State, local officials begin to question homeland security price tag
When the nation raised its terrorism alert level to Code Orange last February, a jittery St. Louis blew through $500,000 in the first week. Buying police overtime was the local-government version of the public's duct-tape frenzy.
Then, in the post-orange calm of early March, Samuel Simon, the director of public safety in St. Louis, took a look at his budget and gasped. To avoid drowning a second time in red ink, he bolstered his connections with his local intelligence sources so that he would be better able to assess whether the city was in real danger.
When Homeland Security Secretary Tom Ridge raised the threat level back to orange on the eve of war with Iraq, Simon responded by simply checking his local sources more frequently, not by loading up on police overtime. "I think it's a more fiscally responsible approach," he said. "Otherwise, we've got guys sitting around for days or weeks."
Simon is ahead of the curve in attempting to infuse cost-benefit realities into homeland-security policy. With the war in Iraq drawing to a close, the climbing-and perhaps limitless-price tag for homeland security has begun to prompt varying levels of cost-benefit soul-searching among local, state, and federal officials.
Yet most policy makers aren't yet ready to acknowledge that there's any limit on what the nation could rationally spend on trying to secure the home front. Cities that would make attractive targets complain that they're starving for federal help, and their leaders tend to be among those least inclined toward making cost-benefit analyses to determine what sort of "protective" efforts are worthwhile.
Asked whether San Francisco, which is spending $2.6 million a week on homeland security, had done any kind of cost-benefit analysis, P.J. Johnston, a spokesman for San Francisco Mayor Willie Brown, offered a disdainful no. He continued, "It is not an option to wait to see if something is going to happen to the Golden Gate Bridge. It is not an option to debate the seriousness of published threats to all three large Bay Area bridges."
At threat levels below orange, San Francisco's protocol for the bridges is to make random truck inspections. Orange means checking every truck. But, of course, a car bomb could be in a car. So, is checking trucks actually making bridges safer? "At the very least," Johnston contended, "it's having a psychological benefit." In other words, perhaps the city is only buying unwarranted peace of mind.
The U.S. Conference of Mayors estimates that cities spend a combined $70 million more on homeland security every week that they are at Code Orange than when the threat level is one shade down, Code Yellow. Hopeful that Congress will shovel more money in their direction, most states and localities are busily tallying the cost of weathering the war in Iraq at an orange level of alertness.
Some state-level homeland officials worry that some of their colleagues have quietly made unwise cost-benefit trade-offs. "I do hear a lot of candid acknowledgment from my counterparts," said Maj. Gen. Tim Lowenberg, who leads Washington state's homeland-security team, "that they do not take actions that would be prudent or they don't raise their state homeland-security threat level to the same level as the federal level, because of cost constraints."
Subscribing to the St. Louis model, the states of Washington and Virginia seem to be among the governments making the most thoughtful cost choices, based on intelligence-gathering. Lowenberg said that in 1999 Washington began ranking its vulnerabilities and recently completed the project. Those rankings provide a rational basis for determining how to allocate the state's homeland-security dollars. "Anyone who thinks you can put this together on a long weekend is delusional," he warned. Virginia is working with its local governments to assess vulnerabilities and to estimate how much a given precaution would reduce a particular vulnerability, said George Foresman, Virginia's homeland-security chief.
But if the threat of terrorism is here to stay, all policy makers will eventually have to evaluate what they're getting for their homeland-security dollar-and how that benefit compares with the benefit that would be realized by spending it instead on, say, education, or the environment-or by not collecting it from taxpayers in the first place. That debate will make its Washington, D.C., debut this summer when the Office of Management and Budget offers guidelines for evaluating the costs and benefits of homeland-security regulations. The General Accounting Office is also beginning to study cost-benefit analyses for homeland security, according to its chief economist, Scott Farrow.
Many members of Congress, especially the Democrats vying for their party's presidential nomination, are still clamoring for additional homeland money, without pausing to link their demands to specific security needs or goals. This pressure to spend, spend, spend, far beyond the approximately $4 billion that Congress approved a week ago is causing consternation among the Scrooges at OMB, where Director Mitchell E. Daniels Jr. recently declared, "There's not enough money in the galaxy to protect every inch of America from every threat by every fanatic."
But even OMB is just beginning to look closely at homeland-security spending. John Graham, the agency's cost-benefit czar, said that OMB's efforts are "at the early stages of public deliberation" and stressed that his office does not actually do cost-benefit analyses of programs, homeland or otherwise, but evaluates other agencies' efforts to make such analyses.
Graham acknowledged, however, that he will need to create to a cost-benefit model for homeland security, because a number of proposals that Congress has passed require a cost-benefit analysis. More broadly, he said, a homeland cost-benefit model would help ensure that policies that are effectively directed toward the greatest public good are able to shoulder aside those that aren't. "We have found at OMB, for example, that agencies have a tendency to submit proposals with homeland-security rationales even when the technical case is not that strong," he said. "As a country, we obviously do not have the resources to execute all of these policies, so informed choices have to be based, at least in part, on rough cost-benefit comparisons."
A cost-benefit model for homeland security must try to quantify how much a given step would reduce the probability of a terrorist attack or reduce the damage from an attack. On the cost side, Graham said, the price in dollars is just the beginning. There's also the price in such intangibles as civil liberties, freedom, and quality of life.
Contemplating cost-benefit analyses of homeland-security measures causes queasiness even in economists such as Graham, because it is so difficult. H. Keith Florig, a risk-management expert at Carnegie Mellon University, points to four big unknowns. The first is what he calls "the Jell-O problem." It's hard to measure whether reducing the security risk in one area, such as airports, reduces the nation's overall risk level, because terrorists tend to gravitate toward targets that are not well protected. "It's just like squishing Jell-O in your hand," he said.
Second, the risk of doing nothing is hard-if not impossible-to gauge. Third, how can the unquantifiable be measured? What's the cost of inconvenience or reduced liberty? Is it worth inconveniencing 40 million airline passengers for an hour to save one life-or 100 lives? Fourth, no one has yet bothered to assess what trade-offs most Americans would willingly make in the name of homeland security.
Outside of officialdom, academics have quietly begun working on measuring homeland security's costs and benefits. Elisabeth Pate-Cornell, who chairs the Department of Management Science and Engineering at Stanford University, has developed a model designed to calculate the probability of different kinds of attacks by various terrorist groups. She'll be in Washington next week to discuss her findings with the GAO.
Pate-Cornell looked at terrorists ranging from Al Qaeda to homegrown malcontents, and assessed each group's "supply chain"-weapons, money, communications, transportation, and skills. She also examined each group's objectives and capabilities, then assigned probabilities to the likelihood that they would attack various types of targets-from a Massachusetts water system to a military base in the Middle East. "I have to put myself in their shoes to see the probability of success," she said.
If academia's early studies are correct, the unhappy reality is that many homeland-security programs designed to save lives may simply not be worth their price-even if they are effective. Carnegie Mellon's Florig has been toiling away on an assessment of the costs and benefits of sanitizing the U.S. mail, for example. The 2001 anthrax attacks killed five people and sickened another 22. He estimates that sanitizing 200 billion pieces of mail a year would run about $700 million and would have to prevent 100 casualties per year to be cost-effective, when compared with other government programs designed to save lives. Among the costs, he listed: a 2 percent increase in postage costs, delayed mail delivery, and damaged mail. But he also noted that on the benefits side, policy makers have to factor in not only saved lives but also the tough-to-quantify benefit of reducing postal workers' fear, as well as that of other Americans.
Why has Washington been slow to embrace this emerging research? Politicians understandably feel pressure to keep doing Something-anything-in response to 9/11. And arguing for more money counts as doing something. But the societal costs of spending billions of taxpayer dollars unwisely-on the wrong priorities or in the wrong places-are high. And as Virginia's Foresman pointed out, "We could spend $9 billion a year for the next 10 years and be not much more secure than we are today."