The Cut in Antiterrorism Grants to New York and Washington, D.C.--Posner

The Department of Homeland Security will be distributing some $700 million this coming year to American cities for antiterrorism measures. The amounts allocated to New York and Washington, which are generally regarded as the prime U.S. targets for a terrorist attack, are about 40 percent lower than the current year's allocations, and this has engendered indignation on the part of officials of those cities. Other large cities have seen their allocations cut sharply as well. In part the change in allocations is due to the fact that Congress cut the overall amount of money for this program, but in larger part it is because of a deliberate decision to shift money to smaller cities. Michael Chertoff, the Secretary of Homeland Security, defends the shift on two grounds: that the money should be used to build physical capacity to respond to terrorism rather than to fund recurring expenses such as salaries of emergency-response personnel, and that New York, Washington, and a few other major cities have received the lion's share of the grants since the beginning of the program because they are the prime targets but their urgent needs have been attended to and it is now time to attend to the needs of the lesser targets. The interesting policy questions are, first, should the federal government be making such grants to cities, and, second, what should be the basis for deciding how large a grant to make to each city? Taking the first question first, there is no doubt that the federal government and not just states and municipalities should spend money to protect the nation from terrorist attacks, since, as we know from the 9/11 attacks, an attack on a city (or on any other major target) has consequences far beyond the state in which the city is located. But should the government finance defensive measures by the cities or should it spend the money itself? The argument usually heard for the grant approach is that the locals know better their vulnerabilities and how best to reduce them. But the argument is weak because while the locals do know a great deal about the competence of their response personnel, they know little about terrorist threats--terrorist plans, methods, preferred targets, and so forth. Moreover, when a pot of federal money has to be divided up among state or local governments, pork-barrel politics are bound to distort the allocation. Concern with this problem led DHS to employ anonymous committees of local security and emergency-response officials to vet the grants, but partly because of their anonymity and partly because such officials are only quasi-professional, this version of peer review was not highly credible. Furthermore, the locals may use the federal money simply to replace the expenditures they would otherwise have made on antiterror measures. Suppose a city wants to spend $10 million on such measures and would spend it out of its own funds, but it gets a grant of $10 million from DHS. Then it may simply reallocate the $10 million in its own funds that it would have spent on such measures to some unrelated program. To the extent that such reallocations occur, the $700 million DHS program, with all its entailed paperwork, peer reviews, and political controversy, is not a security measure at all but just a general federal subsidy of local government. Notice, moreover, that the less of its own money the city spends, the less secure it is against terrorist attacks, and it can use the lack of security to argue for an increased federal grant next year! All this said, probably some sort of grant program makes sense simply because optimal antiterrorism measures require enlisting local facilities and personnel, and cities may underspend on these because the benefits will accrue in part, maybe major part, to other, perhaps far distant, cities; that is the externality point with which I began. I am puzzled why the program should favor communications equipment, computers, emergency vehicles, pathogen detectors, containment shields, and other capital goods over salaries; effective antiterrorism measures tend in fact to be labor-intensive. Becker, however, suggests an explanation in his comment. Moving to the second question, how should the amount received by each city be determined, one encounters baffling problems of measurement. Ideally, one would like the grant moneys to be allocated in such a way as to maximize the excess of benefits over costs. The costs are relatively straightforward, but the benefits are not. The benefits of an antiterrorism measure, for each potential target, depend on (1) the value of the target (not just in terms of financial loss, of course) to the United States, (2) the likelihood of its being attacked, (3) the likely damage to the target if it is attacked (which requires consideration of the range of possible attacks), and (4) the efficacy of a given measure to prevent the attack or reduce the damage caused by it. (2) and (3) are probably the most difficult to estimate accurately, because to do so would require extensive knowledge of the plans, resources, number, location, and motivations of potential terrorists. But (4) is very difficult too, because the effectiveness of increasing the number of policemen, or of installing surveillance cameras on every block, or of increasing the number of SWAT teams, or of taking other measures of prevention or response, is extremely difficult to assess in advance. About all that can be said with any confidence is that cities and other targets that are near the nation's borders (including coastlines) are probably more likely to be attacked than cities and other targets that are well inland, that larger cities are more likely to be attacked than smaller ones because the larger the city the easier it is for a terrorist to hide and move about in it without being noticed, that attacks on large cities are likely to kill more people and do more property damage than attacks on small ones, that among coastal cities New York and Washington probably are the prime targets because of their symbolic significance, but that to neglect the defense of the small inland cities would simply make them the prime targets, and that an attack on such a city might sow even greater fear nationwide than another attack on a large coastal city by making people feel that nowhere is safe. But no numbers can be attached to these probabilities. They belong to the realm of uncertainty rather than of risk, to borrow a useful distinction made by statisticians: risk can be quantified, uncertainty cannot be. This analysis suggests that more antiterrorism resources should indeed be allocated to the large coastal cities than to other potential targets, but that is the pattern even after the recent cuts. What seems indeterminate is the precise amount of money that should go to each city. That makes one wonder why DHS was willing to incur the political pain of drastically altering the existing grant pattern.

Comments

[N.E.Hatfield]

Watches, Agreed, but most of the resources (coal, oil, gas, minerals, food stuffs and the like) that are critical to the maintenance of life and the Nations daily operation and security are located in wild and wooly locations. Are these to be left open to perverted actions by international/domestic terrorists bent on the destruction of the Nation and its people?

[Nelson]

Should the federal government be making such grants to cities?I would argue no. The city knows how best to protect itself. The economic benefit of the city must be enough to offset the cost of protecting itself from attack. What we could do though is reduce federal taxes for everyone so that local governments could raise their taxes to build what they need (whether it be new roads and schools or increased anti-terrorism measures).

[N.E.Hatfield]

The City knows best? Then why did NYC &DC get hit in the first place. Or better yet New Orleans? ;)

[GRG]

I don't think in the case of international terrorism one can assume cities know best. Do police chiefs or mayors have access to CIA/FBI/Pentagon reports and intelligence? No. Do cities have access to the latest counter-terrorist software, hardware, communications, and other equipment? No.

There are certain issues where local control and local regulation should be implemented. Terrorism -- like diplomacy, the national currency, and national defense -- has to coordinated at a federal level.

[Nelson]

It's in the city's best interest to spend their own funds wisely, lets put it that way. Mayors and police chiefs *should* have access to Federal databases. Local governments can always ask for federal advice, but the idea is they're a lot closer to the problem and if they do spend money unwisely, at least it would be their money and not someone else's. Federal funds should be for shared or national resources such as shared computer data bases, naval patrols, CIA, FBI, etc... Local funds should be used for local projects, like building fences and beefing up local law enforcement.

[Maurits PINO]

Off topic:
In the Financial Times of Saturday 17 June there's a long and nice "lunch with the FT" interview with Gary Becker (p. W3).

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