Homeland Security: New Brookings Study Analyzes Bush Administration's Proposals, Recommends Additional Steps

Transcript

MR. ROBERT E. LITAN: We're going to go ahead and get started.

I want to welcome you all here. I'm Robert Litan, I'm the Vice President and Director of Economic Studies at Brookings and I'm pleased to welcome all of you here to a press briefing on a preliminary analysis entitled "Protecting the American Homeland" which Brookings is releasing today. There are seven co-authors, some of whom you will hear from shortly to briefly describe the document. But we are going to introduce the event today with two distinguished speakers who I'm going to introduce in a minute.

First a preliminary announcement that I've been told to provide. This event is being Webcast on the Internet. We're providing live streaming audio and video to all users who want to click on the Brookings home page which is wwww.brookings.edu, and a full video of this event will be on our archives.

With that being said it is my privilege to begin today by introducing Senator Fred Thompson. He's very well known to people in this audience and to Washington and to America. He's had a distinguished career in the movies; a distinguished career in the Senate. He was elected to the Senate in 1996 after serving as an appointment in 1994. Excuse me. He was elected in 1994, excuse me. And reelected in '96. He has been a member of three powerful committees—the Senate Committee on Finance; the Senate Select Committee on Intelligence; and for a period of time he was Chairman of the Senate Committee on Governmental Affairs where he still sits, where he is still active on the issues that we're going to be discussing today.

I personally am glad to have Senator Thompson here because he's been a friend of Brookings. He's been in a number of events here on regulatory issues. So it is a pleasure to have you, Senator Thompson, to come here today.

We're going to then have Representative Jane Harman who is going to be introduced by my colleague Jim Steinberg who is Vice President and Director of Foreign Policy here at Brookings.

But first, Senator Thompson. We're glad to have you here.

SENATOR FRED THOMPSON: Thank you very much. Bob, thank you very much.

Yes, I've made that transition from Chairman to Ranking Member. We refer to that as the "recent unpleasantness", but be that as it may it's a pleasure to be here again with my friend Jane. We're doing the brother/sister act again that we may take on the road after this is over with.

But I'm delighted to be here because I'm delighted with what's happening.

We clearly for the first time in a long time I think in this country have a consensus on something that is very important. It's taken us a long time to get to where we are, however. We have had numerous reports, we've had numerous studies, numerous commissions, numerous hearings. The Governmental Affairs Committee has had ten hearings on the subject of homeland security and related subjects since September 11th. We've had numerous GAO reports. During that time we've spent fairly small amounts of money as a nation on this subject, but after September 11 of course all that changed. We went from a situation where we had done not enough to a situation where we're trying to do an awful lot of things in quite a bit of a hurry.

As the GAO pointed out to us recently, it took the drug policy folks about ten years to get their strategy to where it is today. We don't have that amount of time and no one is suggesting that we take that amount of time but it just gives some idea as to how rapidly this thing has developed.

So we find ourselves now in a situation where the Administration has got to react promptly. They've come forth with a budget, with a limited amount of time to really analyze the needs, and I think they'd be the first to tell you that this is a first step in a long road. They've had to come with something of an organizational structure to get things going, and now we have the debate on the Hill as to what that Executive Branch organizational structure ought to be like, whether or not we ought to go to a lead agency concept, whether or not we ought to go to a coordinator concept which is more or less what the Bush people are doing right now. We're debating and considering to what extent agencies should be consolidated and all of that we're doing without a game plan, without a national strategic plan. We, somewhat of necessity, have gotten the cart before the horse. That plan, of course, is due from the Administration on the 1st of July.

That's the background and the framework in which we find this Brookings Report today. This report that I've had a chance to read parts of and skim the rest of it, but it's obviously a major contribution and should be a major contribution, a major assist to the Administration as they come forth with this strategic plan. I'm sure that it will be given substantial consideration there as we go forward.

Suffice it to say I think that its approach concerning putting the priority on border security, putting a priority on preference, stating very clearly that we have to prioritize the risks, call it a cost/benefit analysis some may be tempted to do, but whatever the label the fact of the matter is that we have to rank risk in terms of severity and we also have to rank them in terms of likelihood and marry those two things together to decide how we're going to spend the resources that we have to devote to it.

Those resources, as we know, are not unlimited. We've learned in this country we can't have guns and butter and this is going to be part of the national overall debate for a long time to come. Our writers think that we need to devote even more resources to this than the Administration has put forth in its first budget. So let the debate and the discussion on that begin.

So I want to thank Brookings for this major contribution and look forward to the discussion here today. Thank you very much.

[Applause]

MR. JAMES B. STEINBERG: Thank you, Senator. It's now my privilege to introduce a good friend, colleague, and certainly a great friend of Brookings, Congresswoman Jane Harman from the South Bay area in Los Angeles, California.

Congressman Harman has been one of the leading voices over the last decade on national security issues in the Congress, and particularly, and well before September 11th, on the issue of terrorism and homeland security. She has been a participant in a number of the important studies that pre-dated September 11th and gave the kinds of warnings and alerts that more people should have heeded.

Since that time she has become the ranking Democrat on the Special Subcommittee on Terrorism and Homeland Security that was set up as part of the House Permanent Select Committee on Intelligence where she's played an important leadership role. She's now working on a study that's going to help us think about the broader problems of intelligence and dealing with terrorism. She's been the author of important legislation that has raised a number of questions about how we should organize ourselves for dealing with the problem of homeland security and particularly for her advocacy of a national strategy which I think has been one of the most important contributions to the debate.

Congressman Harman was elected to Congress first in 1992. She served from 1992 to 1998 and then was recently returned to Congress. She's been an important voice in a number of issues. She also serves on the House Energy and Commerce Committee.

So it's a privilege for me today to welcome Congresswoman Jane Harman.

REP. JANE HARMAN: Good morning, everyone.

As Fred was talking I couldn't help but think that 30 years ago when he and I were both Senate staffers—but who's counting—I would come down to Brookings with the Senator I worked for, John Tunney of California, and be briefed by Charlie Shultz and Alice Rivlin and others on the issues of the day. And I just want to commend the Brookings family here, I'm not sure that's everyone in the audience but certainly many of you, for helping us out over the years. It has made a huge difference to Congress and to the various Administrations certainly since.

And Jim, I thank you for that introduction. I should say about you that you're somebody I have relied on over the years. You may look very young but you're quite old, I just found that out. [Laughter] And it has made a big difference to me to be a partner of yours and to my brother Fred—Hey, we go way back. Some would say that being a Senate staffer is much better than being a member of the Senate or the House because you don't have to raise money.

Anyway, on with this.

As we speak this morning the Senate Appropriations Committee I am told is holding another hearing on homeland security. The witnesses today are Paul O'Neill, Colin Powell, Ann Veneman, and they're talking about what their agencies contribute or could contribute to homeland security.

As Fred said, there have been a number of hearings. I think the best of them has been by his committee, the Thompson/Lieberman committee, or I guess now, in the sad turn of events he described, the Lieberman/Thompson committee on how to reorganize for homeland security. But the point I'm trying to make is that Congress continues to address this issue as the Administration does in piecemeal fashion. This is the problem.

I've been asked over and over and over again, what do we need to do about homeland security? My answer is first we need to organize, second we need to organized, and third we need to organize. We have improvement in many areas but a piecemeal strategy does not a homeland security strategy make. We will continue to be vulnerable, particularly in those gaps that we are not filling because we are not dealing with this in an organized, systemic way. That is the advantage of this new thing.

I commend Brookings and the authors of this report for putting a strategy around these issues. This report should have been written, I believe, by Tom Ridge's office six months ago. Maybe something like it will be written in a couple of months. July 1st I hear is the due date although that seems to be sliding around a bit by his office.

But my point is that the Administration owes us a strategy. It gave us a budget before we had a strategy. It gave us a color coding system before we had a strategy. It's given us some things that I think are admirable like a smarter border system with Canada and some other improvements before we had a strategy. But as Fred said, until we have a strategy there is no sensible way to put our resources, which are not infinite, against our biggest vulnerabilities and then make sure that all levels of government follow the strategy.

Many of you have seen me hold up what I call the Where's Waldo chart, that chart with 125 federal boxes that Governor Ridge actually said was the organization chart for his office. That chart was, you should know, drawn up by the Chief Counsel of the House Intelligence Subcommittee on Terrorism and Homeland Security on which I serve, it has the little copyright in the corner, so he has our subcommittee at the same level as Ridge, I want you to know. This is a very smart fellow. [Laughter]

Anyway, how can that be the organization chart for Governor Ridge? How can that be the organization chart for anybody? It's the disorganization chart. And the point we've all been making, or some of us that is, both inside and outside Congress, is that we need a strategy and we need it now.

On the strategy that's in this report, I have much positive to say and like Fred I haven't read the report as carefully as I'd like to but I've certainly noticed some of its big focuses.

I agree with you that absent a strategy we're going to fight the last war, and we are fighting the last war. That's what has happened in our defense budget over time. We still fight the last war. Now we're going to fight the next war and the last war simultaneously. I'm not sure that will make a sensible defense budget either.

But here most of our effort seems to be going into making sure that what happened on September 11, precisely what happened on September 11, won't happen again. While it could happen again, I'm not sure, and I think Fred's comments went in the same direction, that this is, and I know Brookings' do, that this is exactly where we should be focusing for the future. In fact I would predict that the way the Transportation Security Agency is going, needing 70,000 people and a budget of $6 billion and climbing, is the wrong way. I think we're building an analog agency. We are throwing a huge amount of bodies at a problem. We need to throw smarter technology and smarter systems at a problem, not a huge number of bodies. I think that Congress will finally get indigestion, and I'm not at all sure that when we're done with this exercise we will have achieved the levels of security we're trying to achieve.

So my point is again, consistent with Brookings, that we're fighting the last war and we need a strategy to point us in better directions.

And I agree with Brookings that some of those better directions are the nuclear threat and the bioterrorism threat. Is it not that the Ridge office isn't looking at these, but it is a strategy that starts with the threat assessment, putting resources against the biggest vulnerabilities and then figuring out how all agencies of government at every level will follow the program is needed to make sure that we are as prepared as we can be for a nuclear/bioterrorism threat.

There is a way to look at this that we might consider, and it is consistent with what Brookings is saying but not exactly what Brookings is saying. But as we move forward we might think about stopping the terrorists we know about. We're kind of focused on that. Stopping the terrorists we don't know about. And then stopping people from wanting to become terrorists. This is a very big piece and it's not really addressed in this report but it is something we will have to work on. Even commentators on the current problems in the Middle East which are huge and enormously difficult to solve, are making the point that even if Israel is successful in eliminating the top levels of Hammas and Hezbollah and the other terrorist infrastructure in the Palestinian Authority, new terrorists are going to grow from the young kids in the region.

So we have long term work to go, not just short term work to go. But nonetheless we have good information here about the number of fatalities, the cost to society and so forth from various threats and this will help us as we really think about where our biggest vulnerabilities are.

A few comments on organization and budget and then I want you to hear from, obviously, and you're all waiting to hear from the folks who wrote something very important about both of these things.

But on organization, as Fred mentioned, in Congress this Thursday we are planning to introduce, or I guess you could say reintroduce on a bipartisan, bicameral basis several bills that have been pending for awhile. I would start with the House, of course.

The Thornberry Bill, which is also the Lieberman Bill, to reorganize our border agencies into an expanded border/consequence management agency, sometimes called Super FEMA, FEMA on steroids, but whatever. A bigger agency idea.

Then secondly, the other idea that I would call Gibbons/Harman, some would call Graham. I'm not sure whether Fred's on these bills or not, but he should be. Anyway, on Thursday a number of Senators and a number of House members together will introduce in both chambers a combined bill that codifies and expands the functions of the Ridge office in the White House, and then also codifies this new agency and puts them together. Our point being that we do need one agency in government for homeland security, but we also need an architect or an orchestra conductor in the White House supervising the activities of the whole government, not just the activities on this one agency. So that combined bill will be introduced Thursday.

Also a bill that was introduced unanimously by the House Intelligence Committee a few months back on information sharing is in good shape now and we think will pass on the House consent calendar in the next few weeks. It hasn't moved yet in the Senate but it has the support of the Ridge office so we're very hopeful that quite soon there will be a law that requires a program to be developed in six months to share information between the federal and local levels of government, in both directions, stripping out any classified sources and methods so that the information can go to those who need it quickly. This is a form of information sharing that the United States does with NATO, with Interpol. It is the kind of thing we think that will give some real heft to this color coding system because now you will not only know that today is yellow, but you will know what you're supposed to do about the fact that today is yellow or whatever. Hopefully tomorrow won't be red.

Budget. The Ridge, Governor Ridge or the Administration is asking for close to $38 billion in the 2003 budget for homeland security. There are some broad categories spelled out, but no one is showing up to justify that budget. This has caused a big fuss in Congress.

I think the right answer there is to give statutory authority to Governor Ridge, make him a Cabinet Secretary, give him budgetary authority and then have him testify in the normal course. The right answer is not to subpoena an aide to the President. So hopefully we solve this problem by doing the right thing by the Ridge office.

At any rate until we have that happen there is this huge potential amount of money that I believe could easily be reprogrammed or spent wrong. Having maximum homeland security in West Virginia will not protect the entire country and I don't think anyone has missed that. [Laughter} And West Virginia isn't even Tennessee, [Laughter]

So the right idea is to get a confirmed Cabinet Secretary up to justify how this money should be spent consistent with a strategy which hopefully will exist any time, and an even better idea is to review carefully the budget numbers in this report which are higher and see whether this might be a more carefully drawn budget. I'm not recommending spending more money if we don't need to, but I'm recommending spending the right amount of money and spending it consistent with our strategy.

A final point, Governor Ridge is a talented man. He comes with a great resume and an incredibly close relationship with the Commander in Chief of the free world. These are good things to come with. He also is a former member of Congress with good relationships on the Hill in both parties. But that is not enough to make him successful at the job he has. He will not be successful at that job until he has the tools.

Every day he shows up for work he loses power because we haven't given him the tools to get his job done. I am hopeful that Congress will finally persuade this Administration that the concept it had for Ridge was inadequate and that in the aerosolized turf wars of the present no one can succeed without statutory and budgetary authority.

A final point is that there is no more important issue than this issue. We are looking in the caves in Afghanistan. We are certainly working on the Middle East problem. But to Americans who have enjoyed a way of life for 225 years, our way of life is at stake if we don't protect our homeland.

So I would hope that building on a lot of the good information in this report and continuing in the fine, superb, helpful way that Brookings does, that Brookings will make a major contribution to our national and homeland security by getting this report out, by helping those of us in Congress who are working on this to pass the right statutes now to give our homeland security functions some real opportunity, and by pushing for a well funded and appropriate budget so that by this time next year we can have a little celebration around here and think gee, we did identify the highest priorities, we did put the resources against them, and we are much safer than we are today.

Thank you very much.

MR. STEINBERG: Thank you both for those wonderful introductory remarks.

We're now going to turn to a brief presentation of the study itself and I will give a few opening and overview remarks and then we'll turn to some of the more important conclusions in the report itself.

I think it's very helpful as you think about what we're going to talk about today to put this in a bit of context. After all, homeland security is part of our broader national security effort. I think if you look at the evolution of our broader national security strategy it helps you begin to think about how we try to think about the problem of homeland security.

For those of you who follow the defense and national security discussions, last year in Secretary Rumsfeld's Quadrennial Defense Review, Secretary Rumsfeld raised a fundamental question about how to think about organizing our strategy for national security. He argued in the QDR that with the end of the Cold War and the disappearance of a sort of primary state-based threat to U.S. security that we had to rethink about how we thought about the challenges.

In particular, he argued that we needed to move away from a threat-based approach to developing our national capabilities and our national military strategy to one that he called a capabilities-based approach. He argued that given the uncertainty about the nature of our adversaries and the nature of our threats and particularly with the rise of non-state actors and asymmetrical threats, that it was simply no longer possible to develop specific scenarios in which we could put in effect all our eggs in that basket. But rather we needed to think about the ranges of capabilities that we needed given the uncertainty.

And the overall approach that we have advocated in this study for thinking about homeland security very much follows that basic concept.

It's certainly true that we know of very specific threats out in the world to us, both threats from states that might want to attack our homeland and threats from non-state actors. But we also know that more than these specific threats we do face great uncertainty. That even among the actors who may wish to do us harm such as terrorist groups, that the nature of the threats that they would like to carry out, the objects, the targets of asymmetric threats in terrorism are quite difficult to know in advance. And that while we obviously ought to put what effort we can into identifying specific threats, whether they come from states or non-state actors, and try to discern what they may have as their primary objects or targets that they might try to achieve, that that simply is not going to be sufficient to give us the level of security that we need, and therefore we need to go beyond looking at and trying to diagnose specific threats to a broader architecture that can deal with this problem of uncertainty.

Our study attempts to try to lay out that architecture and then begin to develop specific recommendations within the architecture.

One of the things that goes with a recognition of the problem of uncertainty is that it is difficult to know exactly when and where a terrorist or a state may try to attack us and therefore we have to try to build a strategy that takes into account that uncertainty.

It means in particular that while we must look at the question of our vulnerabilities we know that the highest payoff in terms of our resources will come from efforts that in effect prevent the malefactors from undertaking their attacks in the first place. So our strategy in the first instance puts its highest priority on two aspects of homeland security. That is first perimeter defense which is designed to keep individuals or groups out of the United States so that they are not able to harm us, and also to keep dangerous materials which could be the methods of attack out of the United States.

But recognizing that that of course will not be perfect in all cases and also recognizing that sometimes threats will come from within the United States, the second highest priority is on the area of prevention. That is trying to identify actors in the United States who may seek to do us harm and also to secure the materials that they may try to use to conduct their attack.

That strategy, trying to in effect interdict attacks before they become, has the highest payoff because we don't need to know in advance what the targets are. But we also recognize that that's not going to succeed in every case. That we are not going to have the intelligence that we need in every case to either prevent terrorists from entering the United States or to identify them within the United States before they act.

Therefore we do need to address the question of vulnerabilities of key targets. But as you've heard from the discussion up until now, we also recognize that it is impossible to try to defend every site, and that there's a fundamental problem in the area of protection which is that too often the effort to protect one side may simply lead to the displacement of that attack to another side. In effect, to the extent the terrorists can see what we're doing and where we're investing resources, they may simply say they can see where not to go and therefore know where to go, and you run the risk of the extreme that a very substantial investment of resources could go to provide essentially no additional protection.

So our study tries to provide a methodology for thinking about how we deal with the problem of protecting key sites, both identifying what are the key national interests that we're trying to protect and how we should go about ranking them. We'll have a discussion from our authors about that methodology.

The fourth component of course recognizes that even these three tiers of our strategy are not always going to succeed and therefore we need a strategy to try to limit the consequences of attack should it take place. This element typically known as consequence management is the fourth tier of our overall strategy.

That's the architecture we've tried to lay out and our authors are going to discuss this in detail, some of the elements of it.

We also recognize as Senator Thompson and Congresswoman Harman have made very clear, that even with this architecture you still need to actually carry out the plan, so there are key questions the study tries to address as to who should conduct which aspects of the homeland security effort, who should pay for them, and how should we organize ourselves to try to carry out this overall architecture?

So let me turn now to my colleagues and authors of this report. We're going to begin with Mike O'Hanlon who will talk about the elements of the strategy and the architecture that I've laid out, and then we'll turn to Peter Orszag who will talk about the issue of how to think about who pays, and Ivo Daalder on the question of how to organize ourselves for homeland security.

Mike.

MR. MICHAEL E. O'HANLON: Thanks, Jim. Thanks everyone for coming. I'd also like to recognize all the people at Brookings who helped us a great deal with this report including Aaron Moburg-Jones and Janet Walker and Roy Nash and many other people. It was a real institution effort to get it out fast.

I would like to again reiterate the basic architecture that Jim has mentioned. We think about four broad tiers for homeland security. Border security being the first step, and this is very consistent with the main theme in the Bush Administration budget. But then a second category we call domestic prevention, trying to figure out what people may be up to inside the United States, people that we should be worried about, people who may already be suspicious characters, making sure the information we have on these people is quickly and widely distributed to those who can do something about it.

We've all heard talk a great deal about the number of individuals in the September 11 attacks who should not have been here. We should have had some sense of their potential mal-intent and the information was just not correctly shared between different agencies. There's been a lot of talk about this. The Bush Administration has begun to propose some initiatives in this area but it only has a few hundred million dollars in its 2003 budget for the overall category of using information technology to improve homeland security.

And just to be very quick and give you a sense of where we go with this, we think that on the order of several billion dollars would be needed for the necessary investments in hardware and software to link various federal agencies, state and local agencies, and we're also happy to talk about some of the civil liberties issues that are involved in this. We think they can be handled in a way that would allow us to be much more vigilant and vigorous about how we use this information to pursue people who shouldn't be here in the first place.

So prevention here at home is a critical element. And it doesn't just involve going after the individuals, it also involves trying to make sure they don't get their hands on dangerous materials. So we think there has to be a much greater sense of security for hazardous materials, biological agents, a number of other dangerous kinds of potential weaponry that could get into the hands of these people if we don't do a better job of securing it.

Again, as Congresswoman Harman mentioned and Senator Thompson, there have been some steps in these directions but we think they have not yet been systematic, they've been somewhat scatter shot. We need to try to develop a broader strategy for thinking across the wide array of potential weapons people could get their hands on. So the second tier is domestic prevention.

The third tier is site defense, trying to worry about where you are most vulnerable, where many hundreds or thousands of Americans could be killed, where billions, tens of billions or hundreds of billions of dollars in economic damage could result from attacks against specific targets. And here we have to do our very best to protect those targets.

Again, as Congresswoman Harman mentioned, we've done a pretty good job of thinking about past modus operandi of terrorists—September 11th, anthrax, conventional attacks against buildings, conventional attacks against airplanes. We've thought a lot about those things and about how to prevent those. I'm not sure we've gotten to 100 percent security, but we've made a lot of progress.

What about other potential attacks? Other potential means of attack? We don't think we've quite systematically thought this through and I'm going to give you a couple of scenarios in just a second where I think we could do better. So that's the third tier, is protecting individual sites and infrastructure in the United States.

The fourth tier, as Jim mentioned, is consequence management, knowing in advance you're not always going to succeed in stopping attacks, how do you mitigate the effects of those attacks? Here we think the Bush Administration is doing a pretty good job. It has made the basic concept of consequence management and helping first responders prepare more effectively for their job, a key priority in his budget.

So on the first and the last of these four tiers we think the Bush Administration budget is fairly good and fairly similar to the plan that we lay out. But on the second and third, the domestic prevention and the protection of key sites and key vulnerabilities here at home, we do not think the effort has been systematic. There have been a lot of individually good ingredients, but not yet a broader strategy.

Again, one more broad theme, we do not have too many areas where we criticize as excessive the spending levels proposed by the Bush Administration. We think the $38 billion, most of that money is pretty well justified. We just see a need for a little more and to make these efforts in tiers two and three more systematic. More efforts towards domestic prevention, more efforts towards protecting sites here at home.

So that's the broad framework, and my colleagues Peter and Ivo will continue to talk about these I know as we will in the Q&A. But let me now give you three or four very specific kinds of threats that we believe we've been able to identify, or three or four specific kinds of actions that we think are necessary that our framework has led us to, and then I will wrap up and try to keep this moving quickly since we just have about an hour or so.

One area, again, Jim mentioned it, I mentioned it already it's the broad issue of information technology and the way in which you use this in a preventive strategy. And also to keep bad people out of the country before they get in. So it has to do with your first two tiers—border security and domestic prevention.

The broad concept here would simply be if you look at large government agencies or large national networks that have developed real time information technology architectures, they have typically spent one to five billion dollars to do this. And money is not the only issue here clearly, but it's one key issue. For one individual national architecture, whether it's an IRS modernization scheme or something along these lines, some of what many of the large private companies have done in the United States, credit card companies and so forth. When you modernize a large national information technology system you often have to spend a few billion dollars to get it right. What we're seeing so far out of the Bush budget is a total of $700 million in the 2003 proposal for all information technology efforts across the entire country, preventive as well as defensive or protective. So this is simply not enough effort.

I don't claim to have a detailed proposal for just what we do with each and every agency, but we need to do better with Customs, we need to do better with FAA, INS, FBI, and I think we need to use state and local law enforcement in a real time information network as well. This raises a lot of questions people have been discussing recently about to what extent can you involve the state and local officials without causing civil liberty issues, without causing problems for policing at the local level. Police are worried that if they have to, if immigrants and aliens view them as the adversary who are essentially helping the INS do its job there will be less cooperation at the local law enforcement level so there are some real problems associated with this but on balance I think we have to be more assertive about sharing information in real time.

To give one example, one image, I sort of think there should be a modern computer in most patrol cars around the country hooked into federal databases and working in quite rapid, real time kind of manner to get information on terrorist suspects. That's just one issue. My colleagues know a good deal more about this than I do so I'll just tick that off.

A second issue is the way in which cargo comes into the United States. This may be our single greatest vulnerability that we have not yet made much progress towards addressing in this country. We all have heard some talk and Congresswoman Harman mentioned the idea of better cooperation with Canada on transit of people and of goods. But this is just the beginning and it has to be much mores systematic and much more global. A former Coast Guard officer, Steven Flynn, has written about this in Foreign Affairs and elsewhere. The basic idea in a nutshell, right now we're inspecting two or three percent of all the container ships coming into the United States. That means that if you are a terrorist and you want to get hazardous material into this country you have a very reliable way to do so. Stick it in a box in a container, get it onto a ship in a foreign port, bring it into the United States, figure out how you can get to that box for unloading purposes later on, and be pretty confident that no one else is ever going to look at it throughout the entire transit of that merchandise into this country. It's simply not good enough. We have to do much better.

Inspecting 100 percent of all goods is unrealistic and if we tried to do it with the current system we would largely bring the economy to a standstill. Imagine the queues comic into Long Beach or Detroit if we tried to inspect 40 or 50 times as much cargo as we're inspecting today. So you can't do it that way.

What you've got to do is use information technology and use international cooperation to try to inspect goods and monitor loading of goods when they're being put into ships in the foreign port before they even come to the United States. There has to be a more internationalized system. The Coast Guard has some interesting ideas on how to do this sort of thing because they have worked on port safety after the Exxon Valdez experience, they have worked a great deal on figuring out how to make sure people comply with safety standards. We can now try to demand similar cooperation on security standards. If you are a foreign company or a foreign port and you want to do business with the United States, you've got to do a lot to inspect goods as they're being loaded into containers in your port and to provide security for your port so that people who don't belong there can't get in. A lot of the inspection has to happen at that end, and largely by foreign governments and by the private sector.

Coast Guard and Customs should be more in the business of spot checking, of creating databases so we know who's cooperating and who's not, making sure we inspect those who are not cooperating, or potentially even turn them away from doing business with our ports to the extent that there is continued concern about goods being smuggled into this country.

So certainly if you're worried about chemical weapons, if you're worried about large conventional explosives, a nuclear device, a radiological bomb, it's the cargo ship that's the big worry in my judgment and we're not doing nearly enough. So we proposed the kinds of investment in databases, the kinds of proposals that would be needed to do this cooperation with foreign governments, modest increases in the staffing of Customs and Coast Guard. These are the sorts of things we would propose.

And by the way, our proposal for information technology and prevention would also require an increase in staffing at the FBI. But largely along the lines of 5,000 people, 10,000 people. These are the sorts of numbers that we think are necessary. Not astronomical increases. Doing things differently and doing things smarter as well as just doing more of these things. It has to be a big part of the solution.

Just two more areas where I want to try to scare you before turning things over to Peter and Ivo and then I'll be done. Two more threats we really haven't done enough about in this country. One would be hazardous materials being shipped around the nation. Now we've all read in this area about Route 110 by the Pentagon being limited in its access for certain kinds of trucks that may be carrying hazardous or explosive materials. Given the proximity to the Pentagon people thought it wasn't that prudent to have some of this truck traffic on that road. There's been a big debate about that.

Why should that kind of a debate be confined to the concern about the Pentagon? We have population centers around this country where trucks carrying very toxic chemicals are traveling all the time. We saw a very miniaturized version of this problem yesterday on the Beltway in the Washington area with a truck with chlorine gas out in the northern vicinity around Maryland having an accident. If you did this kind of a thing deliberately, if you released toxic gas deliberately in a major metropolitan area you could kill thousands of people, maybe even more.

And if you got access to a chemical plant in the United States and you were able to cause an explosion along the liens of the Bopal, India accident of 1984, but if you were able to do this deliberately with the right kind of plant you could kill many thousands if not even tens of thousands of people.

I'm not sure how to evaluate the real dangers here, but I do know that a lot of the truck traffic in this country is not subject to serious safeguards. We are not doing background checks on the people doing the driving, we don't have technology that allows us to track where those trucks are. We don't have any limitations on what kinds of roads they can take with the occasional exception of a Route 110 kind of scenario. That's far too specific and far too little in the way of thinking through this problem. So we would propose not only doing background checks on drivers of hazardous material trucks, but also we would propose putting in some technology so we can track some of these trucks. If they're carrying especially dangerous radioactive or highly lethal toxic chemicals we think we have to figure out ways of knowing where they are and possibly even putting automatic braking technology on some of them so they cannot be taken to places where they should not be and they can be physically stopped from moving if they go there.

It sounds like a fairly ambitious agenda, but this is an example of a potentially catastrophic threat to our country where our report says you can't wait for the accident or the attack to happen first and then think about how to handle the problem later. We think you have to have a framework for analysis that says the worst possible attack, catastrophic attack against the population or the economy. We have to think of these in advance and we have to assume future terrorist MOs will be different than past MOs so if there's a big vulnerability out there let's do something about it now. That's my third category.

My fourth and final one, and I hope it tees things up well for Peter because it also raises the difficult question of who should pay for a lot of these proposals that we're talking about. Should it be the federal government, state and local governments, or the private sector? The last area is large buildings in cities. We've all spent a lot of time thinking about how to protect them from hijacked airplanes but what about other threats to these large buildings? And the particular one that I would want to mention today and we spend some time discussing in the report is the potential for a terrorist to introduce high quality biological agent into the air intake system or the heating, ventilation and air conditioning system of one of these buildings.

We don't do the kind of original biological weapons analysis in this report that would be necessary to ascertain the nature of this vulnerability, but those scientist that we talked to and read studies from in the course of doing our research have suggested that you could theoretically kill many hundreds if not thousands of people if this kind of an attack was carried out and no one knew about it until people started getting sick.

Last fall with the anthrax attacks we were lucky. Not that many people were exposed, and those who were exposed first were essentially the warning indicators for the rest of us to be vigilant. If you had a biological attack against a large building using the air circulation system as the means of dissemination of the agent, you would not have any such warning. You would have 5,000 people exposed all at once, and then they would all start to get sick more or less at the same time, and if that was your first warning of the fact that such an attack had occurred you could lose half of the exposed population.

So what does this mean? Well, it's a very hard problem because you're not going to go around and rebuild every hearing, ventilation and air conditioning system of every building in the country. Not even of every large building. So you have to have a graduated approach, an incremental approach that requires people to do some easy and obvious things right away. For example limiting access to the areas around the air intake systems of these heating, ventilation, air conditioning systems. And then over time introducing more filters, introducing other means of limiting the danger of exposure of this kind of an agent. And how you create some economic incentives for that kind of action to happen, Peter's going to talk about that in just a second as one of his topics.

But those are some of the specific areas that I wanted to leave you with. The kinds of threats that we still think are not being addressed because the Administration doesn't have a comprehensive framework, and we think that if you create this four-tired concept of border security, domestic prevention, domestic site protection and consequence management, and then you think through your greatest vulnerabilities, the threats to large numbers of people or large damage to the economy and consider that to be your top priority, attacks that would have these sorts of implications, you can begin to then identify and prioritize the kinds of threats and the kinds of necessary steps that should follow.

Thanks very much and I'll turn things over to Peter.

MR. PETER R. ORSZAG: Thank you, Mike.

From an economics point of view there are several very interesting issues that arise with regard to homeland security. The first is obviously the economic cost involved. We could spend a lot of money trying to improve our homeland security for every little return and a lot of foregone economic output. If you put a dollar into homeland security that's a dollar that's not spent making widgets or other goods that contribute to people's well being.

So there's a very difficult tradeoff involved in terms of improving security and the foregone economic output that arise as a result. What we think that highlights is the importance of a risk management approach. It also underscores the dangers associated with the type of displacement effects that Jim mentioned. If we spent a lot of money protecting Target A and just shifted terrorist focus to Target B, we will have spent a lot of money in return for very little net improvement in the protection that's offered to the country as a whole. That's why the volume puts so much emphasis on risk reducing activities like perimeter defense and domestic prevention and a little bit less emphasis on site protection.

In order to reduce the economic costs of homeland security there are three themes that run throughout the book that help to provide more security at lower cost. The first is to provide incentives for private firms to go beyond the minimum level of security effort. This may be in terms of reduced waiting times at the border. We've already seen that in terms of smart borders. If your firm is willing to undergo additional security checks you can get passed through the border more quickly. The same thing for travelers. If you're personally willing to undergo additional security checks perhaps you pass through Customs more quickly than others. There's a benefit being provided to you in exchange for additional security measures.

Similarly, insurance. Firms that undertake additional security measures could get a break through lower insurance premiums. That provides some sort of incentive.

But thinking through that kind of incentive is a theme that runs throughout the volume in order to reduce the cost.

A second theme is a stakeholder's pay one. This means that those who fly pay for airport security; those who ship pay for port security; those who work in a building or own it pay for the security at that building. The purpose here is to avoid goldplating. If you have the federal government picking up substantial amounts of costs for security measures in private sector settings there will be a tendency to waste money basically. So we want to make sure that the costs are borne by the stakeholders in the service in order to reduce the overall cost.

The third theme is information technology. It seems like there's a lot of bang for the buck in terms of reducing the risk from the intelligent use of information technology, and since both Jim and Mike spoke about that I'll leave it at that.

The second general issue that arises for economists is why should the government be involved in security of private sector settings at all? There have actually been in many different sectors—chemicals and others—industry organizations arguing don't touch us. We can take care of security ourselves. We have a strong incentive to make sure that we're safe, don't worry about us.

We put forward a variety of rationales for why we don't think that that private motivation for security is sufficient to provide the right level of security for the nation as a whole. Let me just mention one having to do with chemicals. If someone steals chemicals from a chemical facility that then makes other targets much more vulnerable. Chemicals are effectively an input into a terrorist attack. And it's very, you would not expect a private firm to take into account those external costs in providing its own level of security. You combine that with the operation of the bankruptcy laws in a way that we describe in the text and basically private firms do not have sufficient incentive to provide security without some form of government intervention in many settings, and we talk about that in the volume.

Well if government intervention is warranted in these private sector settings, how should the government go about trying to provide better security in those settings? There are three alternatives. You could regulate; you could subsidize the measures that the firms are doing themselves; or you could mandate insurance.

We think that over the longer term the best approach would be a combination of regulation, performance-oriented regulation, and some sort of anti-terrorist, insurance. The logic here is that the performance-oriented regulation provides a backstop of protection and insurance is providing information and incentives for innovation in providing that security. So through lower insurance premiums and through the insurance firms themselves going out and saying ah, on this air filter, if you put in a somewhat better air filter your insurance premiums are going to go down. That provides a somewhat stronger incentive to actually put in the better air filter rather than the less fine air filter.

On air filters, for example, in some buildings putting in a very fine air filter will require ripping out the whole air circulation system. In other buildings it wouldn't require that. If we just mandated that every large building had a very fine air filter, that would be extremely expensive. If however we said you need a lower level air filter as a backstop and then provided incentives to go beyond that, that could work much better.

The third issue that is of particular interest to economists is well who pays for all of this? I've already said that in private sector settings we think that basically the stakeholders should pay. So the owners or operators of a building should pay for the air filter; the people who are flying on airplanes who should pay for the security there; the shipper should pay for port security.

Within the public sector, however, there's a much more difficult question. What level of government should pay for the public sector activity? Here the principle that we espouse in the volume is that the larger the local collateral benefit from any activity, the smaller the federal share should be. There are lots of homeland security efforts that are sort of mixtures. They're not pure homeland security and they're not pure something else. They're sort of a little bit of each.

This principle basically would say if you go out and hire extra police officers, which may help a little bit on homeland security but primarily reduces local crime, the local government should pay. But for specialized anti-terrorism training like to recognize a chemical attack or to handle the immediate consequences of a biological attack, the federal government should pay because that is primarily intended to address a homeland security threat and has very little local element to it beyond that homeland security component.

So that's a broad overview of some of the economics issues that we discuss in the volume, but I'll obviously refer you to the volume itself for the details, and now we'll turn it over to Ivo to discuss the organizational aspects.

MR. IVO H. DAALDER: Good morning. Let me be brief because I'm sure there are lots of questions.

I want to discuss just the organizational aspect of our report and of the homeland security effort.

When Tom Ridge was nominated he was widely welcomed as the right person to lead the effort in homeland security but he was also widely derided by politicians on the Hill, by the press, by pundits as having authority that was inadequate to the task. In fact he had very little authority.

Former Senator Gary Hart who was with Senator Rudman, the head of the Hart/Rudman Commission which recommended in March 2001, well before September 11th, major changes in the way we should organize for homeland security said immediately upon his appointment that Governor Ridge wont' be able to do the job that he needs to do because, "Anyone who knows how Washington works knows that this way is not the way to do it." Indeed, others shared that view. The former drug czar, Barry McCaffrey, a four star general, who certainly knows something about organization, said that Tom Ridge in six months time will be known as the head of the speakers bureau for homeland defense. These were just some of the lesser endorsements of Governor Ridge and his job that were around late last year, and I can say that if you look at the newspapers it's only gotten worse.

The critics of Governor Ridge and the way in which the government has been organized in its initial response have come up with a more drastic proposal for reform. They want a department or an agency for homeland security which would have a Cabinet Secretary, which would have a budget, which would have people, which would have a program, and that once you consolidate as many of the homeland security functions as you can find in a single agency, you then have organized for the possibilities and implementation of a strategy for homeland security.

But we argue in this report that on its own, erecting a new building on Constitution Avenue and putting a newly-designed seal for the Department of Homeland Security on that building is not going to solve your organizational challenge. We give two reasons. First, much, including the most important functions for homeland security will not be part of this new agency. The FBI is not going to be part of this new agency. The CIA is not going to be part of the new agency. The Health and Human Services functions that are important for homeland security are not going to be part of the new agency. Indeed if you take the organizational chart that Congresswoman Harman mentioned, there are 125 boxes. If you take five of those boxes and consolidate them into one you still are left with 121 boxes. In other words, you still need to coordinate. You still need somewhere in the U.S. government no matter how much consolidation takes place, to coordinate the functions of the federal government that are widely disbursed from between 40 and 50, depending on how you count the agencies, to indeed 125.

Secondly, every proposal for consolidation, whether it is the Hart/Rudman Bill or indeed the bill that is about to be introduced on the Hill will argue for maintaining those agencies to be consolidated as "distinct entities". In other words, we are rearranging boxes on an organizational chart because if you're not integrating the Coast Guard and the Customs Service and the INS and the Border Patrol but you are keeping them as distinct entities, then reporting chains are changing, efficiencies may well occur, but you're not fundamentally changing the organizational structure of the U.S. government. And indeed, it is difficult to do that.

Does that mean that the Ridge office and the Ridge nature of the coordinating structure that has been built up is the way to go? Yes, to a certain extent you will need something like Tom Ridge. But justifiably, questions have been raised about his tenure and about the sustainability of his job and the credibility of the person in the way it has been managed in the past six or seven months. The fight over whether or not Tom Ridge should testify on Capitol Hill has to a significant extent been a distraction—for him, for the Hill, for the press, and for everybody else and it has undermined Tom Ridge's credibility on Capitol Hill in the press and in the public. Because how can a government submit a unified budget to deal with homeland security but then refuse to send the person who prides himself on having pulled that budget together to testify? The refusal may be understandable, having to do with Article 1 and Article 2 of our U.S. Constitution. But it is not a fight that we should be having when we are faced with the kind of threats that we have.

Tom Ridge has also engaged in bureaucratic battles in which, to put it charitably, he has not emerged as the victor in those battles. To take two. The alert system, much derided, rightly and/or wrongly that was developed by Tom Ridge's office is going to be invoked not by the man responsible for homeland security but by the Attorney General. There was a debate about who should invoke the new alert status and whether Mr. Ridge preemptively folded or whether he lost the debate. He did not get that right. The same is true on the border agency. Tom Ridge went around the country driving the notion that we had four different faces at the border. We had the INS face, the Customs face, the Agricultural Inspection face and it was time that we merged these people so there was a single face at the border. Out of the government a month ago comes a proposal that is a minuscule way of dealing with this issue. We're taking the Customs Service and merging it with part of INS into the Justice Department. In other words, he went to the mat, lost the debate internally on how to organize for the border.

As a result internally within the Administration and externally in his relationship with the Hill, Tom Ridge is having a rough time these days.

Therefore we propose two measures in order to help him and to help the organizational structure to start implementing the strategy that we have put forward.

First and most importantly, to bolster Ridge we propose, like Congresswoman Harman suggested, that his position, his office and the Homeland Security Council, all of which are provided for in the Executive Order of October 8th, becomes statutory. That the Congress pass a law that makes Tom Ridge a confirmable, Cabinet level official who heads an office that has a status in law and that is part of and in support of a council, the Homeland Security Council, that has a status in law. We would like to see the Executive Order or something like it that was signed by President Bush on October 8th be the basis for that legislation because on the basis of that Executive Order Tom Ridge can lead in forging a national homeland security strategy; he can coordinate the many tens of agencies in the federal government and work with state and local government and private sector entities to begin to implement effectively that strategy; and he can mobilize the resources and motivate the people on the front lines on who's security our country depends.

What Tom Ridge needs to do first and foremost is to make sure that individuals on the front line make the right decisions at the right time. That the Custom agent seeing a car traveling across the border from Canada, take that car, open up the trunk in order to find out, as in fact happened in December 1999 that that trunk was carrying explosives designed to blow up LAX. That the doctor reading the X-ray says this looks like anthrax and puts somebody on prophylactic antibiotics and thereby saves his life as happened with a postal worker back in October.

It is these people on who your and my security will depend, and Tom Ridge's job is going to be to motivate those people and give them the resources that are necessary.

Secondly, it isn't enough just to have Tom Ridge in the statutory authority and stronger authority, though that is important. We also believe that if you want to do good perimeter security it is time that we have a federal border agency. Today the border and the defense thereof is in the hands of six different departments. The Department of Defense is responsible for defending our borders, particularly our airspace and our sea access routes; the Department of Justice has the Border Patrol; the Treasury Department has the Customs Service; the Agricultural Department has the Agricultural Inspection Agency; the State Department has the consular affairs people who stamp your visa and help you get your passport when you lose it abroad; and the Department of Transportation has the Coast Guard. None of these departments regard border security as a major mission of their department.

The Secretary of State doesn't really think about consular affairs as the number one issue. The Secretary of Defense I can tell you doesn't think that border security is very important because we have this military tradition of not protecting our borders. A unique feature of this country. The Secretary of Transportation doesn't think about border security. The Attorney General doesn't think about border security. We need a person in charge in the Cabinet with a Cabinet level position who thinks about border security. Therefore we would propose and strongly agree with those part of the legislation that are starting to emerge on the Hill, that you take the Customs Service and the Coast Guard and the Border Patrol as well as other enforcers of INS and the Agricultural Inspection Agency, and probably as well the Consular Affairs Bureau of the State Department and the Transportation Security Agency, put them in one building, do give them a new seal—in this case a new seal may work—and make it a Cabinet-level agency in order to protect our borders because that is ultimately where the first line of defense is going to be in homeland security.

Thanks very much.

MR. STEINBERG: Thanks to all my colleagues.

Before we turn to questions, I just want to make two final overview remarks. First, as you all have noticed we've entitled this a, "Preliminary Analysis." I think we're modest enough to recognize that the challenge of dealing with homeland security is an enormous one and that no single report, particularly one done over a couple of months, is going to answer all the questions.

Just to highlight two areas which we specifically identify where more work needs to be done. We place an enormous emphasis on the use of information and information management. We touch on a number of elements of the strategy in the report, but Brookings is now involved in a longer term effort sponsored by the Markle Foundation and working with CSIS here in Washington and the Miller Center at the University of Virginia to do a major look at the question of how do we mobilize information in aid of these new security threats.

Second are the problem of research and development, another very promising area. How can we develop new strategies and new technologies? The National Academy of Sciences is now involved in a very important study on technologies and not only what existing technologies we have but how to develop new technologies and that's something that we are collaborating closely with.

So I know there will be many questions where our answers are going to be. We need to do more work on this, but we hope that what we've done is provide a framework that will help elucidate those areas where further research and analysis needs to be done.

The second overall observation is you will note that we do not talk about the external dimension of homeland security here except with respect to border defense. There is clearly a major part of our overall strategy that has to deal with identifying the problems as they emerge abroad. Congresswoman Harman made mention of that in her own explanation of what she thought the key elements would be. Clearly foreign intelligence is an important part. There is a role for the military and external law enforcement in dealing with threats before they even begin to try to enter the United States. The fact that we don't cover it here should not in any way suggest that we don't think these are important but simply that we wanted to try to focus now on the direct question of homeland security itself.

So with that let me open the floor to questions. I would ask that as I recognize you there will be a mike, and if you would stand up, if you would identify yourself, and if you want to direct it to any of our guests or our authors please go right ahead.

Q: Max Chapin, Software Technology Magazine.

Last week Software Technology Magazine reported that the government has a new technology called underground pebble bed reactors that makes nuclear power safe from terrorists and would displace all imports of foreign oil within five to ten years. What steps is homeland security taking on this, if any, and if not, why not? And I would just add if you look at the very big picture, the lives of hundreds of millions of people, aren't nuclear issues and oil issues among the greatest of threats to the United States of America?

MR. O'HANLON: Energy is a big question. I'm not going to do full justice to your concern but I would say a couple of things and these are different dimensions of the problem.

We are not going to be able to replace in any way, shape or form our foreign oil dependency. Military tools are going to be an important element of preserving access to global oil resources no matter what other things happen in the domestic debate, whether it's on the Alaska resources, whether it's on homeland security, whether it's on the future of nuclear energy.

As for nuclear power plants and their security, which is something you may have been hinting at as well, we do see some progress in this direction but I think, and it's a hard thing to fully understand from the outside. You'd have to do a classified threat assessment of how people can do mock raids of different plants. The general sense I have is that we haven't yet gone quite far enough. I'm not sure we need to worry about airplanes crashing into cooling towers. My sense is that probably is not a huge concern but there probably does need to be a bit more work in the way of making sure we have the ability to withstand different kinds of raids against nuclear facilities.

MR. ORSZAG: ?? If I could just add to that there has been an exchange between the Nuclear Regulatory Commission and Representative Markey highlighting many of the flaws that have existed in the security systems at nuclear facilities including, for example, that foreign workers, not U.S. nationals, were not subjected to criminal background checks just because the database didn't contain foreign information. Things like that.

So there are obviously specific steps that can, and it's our understanding are being taken to improve the situation at those facilities.

Q: Scripps Howard News Service.

I would note the driver of that truck yesterday also apparently wasn't licensed to drive that truck. Which brings me to the question of the whole question of using smart card technology to license for people in the transportation industry and also drivers licenses.

This question is directed to the Senator and the Congresswoman. The people at Oracle and Sun Systems and EDS say that the technology is there to do this. Transportation industry people like Federal Express want access to federal criminal databases to check the background of employees. So the question is, is the political will there to go into these privacy questions allowing this type of access to government databases?

REP. HARMAN: I think we need smart card technology. I think we need increased use of biometrics so that we're sure that a person using some form of identification is in fact the person on the identification. Obviously to get there and to rely on it you need to know that the person applying for the piece of identification is in fact who she says she is. And so we have to go further back than that.

I think this issue must be looked at. We don't automatically have to call it a national ID card. That's a radioactive term. But we can certainly think about smart cards for essential functions and we need the database to support that. I think most people are already there.

Keep in mind that if we have a second wave of attacks the folks who are raising objections will probably lose totally, so the better idea is right now to do what I would call rebalance our increased security needs with our very justifiable and valid civil liberties and constitutional requirements. That balance will be hard, but Congress did a pretty good job I think, I hope Fred agrees, on the Patriot Act. Some of you may disagree, but we disallowed some of the things that General Ashcroft wanted because we thought they were excessive. There still is a balancing mechanism which is of the courts. I think we can do this better now than we'll be able to do it in the future if something more serious happens.

I just want to day one thing to the prior questioner about nuclear safety and so forth. I was one of those who voted no last week on Yucca Mountain. The reason that I did was that I think the transportation issue is very serious and we haven't figured it out. Ed Markey was talking about mobile Chernobyls as only Markey can. The barges and trucks and trains that will transfer the spent nuclear fuel to Yucca Mountain. They are still vulnerable. That is something we do have to figure out.

Finally, I do think we can achieve energy independence. I think that ought to be a goal and it ought to be achievable in the nearest possible time through a combination of conservation and investment in clean technologies, efficient technologies. I think that would help our technology industries here and I think that's a goal that will be very consistent with homeland security.

MR. STEINBERG: Let me just add on the issue of identifiers that this is a very important part of the overall strategy and one of the things that we argue in the report is that in some ways technology can help us deal with the very problem that people worry about in terms of privacy and protection of information. Because in many ways the ability of technology to limit who can have access by providing access limitations and authentication may provide ways of sharing relevant information while preventing people from getting access to information that they're not entitled to, whether it's private sector and public sector sharing or within different levels of government.

So we think that in many ways this is better than a paper system where you don't have the same kinds of protections and yet are not nearly as efficient in using that information.

SENATOR THOMPSON: He asked a question of political will and I think that is one of the most important ones, and I think the jury is still out on whether or not we have political will to do many of the things that we're going to need to do.

I don't think that the budgetary impact of this has settled in on people yet. I don't think we've been totally realistic in terms of the amount of money it's going to take. I don't think we've been realistic in not realizing the reprioritization that we're going to have to do in this country. We're still talking about everything else just the way we did before. We still want the same programs, same amount of money spent and all of that. We haven't come to terms with all of that. We haven't come to terms with some of the organizational issues. The fact that they're over there arguing about these boxes and can't even come together on border issues is not very encouraging.

What we ought to be doing is taking the opportunity to do what Paul Light has been doing for a long time and that is reorganize the entire Executive Branch of government. Why we think we can pick this one area of such importance out in the middle of kind of a governmental mess and have it run efficiently is beyond me. When you talk about issues of information technology, issues as you do in your report of human capital, employees, and salaries and things of that nature, overlapping, duplication, they're all the things that I address in a report that I did back in June of last year talking about all the things that are on the government's high risk list.

We're doing a terrible job in all of these areas. We're wasting and misspending amounts one year mid $30 billion, the entire budget of homeland security.

So we've got an entire governmental problem which this is just a centerpiece of and we've not yet come to terms with those broader important issues. So we're going to have to do a lot better and I don't know, if 9-11 doesn't change that I don't know what will. But we've got to keep the pedal to the metal and do the best we can.

Q: My name's Art Bush, I'm a National Guardsman.

Given that the Hart/Rudman Commission and the Heritage Foundation both advocated a vastly expanded role for the National Guard, where does Brookings stand as far as usage of the National Guard in homeland defense?

MR. DAALDER: We actually basically endorse the Hart/Rudman Commission report which says that the National Guard ought to go back to its constitutional mission which is homeland defense. And in that sense that the Defense Department, this is going to take time because the National Guard of course is structured at the moment to support our overseas commitment and that we need to start divorcing as much as possible those two responsibilities. That can't happen overnight. It will take time. But it is fundamentally something that needs to be done. We need to have our military think about defending the United States as something that starts at home.

MR. O'HANLON: In addition to what Ivo has said I would want to add one point, however, which is that we think one has to keep expectations realistic about what the National Guard is going to be able to do by way of first response. In general in this country it's going to be local fire rescue and police who are going to be on the scene of a chemical or conventional attack first. The National Guard may come in later to manage an emergency situation if you have a city that's been largely destroyed or large parts of a city. Law and order issues, where mass rescue and mass response issues 12 and 24 and 48 hours after the attack. But the immediate response is going to be more local police, fire and rescue. And also for a biological attack, the immediate response is usually going to be hostile to the public health infrastructure.

So I don't disagree with Ivo, obviously we're all on the same theme here as authors, but I think that National Guard has a certain responsibility within the homeland security mission but one has to keep expectations realistic and remember who's likely to be on the scene first and that's the main additional point I would want to make.

Q: Phil Dine, St. Louis Post Dispatch.

One of the earlier speakers mentioned doing this without affecting civil liberties, but don't we risk glossing over something we really need to confront? And especially given your second tier of finding out what people are up to here and preventing it, don't we need to maybe change the way we think about civil liberties and privacies to protect our grater freedoms?

MR. STEINBERG: I think Congressman Harman touched on this, but I think in general the first question is what works? Before we get to the question of how much tradeoff we're going to face in terms of civil liberties and privacy.

I think a lot of the concerns and I think some legitimate concerns, are worries about vacuum cleaner approaches, wholesale, unthinking sharing of information that may have marginal relevancy over all homeland security tasks. So the first element of an information strategy is to try to identify what information really would matter if we had it.

A lot of things people are concerned about probably have very little probative value in helping us think about how you prevent terrorist attacks.

So one way we deal with the problem of limiting the civil liberties impact is to make sure that we know what we really need to have and don't spend a lot of time collecting information and sharing information that's of very little value.

The second element as I've suggested is that I think there is tremendous opportunity to use technology to limit the way information is shared. We have what I would call the two sides of the coin of compartmentalization. On the one hand in the past we've had a problem of excessive compartmentalization. That is agencies holding on to information, not being willing to share it and therefore the people who really need to have information, who are able to use it as my co-authors have suggested, are not able to get it. The CIA not sharing with domestic law enforcement agencies. The FBI not providing it to state and local governments.

So we need to break down those walls that are preventing the right people from having information, but we also can use technology to provide safeguards against people sharing information that's irrelevant to the task. As I say in the report, there is certain information about perhaps the criminal background of somebody who's trying to board a plane that may be relevant to the agent at the gate but it's probably not relevant that they know where they stand on their mortgage payments or what their preference is on videos.

So what we need to do is try to harness the extraordinary amount of information which we now collect and use it in a smart way. And there are also other techniques that we've used over the years including appropriate supervision and accountability of the use of information that we think can provide adequate safeguards that doesn't require a fundamentally dramatic change in the balance that we have in our society.

I think if we begin by trying to use information smart we may find that we can get a lot of marginal benefit without any dramatic change in the way we see the relationship between the individual and the state.

Q: Otto Kreisher, [Copley] News Service. This is for Michael.

There's a ripple effect on the use of National Guard for greater homeland security. DoD has organized itself so that it can't do anything overseas without calling on the Guard and Reserve. Operation Enduring Freedom is a good example. If you do this greater job for the National Guard for the homeland do you have to reorganize the whole first team, the one-team approach for national security outside?

MR. O'HANLON: Thanks Otto. That's part of why I wanted to add my previous remarks to Ivo's because I think they're both important parts of the overall answer. I don't think we want to take the National Guard or Reserve in general out of the overseas defense mission, but I think that many of the combat brigades and divisions of the current National Guard are not really all that important for the overseas warfighting plan and that's where I think some of Ivo's ideas have their greatest potential. You may be able to ask, if we're going to keep some of these brigades anyway, and largely for political reasons, frankly, you might as well have them be best suited for the kinds of missions they're more likely to do and that may mean homeland security.

Again I don't think it means buying top tier, biological weapons protection capability for all 300,000 people in the National Guard. That's the kind of expenditure that I would not support. But if what it means is that some of the training may be another day a year at the margin, goes into this kind of mission, or if you think about where you base these people as you downsize, you make sure that you keep a certain geographic distribution so you have rapid response capability to the extent possible, those sorts of relatively modest but still important considerations may enter in.

So I'm not arguing for a revamping of the fundamental way in which the reserve component of the U.S. military is organized and given missions, but I think there are opportunities for marginal improvement on how they contribute to homeland security.

Q: Al Millikan, Washington Independent Writers.

I was wondering if anyone else had additional safeguards from what has already been mentioned for sensitive information being potentially abused or misused, and then what incentives or motivation do you see changing for separate government agencies to increase their information sharing?

MR. STEINBERG: I think we've touched on that a couple of times. As I say, I think there is clearly a potential for abuse here, but I also think we need to look at the fact that we have missed a tremendous amount of value in the information system. To a large extent I think there's a lot we can do without even collecting any more information than just using the information that we have well. We've made some starts. There are elements of the Patriot Act, for example, that has begun to break down the wall between domestic law enforcement and intelligence collection.

But I think that we need to, as I suggested, develop an information architecture that helps us identify what information is the most relevant information, allows us to collate different pieces of information that we collect from different sources, strengthen our analytic capability, strength our information sharing capability, and ultimately, in some ways the most important, is develop a system of deploying information so the individual on the ground that we've talked about, the Customs inspectors, the local law enforcement official, the agricultural sector, can have the information that they need when they need to do it.

No system is going to be perfect. There needs to be accountability. There needs to be ways in which there's overall supervision and people are held liable, frankly, for the misuse of information. But the power of information in this context is extremely important and it has a high leveraged impact in a way that investment in site defense or other kinds of very costly interventions can make it really very attractive. So this is something that we really do need, I think, to make a major effort and it will require some fundamentally new ways of thinking about how we do business, which is why these organization issues are important.

REP. HARMAN: If I could just add to that, we already have an essentially private sector based information sharing system. Credit card companies run it. The good news is they are capable of collecting a lot of information and popping out things using state of the art technology that would show, in my case for instance, that somebody else was using my credit card last week. I mean that happens I'm sure to you too. Then they call you up and say did you buy this, and you say no, and they've figured out that based on your patterns of buying you couldn't have bought that thing wherever it was that you bought it, then they cancel the card, you get a new card, and so forth. That is a private sector based system that works well.

There is also a private sector based system that's abused.

So the goal is to redesign it so that the important and relevant information surfaces in the right places to the right person who is in charge of running a system to make sure that the people who carry these smart cards are supposed to carry them and they're doing jobs where they are not threatening our national security. That's the system we need to get to. We have the technology and we have a whole bunch of folks in place now. Now the goal is to follow a report like this to implement a system, an organization that will harness what we already can do for the right goals.

MR. MACK DESLER: I'm Mack Destler. I worked on the organizational chapter with Ivo. I wanted to respond very quickly to the part of the question that was how do you motivate the agencies. That's very hard in that you have traditions of compartmentalization, you have traditions of keeping this information limited.

One of the key things that a person like Ridge needs to do and his people need to do is they have to organize task groups, bring them together, give them concrete problems, ask them to respond. You do this at the near top level, you do it at the working level, and you have them develop systems, you do drills, you do all sorts of things that brings them together, gets them accustomed to working together. I think because of September 11th there is an opportunity to break down some of these walls and people are working very hard on this. But it is, as the questioner suggested, not automatic and there are strong traditions that work against it.

SENATOR THOMPSON: I think it's a question of management, an area which the government has been sorely lacking in many many years. It's a matter of leadership and management. We have a very poor management record in all the critical issues that are now much more important in the homeland security area.

Q: Donald Duffer, ex-Indian army.

You have in the brochure, in the introduction, under the column possible scale of terrorist attacks, you have atomic bombs detonated in major U.S. cities. Estimated likelihood of this being used as a terrorist attack is very low. What are the various reasons which went into categorizing this as very low? I think this is most likely to happen if there was going to be a terrorist attack.

MR. STEINBERG: I think the reason we characterized it as very low at the moment, and as we suggest in the report, is that these are things that have to be reviewed all the time. It's just our judgment that there are no current terrorist organizations which possess the capability to do that.

Q: Bridget Blair with Federal Times. This is a question for Senator Thompson and Congresswoman Harman.

How will the Administration or how should the Administration use performance measures to control and enforce money going to the state an local levels? I know Governor Ridge has dropped the term performance measures in using these measurements, but there hasn't really been a lot of specifics out there and I thought that you guys could talk about that.

SENATOR THOMPSON: I think it's very important. As you know we've been trying to interject results and performance into the entire system for some time now with mixed results. The Results Act was passed a few years ago and we're just now trying to get all the agencies to come in with performance reports that mean something. Some are beginning to do a pretty fair job. Until we tie it with the appropriations process it probably wont mean very much. Until there are consequences for poor performance it won't mean very much.

Again, it's a government-wide problem, and now here we find ourselves in a situation with an extremely important problem that has to be addressed immediately, and we need to bring all these disciplines to it immediately, when we've not been able to do it over many many years with regard to any of the rest of the government.

But clearly as we address these issues we have to build into a way to determine what's working and what's not working and not have performance based on how much effort you're putting into something or how many papers you're producing or how many people you're employing, but actually whether it's doing the job. So hopefully that will be a part of what the overall strategy comes up with.

REP. HARMAN: I would just add that you can't do it without a strategy, without an overall strategy. Because what are you measuring what against? The budget is a piece of that but the budget presumably is drawn up to implement the strategy and where we're still lacking is that we have an Administration without a strategy and I think the Brookings report has set us on a very good course. Something that I didn't mention but was mentioned by the authors of the report that I think is extremely important is the need to coordinate public and private sector responses. It is absolutely true that more money is going to be spent on this problem in the private sector by far than the public sector could ever spend and if we don't have coordination we're not getting the leveraging effect we should. It is also true that most of the technology that will help the federal government implement smart airport screening systems, for example, is private sector based. So it is very important again to forge the right private/public partnerships.

I really think Jim and authors that you've done an excellent job here and I want to commend you and hope that you keep what works. Because in the absence of an Administration strategy, you're it and we're counting on you.

MR. STEINBERG: Thank you, Jane. That's a nice note to end on and I'll take advantage of that and thank our guests, Senator Thompson, Congresswoman Harman, and thank you all for coming.