9/11 and terrorism: Why does the government refuse to do a cost-benefit analysis on homeland security spending?

9/11 and terrorism: Why does the government refuse to do a cost-benefit analysis on homeland security spending?

9/11 and terrorism: Why does the government refuse to do a cost-benefit analysis on homeland security spending?

Who's winning, who's losing, and why.
Sept. 7 2011 12:10 PM

Does the United States Spend Too Much on Homeland Security?

The government refuses to subject homeland security to a cost-benefit analysis.

Read more from Slate's Sept. 11 anniversary coverage.

This is adapted from Mueller and Stewart's new Terror, Security, and Money: Balancing the Risks, Benefits, and Costs of Homeland Security. Check back tomorrow for a second excerpt about why the government always overestimates the risk of terrorism, and the day after for a final article on how there would need to be 1,667 Times Square-style attacks every year to justify current homeland security spending.

John Mueller and Mark Stewart. Click image to expand.
John Mueller and Mark Stewart

In seeking to evaluate the effectiveness of the massive increases in homeland security expenditures since the terrorist attacks of Sept. 11, 2001, the common and urgent query has been, "Are we safer?" This, however, is the wrong question. Of course we are "safer"—the posting of a single security guard at one building's entrance enhances safety, however microscopically. The correct question is, "Are the gains in security worth the funds expended?"

The key fact is this: At present rates (and including 9/11 in the count), the likelihood a resident of the United States will perish at the hands of a terrorist is 1 in 3.5 million per year. And the key question, one almost never broached, is this: How much should we be willing to pay to make that likelihood even lower?


We have, in fact, paid—or been willing to pay—a lot. In the years immediately following the terrorist attacks of Sept. 11, 2001 on Washington and New York, it was understandable that there was a tendency to fashion policy and to expend funds in haste and confusion, and maybe even hysteria, on homeland security. After all, intelligence was estimating at the time that there were as many as 5,000 al‑Qaeda operatives at large in the country, and as New York Mayor Rudy Giuliani reflected later, "Anybody, any one of these security experts, including myself, would have told you on September 11, 2001, we're looking at dozens and dozens and multi-years of attacks like this."

The intelligence claims and the anxieties of Giuliani and other "security experts" have clearly proved, putting it mildly, to be unjustified. In the frantic interim, however, the U.S. government increased its expenditures for dealing with terrorism massively. At the 10th anniversary of 9/11, federal expenditures on domestic homeland security have increased by some $360 billion over those in place in 2001. Moreover, federal national intelligence expenditures aimed at defeating terrorists at home and abroad have gone up by $110 billion, while state, local, and private sector expenditures have increased by $200 billion more. And the vast majority of this increase, of course, has been driven by much heightened fears of terrorism, not by growing concerns about other hazards.

Tallying all these expenditures and adding in opportunity costs—but leaving out the costs of the terrorism-related (or terrorism-determined) wars in Iraq and Afghanistan and quite a few other items that might be included—the increase in expenditures on domestic homeland security over the decade exceeds $1 trillion. See the following table.

The Trillion Dollar Table.

This has not been enough to move the country into bankruptcy, Osama Bin Laden's stated goal after 9/11, but it clearly adds up to real money, even by Washington standards.

In our book, we apply conventional cost-benefit and risk analytic approaches to this massive increase in expenditures in an effort to provide an answer to the key question. These approaches have been recommended for many years by the United States Office of Management and Budget, and they are routinely used by such agencies as the Nuclear Regulatory Commission, the Environmental Protection Agency, and the Federal Aviation Administration. In 2004 the 9/11 Commission specifically called on the government to apply these approaches to assess the risks and cost-effectiveness of security measures put in place to deal with terrorism. However, it appears that this simply has not been done.

Upon taking office in 2005, Department of Homeland Security Secretary Michael Chertoff did strongly advocate a risk-based approach, insisting that the department "must base its work on priorities driven by risk." Yet, a year later, when DHS expenditures had increased by some $135 billion beyond those already in place in 2001 and when the department had become the government's largest non-military bureaucracy, one of its senior economists wistfully noted, "We really don't know a whole lot about the overall costs and benefits of homeland security." By 2007, RAND President James Thomson was contending that most DHS programs are implemented, "with little or no evaluation" of their performance or effectiveness, and the agency "receives little analytical advice on issues of policy, program, and budget." And, after an exhaustive assessment, the Congressional Research Service concluded at the same time that DHS simply could not answer the "central question" about the "rate of return, as defined by quantifiable and empirical risk reductions" on its expenditure.