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

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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.

Indeed, at times DHS has ignored specific calls by other government agencies to conduct risk assessments. In 2010, the department began deploying full-body scanners at airports, a technology that will cost $1.2 billion per year. The Government Accountability Office specifically declared conducting a cost-benefit analysis of this new technology to be "important." As far as we can see, no such study was conducted. Or there was GAO's request that DHS conduct a full cost-benefit analysis of the extremely costly process of scanning 100 percent of U.S.-bound containers. To do such an analysis would require the dedicated work of a few skilled analysts for a few months or possibly a year. Yet, DHS replied that, although it agreed that such a study would help to "frame the discussion and better inform Congress," to actually carry it out "would place significant burdens on agency resources."

Clearly, DHS focuses all or almost all of its analyses on the contemplation of the consequences of a terrorist attack while substantially ignoring the equally important likelihood component of risk assessment as well as the key issue of risk reduction. Moreover, we have been able to find no reference whatever to the likelihood of a terrorist attack beyond rather vague references such as "high," "imminent," "dynamic," "persistent," and "emerging." In general, risk assessment seems to be simply a process of identifying a potential source of harm and then trying to do something about it without evaluating whether the new measures reduce risk sufficiently to justify their costs.

This conclusion was strongly supported by a 2010 report of the National Academy of Science. Requested by Congress to assess the activities of the Department of Homeland Security, a committee worked for nearly two years on the project and came up with some striking conclusions. Except for the analysis of natural disasters, the committee "did not find any DHS risk analysis capabilities and methods that are yet adequate for supporting DHS decision making," and observed that "little effective attention was paid to the features of the risk problem that are fundamental." Therefore, it concluded, "only low confidence should be placed in most of the risk analyses conducted by DHS." It also found an "absence of documentation" with the result that it sometimes had to infer details about DHS risk modeling. Indeed, in some cases it was unable to determine what problem was being addressed. It also found "a pattern" of "trusting numbers that are highly uncertain." And, concluded the committee rather glumly, "it is not yet clear that DHS is on a trajectory for development of methods and capability that is sufficient to ensure reliable risk analyses": although it found that "there are people at DHS who are aware of these current limitations," it "did not hear of efforts to remedy them."

Overall, it seems, security concerns that happen to rise to the top of the agenda are serviced without much in the way of full evaluation—security trumps economics, as one insider puts it—and such key issues as acceptable risk are rarely discussed while extravagant worst-case scenario thinking dominates, and frequently savagely distorts, the discussion.

It is clearly time to examine massive homeland security expenditures in a careful and systematic way, applying the kind of analytic risk management approaches emphasizing cost-benefit analysis and determinations of acceptable and unacceptable risks that are routinely required of other governmental agencies and that have been standard coin for policy decision-making for decades throughout the world when determining regulations even in such highly charged and politicized decisions as those regarding where to situate nuclear power plants, how to dispose of toxic waste, and how to control pollution—decisions that engage the interests and passions of multiple groups.

Political and emotional conditions do supply an understandable excuse for expending money, but not a valid one, and they do not relieve officials of the responsibility of seeking to expend public funds wisely. It is particularly important to do so with homeland security expenditures. They deal not with bridges to nowhere or with crop subsidies, but with public safety—or domestic tranquillity—the central, fundamental reason for the existence of government in the first place. It is imperative that decisions be made sensibly and responsibly in this area. To be irrational with your own money may be to be foolhardy, to give in to guilty pleasure, or to wallow in caprice. But to be irrational with other people's money, particularly where public safety is the issue, is to be irresponsible, to betray an essential trust. In the end, it becomes a dereliction of duty that cannot be justified by political pressure, bureaucratic constraints, or emotional drives.

Tomorrow: Why the government always overestimates the risk of terrorism.

John Mueller is a political scientist at Ohio State University and a senior fellow at the Cato Institute.

Mark G. Stewart is a civil engineer at the University of Newcastle in Australia and a visiting fellow at Cato. He is co-author of Terror, Security, and Money: Balancing the Risks, Benefits, and Costs of Homeland Security.

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