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Op-Ed

Unfinished Defense

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Half a year after the creation of the Office of Homeland Security, how well is the Bush administration doing in its efforts to improve protection of the United States against terrorist attacks? No major attacks have occurred since Sept. 11, giving a first impression that the effort is going well. But al-Qaeda has historically spaced its major terrorist actions by one to two years, and may

need more time in this case given the military action in Afghanistan, so the absence of major attacks in the last seven months has only limited significance. In fact, while the administration has made impressive progress to date, it has not yet developed general plans, much less requested budget proposals and implemented programs, for a range of other threats. As a result, the country is still rather vulnerable.

To be sure, a large, free, and open country cannot make itself invulnerable to terrorism. An effective homeland security strategy, however, can make the most deadly and costly types of terrorist attack less likely to succeed. Measured against these metrics, the goal of providing good homeland security is far from hopeless, but efforts to date are far from sufficient.

The Bush administration’s budget plan for fiscal year 2003, released in February 2002, includes $38 billion in proposed homeland security spending. That is roughly twice the level of the pre-Sept. 11 world. It would emphasize airline and airport security, preparations against biological attack, better monitoring and regulation of traffic across the country’s borders, using information technology more effectively, and dealing with the consequences of any attacks that occur despite our best efforts to prevent them.

The proposed budget, however, has two significant shortcomings. First, it focuses more on preventing recurrences of attacks like those in 2001 and previous terrorist actions—through airliners or anthrax or conventional weapons bombings—than on a more comprehensive agenda. It thus focuses too exclusively on the “last war,” rather than the possible next one.

Second, it does not do enough to preempt terror attacks before they are even attempted; it pays insufficient attention to prevention. In particular, its plans for improving the intelligence sharing among various law enforcement agencies are woefully inadequate so far. Preventing terrorist attacks, by pre-emptively pursuing terrorists here in the United States and by tightly guarding materials they might use in any attacks, should be a higher priority than the Bush administration has made it to date.

Unfunded initiatives

The administration itself recognizes that its current plan is incomplete. Tom Ridge and his Office of Homeland Security continue to work on a strategic plan for protecting the United States that would presumably include a number of initiatives not yet funded in the $38 billion request. But, given Ridge’s unwillingness to testify before Congress, and the absence of that strategic plan from the public debate, it is impossible to know if the deficiencies are being rectified.

Authors

Peter R. Orszag

Vice Chairman of Investment Banking, Managing Director, and Global Co-Head of Healthcare - Lazard

The plan may not appear until the fall, and Ridge may never testify if the Bush administration maintains its current policy.

Even if the entire $38 billion Bush homeland security budget were implemented, between $5 billion and $10 billion in additional annual federal spending would be needed to adopt additional measures that promise considerable security benefits for a modest cost. Up to $10 billion in additional private-sector spending, and several billion dollars more in state and local spending, could also be needed each year. Specifically, our recommendations feature the following proposals:

—Substantial expansions in domestic law enforcement agencies, well beyond those proposed by the Bush administration, in terms of personnel and information technology. This would fill clear gaps in agencies such as the Border Patrol and FBI, while providing real-time data links among federal agencies and also between federal, state and local law enforcement officials.

—Various measures, including filters and protected air intake systems, for reducing the odds that biological agents could be introduced into the air intake systems of major buildings and other large facilities,

—Additional measures for protecting prominent buildings against conventional explosives and fires, including use of shatterproof glass in lower floor windows,

—Improved safeguards, including automatic braking mechanisms, on trucks carrying hazardous materials, as well as background checks on their drivers, and major improvements and expansions in the Coast Guard and Customs services, well beyond those already suggested by the Bush administration. Today, only 5 to 10 percent of cargo entering the country is monitored in any way.

Our proposals would drastically increase that figure, largely by aggressively implementing a strategy for inspecting cargo as it is loaded in overseas ports. Shipping companies and overseas ports that cooperated would get their goods into the country quickly; others would have to sit in inspection queues here in the States, or even be denied entry.

Who should pay?

The homeland security effort must involve the private sector in addition to the government. Some question why government intervention is even needed to protect private property, such as chemical plants or large commercial buildings. They argue that market incentives will be enough to convince firms to protect themselves.

Market forces are indeed powerful, but they need to be guided in the right direction. For example, loose security at a chemical facility could provide terrorists with the materials they need for an attack. When poor security at one firm endangers the security of others, and when the potential consequences of such security breaches are substantial, market forces are not enough to address the problem, and government has a legitimate interest in mandating additional precautions.

Where intervention in the private market makes sense, Washington has various tools at its disposal, including regulation or subsidization. Each approach has various shortcomings. The most cost-effective approach over the longer term may be a combination of straightforward, performance-based regulation with insurance coverage.

What does that mean? This type of mixed system is used elsewhere, such as in owning a home. Local building codes specify minimum standards that homes must meet. These are the performance-based regulations. But mortgages generally require homes to carry insurance, and insurance companies provide incentives for improvements beyond the building code level—for example, by reducing premiums if the homeowner installs a security system.

Similarly, in homeland security, regulations should provide a backstop of protection, while the insurance market could spread information about best practices and provide a direct financial incentive to improve security.

In meeting the costs of security in the private sector, the government generally should not foot the bill. That should be up to the various users, providers and owners of the property. That avoids the gold-plating of private security activities that could arise if the federal government subsidized the activities, and also reflects the difficult federal budget outlook already facing the nation.

Another question involves how to share costs within the public sector. Our answer is that the federal government should finance those steps that specifically and primarily address terrorist threats. State and local governments, however, should finance those anti-terrorism measures that carry substantial benefits within their own jurisdictions (in addition to affecting their ability to prevent or address terrorist attacks).

The larger the local benefit of a specific measure relative to the anti-terrorism benefit, the larger the local and state share of the costs should be. For example, the federal government should finance specialized anti-terrorism training and equipment for police and fire departments, but should not finance the hiring of additional police or firefighters.

Organizing government

What about the issue of government reform and government structure? As is evident, the effort to protect the American homeland is a truly mammoth task. Success requires the participation of tens of federal government agencies, thousands of state and local government authorities and literally millions of individuals who guard the frontlines at our borders, fire and police departments, hospitals and elsewhere.

The task of organizing this collective effort has fallen to Ridge. He heads a 100-person office inside the White House, which is in charge of coordinating the federal government effort to prevent, protect against and respond to terrorist attacks in the United States. He is also the principal liaison with state and local authorities and the private sector-all of whom must be enlisted in the effort.

So far, Ridge has scored some important successes. He has forged much-improved border control operations with our neighbors to the north and south. He has created a national alert advisory system, which, though much derided by late-night comedians, has been widely welcomed by local law enforcement officials for the guidance it provides them as to the intensity of the threat and adequacy of preparation and response efforts. And he has pulled together the first, integrated homeland security budget.

What Ridge has not yet done is pull together an integrated strategy for homeland security. Nor has he been able to gain all the support he needs—either within the administration or on Capitol Hill. Some cabinet colleagues have sought to undermine his reorganization efforts, notably with regard to consolidating widely dispersed border control functions.

A top Pentagon official recently derided Ridge’s role in homeland security decision-making in a front-page story in The New York Times. And the president’s refusal to allow Ridge to defend the administration’s homeland security priorities in testimony before Congress has undermined Ridge’s credibility on the Hill.

Many propose to rectify this situation by putting Ridge in charge of a new Department of Homeland Security, composed of a number of key agencies involved in the effort. But erecting a new building on Constitution Avenue and adorning it with a bright new seal won’t do the job on its own. Too many security agencies and functions—from the FBI and CIA to defense and public health services—would remain outside a new department. Someone still would have to coordinate the department and these many other agencies.

Ridge can still be the man for that job. But he needs more authority, which only Congress can give him. Ridge and his office should have statutory authority—making Ridge not just a presidential adviser but the person directly responsible and accountable for homeland security within the federal government.

We also need to improve our border control efforts by consolidating the widely dispersed efforts into a cabinet-level Federal Border Agency. Rather than relying on the secretaries of the Treasury, Transportation, State and Agriculture, as well as the Attorney General, to empower small entities within their departments, as is currently the case, simplification is needed. The president, Congress and the nation would benefit if a single agency was formed to make sure our borders are secure.

This agenda is challenging, but hardly excessive. Once fully adopted, federal homeland security programs would constitute only 0.5 percent of GDP and about one-seventh of total defense spending.

The Bush administration has done a good job to date in improving the country’s protections against terrorist action at home. But its efforts have not been sufficient, and they have not been adequately subjected to Congressional and public oversight. It is time to broaden the debate and get on with the job.

We may not have much time to lose.

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