs are. As a consequence, the airline industry is happy to let the government take over the job of airport screening because it won't cost them as much and it won't be their fault if there is another attack in the future. The politicians want to be perceived as actively addressing the concerns of the voters. The FAA enjoys its increased powers in a context that pleases the government and the
6
airlines, and the public likes the feeling that something is being done. Yet it does not mean that the measures adopted will end up increasing security. Public Choice theory underlines the different incentives and processes that operate when goods are sought through political means rather than through economic means.30 For instance, if you have to use your own money to buy the lock on the door to protect your house, you will make sure that the increased security from the lock is worth the price of the lock. In the words of Buchanan (1969), an individual spending his own money makes sure that anticipated benefits exceed the costs. 31 In the political process though, the people buying the lock are rarely the ones paying for the lock. As such, they have less reason to balance costs and benefits. The political appropriation and distribution of goods concentrates its benefits and disperses its costs. Many people can be taxed at a low rate so a small number of people can be given large sums. Special interests groups have an incentive to lobby the government to see that wealth is transferred to them. The term economists use to describe such lobbying is "rentseeking."32 These pressure groups have a clear advantage in a political process where politicians are frequently accused of hearing nothing from the many and a lot from the few.33 But policymakers represent an interest group too. In seeking reelection, they have an incentive to please those who might have money or votes to contribute to them. For instance, being elected by state voters rather than federal ones, a Congressman has an incentive to try to bring back to his state as much federal money as possible rather than to fight to cut down federal spending.34 A good example of this phenomenon is the increasing number of low priority and wasteful spending items-- also called pork barrel spending--introduced by Congress at the last moment into federal spending bills and directed at a specific state locality or at a specific facility. In the same way, politicians are likely to favor and transfer wealth to targeted industries--like the farm or the automobile industry. 35 Thus, constituencies and interest groups are created for each particular political benefit program, and it may become, if this theory is correct, nearly impossible to develop policy initiatives without their input. This of course has major implications for the way politicians will make decisions about homeland security spending. First, because policymakers who are ultimately making homeland security decisions are often not the ones making the tradeoffs, it is possible that they will throw money at the problem rather than finding the most cost-effective antiterrorist measure to adopt. Also, lawmakers are likely to use homeland security funds to achieve non-homeland security agendas through the use of pork barrel spending and corporate welfare. Finally, "homeland security" pressure groups--e.g. first responders, state officials and/or specific industries like the airline industry--may have an incentive to lobby lawmakers to try to grab a bigger share of the funding allocated to homeland security programs and /or to transfer their responsibilities to the federal government. In a recent paper, Besley et al. (1999) look at the tradeoffs between centralized and decentralized provision of local public and private goods.36 They emphasize the importance of the politics of decision making for the move toward more centralization of local responsibilities and the inefficient allocation of resources resulting from this process.37 Federalization of airline screeners and the trend toward the federalization of law enforcement and first responder programs are recent examples that may be consistent with this evidence. 7
III. The State of Homeland Security Spending According to the Congressional Budget Office, "tracking and analyzing [homeland security] spending has proven to be difficult." The funding is split into 200 different appropriation accounts within the federal budget and involves many different functional areas of government. Furthermore, most of the funding resides within accounts that primarily finance activities not directed at homeland security. Congress and the administration also created a new Department of Homeland Security (DHS) to consolidate in one agency activities that had previously been spread throughout the federal government. Many--including at first President Bush--opposed the idea that creating additional layers of bureaucracy would make America more secure. In spite of this early opposition, recently appointed DHS Secretary Michael Chertoff today oversees nearly 190,000 employees and, excluding funding for Project Bioshield, the President requested that DHS receives roughly $41 billion for FY2006.38 Last year, including funding for Project Bioshield, mandatory spending and fee-funded programs, DHS received a total of $40.7 billion for FY2005 through the Homeland Security Appropriation Act of 2005 which President Bush signed into law.39 This is $896 million more than the president had requested in its February budget.40 Despite the creation of the DHS, homeland security spending continues to be an elusive figure to quantify because a large portion of homeland security spending takes place outside of the Department of Homeland Security. In addition, its name notwithstanding, the Department of Homeland Security's activities are not strictly directed to the protection of the homeland. Figure 1 illustrates that point. In February, President Bush proposed the FY2006 budget for the Department of Homeland Security to be roughly $41 billion (this amount does not include the 2005 Iraq supplemental).41 Only $27 billion of DHS's budget is directed toward activities that meet the executive branch's definition of Homeland security.42 The remaining $14 billion-- 8
a significant portion of DHS's budget--finances non-homeland security activities like the Coast Guard's role in maritime rescue and FEMA's Emergency Food and Shelter Program. Figure 1 also shows that the President's proposed budget authority for homeland security activities government- wide represents about $50 billion for FY2006.43 It means that $23 billion out of $50 billion is spent and labeled homeland security spending outside of DHS. Figure 2. Homeland Security Spending: Outside vs. Inside of DHS
Billion of Dollars
23 21 19
22
25
27
FY2004
FY2005
FY2006
HS Spending inside of DHS HS spending outside of DHS
Source: Budget of the United States, FY2006 Table S-5. Note: excludes $107 M in supplemental in 2004 and $16M in 2005 for Project BioShield
Figure 2 shows that during the last three years, a large amount of homeland security spending has taken place outside of the Department of Homeland Security. This is explained by the way legislators decided which programs should or not be transferred to the newly created DHS. It appears that the only real question asked then was "in" or "out." As it happened, large homeland security items were left out of DHS, while some small items not related to homeland security were incorporated into DHS, perhaps because this made the programs less likely targets for future cuts. Table 3 shows which agencies and departments are supposedly performing homeland security activities outside of the Department of Homeland Security. It also shows how much money the President requested for each agency and department for homeland security activities in FY2006. Of those, four agencies--the Department of Defense (DOD), Health and Human Services (HHS), Justice (DOJ), and Energy (DOE)--account for approximately 82 percent of total government-wide homeland security funding outside of DHS. Not surprisingly, a large portion of the homeland security money will be spent by the Department of Defense--$9.5 billion in FY2005--and by the Department of Justice--$3.1 billion.44
9
Table 3. Homeland Security Funding By Department and Agency (Budget Authority in Millions of Dollars)
Departments
FY2006
Department's Share of Total HS funding outside of DHS
Agriculture
704
Commerce
183
Defense-Military
9513
Energy
1666
HHS
4407
Interior
57
Justice
3104
State
938
Treasury
111
Transportation
192
Veterans Affairs
299
Corps of Engineers
72
EPA
184
General Security Administration
80
NASA
205
NSF
344
Smithsonian Institution
87
Social Security Administration
178
Other Agencies
288
Total HS Funding outside of DHS
22612
Source: Budget of The United States, FY2006, Table S-5.
Note 1: FY2006 are estimates
3.1% 0.8% 42.1% 7.4% 19.5% 0.3% 13.7% 4.1% 0.5% 0.8% 1.3% 0.3% 0.8% 0.4% 0.9% 1.5% 0.38% 0.79% 1.3% 100%
Other funding decisions are more curious. The Environmental Protection Agency (EPA), for example, receives significant funding. The funding supports programs to develop technology to "help decision-makers prepare for, detect, contain, and decontaminate chemical and biological attacks directed against buildings and water treatment systems."45 NASA also receives funding. The NASA funding supports the development of microscopic sensors for the detection of biological, chemical, and nuclear weapons and the monitoring the nation's air and water resources.46 Veteran Affairs, which has the primary mission of caring for veterans, receives homeland security spending "to ensure that our facilities are sufficiently hardened to protect our own staff and patients and ability to serve veterans."47 The U.S. Department of Agriculture (USDA) receives funding "to focus upon three key areas: agricultural production and the food supply, USDA facilities, and USDA staff."48 The Department of Commerce (DOC) also receives funding to develop a formal working relationship with the DHS Science and Technology Directorate and the DOC Technology Administration's National Institute of Standards and Technology (NIST). NIST research includes programs for the detection of chemical, biological and other explosive threats.49 And the Smithsonian
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Institution uses the allocated homeland security funds for general security around their museums and for labor costs for the museum system's guard force.50 Why all these agencies with new homeland security accounts are getting homeland security funds is not a trivial question since many of these agencies have suffered from documented mismanagement.51 Official reports about various shuttle disasters and the General Accounting Office (GAO) have repeatedly declared NASA mismanaged.52 Reports also show that in the last 20 years the Department of Energy has consistently terminated projects prior to completion, causing billions of dollars of losses, while most of its other projects were either over budget or behind schedule.53 The Army Corps of Engineers, which now receives homeland security funds as well, has been found to falsify data to justify large construction projects.54 And the agency is frequently criticized for wasting billions on environmentally damaging projects in the districts of important Members of Congress.55 The GAO reported that the Pentagon's financial management problems are "pervasive, complex, long-standing, and deeply rooted in virtually all business operations throughout the department."56 And in January, a new GAO report concluded that DOD is one of the most prone to waste, fraud and abuse raising serious concerns about the effectiveness of many of its programs. Finally, DOC is found to need improvement in its financial management and control over its internal weakness while USDA is often declared to "lack financial accountability over billions of dollars of assets."57 One might think that the creation of the DHS would have allowed the government to move spending away from agencies with troubling track records. With so much funding spent on homeland security outside of DHS, the promise that the creation of DHS would result in an entity with sole responsibility for the government's efforts against terrorism is called into question. Moreover, with the money split between so many departments and programs, the ability of DHS or Congress to conduct effective oversight decreases. The new department has authority over the parts of agencies subsumed under it but not over the many more that remain outside of its control. Congress's failure to consolidate oversight of the Department of Homeland Security is possibly the single greatest obstacle to creating an efficient and effective Department. Even after consolidation of over two dozen agencies, committee chairs have been unwilling to relinquish much of their jurisdiction over the 22 agencies and activities transferred to DHS and so have blocked reform. This is also extremely time consuming. Last year alone, the leaders of DHS had to appear before 88 committees and subcommittees of Congress.58 The good new is that the temporary House Select Committee on Homeland Security, created in February 2003, and co-chaired by Congressmen Chris Cox (R-CA) and Jim Turner (D-TX), was made permanent earlier this year. This will broaden DHS's oversight. More importantly, the Committee will have a large responsibility for the DHS authorization bill. Finally, the political effect of the words "homeland security" increases the necessity of effective oversight. Agencies, including DHS, are often aggressive advocates of the expansion of their own budgets and protect vigorously their own statutory mandates. With so much of the spending already diffused, the current structure invites future disputes. Conversely, because so much money unrelated to homeland security activities is spent inside DHS, the risk of funding increasing for these activities under the assumption that it serves some homeland security purpose may also be high. Last Christmas, for instance the DHS handed out about $153 million for programs offering food and shelter for the poor to be spent thorough 2004. This is a significant increase from this program's previous year budget.59 And in September the Senate 11
Billions of Dollars
attached $2.9 billion in disaster aid for farm states plagued by droughts, floods and freezes in the past year to the FY2005 Homeland Security bill. Also, former homeland Security Secretary Tom Ridge campaigned aggressively about the idea that hurricane disaster relief and others are a legitimate part of homeland security since the Federal Emergency Management Agency (FEMA) can respond to a wider variety of emergencies than just terrorism relief. This is likely the first step toward the slippery slope of the increased involvement of the Department of Homeland Security in non-homeland security activities. Programs that Congress might not approve if they were outside of DHS may likely sail through because of their DHS affiliation. Indeed, a significant volume of legislation since 9/11 has been rushed through in a tone of urgency with reference to the tragedy and its relationship to homeland security, with the $190 billion farm bill serving as a recent example IV. The Rapid Growth in Homeland Security Spending Figure 3. Trend in Homeland Security Spending between FY 1995 and 2005 60 50 40 30 20 10 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Sources: Budget of the United States, Fiscal Year 2006, Table S-5 and Office of Management and Budget, "Securing the homeland, Strengthening the Nation." Note: Levels for FY 1995 through 1997 are estimated, as OMB did not collect data on these activities prior to FY 1998 Funding for homeland security activities has risen substantially since 2001. Figure 3 shows the government-wide trend in homeland security spending since FY1995. Levels for FY 1995 through 1997 are estimated, as OMB did not collect data on these activities prior to 12
Billion of Dollars
FY1998.60 Not surprisingly, the estimate shows that homeland security spending was relatively small prior to 2001 and increased drastically between FY2001 and FY2006, from $16.9 billion to at least $49.9 billion--a 195 percent increase over that period. Nor has the growth slowed in recent years. The figures show a $6.1 billion (22.5 percent) increase since FY2004. Also since FY2001, Congress and the President increased nondefense discretionary appropriations for homeland security from $10 billion in 2001 to the president's request of $32 billion for FY2006--a 220 percent increase.61 The largest part of this increase comes from an increase in the total Department of Homeland Security's budget, which grew from $31.2 billion in FY2003 to a requested $41 billion in FY2006 (this figure does not include the most recent Iraq supplemental bill). This represents a 31.4 percent increase since the department was created in November 2002 and a 7 percent increase since FY2005.62 Figure 4 shows the increase in homeland security activity spending in the Department of Homeland Security. Figure 4. Evolution of Homeland Security Activity Spending Within DHS Since FY2001 30 25 20 15 10 5 0 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 Source: Budget of the United States, FY2006, Table S-5. The Department of Homeland Security was established in 2003 so the figures for 2001 and 2002 represent the spending of the agencies that eventually composed the new department. These agencies that are now part of DHS include the Coast Guard, the Federal Emergency Management Agency (FEMA), the Secret Service, the Transportation Security Administration, and offices that were formerly part of the Immigration and Naturalization Service (INS) and the Customs Service. The portion of the DHS budget devoted to homeland security has increased from an estimated $10.7 billion in FY2001 to a proposed $27.3 billion in FY2006.63 13
V. Risk And Cost Benefit Analysis in Homeland Security Spending
V. A. First responder Grants:
Are homeland security funds within DHS well spent? How much security does $27 billion buy? On this score, information gleaned from the budget documents range from mixed to vague. A review of homeland security spending by DHS raises considerable doubt. The September 11th attacks revealed some gaps in the ability of local officials to respond to terrorist attacks on major urban cities. In response, Congress moved swiftly to appropriate homeland security funds to state and local governments. Total federal homeland security spending to state and local governments increased from $2.7 billion in FY2001 to $8 billion in FY2006 (a 1962 percent increase).64 A significant portion of that effort was directed to "first responder" programs ­ essentially federal funds for state and local police and fire departments. Homeland Security funding to state and local governments for first responder programs increased from $616 million in FY2001 to $3.36 billion in FY2006 (a 500 percent increase).65 But the biggest share of this first responder program explosion took place in the form of grants to lower level governments. Figure 5 shows the increase in terrorism preparedness grant programs to the states for first responders. Between FY2001 and FY2006, the money appropriated for these grants increased by roughly 1800 percent from $135 million to $2.6 billion.
Figure 5. DHS Grants to States to Enhance the Ability of First Responders
Million of Dollars
3000 2500 2000 1500 1000 500 0
2001
2002
2003
2004
2005
2006
Source: House Select Committee On Homeland Security, "An Analysis of First Responder Grant Funding," p. 25 and Budget of the United States, FY2006, Appendix, p. 479
This first responder grant money--which is channeled through the Department of Homeland Security--is intended to help so-called first responders to buy chemical and radiological detectors, improve their emergency communication systems, expand training and take a series of other steps to help deter and respond to terrorist attacks. While the quantity of funds is significant, the funds are not being allocated according to a plan that was devised by security experts. According to a report released in April 2004 by Chairman of the House Select Committee on Homeland Security Chris Cox (R-Calif) "An Analysis of First Responder Grant Funding," the formula that drives the process is mainly to blame for that evolution.66 In keeping with the way Washington spreads federal taxpayer's money to the states--whether for highways, education or emergency preparedness--DHS 14
follows in part a formula set by Congress that provides every state with a guaranteed minimum amount of state grants regardless of risk or need. Specifically, the formula written into law by Congress into the Patriot Act after September 11th guaranteed each state 0.75% of the total amount appropriated to DHS for state terrorism preparedness grants, with smaller shares going to territories like Puerto Rico. It amounts to 40 percent of the total pot of money being divided up equally among the states, regardless of size, risk, or need. Prior to September 11th, total funding covered by the formula--i.e the State Homeland Security Grant Programs (SHSGP), which is the sum of a series of separate grants, plus Critical Infrastructure Protection Grants--amounted to $97 million.67 It means that in 2001 the guaranteed minimum each state would receive was less than $1 million. However, due to the 20fold increase in this program between FY2001 and FY2003 from $97 million to $2,066 million the minimum guaranteed amount each state was receiving went from $1 million to $15.5 million regardless of risk or need.68 In FY2004, this minimum guaranteed sum was roughly $13 million In FY2005, the amount allocated decreased along with the minimum guaranteed (see Figure 6). Figure 6. Trend in Minimum Guaranteed to States by DHS
Million of Dollars
15 13 8
2 1
2001
2002
2003
2004
2005
Source: Author's calculation based on Office of Domestic Preparedness, "State Homeland Security Grant Program"
After this 40 percent of SHSGP is allocated to states, the 60 percent left over is apportioned among states based on population, not risk. For the smallest states, this formula means an additional $2 million on top of the guaranteed minimum. In FY2004, the two combined allocation formulas resulted in Wyoming, the least populous state, receiving $17.5 million and California, the most populous state, receiving $164 million regardless of risk or need.69 And according to the same calculation, in FY2004 Wyoming is guaranteed to receive a minimum of $15 million and California, the most populated state, at least $133 million. The underlying theory behind this all-state-minimum formula is that terrorists could strike anywhere and that heads of homeland security agencies in rural and small states throughout the country have now become convinced that their turf is just as threatened as Washington, New York or Chicago. The journalist Amanda Ripley adds in the New York Times Magazine "when asked about relative risks, these officials talk about relative worth and the right
15
of their citizens to get the same kind of protection that they are afforded in other places in the country."70 The theory that money should be spent smoothly across states has not been supported by reasoned analysis during the public policy debate. And experts in the field have reached different conclusions. The Insurance Services Office (ISO)--a private company--serves the insurance industry by maintaining data on risks of all kinds and helping insurance companies underwrite policies at prices commensurate with those risks. In 2003 ISO did a research project to set objective prices for terrorism insurance. They surveyed five former FBI, CIA and Pentagon intelligence experts and applied their opinions to a database of 300,000 potential targets. They then used this information to set baseline rates for terrorism insurance. Their conclusion is the following: The highest risk cities in the U.S. are New York, Washington, DC, Chicago, San Francisco and those at high risk of attack are Los Angeles, Philadelphia, Houston, Seattle and Boston.71 Many other glitches in the homeland security grant distribution are the result of those two government formulas. For instance, among the top 10 states and districts receiving grants only the District of Columbia also appeared on a list of the top 10 most at risk places.72 Currently, states in rural, less populated areas, or populated areas ­ but less likely to be targeted by terrorist acts ­ often receive a disproportionate amount of grant money. Table 4 shows how much in dollars per capita each state received from State Homeland Security Grants Programs for FY2004. New York State received 4.68 percent of general grant money while its population accounts for 6.55 percent of the nation's population. California received 7.95 percent of general grant money while its population accounts for 12 percent of the nation's population. And Wyoming, which has a population that accounts for 0.17 percent of the nation's population, receives 0.85 percent of all the grant monies. This translates to$5.41 per capita in New York State, $4.97 per capita in California and $37.74 per capita in Wyoming. And spending on U.S. territories is equally variable. In FY2004, the US Virgin Islands received $104.35 per capita, Guam $90.36, and Northern Mariana Islands $54. One should not conclude that more money should be handed to states with a lower dollar grant per capita or with a large population like California or that money should be taken away from small states with high dollar per capita. Cox (2004) points out "It is not the case that American Samoa should receive proportionately less or should, in the nature of things, receive more or less than anywhere else, except in my view, if security needs require it."73 In other words, grant money should only be distributed based on an evaluation of risk and security need and nothing else. The political formulas used now to allocate the money disconnect the funding from the risk of being attacked. The same lack of assessment of risk and need exists in the way states allocate or pass through the funding from DHS to their localities (they are obligated to pass through 80 percent of the money received).74 For instance, Carafano (2004) reports "California distributes its federal grants in base-amounts of $5,000 to each county, an amount so small and arbitrary it seems that it is difficult to imagine how it could be used productively."75 16
Table 4. Dollars Per Capita Received by States From Homeland Security First Responder Grant Programs
for FY2004
State
Grant Dollars per Capita
State
Grant Dollars per Capita
Virgin Islands
104.35
Oregon
9.18
Guam
90.36
Puerto Rico
8.82
Northern Marina Islands
54.00
Kentucky
8.57
Wyoming
37.74
South Carolina
8.52
American Samoa
37.54
Alabama
8.24
District of Columbia
34.16
Louisiana
8.24
Vermont
31.43
Colorado
8.17
North Dakota
30.82
Minnesota
7.81
Alaska
30.18
Wisconsin
7.57
South Dakota
26.32
Maryland
7.53
Delaware
24.86
Missouri
7.45
Montana
22.66
Arizona
7.43
Rhode Island
20.00
Tennessee
7.37
Hawaii
17.75
Washington
7.22
New Hampshire
17.44
Indiana
7.21
Maine
17.26
Massachusetts
7.14
Idaho
16.65
Virginia
6.75
Nebraska
14.10
North Carolina
6.49
West Virginia
13.73
New Jersey
6.45
New Mexico
13.39
Georgia
6.40
Nevada
11.84
Michigan
6.19
Utah
11.56
Ohio
6.00
Kansas
10.65
Pennsylvania
5.89
Arkansas
10.63
Illinois
5.85
Mississippi
10.32
Florida
5.45
Iowa
10.20
New York
5.41
Connecticut
9.30
Texas
5.24
Oklahoma
9.27
California
4.97
Source: Author's calculation based on Office of Domestic Preparedness, "Fiscal Year 2004 Homeland
Security Grant Program" and US Census Bureau, "Annual Population Estimates 2000-2003."
Finally, almost three years after the State Homeland Security Grant Program was launched, first responders across the Nation have not received the vast majority of the $6.3 billion that congress and the Administration have allocated in terrorism preparedness grants since September 11 (FY2002 to FY2004).76 In fact $5.2 billion in the Department of Homeland Security grant money remains in the administration pipeline, waiting to be used. And soon the money allocated for FY2005 and requested by the President FY2006 will be added to the funding pipeline (another $5.2 billion). V. B. Port Security Grants Sadly, the lack of means to ensure that the greatest priorities are funded first is not restricted to first responder grants. A review of the Port Security Grant Program
17
conducted by the DHS Inspector General between December 2003 and May 2004 questions the merits of "several hundred projects" related to port security.77 The U.S. maritime system includes more than 360 sea and river ports with more than 3,700 cargo and passenger terminals and more than 1,000 harbor channels along thousands of miles of coastline.78 Maritime shippers have increasingly concentrated their traffic through major cargo hubs (called mega ports) because of their superior infrastructure. In the United States, 50 ports account for approximately 85 percent of all cargo tonnage.79 The U.S. maritime system has tremendous economic significance. As the primary mode of transportation for world trade, ships carry more than 95 percent of the nation's non-North-American trade by weight and 75 percent by value, and 100 percent of the foreign oil imported by the United States.80 In 2003, waterborne cargo contributed about 7.5 percent of the U.S. gross domestic product.81 Given the importance of maritime trade to the U.S. economy, disruption of that trade can have immediate and significant economic consequences. As a result, the attacks of September 11, 2001 renewed lawmakers' focus on protecting the country's port facilities. In 2002, Congress provided the first wave of funding to the Transportation Security Administration (TSA), then part of the Department of Transportation, to enhance the security of ports and other facilities. TSA, along with the Maritime Administration (MARAD) and the U.S. Coast Guard (USCG), developed the Port Security Grant Program, which it continued, once it became part of the Department of Homeland Security. In FY2002, the TSA received a total budget of $1.24 billion, of which $92 million was dedicated to the new Port Security Grant Program.82 In addition to this first round of awards, DHS has awarded $471 million for over 1,200 port security projects over three years ($168 million in July 2003, $179 million in December 2003, and $49 million in September 2004 as part of the Port Security Grant Program, and $75 million from the Urban Area Security Initiative in August 2003.)83 A close look at homeland security funding for port security reveals that probably too little money is appropriated, much of the appropriated money is allocated to the wrong things, and much of the allocated money is not spent. First, appropriators should direct funding to programs that provide the greatest contribution to the most critical missions; ideally, getting the biggest return on our tax dollars should be the only criterion guiding spending decisions. Thus, considering the importance of the U.S. maritime system to our economy and our security, the federal government--to the extent that it should be involved in port security at all--should make protecting our ports a priority. But Congress has not done so: in FY2005, it allocated only $150 million for port security grants out of TSA's $5.4 billion budget ($4.7 billion will be going to aviation security in FY2006).84 To put that number in perspective, consider that the Coast Guard estimates that the first-year costs for enhancing security at America's 360 maritime facilities would be $963 million and then $535 million annually for the succeeding decade.85 So if the goal is really to protect our ports, $150 million seems rather pointless. Second, allocating money efficiently means that the money appropriated should be spent based on risk analysis. Because most U.S. ports face a very low probability of attack, providing resources for every port in the country makes little sense. In addition, 18
the U.S. port infrastructure is so vast that spreading $150 million across the nation will not achieve meaningful security either. To be most effective, the money should go to critical national ports and terminals, the areas of highest consequence with the greatest vulnerability to terrorist attack. As explained above, 95 percent of all foreign commerce enters the United States through the nation's 360 public and private ports and about 42 percent of that trade moves through just 10 ports, with the biggest loads passing though Houston, New York and South Louisiana.86 Severely damaging one of these critical ports could not only cause injuries, death, and property damage, but could also disrupt the flow of basic goods into and out of the country. For this reason, the nation's biggest ports are regarded as high-risk areas. However, they are often getting relatively less than smaller and lower risk ports.
Table 5. Dollars Per Ton Each State Received from Port Security Grant Programs Over
the Last Three Years
State
Grant Dollars per Ton
State
Grant Dollars per Ton
Guam
3.196
Louisiana
0.105
North Carolina
0.865
Oregon
0.090
Hawaii
0.527
New Jersey
0.088
California
0.428
Pennsylvania
0.080
Massachusetts
0.400
Mississippi
0.074
Georgia
0.386
Illinois
0.070
Florida
0.385
District of Columbia
0.060
Connecticut
0.380
Virgin Islands
0.056
New Hampshire
0.348
Tennessee
0.048
South Carolina
0.333
Alabama
0.039
Maryland
0.303
Ohio
0.039
Washington
0.295
West Virginia
0.034
Virginia
0.293
Michigan
0.024
Rhode Island
0.288
Minnesota
0.020
New York
0.272
Delaware
0.019
Puerto Rico
0.250
Missouri
0.016
Oklahoma
0.242
Kentucky
0.016
Texas
0.137
Indiana
0.014
Kansas
0.131
Iowa
0.004
Maine
0.109
Wisconsin
0.002
Alaska
0.105
Source: Author's calculation based on American Association of Port Authorities
website: http://www.aapa-ports.org/govrelations/issues/crime.htm and the Army Corps
of Engineers (2003 figures): http://www.iwr.usace.army.mil/ndc/wcsc/stateton03.htm
Note: Mariana Islands-Saipan and Vermont are not included because no waterbone cargo data was available. Mariana received a total of $2,129,577 and Vermont received $131,232.
Table 5 shows how much in dollars per ton each state received from the Port Security Grant Program over the last three years (i.e., excluding the $75 million made available under the Urban Area Security Initiative). The states with the biggest loads
19
passing through their ports are Louisiana, Texas, New York and California. Nearly 53 percent of all trade moves through these four states.87 Louisiana received 10 percent of general grant money while its trade accounts for 16 percent of the nation's commerce. Texas received 13 percent of general grant money while its trade tonnage accounts for 16 percent of the nation's commerce. And Guam, which accounts for 0.01 percent of the nation's commerce, receives 0.16 percent of all the grant monies. This translates to $0.105 per ton in Louisiana, $0.137 per ton in Texas and $3.196 per ton in Guam. After four separate rounds of port security grants, the DHS Inspector General's audit reveals a vast problem of misplaced priorities in the grant program. The grants were given out based on applications submitted by individual ports, but they were awarded even when the Department staff members found that the applications lacked merit. According to the IG report, the Department has put too much emphasis on spreading money around broadly, instead of directing it toward the most vulnerable and important targets. According to the audit, "Grant award decisions are made with the intent of expending all available funding and spreading funds to as many applicants as possible."88 In the third round, selecting officials even capped funding per entity and per award in order to reach more applicants and projects.89 In other words, hundred of thousands of dollars were spent on low traffic ports defined as low-risk areas by DHS's own standards. Major ports such as New York, Los Angeles, Houston, and South Louisiana received large allocations, but DHS also awarded smaller grants to ports such as Christiansted in the Virgin Islands, Martha's Vineyard in Massachusetts, Tulsa Port of Catoosa in Oklahoma, and six ports in Alaska, none of which appeared to meet the grant eligibility requirements.90 For example, a $180,000 grant was awarded to a port that the field review team described as a "small remote facility that receives less than 20 ships a year."91 The IG audit also reports that "[t]he program funded projects despite dubious scores by its evaluators against key criteria, raising questions about the merits of several hundred projects."92 For instance, more than $130,000 was awarded to a port for a closed-circuit television system even after the field reviewers ranked the project 27th of 29 applications and stated in its internal review documents that "these initiatives would be redundant to what the port authority has in place."93 And a $25,000 grant was awarded to install video surveillance equipment and alarms at a port next to a luxury entertainment complex that included restaurants, a hotel, and a spa, even though this project was ranked last among the applications.94 Furthermore, the reverse situation also occurred: many projects were not funded despite strong support from the field review. For instance, in round three, no grants were awarded to 54 projects that were ranked highly, i.e., in the top five of their groups.95 The report also explains that public seaports are generally owned and operated by local governments through a port authority; however, large portions of seaport real estate are leased to the private sector with the local government operating as a landlord. In addition, there are many privately owned and operated terminals within seaports that exist independently of the local port authority. Yet the question of where the private sector's responsibility for preventing terrorism ends and where the federal government's begins is not addressed at all in the distribution of port grants. The auditor notes that "[p]rivate entities have applied for, and received, substantial funding." 96 But shouldn't the private sector, not the federal government, be responsible, for the protection of private 20
assets? To make matter worse, the IG reports that "Some of these funds went to projects that reviewers rated overall as below average or worse during the evaluation process, calling into question the merits of these projects."97 For instance, in rounds two and three, 155 private-sector projects that ranked below average or worse were funded at a cost of $32.4 million.98 Finally, as is the case with the first responder grants, port security grant recipients have not spent the funds awarded to them: after the first three rounds of grants, including the Urban Area Security Initiative, recipients have spent only 21 percent of the total amount awarded ($107 million out of $515 million).99 As the audit concludes, the Department has "no assurance that the program is protecting the nation's most critical and vulnerable port infrastructure and assets."100 But the real question to ask is whether protecting our critical infrastructures is the best use of our federal dollars. It seems that the best way to keep bad things from America's ports is to stop them before they arrive. Not, as James Carafano puts it "turn every seaport into a little Maginot line."101 The Coast Guard assets support many of the missions aimed at keeping terrorists out of our ports. So instead of pouring money into port grants for state, local, and private sector projects which contribution to the overall maritime security is unclear, Congress and the President should ensure that the Coast Guard's modernization and recapitalization program called Integrated Deepwater System is fully funded. Since September 11th, the Coast Guard homeland security missions have greatly expanded and its equipment is wearing out fast. Last year, President Bush and Congress allocated $6.3 billion for the Coast Guard for FY 2005. As part of funding for Coast Guard programs, the appropriations bill includes $724 million for the Deepwater multi-year acquisition to modernize and recapitalize the Coast Guard's. VI. Use Of Homeland Security Grants The lack of risk-based funding coupled with the absence of federal terrorism preparedness standards or goals to guide expenditure of funds at the state and local levels has resulted already in some questionable uses of homeland security grants (whether they are DOJ, HHS or DHS grants).102 Expressing his concern, former Senate Budget Committee Chairman Nickles notes, "Congress is creating programs under the banner of homeland security, which in some cases, some cities and some states are using as more or less revenue sharing."103 And Chairman Chris Cox notes that "there have been numerous reports suggesting that the first responder monies that have been received and spent to date have not necessarily gone to the first responders who need it most, or for projects that materially enhance our homeland security."104 The data support their fears. The misuse of federal funds by states and local governments includes: · $351,000 awarded to a port to buy a mobile command center that DHS's field reviewers said "appears to be a luxury item."105 · $10,000 given to one port for encrypted radios that the DHS field staff concluded were not needed and perhaps not compatible with the federal and state radios.106 21
· $935,000 awarded to a port where an industrial park was being built, leading the Department staff members to question if the money was in fact an economic grant instead of anti-terrorism financing.107 · $1,060,000 awarded to a port for fortified crash beams even though the Department field reviewers believed that this project was primarily anti-theft, not antiterrorism.108 · $63,000 spent on a decontamination unit that is now stored in a warehouse in rural Washington State because the state does not have a HAZMAT team to use it.109 · $22,800 spent by Mason County, WA to buy six radios that are incompatible with county radios.110 · $30,000 used by officials in Lake County, TN, to help a high school buy a defibrillator to have on hand for a basketball tournament.111 · $500,000 spent by Outagamie County, WI. (pop. 165,000) to buy chemical suits, generators, rescue saws, disaster-response trailers, emergency lighting, escape hood, and a bomb disposal vehicle.112 · $98,000 spent on training courses in incident management by the Tecumseh fire department in Lenawee County, MI that no one attended. 113 · $557,400 awarded to North Pole, a town in Alaska (1,570 people), for homeland security rescue and communications equipment.114 These are not isolated cases of unfortunate uses of homeland security funds. Meanwhile, as Senator Nickles points out, "[Large and high risk cities] are as likely to waste homeland funds as low risk areas."115 Senator Conrad notes, "I have heard from individual departments that spending initiatives that were pending previously that were not approved, once they were given the label of homeland security, whether or not they fit the description, sailed through."116 For instance, Washington DC--incontestably one of the high threat areas in the country--used the region's first wave of homeland security aid as "seed money" for a computerized car towing system that the mayor had promised for three years to help combat fraud by private towing companies.117 D.C. also used $100,000 to fund the mayor's popular summer jobs program.118 According to DHS officials, DHS spending has been the subject of many audits, none of which found any systemic cases of fraud or abuse of program funds. Indeed, many of the purchases made with DHS funds were allowable and justified under Department guidelines. To end the discussion there, however, ignores the larger point that the system for disbursing homeland security funds is flawed and does not ensure that the greatest priorities are funded. While the audits did not find systemic problems, some of their specific recommendations fit well with Chairmen Nickles and Cox' arguments on this point. For instance, the Inspector General's audit of first responder grants admonishes, "Efforts to monitor and measure the impact of first responder grants needs to be improved."119 The Inspector General's report on Port Security Grant Program notes that many grants were given to port security projects that "appeared to be for a purpose other than security against an act of terrorism."120 Spending $58,000 on a rescue vehicle capable of boring through concrete to search for victims in collapsed buildings in Colchester, Vermont (18,000 people), for example, may be allowable and justifiable under DHS guidelines, but are those guidelines appropriate?121 And while there may be some ways to justify spending homeland security 22
funds in this location, we should question whether locations like Vermont, Michigan, or Tennessee are truly the front lines in the war on terror. VII. Are Federal Grants to States Efficient? The real question is whether these problems with homeland security grants to the states are not simply symptomatic of any federal grant system. If that is the case, it means there are more productive ways to protect America than federal grant programs to state and local governments. In theory, the United States is a federal system, meaning that the federal government was designed to have specific limited powers with most basic functions left to the States. But in the last fifty years, the federal government has undertaken a large number of activities that were traditionally and constitutionally reserved to the states. To extend its power into state affairs the federal government has developed a vast and complex system of grants to states and local government.122 In FY2005, the total amount of federal grants paid out to the states and local government is scheduled to reach well over $425.8 billion. President Bush requested $435.7 billion for grants for FY2006.123 According to the GAO, over the past 20 years the number of federal grant programs to states and local government has proliferated from less than 450 in 1980 to roughly 700 in 2001.124 These grants are directed towards a huge range of activities such as education, healthcare, transportation, housing and more. To be sure, these grants are an imposition of federal priorities on state and local government.125 But are they an economically efficient way to manage homeland security spending?126 Numerous reports have pointed at the complexity and redundancy in the federal grant industry as well as at the mismanagement, fraud and abuse of federal funds. The GAO notes "GAO's work has been pointing out the chronic problems of federal grants since at least 1975.127 And in spite of GAO recommendations and occasional reforms, the same problems remain. So although the initial goal of grant programs might be a high-minded purpose--such as help for poorer regions or homeland security--they frequently have turned out to be an extremely ineffective way to achieve a policy goal. The unsatisfactory performance of federal grant programs has been repeatedly reported. Indeed, the Office of Management and Budget regularly points out that grant programs have poorer performance, on average, than other federal programs.128 These grants often come within the frame of one-size-fits all federal regulation, which reduces States' incentive to be innovative. This abundant literature serves as evidence that federal grants and funds to states are a wasteful way of providing government services to Americans. There is no reason to believe that it will suddenly become an effective way to enhance America's homeland security. In addition to the problems underlined in the previous section, GAO reports that homeland security grants are already following the same troubling pattern of other federal grants.129 First, the amount of homeland security funds transferred to lower level governments is growing at an impressive rate. Homeland security funds--which included grants from DHS, DOJ and HHS--handed down to the states for first responders alone increased from $2.7 billion in FY2001 to $5.5 billion in FY2005.130 In FY2005, a total of $8.4 billion will be paid by the Department of Homeland 23
Security in the form of grants to state and local governments to finance homeland security activities. The president's FY2006 budget proposed to raise that amount to $9.1 billion.131 Second, excessive complexity and duplication in the federal homeland security grant industry is already quite evident. For instance, GAO describes the extreme complexity and fragmentation of the major federal homeland security assistance programs targeted to first responders. 132 Some grants go to state emergency management agencies, some go to state fire marshals, some go directly to local first responders and some go to the cities. Some grants are paid by DHS through the Office of Domestic Preparedness and/or through FEMA, some are paid by the Department of Justice through the Office of Justice Programs and/or through the Office of Community Policing Services and others are paid by the Department of Health and Human Services through the CDC and/or through the health Resources and Service Administration. Finally, there at least 16 overlapping grant programs for local first responders such as firefighters and local law enforcement ­ highlighting the problem of duplication in the federal grant program.133 And like other grant programs, homeland security grants have spurred much wasteful lobbying activity.134 Edwards (2004) reports "On March 4th 2004, 3,000 officials flew into Washington to lobby Congress for larger first responder grants; they were followed on March 16 by firefighters from across the country coming to lobby Congress."135 Other officials are coming to complain about the level of grants they are getting compared to others and asking for a level playing field. And yet, when Senator Nickles asked Homeland Secretary Ridge in February 2004 "these [first responder] funds, correct me if I am wrong, these funds really aren't supposed to be a subsidy for local police and fire, is that correct?" former Secretary Ridge replied without blinking "That's correct."136 Our homeland security is only as strong as the weakest link. Most dollars spent on anything else than the weakest link--in term of probability of something happening, the likelihood of it succeeding and the consequences of it occurring--are likely to be a waste of money. It means that giving state and local government money to increase their capacity to response to a terrorist attacks is the wrong answer. The Council on Foreign Relations measured the cost of equipping every sate and U.S. territory with enough resources to conduct each critical homeland security task could be at least $103 billion per year.137 And this level of funding could not even guaranty the U.S against devastating attacks. According to security expert Bruce Schneier "critical to any security decision is this notion of trade-offs, meaning the cost--in terms of money, convenience, comfort, freedoms and so on--that inevitably attached themselves to any security system." He adds "better understanding of trade-offs leads to a better understanding of security decisions."138 A recurring recommendation from the GAO over the years has been the need to use risk management as an important element in developing a national strategy to fight terrorism.139 Risk management is about playing the odds. It is figuring out which attacks are worth worrying about and spending money on and which are better left ignored. It is spending more resources on the serious attacks--defined as being very likely or if successful having devastating effects--and spending less on the trivial ones. It is taking a finite security budget and making the best use of it. In other words, homeland security should be about wise choices, not just increased spending. Risk management is also about figuring out who is the best player suited to address a given risk. At the federal level, homeland security should be about preventing adverse 24
consequences from the intentional and unwarranted actions of others. In that sense, federal homeland security grants are not making us more secure. The grant programs--especially the first responder grants--are predicated on the notion of cleaning up after terrorists successfully attack. This is a huge waste of our scarce federal resources. Cox (2003) notes, "The mission of the Department of Homeland Security must be first and foremost to prevent another deadly attack on the United States."140 And he adds "A dollar spent on preventing the next terror attack is vastly superior to spending dollars on cleaning up the mess when we fail to do job one, which is preventing terrorism."141 Homeland security should be based on the investigation, interdiction and elimination of terrorist threats. As Governor Mitt Romney (R-MA), co-chairman of the National Governors Association's homeland security efforts, points out "Many states are focusing too much efforts on preparing to respond when the most important investment would be preventing terrorist attacks."142 It means that the billions going to states and local governments would be best spent on bolstering the ability of federal law enforcement and intelligence services to achieve these goals instead of subsidizing local fire stations throughout the country. Alternatively, instead of wasting money on building response capacity, federal funding could be spent to create a truly national prevention system with a robust capacity for state and local intelligence, early warning, exchange and exploitation of information and domestic counterterrorism. According to James Carafano (2004), grant programs have proven far more effective when federal money has been used to fund vulnerability assessments and to encourage public-private partnerships that adopt sustainable and effective security programs.143 It does not mean that investing money on first responders in not important. However, states and local communities should be in charge of most of their preparedness efforts. If police officers feel they need more equipment to do their job, or firefighters need training or gym memberships they are not getting right now, they should turn to their state and local officials for funding. More importantly, leaving the responsibility for developing proper first responder policies to the states makes much sense. Federalizing first responder programs accentuates the public choice problem that already plagues the political process. When first responder programs are funded at the federal level, a Congressman from Wyoming has no incentive admitting that his state is not a likely target or that if it ever were a target, the level of damages would be limited. This same Congressman has no incentive to turn down federal money, and even less incentive to volunteer sending his state taxpayer's dollars to benefit other states. By contrast, when first responder programs are states' responsibility, then this same Wyoming Congressman in theory should have a stronger incentive to assess risk and potential damages to his state accurately. He should have an incentive to decide whether to spend more on homeland security or on other accounts. It does not mean that local communities would never have any claim to federal funds in case of a terrorist attack. But these funds should be accessed only when needed in case of an emergency, in the same way that FEMA funds can be accessed following a natural disaster.144 But implementing this system should not be an excuse to federalize the cost of state and local responsibilities. Economics and public choice theory suggest a natural organization that appears to have eluded lawmakers so far. Not every jurisdiction needs a bomb squad. What every jurisdiction needs is to know where they can get a bomb squad if they need one, and/or where to ask if they 25
need to find a bomb squad. Today, it is incredibly easy and fast for a team of specialized responders to fly from one state to another and to help the state in distress. After September 11th, individuals, firefighters, police officers and many others all over the country mobilized to help New York and Washington. And that would happen again. VIII. Homeland Security and Special Interests The evidence suggests that homeland security grants to state and local governments are at times wasted. Accordingly, reform of this system is a worthy priority. The highest priority for federal spending is not to service every one of state and local governments' needs. The priority must be to create a true national preparedness system. To that effect, funds should be distributing strictly based on risk and vulnerability. A first step in that direction would be to eschew the requirement that every state get part of the homeland security money. Also, because the grant system has proven to be very ineffective in the past, money should not be allocated through grants. Congress, however, appears to be moving in the opposite direction. For example, instead of reforming the way money is distributed to states, it created an addition grant program called the Urban Area Security Initiative Grants. In theory the Urban Area Security Initiative Grant program is designed to allocate the money based on an evaluation of risks.145 The three principle criteria used are population density (half of the weight), presence of critical infrastructure (one third), and presence of a credible threat (about 1/6 of the weight).146 Early 2003, Congress announced that it would pay a total $100 million grant to seven cities--New York, Washington, Los Angeles, Seattle, Chicago, San Francisco, and Houston--that had made the "high threat list." Former DHS Secretary Tom Ridge and Members of Congress, however, immediately started receiving calls from city officials who felt they had been unfairly left out. As a result, the list of qualifying cities started to expand considerably. In May of 2003, the number of most-atrisk cities had grown from 7 to 30.147 In a few months, the pool of money had increased from $100 million to $700 million.148 Then in 2005, the Department of Homeland Security announced an even longer list of 80 cities and mass transit agencies, including Indianapolis, Louisville, and Columbus and a budget of $829.6 million.149 In FY2005, each of these cities will receive respectively $5.6 million, $5 million, and $7.6 million, on top on the minimum guaranteed from the grants to first responders.150 On July 22, 2004, the National Commission on Terrorist Attacks Upon the United States (9/11 Commission) issued The 9/11 Commission report recommending among other things that federal homeland security assistance be distributed to state and local government based on risk and vulnerability. It added that, "Federal homeland security assistance should not remain a program for general revenue sharing. It should supplement state and local resources based on the risks or vulnerabilities that merit additional support."151 Other critics of the present funding distribution method include House Homeland Security Committee Chairman Chris Cox. To that effect, he has been promoting legislation, HR3266, the "Faster and Smarter Funding for First Responders Act" that would authorize the Secretary of the Department of Homeland Security (DHS) to change the criteria used to distribute funding to DHS' major programs in order to base grants to state and local governments primarily based on the risk of terrorist attacks and the magnitude of potential damages--not 26
population.152 Under the Cox proposal, each state would get a 0.25 percent of the available first responder dollars--instead of 0.75 percent. Last year, the House version of intelligence reform legislation (HR10) included language, which originated in the House Selected Committee on Homeland Security, changing the funding formula to base homeland security grants on risk assessment and changing the formula so each state would receive at least 0.25 percent of the total grant pool (versus 0.75 percent with the current formula). It immediately triggered very strong oppositions in the Senate. Senator Leahy (D-VT), member of the powerful Homeland Security Appropriations Subcommittee, for instance, has argued that dropping the all-state minimum formula would "shortchange rural states."153In the end, the language did not survive the House-Senate conference. A surprising endorsement of the intelligence bill's risk or threat-based model came from seventeen fire and police organizations. In a letter to Rep. Peter Hoekstra (R-Mich), chairman of the congressional conference committee, they wrote "We believe that the funds should be distributed based on a risk or threat-based model."154 They even went further than the House version of the intelligence bill (HR10). They wrote, "To the extent that state minimums are included, we urge that the minimums be kept low, in order to provide maximum funding to areas of greatest need."155 Yet, again the victory of logic over state dependency did not see the light of day due to the extreme resistance to the idea. This year, the President's FY2006 budget also tries to move toward a risk based allocation of homeland security funds. To that effect, the administration's budget rightfully restraints the amount of grants going to state and local governments. It also makes an effort to restructure DHS grants to focus on strategic needs rather than giving fixed allocations to individual states. For instance, the administration has proposed $3.4 billion in grants, which amounts to a $200 million decrease from FY2005.156 Moreover, the President decided to adopt the basic principles of the "Faster and Smarter Funding for First responders Act," as passed by the House in H.R. 10 during the108th Congress and change the formula so that states would get a 0.25 percent of the available funds.157 Secretary Chertoff explains "We have to put the resources where the highest threats are." He has ordered an internal review of his agency's organization, operations and policies. In a statement before the House Appropriations Committee's Homeland Security Subcommittee, Chertoff said," I want to emphasize that our analysis of threats and risks posed to the United States by terrorists will drive the structure, operations, policies and missions of the department, and not the other way around."158 Delivering a speech at the George Washington University Homeland Security Policy Institute, the Secretary explained, "We need to adopt a risk-based approach in both our operations and our philosophy. Risk management is fundamental to managing the threat, while retaining our quality of life and living in freedom." More importantly, he added, "Here I inject a note of caution because the media and the public often focus principally on threats. Threats are important, but they should not be automatic instigators of action. A terrorist attack on the twolane bridge down the street from my house is bad but has a relatively low consequence compared to an attack on the Golden Gate Bridge. At the other end of the spectrum, even a remote threat to detonate a nuclear bomb is a high-level priority because of the catastrophic effect." If the President's new budget proposals are adopted, it will be an important step in the right direction and a serious improvement of how we are spending homeland security funds to protect our nation. In a letter to the House Budget Committee on March 8 2005, Chairman Chris 27
Cox expressed his support for the President's first responder funding levels.159 However, it probably won't go through without other serious resistances in the Senate. The Senate already offered signs that lawmakers may buck the Bush administration on spending priorities. An amendment to the 2006 budget resolution (S Con Res 18) offered by Senator Susan Collins (R-Maine) and Joe Lieberman (D-Conn.) restoring $855 million in first responder funding that was eliminated by the administration was approved earlier in March. In a prepared statement, Joe Lieberman explained "Homeland security cannot be had on the cheap and our first responders must have the training and equipment they need to keep our community as safe as possible."160 In a few weeks, Senator Collins will reintroduce her S. 2845 bill, the Senate version of the intelligence reform legislation. Here are some of key differences between the First responder funding in Senator Collins'S.2845 and Chairman Cox's H.R. 10. · S. 2845 retains the flawed structure for allocating homeland security assistance grants. Under S. 2845, DHS would first allocate the higher base amount to each State, and then an additional amount on the basis of risk. Under H.R. 10, DHS would first allocate all funds based on an assessment of risk, and then provide, if necessary, additional funds to those States that have not met the base amount. The failure of S. 2845 to reform this structure means that DHS will be instructed to allocate far too much funding without regard to any risk. By contrast, under HR 10, 99% of funding will be risk-based. · S. 2845 does not require DHS to evaluate and prioritize applications based upon risk or need. In fact, every State that has a single "key asset" would get additional monies under their bill, continuing to spread this money around without any sense of prioritization. · And their bill would not require States to allocate monies within their States according to risk, either ­ effectively perpetuating the horror stories we hear every day about how this terrorism preparedness money is being used for all sorts of activities unrelated to terrorism, such as health club memberships and traffic cones. 161 · S. 2845 transfers approximately fifty (50) percent of the funds from the Urban Area Security Initiative (UASI), a risk-based grant program, to the State formula grant programs. This dramatic shift means that even less money will be distributed to States on the basis of risk. · S. 2845 dramatically expands the number of jurisdictions eligible for UASI grant funds. Under current law, DHS allocates UASI grants to eighty (80) high-threat, high-density urban areas and mass transit agencies. Under S. 2845, however, any jurisdiction may be eligible for UASI funds if it only possesses one (1) key asset identified by the Secretary or its State. At the end of the day, the differences between the House and the Senate can be explained by the fact that Senators from rural States have grown accustomed to grabbing disproportionate slices of the federal money pie. More generally, block grants are to the states and localities what entitlements are to citizens: money that flows to them automatically from the federal government. Of course, he lure of easy money for their recipients has made them popular with Congress. Now, the President along with Chairman Cox and Secretary Chertoff are threatening to change that by employing risk analysis to determine how to deploy money. And as the Secretary notes, "Not everyone is going to be happy."162 Interestingly, the proposal from the White House to tweak the DHS's formula for state grants is only part of the start of what will probably become a major overhaul in the way the Department distributes funding for first responders. Matt Mayer, acting executive director of the Office of State and local Government Coordination and Preparedness, said the vehicle for change 28
will come in the form of the National Preparedness Goal expected to be released on March 31, 2005.163 In an interview for Congressional Quarterly, Mayer explained that "the goal is a transformative document that will spell out how the federal government should distribute funding to best prepare the country for a terrorist attack."164 This is good news since so far, DHS does not have a formal document to gauge preparedness. Finally, even if the concept of allocating homeland security funds based on risk assessment is endorsed and adopted, many state officials believe that the process of assessing these terrorist threats and risks, even with ongoing guidance from DHS, will remain a very flawed procedure due to subjective interpretations. Based on previous experiences, DHS officials already acknowledge that the 50 states `terrorists risk assessments usually fall short of being objective.165 Moreover, the economic incentive does not seem to favor a proper evaluation of those risks. Financial stakes are high for state officials who might feel that if their state is seen as a non-risk state, no money would be coming their way. Confirming this intuition is the fact that shortly after the creation of DHS in March 2003, the 50 state governments were asked to initiate terrorist threat risk assessments by identifying critical assets and people or groups within their states that posed a terrorist threat. The assessments were due in early 2004. According to David Miller, Iowa's homeland security administrator, because of the amount of money at stake "some leaders felt they ought to list at least one threat for their region, even if it was just a risk of terrorist passing through the area."166 To be sure, all levels of government contain some amount of inefficient or wasteful spending. The criteria used to identify such wasteful appropriations are the following ones: 1. the appropriation is not properly authorized by the House and/or the Senate and was not requested by the administration, 2. the appropriation is unauthorized and unrequested, has locality-specific or has facility-specific earmarks including those funds above the administration request, 3. the appropriation involves the transfer or disposal of federal property or items under terms that circumvent existing law and 4. new items added in conference that were never considered in either bill in either the House or the Senate.167 According to Citizens Against Government Waste (2004), in FY 2003 Congress added a record level of $22.5 billion in wasteful spending.168 The Republican leadership this year is no different, with 8,000 pork items attached to the February Omnibus bill.169 And it is now obvious that rather than curbing lawmakers' appetite for home state earmarks, the surge in emergency spending to strengthen "homeland security" and bolster the Pentagon budget provides ample opportunities for lawmakers to direct such funds to their districts and states. Federal coffers are wide open to fight terrorism, and lawmakers can hardly be faulted for pushing projects aimed at protecting their constituents. As a result, in spite of promises by appropriators to pass a pork-free homeland security bill, the fiscal 2004 Homeland Security bill is laden with earmark projects.170 Some of the pork items in the FY2004 Homeland Security bill are: · $2,000,000 to the Great Lakes Region to purchase an Icebreaker so that commercial ships can go through during the winter time. · $200,000 to project Alert, a school-based drug prevention program for middle grade youth. · $7,100,000 for forensic support and grants to the National Center for Missing and Exploited Children. · $100,000 to the Child Pornography Tipline · $3,000,000 to Child Labor Enforcement 29
· $10,000,000 to Intercity Bus Security to improve security for operators and passengers by providing bus security enhancements and training to bus companies and others. · $22,000,000 to trucking industry security program to promote security awareness among all segments of the commercial motor carriers and transportation community. · $19,250,000 to be split between Mobile Alabama, Burlington Iowa, LaCrosse Wisconsin, Chelsea Massachusetts, New Orleans Louisiana, Morris Illinois and Charleston, South Carolina for alteration of bridges. · $2.5 billion for "highway security," which consists of building and improving roads. · $70,000,000 for the Homeland Security Fellowship Program for students and universities. · $50,000,000 to the National Exercise Program to provide an exercise program that meets the intent of the Oil Pollution Act of 1990. · $38 million to fully cover all remaining fire claims from the Cerro Grande Fire in New Mexico · $20,000,000 added by the Senate for the renovation of Nebraska Avenue Headquarters of the Department of Homeland Security. · $6,400,000 for the Intellectual Property Rights Center. The center's focus is to combat intellectual property right crime--a long time FBI project. · $500,000 to Kentucky Morehead Sate University Institute for regional Analysis and Public Policy for a homeland security program · $60,000,000 to the Urban Search and Rescue Team to structure local emergency services personnel into integrated disaster response task forces. CAGW (2004) counted 18 wasteful items amounting to $423 million in the 2004 Department of Homeland Security bill.171And this year is no different than last year. In fact, it is even more pronounced as $896 million were added over the President's request to the FY2005 homeland security funding bill.172 During the debate that preceded Congress and the Senate's adoption of fiscal 2005 Homeland Security appropriations bill, lawmakers showed an extremely high level of regional concern reflecting a change from last year, when they vowed to keep the bill clean of earmarks. First, countless attempts were made to use the bill as a vehicle for large packages of emergency hurricane and drought aid. Senator Leahy (D-Vt) championed an outsourcing ban saying that "it would save the jobs of a 100 Vermonters." 173 Thankfully, Republicans managed to block Senator Lautenberg (D-NJ) from adding another $100 million for fishing enforcement and Coast Guard rescue operations. In the end, Senate leaders stopped Senate Democrats from adding more than $20 billion to the $33 billion FY2005 Homeland Security spending bill. Sadly, Senators Max Baucus (D-Mont.) and Conrad Burns (R-Mont.) managed to attach $2.9 billion--accounting for nearly 10 percent of the bill's total cost--to the FY2005 Homeland Security bill in so-called disaster aid for farm states. Another $700 million in hurricane aid for Florida farmers was added and then later removed. Drought relief or hurricane relief have nothing to do with homeland security and should not be presented as having anything to do with the essential task of defending the homeland from terrorists. Finally, Senator Pete V. Domenici (R-NM) obtained an increased spending of $20 million for the National Infrastructure Simulation and Analysis Center, collaboration between Sandia and Los Alamos national laboratories in his own state.174 30
To conclude, if we add to the pork barrel spending figure the reported $2.6 billion spent possibly wastefully by state and local government, it means that billions, which could have been spent on worthy security, were not. And what does not make us safer makes us less safe. VIII. The Transportation Security Administration: Fighting Yesterday's Battles One of the major shortcomings that led to the 9/11 tragedies was that the responsibility for protecting commercial airlines was left to the government, the FAA, the FBI, the CIA, and the INS. They failed. By contrast, reinforcing cockpit doors would have most likely prevented most of the deaths that occurred on that fateful day. Scheiner (2003) explains how government involvement in airplane safety and treaties to limit the amount of damages airlines would have to pay to families of international airplane crash victims artificially changed the economics of airplane safety.175 A direct consequence was that it made sense for airlines to resist improvements in airplane safety since the cost of safety failures was reduced drastically. Yet, in spite of past failures, the government's response to 9/11 was to federalize the security screeners and authorize the military to shoot down airliners if they are hijacked. After the terrorist attacks in 2001, Congress rushed into existence a new antiterrorism agency to protect America's planes, trains and trucks. The legislation (The Aviation and Transportation Security Act) was meant to enable the federal government to take over screening of passengers and baggage at all but 5 of the 429 U.S. commercial airports. The five airports are San Francisco, Kansas City, Rochester, N.Y., Jackson Hole, Wyo., and Tupelo, Miss. The Transportation Security Administration was born and it is now part of the Department of Homeland Security. Three years after the federal takeover of airport passenger screening, the 45,000employee bureaucracy has been inundated with complaints about its performance. According to GAO, the federalized system has proven to be very ineffective at providing quality airport screening. Their diagnosis is that TSA is unresponsive and bureaucratic. And DHS just released the results of a four-month audit that showed that passenger screening by the TSA needs to be improved to keep explosives and weapons off commercial aircraft.176 According to the Congressional Quarterly, the report published Wednesday September 22nd is a sanitized version of the full report, which details the nature and number of the screening failures. The full report remains classified. On March 3, 2005, David Stones, assistant secretary of Homeland Security, testified before the Homeland Security Subcommitte. As a measure of success of TSA's recent accomplishments he explained how TSA "intercepted seven million prohibited items at airport checkpoints, including just over 600 firearms." It means that 0.008 percent of items intercepted are actually firearms and that 99.992 percent of intercepted items are tweezers and breathe fresheners. Is that really supposed to make us feel more secure? This is no trivial matter considering the amount of money allocated to TSA. TSA's budget increased from $1.24 billion in FY2002 to $5.56 billion requested in FY2006.177 Its budget now exceeds that of the FBI or the Secret Service. And although Congress originally charged the agency with protecting all modes of transportation, it has done little beyond aviation. In fact, over 90 percent of TSA's budget requested for FY2006 is devoted to air transport.178 Also, in effect TSA is only responsible for passenger and baggage screening. The airports are 31
still responsible for securing the other crucial parts of the airport. It appears therefore, that TSA provides only a small portion of air transport security, yet still complains of under funding.179 However, the true cost of TSA to taxpayers goes way beyond the expected $5.6 billion it will cost in FY2006. Sound homeland security requires investing in activities to make America more secure without hindering economic growth. The lack of staffing flexibility in TSA, for instance, imposes a tremendous and unjustified cost to airports. The airline business is an extremely competitive industry, with airlines adding and dropping airports on short notice. Since passenger and baggage screening workforces affect all passengers, the impact on passenger processing of improperly sized screening workforces is incredibly costly and constitutes a significant drag on the economy.180 A quick back of the envelop calculation suggests that if 624 million passengers spend 2 hours waiting in line--which is the estimate given by the ATA--the aggregate opportunity cost incurred is roughly $4 billion per year. This number is to be added to the actual cost of TSA itself. In addition, many security experts have argued that TSA's mandate is not pointed at the right target. Schneiner (2002) explains that "The federal government and the airlines are spending millions of dollars on systems that screen every passenger to keep knives and weapons out of planes, but what matters most is keeping dangerous passengers out of airline cockpits which can be accomplished by reinforcing the doors."181 And now, TSA announced a ban on all types of lighters beginning April 14 2005. House Aviation Subcommittee Chairman Mica (R-FL), who was never comfortable with creating this new bureaucracy, has been a strong voice pointing to the Poor Performance by TSA. 182 Mica (2004) notes, "They look nice. They have a patch and a uniform, but my question is: how well do they detect threats?"183 Now he has advocated the return of all airport security screener jobs to the private sector.184 According to the law that created TSA, after three years with the new system, airport managers will be allowed to ask for private screeners who ultimately would be overseen by TSA. The airport industry has predicted that between 20 and 100 of the nation's 445 commercial airports will ask to revert to using private screener companies when they have the chance this November.185 In spite of the evidence of TSA's low performance, Democrats have already expressed their opposition to this idea and House Democrats say "they will stop even one from booting TSA's workers."186 On July 22, 2004 Rep. Maloney of New York, who heads the House Democratic Task Force on Homeland Security and three Democratic co-sponsors introduced a bill (HR 4970) to repeal the opt-out provision.187 A GAO report comparing the performances of private screeners and public screeners explains that "TSA provided the screening contractors with little opportunity to demonstrate innovations, achieve efficiencies, and implement initiatives that go beyond the minimum requirements of the Aviation and Transportation Act [...] TSA has allowed them to implement some airport specific practices."188 As a result, GAO concludes, "These practices have enabled the screening contractors to achieve efficiencies that are not available at airports with federal screeners."189 By contrast, in April 2004, Homeland Security Inspector General Ervin testified to the House Transportation and Infrastructure aviation subcommittee that U.S. airports with federal screeners and the few ones with private screeners do an equally poor job.190 This observation however, does not serve as an endorsement of public screeners. Indeed, when private security screeners do a poor job, they can be fired and the system can be reformed or terminated. Besides, according to a new report by the department of Homeland Security inspector general, poor 32
oversight by TSA in the four pilot programs is probably to blame for the poor performances of the private contractors.191 The report notes that TSA's involvement limits contractors' ability to improve their program. According to Robert Poole, Director of Transportation Studies at the Reason Public Policy Institute, "Global experience in combating terrorism, particularly in Europe and Israel, has clearly demonstrated that the best approach to aviation security relies on private-sector security companies that are held to the highest performance standards but have the flexibility to innovate."192 He adds, "International experience has also demonstrated the superiority of a system that directs resources, technology and scrutiny to individuals that represent the greatest risks."193 Yet Congress put in place a system that does exactly the opposite. This is more troubling, when considering that some homeland security programs appear to be properly designed to assess and concentrate on high-risk elements. For instance, the U.S. government has contracted--after a truly competitive process--with the defense contractor TRW to devise methodologies for best-practice vulnerability assessments in ports.194 Part of the Maritime Transportation Security Act (MTSA) of 2002 requires ports to perform their own risk assessments.195 Almost all the $200M the federal government spent on port security in 2002 and 2003 was to finance these individual risk assessments. Of course, the results were spotty and some of the assessments were questionable. Yet as a whole, the dollar amounts is small and constitutes a step in the right direction since it set the stage for more-thoughtful assessments to come. But the most impressive program in homeland security activities seems to the highly leveraged government initiative called known Shipper. Here, the onus is on the private sector to verify the bona fides of the shippers in advance of their cargo arriving in U.S. ports. This program relies on the common-sense fact that most terrorists would find it very difficult to impersonate a well-established company. Of course, the most likely reason the government turned to Trusted Shipper was because it was going to be physically impossible to screen all cargo--they will end up screening 2 percent of boats that were identified as high-risk vessels-- so they were forced to be reasonable. To conclude, unlike these programs--which remain imperfect--TSA is poorly leveraged. And TSA does not make us safer. Moreover, the obvious lack of trade-offs between spending and efficiency would actually make us less secure. Congress should follow Chairman Mica's advice and return all screener jobs to the private sector. The federal screeners could get the first opportunity to apply to the private jobs. There is no doubt that the $5.3 billion would be better spent on tracking down and wiping out the terrorists than on TSA. IX. Lack of Trade-Offs in the Budget Compromises Security Between FY2001 and FY2006, the administration expects total outlays to rise from $1,864 billion to $2,650 billion--a 42 percent increase.196 The Bush administration has followed a remarkably irresponsible course by requesting many spending increases often in the name of security but rarely asking for cuts to programs or agencies. As for Congress, most members are blaming the overall spending increases on post-9/11 national security costs and few talk about eliminating unneeded government programs to fund this added protection money. Clearly, no trade-offs are being made in the budget, as evinced by non-defense spending increases of 39 percent during the same period.197 33
While the Pentagon's budget grew by 46.8 percent since President Bush took office (that figure does not included the amount requested by the White House in earlier this year for Operations in Iraq), nondefense related department budgets have also ballooned. The Department of Education budget has grown rapidly under President Bush. Education outlays increased from $36 billion in FY2001 to an estimated $64.2 billion in FY2006, an 80 percent increase.198 This is remarkable considering that the GOP presidential platform in 1996 stated: "The federal government has no constitutional authority to be involved in school curricula . . . this is why we will abolish the Department of Education."199 The Bush administration has argued that new spending was a necessary price to get education reforms through Congress. The final No Child Left Behind legislation of 2002 boosted spending but was stripped of most real reforms. farm programs are also ballooning under a Republican White House and Congress-- some of them under the homeland security label. Since FY2001, funding for the Department of Agriculture will grow at least 39.1 percent.200 The farm bill signed into law by President Bush in 2002 represented a reversal of the Republican 1996 Freedom to Farm Act, which aimed to wean farmers off federal price supports and subsidies.201 Republicans have turned their back on their own farm reforms with the embrace of price supports and higher farm subsidies. In theory, the tragic events of September 11th should have made security the U.S.'s budgetary priority, but the more spent on non-security activities, the less there is available for productive homeland security spending. The record of almost continual growth in most departments over the years raises concerns about the newly created Department of Homeland Security. In FY2006, the department's budget will be $41 billion, a 85 percent increase over FY2002.202 The White House had claimed that the department would not cost any additional money because it was to consolidate activities already carried out in nine other departments.203 However, spending for DHS keeps rising with no indications of actual cost savings. According to the 9/11 commission's recently released 600-page report, our government bureaucracy failed us. It seems legitimate to ask why not get rid of some of it instead of adding to it? At the very least, if the White House and Congress want more security spending, they should find serious savings elsewhere in the budget. X. Conclusion In the largest open society in the world, improving homeland security is a challenging task. Among other vulnerable targets, the United States has thousands of miles of borders, thousands of bridges, sports stadiums and shopping malls, hundreds of skyscrapers and power plants. Certainly, the attacks on Washington DC and New York have put immense pressure on the Administration and Congress to show that security against future attacks is being enhanced. A common path to bad security is knee jerk reaction to the news of the day. Sadly, too much of the U.S. government's response post 9/11 seems to be exactly that. We have been told that we are in graver danger than ever and that in order to be secure, homeland security spending needed to increase drastically. And it was increased: by roughly 200 percent since FY2001. Yet, because most of the money is allocated on a political basis rather than a sound cost benefit analysis, much of the new spending will not result in sound security. In other words, the security we are getting against terrorism is likely to be ineffective, yet comes at an enormous expense. 34
By definition, the purpose of homeland security is to make America safer. As such, wasteful spending and grants to state and local governments do not achieve that goal. In the same way, the federalization of law enforcement and airport security screeners appear to be ineffective ways to address our homeland security problem. In some cases, they might increase our feeling of security but in reality they might even make us less safe. Economics suggests the following: spending decisions should be based on a true cost benefit analyses. It also underlines the need to more formally deliberate what level of government is the best suited to make homeland security investments taking under considerations the public choice ramifications of the alternatives. And finally, it requires paying particular attentions to pork barrel spending and sanctioning it. That will be a good start. The challenge of determining what the best security investments are will remain and should be left to security experts rather than politicians. Governments, by nature, are very inefficient institutions. We must accept this as fact. So instead of thinking that the solution to 9/11 is more and more of the same approaches that failed us, policymakers should start doing the analysis needed and making the tradeoffs as to where we should focus our limited security resources. 1 Author's calculation based on The Budget of the United States government, Fiscal year 2006 , Table S-5, (Washington: Government printing Office, February 2005) and Office of Management and Budget, "Securing the homeland, Strengthening the Nation" http://www.whitehouse.gov/homeland/homeland_security_book.pdf 2 Author's calculation based on The Budget of the United States Government, Fiscal year 2006 , Table S-5, (Washington: Government printing Office, February 2005) and Current Population Survey, March 2003. 3 Author's calculation based on The Budget of the United States Government, Fiscal year 2006 , Historical Tables and Congressional Budget Office, Budget and Economic Outlook: An Update, Table 1-2, September 2004. The FY2006 figure includes the $82 billion war supplemental. 4 Author's calculation based on The Budget of the United States Government, Fiscal year 2006 , Table S-5, (Washington: Government printing Office, February 2005). Also, see Veronique de Rugy, "The Republican Spending Explosion," Cato Institute Briefing Paper no. 87, March 3, 2004. 5 For a good discussion about the concept of tradeoffs see James Buchanan, Cost and Choice, An Inquiry in Economic Theory, Collected Works of James Buchanan Volume 6, (Indianapolis: Liberty Fund). 6 Center For Disease Control, http://www.cdc.gov/nchs/datawh/statab/unpubd/mortabs.htm 7 Department of Transportation's Safe, Accountable, Flexible and Efficient Transportation Equity Act of 2003 (SAFETEA), authorizes funds for Federal-aid highways, including highway safety programs. The numbers are compiled from http://www.fhwa.dot.gov/reauthorization/safetkeyinfo.htm#ast. And Budget of the United States, FY2006, Table S-5. 8 The difficulty of estimating low probability risks is stressed by Kunreuther et al. (1978). 9 There is a recent but large literature on Insurance and terrorism risk in the wake of September 11th. See for instance, Jeffrey R. Brown, Randall S. Kroszner, Brian H. Jenn (2002), "Federal Terrorism Risk Insurance," NBER Working Paper No. w9271 Issued in October, Gordon Woo (2003), "Insuring Against Al Qaeda: Risk Management Solutions," NBER Meeting and Howard Kunreuther, Erwan Michael-Kerjan and Beverly Porter (2003), Assessing, Managing and Financing Extreme Events: Dealing with Terrorism," NBER Working Paper No. 10179. 10 The role of media attention is discussed in Fischhoff et al. (1981). 11 W. Kip Viscusi and Richard J. Zeckhauser, "Sacrificing Civil Liberty to Reduce Terrorism Risks," John F. Kennedy School of Government Harvard University, Faculty Research Working paper RWP03-017, January 2003. 12 Manuel Trajtenberg, "Defense R&D in the Anti-Terrorist Era," NBER Working Paper No. 9725, May 2003. 13 Becker, Gary. "Crime and punishment: An economic approach," Journal of Political Economic, 1968. 35
14 See John R. Lott Jr. (2001), The Bias Against Gun: Why Almost Everything You Have Heard About Gun Control is Wrong, (Washington DC: Regnery Publishing, Inc), Chapter 6. Lott tests the economic model (that if you make something more difficult or increase the cost of being caught for doing something people do less of it) on perpetrators of multiple victim public killers. He finds that in this case, although legal sanctions such as higher death penalty execution rates should imply both fewer attacks and fewer people harmed, it is less of a significant factor in deterring multiple victim killings than it is in deterring normal murders. Also See Frey et al (2003) 15 John R. Lott Jr. (2004), "Pilots Still Unarmed," New York Post, January 6, 2004. 16 See Lott (2004). 17 John R. Lott Jr. (2004), "Marshals are Good But Armed Pilots are Better," Wall Street Journal Europe, Friday January 2nd. 18 For a complete explanation of the cost effectiveness of reinforced cockpit doors in airplanes see Bruce Schneier, Beyond Fear: Thinking Sensibly About Security in an Uncertain World, (New York: Copernicus Books, 2003), p. 46. Other experts have raised the fact that some engineering constraints in the wall and the hinges where the doors are hanged might reduce the effectiveness of these doors. See Lott (2004), "Pilots Still Unarmed." Yet, it still seems that a very cost effective measure. 19 Federal Aviation Administration, "Airlines Meet FAA's Hardened Cockpit Door Deadline," Press release, April 2003. 20 Ibid. 21 Department of Homeland Security, Budget in Brief, FY2006, p. 15. 22 In Bruce Schneider (2003), makes this point using the data compiled by Wm. Robert Johnson and published in the "Worst Terrorist Strikes U.S. and Worldwide." 12 out of 25 of the deadliest terrorist strikes of the last 80 years are airline related. 10 out of these 12 involve crashing of an highjacked plane. 23 For a good discussion on the economic costs of terrorism see S. Brock Blomberg, Gregory D. Hess and Athanasios Orphanides, "The Macroeconomic Consequences of Terrorism," CESifo Working Paper No. 1151, March 2004. 24 Joint Economic Committee, "The Economic Cost of Terrorism," May 2002, p. 7. 25 See for example Gold (1999) for a good review of the literature and a discussion of defense as a public good. 26 There is however a strong case to be made that even defense could be better provided by the private sector. 27 Of course, saying that some areas of homeland security have public features and should probably be provided by the government does not exclude the possibility of inefficient and wasteful provision of that good. 28 An argument in favor of federalization of these investments is that because investing in protection is likely to displace a terror attack, the private sector or local and state governments might have an incentive to overspend on homeland security. 29 Bruce Schneier, Beyond Fear: Thinking Sensibly About Security in an Uncertain World, (New York: Copernicus Books, 2003), p. 33. 30 See James Buchanan and Gordon Tullock (1962), The Calculus of Consent, University of Michigan Press, Ann Harbor. 31 James Buchanan, Cost and Choice, An Inquiry in Economic Theory, Collected Works of James Buchanan Volume 6, (Indianapolis: Liberty Fund). 32 For a discussion about the economics of interest groups see MANCUR OLSON (1982), `The logic', in The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities, New Haven: Yale University Press, p. 17-35, Also see George J. Stigler (1974), `Free Riders and Collective Action: An Apendix to Theories of Economic Regulation', Bell Journal of Economics and Management Science, 5 (2), p. 359-65. Gary S. Becker (1983), `Theory of Competition Among Pressure Groups for Political Influence', Quarterly Journal of Economics, XCVIII (3), August, p. 371-400. For a good description of the theory of rent seeking see Gordon Tullock (1967), `The Welfare Costs of Tariffs, Monopolies, and Theft', Western Economics Journal, V, p. 224-32 and Robert Tollison (1982), `Rent Thinking: A Survey', Kylos, 35 (4), p. 575-601. 33 For discussion about the dynamic of pressure groups see Becker, G. (1983), "A Theory of Competition among Interest Groups for Political Influence," Quarterly Journal of Economics98, 371-400 and Becker, G. and C. Mulligan (1998), "Deadweight Costs and the Size of Government," NBER Working 36
Paper 6789. 34 For a discussion on pork Barrel Spending see for example Acemoglu, D. and J. Robinson (2001), "Inefficient Redistribution," American Political Science ReView 95, 649-61 and Baron, D. (1991), "Majoritarian Incentives, Pork Barrel Programs, and Procedural Control," American Journal of Political Science35, 57-90. See also Coate, S. and S. Morris (1995), "On the Form of transfers to Special Interests," Journal of political economy103, 1210-35 and Shepsle, K. and B. Weingast, (1981), "Political Preferences for the Pork Barrel: A Generalization," American Journal of Political Science 25, 96-112. 35 Grossman, G. M. and E. Helpman (1994), "Protection for Sale," American Economic Review 84, 833-50. 36 Timothy Besley and Stephen Coate (1999), "Centralized Versus Decentralized Provision of Local Public Good: A Political Economy Analysis," NBER Working Paper No. 7084. 37 See also, Stephen Coate (1997), "Distributive Policy Making as a Source of Inefficiency in Representative Democracies," Institute of Economic Research, University of Pennsylvania, Working Paper No. 97-041. 38 Department of Homeland Security, Budget in Brief, FY2006, p. 5. 39 Mickey McCarter, "Bush Signs Homeland Security Appropriations Bill," Congressional Quarterly, October 18, 2004. 40 Department of Homeland Security, Budget in Brief, FY2006, p. 3. 41 Department of Homeland Security, Budget in Brief, FY2006, p. 5. 42 Author's calculation based on The Budget of the United States Government, FY2006, Table S-5. 43 Most funding for homeland security is classified as discretionary spending and provided through appropriations. Mandatory spending finances some additional homeland security activities but at a much lower level ($2 billion in FY 2004 and roughly the same for FY2005 and FY2006). 44 The Budget of the United States Government, FY2006, Table S-5. 45 For details about these programs see Environmental Protection Agency's web site, http://www.epa.gov/ordnhsrc/ 46 For details about these programs see http://www.azonano.com/details.asp?ArticleID=302 and http://earth.nasa.gov/eseapps/theme9.htm 47 For more details about this program see http://www.homelandsecurity.org/journal/Interviews/displayInterview.asp?interview=5 48 For more details about USDA's homeland security activities see http://www.usda.gov/news/speeches/st28.htm 49 For details see http://www.dhs.gov/dhspublic/display?theme=27&content=775 50 The contact for this information was the Smithsonian Department of Budget and Planning. 51 For detailed examples of selected agencies' mismanagements see Chris Edwards, "Downsizing the Federal Government," Cato Institute Policy Analysis no. 515, June 2, 2004. 52 NASA, Columbia Accident Investigation Board, Vol. 1 (Washington: NASA, August 2003) and GAO, "Space Station: Actions Underway to Manage Costs but Significant Challenges Remain," GAO-02-735, July 17, 2002 and GAO, "Compliance With Cost Limits," GAO-04-648R, April 2, 2004. 53 GAO report cited in a Senate Committee on Government Affairs, Vol. 1, pp. 37-47 and GAO, "Major Management Challenges and Program Risks: Department of Energy," GAO-03-100, January 2003 54 Michael Grunwald and Mike Allen, "Corps of Engineers' Civilian Chief Ousted," Washington Post, March 7, 2002, p. A1. 55 Chris Edwards, "Downsizing the Federal Government," 2004, p. 18. 56 GAO, "Fiscal Year 2003 U.S. Government Financial Statement: Sustained Improvement in Federal Financial Management is Crucial to Addressing our Nation's Future Fiscal Challenges," March 2004, GAO-04-477T, and GAO, "Major Management Challenges and Program Risks: Department of Defense," GAO-03-98, January 2003. 57 GAO, "Major Management Challenges and Program Risks: Department of Commerce," GAO-03-97, January 2003 and GAO, "Major Management Challenges and Program Risks: U.S. Department of Agriculture," GAO-03-96, January 2003 58 The 9/11 Commission report, Final Report of the National Commission on Terrorist Attacks Upon the United States, Official Government Edition, (US. Government printing Office, Washington DC, November 2004), p. 421. 37
59 Alice Lipowicz, "Just in Time for Christmas: Homeland Security Department Gives $150 Million to Poor for Food and Shelter," Congressional Quarterly, December 11, 2003. See also Budget of the United States, Analytical Perspective, FY2004. 60 Data prior to FY2001 comes from Office of Management and Budget, "Securing the homeland, Strengthening the Nation," http://www.whitehouse.gov/homeland/homeland_security_book.pdf 61 Author's calculation based on Office of Management and Budget, Budget of the Government and MidSession review for FY2005, p.29. 62 Department of Homeland Security, Budget in Brief Fiscal Year 2006, p 15. 63 The Budget of the United States Government, Fiscal year 2006 , Table S-5. 64 Author's calculation based on The Budget of the United States Government, Fiscal year 2006 Appendix, Department of Homeland Security, Department of Justice, and Department of Health and Humane Services and Chairman Cox (2004), House Select Committee On Homeland Security, "An Analysis of First Responder Grant Funding," p. 25. 65 Shawn Reese, "FY2006 Appropriations for State and Local Homeland Security," Congressional Research Service, RS22050, February 14, 2005, p.1. http://www.ndu.edu/library/docs/crs/crs_rs22050_14feb05.pdf 66 House Select Committee On Homeland Security, "An Analysis of First Responder Grant Funding," p. 2. 67 The data on funding can be found in House Select Committee On Homeland Security, "An Analysis of First Responder Grant Funding," p. 25. 68 In FY2003 the amount covered by the formula was $2.066 billion. The $15.5 million is calculated with the following formula: $2.066.000*0.0075 = $15.49 million. 69 Author's calculation based on data collected from The Office of Domestic Preparedness, FY2003, State Homeland Security Grant Program (SHSGP), part I, http://www.ojp.usdoj.gov/odp/docs/ODPApplication.txt and Part II http://www.ojp.usdoj.gov/odp/docs/fy03shsgp2.pdf 70 Amanda Ripley, "How We Got Homeland Security Wrong," Time Magazine, Monday March 22, 2004. 71 The Insurance Services Office, "ISO continues to help you response to the Terrorism Insurrance Act of 2002," May 2003. For more detailed information see www.iso.com. 72 Author's calculation based The Office of Domestic Preparedness, FY2004, State Homeland Security Grant Program (SHSGP), part I, and Part II. 73 Congressional Quarterly, "Republican Cox Delivers Remarks at McGraw-Hill Homeland Security Summit," June 4, 2004. 74 House Select Committee On Homeland Security, "An Analysis of First Responder Grant Funding," p. 6. 75 James Jay Carafano, "Homeland Security Dollars and Sense #1: Current Spending Formulas Waste Aid to States," 2004. 76 House Select Committee On Homeland Security, "An Analysis of First Responder Grant Funding," p. 9. 77 Richard Skinner, Office of Inspector General, Department of Homeland Security, "Review of the Port Security Grant Program," OIG-05-10, January 2005. http://www.dhs.gov/interweb/assetlibrary/OIG_0510_Jan05.pdf 78 John Frittelli, "Maritime Security: Overview of Issues," Congressional Research Service, RS21079, February 24, 2003. http://www.boozman.house.gov/UploadedFiles/TRANS%20%20Maritime%20Security%20Overview%20of%20Issues.pdf 79 US Army Corps of Engineers' Navigation Data Center ranks U.S. ports by dollar value and tons of cargo imported and exported. See http://www.iwr.usace.army.mil/ndc. 80 John Frittelli, "Maritime Security: Overview of Issues," February 24, 2003. 81 John Frittelli, "Maritime Security: Overview of Issues," February 24, 2003. 82 Department of Homeland Security, Budget in Brief FY2004, p. 9. See also Department of Homeland Security, Press Release, "Department of Homeland Security Announces $49 Million in Grants to Secure America's Ports," September 13, 2004. 83 Office of Inspector General, January 2005, p. 4 and Department of Homeland Security, Press Release, "Department of Homeland Security Announces $49 Million in Grants to Secure America's Ports," September 13, 2004. 84 Department of Homeland Security, "Budget in Brief, FY2006," p. 40 and Department of Homeland Security, Press Release, "Department of Homeland Security Announces $49 Million in Grants to Secure 38
America's Ports," September 13, 2004. http://www.dhs.gov/dhspublic/display?theme=43&content=3996&print=true 85 John Frittelli, "Maritime Security: Overview of Issues," February 24, 2003. 86 Author's calculation based on tonnage data from the Army Corps of Engineers (2003 figures): http://www.iwr.usace.army.mil/ndc/wcsc/portton03.htm 87 Author's calculation based on tonnage data from the Army Corps of Engineers (2003 figures): http://www.iwr.usace.army.mil/ndc/wcsc/stateton03.htm 88 Office of Inspector General, January 2005, p. 4. 89 Office of Inspector General, January 2005, p. 17. 90 Office of Inspector General, January 2005, p. 30 91 Office of Inspector General, January 2005, p. 27. 92 Office of Inspector General, January 2005, p. 4. 93 Office of Inspector General, January 2005, p. 26. 94 Office of Inspector General, January 2005, p. 36. 95 Office of Inspector General, January 2005, pp. 24-25. 96 Office of Inspector General, January 2005, p. 33. 97 Office of Inspector General, January 2005, p. 33. 98 Office of Inspector General, January 2005, p. 34 99 Office of Inspector General, January 2005, p. 38 100 Office of Inspector General, January 2005, p. 17 101 James Carafano, "The FY2006 Budget request for Homeland Security: A Congressional Guide for Making America Safer," The Heritage Foundation, Backgrounder n. 1835, March 18, 2005, p. 8. 102 This is not surprising considering that, until recently, the planning to spend first responder grants often occurred after the grants were actually received. 103 Congressional Quarterly, "Transcript of Senate Budget Committee Hearing on FY2005 Homeland Security Department Budget," February 25, 2004. 104 House Select Committee On Homeland Security, "An Analysis of First Responder Grant Funding," p. 7. 105 Office of Inspector General, January 2005, p. 34. 106 Office of Inspector General, January 2005, p. 26. 107 Office of Inspector General, January 2005, p. 36. 108 Office of Inspector General, January 2005, p. 42. 109 House Select Committee On Homeland Security, "An Analysis of First Responder Grant Funding," p. 7, followed up with an interview of Mason County Sheriff on March 3rd. 110 Ibid, p. 7. 111 House Select Committee On Homeland Security, "An Analysis of First Responder Grant Funding," p. 8. 112 Ibid. 113 Alice Lipowicz, "For Michigan Volunteers, Free Training Course Proves Too Expensive," Congressional Quarterly, March 11, 2004. 114 Alice Lipowicz, "North Pole Receives Homeland Security Funds," Congressional Quarterly, October 22, 2002. 115 Congressional Quarterly, "Transcript of Senate Budget Committee Hearing on FY2005 Homeland Security Department Budget," February 25, 2004, p. 7. 116 Congressional Quarterly, "Transcript of Senate Budget Committee Hearing on FY2005 Homeland Security Department Budget," February 25, 2004. 117 "Anti-terrorism Funds Buy Wide Array of Pet Projects; Some of Region's Unused Million Could be Lost," Jo Becker, Sarah Cohen, and Spencer S. Hsu, The Washington Post, November 23, 2003, followed up with an interview of D.C. Deputy Mayor's office, March 2, 2005. 118 "Anti-terrorism Funds Buy Wide Array of Pet Projects; Some of Region's Unused Million Could be Lost," Jo Becker, Sarah Cohen, and Spencer S. Hsu, The Washington Post, November 23, 2003. 119 Office of Inspector General, Department of Homeland Security, "An Audit of Distributing and Spending `First Responder' Grant Funds," March 2004, http://www.dhs.gov/interweb/assetlibrary/OIG_ODP_03- 04.pdf 120 Office of Inspector General, January 2005, p. 34. 121 Kate O'Beirne, "Introducing Pork-Barrel Homeland Security," National Review, August 11, 2003. 39
122 For a brief history of the federal grant system see Congressional Research Service, "Federal Grants to State and Local Governments: A Brief History," Library of Congress, February 19, 2003. Also see General Accounting Office, "Federal Assistance: Grant System continues To Be Highly Fragmented," United States Accounting Office, GAO-03-718T, April 29, 2003. 123 The Budget of the United States Government, FY2006, Analytical Perspectives, p. 123. 124 GAO-03-718T, p. 4. 125 For a comprehensive criticism of the Federal Grant Programs see Chris Edwards, "Downsizing the Federal Government," Cato Institute Policy Analysis no. 515, June 2, 2004. 126 For an excellent discussion about federalism see Michael Greve, "Big Government Federalism," Federalist Outlook No. 3, March 1st, 2001. http://www.aei.org/publications/filter.,pubID.12576/pub_detail.asp 127 GAO-03-718T, p. 6. 128 The Budget of the United States Government, FY2005, Analytical Perspectives, p. 114 and p. 119. 129 Ibid, p. 9. 130 House Select Committee On Homeland Security, "An Analysis of First Responder Grant Funding," see Table p. 25. 131 The Budget of the United States Government, FY2006, Analytical Perspectives, p. 123. 132 GAO-03-718T, p. 13. 133 Ibid. p. 13. 134 Chris Edwards, "Downsizing the Federal Government," p. 32. 135 Ibid, p.32. 136 Congressional Quarterly, "Transcript of Senate Budget Committee Hearing on FY2005 Homeland Security Department Budget," February 25, 2004, p. 2 and p. 9. 137 The Council On Foreign Relations, Independent Task Force, Emergency responders: Drastically Underfunded, Dangerously Unprepared, 2003, p. 13. http://www.cfr.org/pdf/Responders_TF.pdf 138 Bruce Schneier, Beyond Fear: Thinking Sensibly About Security in an Uncertain World, (New York: Copernicus Books, 2003), p. 3 139 General Accounting Office, "Homeland Security A risk Management Approach Can Guide Preparedness Efforts," GAO-02-208T, October 31, 2001, p. 2. Also see "Combating Terrorism: Selected Challenges and related Recommendations," GAO-01-822 September 20, 2001. 140 Jeremy Torobin, "Preventing Terrorism Tops Cox's Agenda for New House Homeland Security Committee," Congressional Quarterly, Tuesday, February 11, 2003. 141 Ibid. 142 Mitt Romney, Testimony before the Committee on Governmental Affairs, U.S. Senate, May 5, 2003. http://www.senate.gov/~gov_affairs/051503romney.pdf 143 James Carafano, "Homeland Security Dollars and Sense #2: Misplaced Maritime Priorities," Webmemo #648, February 2005. 144 This of course does not mean that we think FEMA is doing an effective job. The media constantly reports about the mismagement of FEMA and its failure to deliver disaster relief. See for instance Washington Post, "Housing Problems Beset FEMA in Florida," Monday August 23 2004, p A 2. 145 House Select Committee On Homeland Security, "An Analysis of First Responder Grant Funding," p. 6. 146 All the criteria used are credible threat, presence of critical infrastructure, vulnerability, population, population density, law enforcement investigative and enforcement activity, and the existence of formal mutual aid agreements. Shawn Reese, "Fiscal year 2005 Homeland Security Grant Program: State Allocations and Issues for Congressional Oversight," CRS Report for Congress, RL32696, December 13, 2004, p. 4. 147 Amanda Ripley, "How We Got Homeland Security Wrong," Time Magazine, Monday March 22, 2004. 148 Ibid. 149 The list of all the cities can be found in Department of Homeland Security Office of Domestic Preparedness, "Fiscal year 2005 Homeland Security Grant Program, Program Guidelines and Application Kit," p. 3-7. http://www.ojp.usdoj.gov/odp/docs/fy05hsgp.pdf 150 Ibid. 151 The National Commission on Terrorist Attacks Upon the United States, The 9/11 Commission Report, (Washington: GPO, July 22 2004), p. 396. 40
152 Information on "The Faster and Smarter Funding for First Responders," HR. 3266, can be found at http://homelandsecurity.house.gov/release.cfm?id=216 153 Amanda Ripley, "How We Got Homeland Security Wrong," March, 2004, p. 5. 154 Alice Lipowicz, "First Responder Groups Endorse Risk-Based Grants Formula," Congressional Quarterly, October 22nd, 2004. 155 Alice Lipowicz, "First Responder Groups Endorse Risk-Based Grants Formula," Congressional Quarterly, October 22nd, 2004. 156 Budget of the United States FY2006, Appendix, p. 479. 157 Budget of the United States FY2006, Appendix, p. 478. 158 Jim Morris, "Chertoff Orders Thorough Review of the DHS structure and Operations," Congressional Quarterly, March 2nd, 2005. 159 Tim Starks, "Amendment on first responders Set up potential Fight with the White House," Congressional Quarterly, March 19, 2005. 160 Sean Madigan, "Senate Restores $855 Million in First Responder Funding," Congressional Quarterly, March 17 2005. 161 Jason Feifer, "Security Grants Buy Gym, Fire Equipment: Princeton Chief Says Fitness Saves Firefighters' lives," Sunday Telegram, October 17, 2004, p. A1. 162 Brian Bennett, "Chief in a Hurry," The Time Magazine, Web Exclusive, Wednesday March 23, 2005. 163 Sean Madigan, "Cash Act: More Changes Coming in First Responder Funding, DHS Official Says," Congressional Quarterly, March 18, 2005. 164 Ibid.. 165 Alice Lipowicz, "Apples to Oranges': State\ Assessments of Terror Threats Are a Study in Subjectivity," Congressional Quarterly, October 12, 2004. 166 Ibid.. 167 Senator McCain has been a strong critic of pork barrel spending over the years. For details about how to measure wasteful spending see Senator McCain "Pork Statement," http://mccain.senate.gov/index.cfm?fuseaction=NewsCenter.Pork 168 Tom Schatz, "Pigging Out At record levels," Citizens Against Government Waste Pig Book, Tuesday April 8, 2004. 169 For details about the items see Veronique de Rugy, "The Republican Spending Explosion," Cato Institute Briefing Paper no. 87, March 3, 2004. 170 Department of Homeland Security Appropriation Act of 2004, Public Law 108-90. 171 Citizens Against Government Waste, Pig Book, April 8, 2004. 172 Tim Starks, "Congress Overcomes Obstacles to Complete Homeland Spending Bill," Congressional Quarterly, October 15, 2004. 173 Ibid. 174 Ibid. 175 Bruce Schneier, Beyond Fear: Thinking Sensibly About Security in an Uncertain World, (New York: Copernicus Books, 2003), p. 40-41. 176 Caitlin Harrington (2004), "DHS Audit Found Significant Problems in Airport Security," Congressional Quarterly Homeland Security, Sept. 22. 177 Department of Homeland Security, Budget in Brief FY2006, p. 37 and Department of Homeland Security, Budget in Brief FY2004, p. 9. 178 Author's calculation based on Department of Homeland Security, Budget in Brief FY2006, p. 40. 179 Steve Miletich, Cheryl Phillips and Ken Armstrong, "Air Safety Hinges on Change of Course For Ailing Agency," Seattle Times, July 13, 2004, report that Rep. Peter DeFazio (D-Ore.) complains about the TSA's lack of resources. 180 Poole, Robert W. Jr. "Revisiting Federalized Passenger Screening." Reason Public Policy Institute Policy Study no. 298, August 2002. 181 Charles Mann, "Homeland Insecurity," The Atlantic Online, September 2002. 182 Steve Miletich, Cheryl Phillips and Ken Armstrong, "Air Safety Hinges on Change of Course For Ailing Agency," Seattle Times, July 13, 2004. 183 Ibid. 41
184 Fox Leslie Miller, "Transportation Security Agency is Coming Under GOP's Gun," The Seattle Times, June, 2004. 185 Jeremy Torobin, "Maloney Vows to Block Airports From Booting TSA Screeners," Congressional Quarterly, July 29, 2004. 186 Ibid. 187 Ibid. 188 General Accounting Office, "Aviation Security: Private Screening Contractors Have Little Flexibility to Implement Innovative Approaches," GAO-04-505T. 189 Ibid. 190 Tom Ramstatck, "Airport Screeners Perform Poorly," Washington Times, April 23, 2004, p. A1. 191 Zack Phillips, "TSA Interference Degraded Private Screener Performance, IG Says," Congressional Quarterly, October 12, 2004. 192 Robert Poole, "Statement Regarding the Appointment of Admiral James Loy as Head of the Transportation Security Administration," July 2003. 193 Ibid. 194 A good description of this program and the competitive grant system can be found at http://www.dot.gov/affairs/tsa0302.htm 195 For information about this program see Department of Homeland Security, "Secure Seas, Open Ports: Keeping Our Water Safe, Secure and Open for Business, June 2004. 196 Author's calculation based on The Budget of the United States Government, Fiscal year 2006 , Historical Tables and Congressional Budget Office, Budget and Economic Outlook: An Update, Table 1-2, September 2004. The FY2006 figure includes the $82 billion war supplemental. 197 Author's calculation based on The Budget of the United States Government, Fiscal year 2006 , Table S5, (Washington: Government printing Office, February 2005). Also, see Veronique de Rugy, "The Republican Spending Explosion," Cato Institute Briefing Paper no. 87, March 3, 2004. 198 Author's calculation based on The Budget of the United States Government, Fiscal year 2006 , Historical Tables. 199 Republican National Committee, 1996 GOP platform, www.rnc.org. 200 Ibid. 201 Chris Edwards and Tad DeHaven, "Farm Subsidies at Record Levels as Congress Considers New Farm Bill," Cato Institute Briefing Paper no. 70, October 18, 2001. 202 Department of Homeland Security Budget in Brief, FY2006, and Department of Homeland Security FY2004 Budget Fact Sheet, February 2003. http://www.dhs.gov/dhspublic/display?content=4243 203 George W. Bush, "Remarks by the President in Address to the Nation," June 2002, www.white house.gov/news/releases/2002/06/20020606-8.html. 42

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Title: Homeland Security Spending: What Are we spending the Money on
Author: AEI
Published: Thu Apr 7 14:08:53 2005
Pages: 44
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