Are we ready for the next 9/11? The sorry state--and stunning waste--of homeland security spending.

WHAT DO GYM memberships, the Fourteen Mile Bridge in Mobile, Alabama, and a promotional campaign for a child pornography tip-line have in common? Answer: They all were funded with your homeland security dollars.

Since September 11, Congress has appropriated nearly $180 billion to protect Americans from terrorism. Total spending on homeland security in 2006 will be at least $50 billion--roughly $450 per American household. But far from making us more secure, the money is being allocated like so much pork. States and cities are spending federal homeland security grants on pet projects that have nothing to do with homeland security; state and local officials fight over who will get the biggest share of the money, regardless of whether they have a legitimate claim to it. And when Congress isn't doling out cash indiscriminately, it's overreacting to yesterday's attacks instead of concentrating on cost-effective defenses against the most likely current threats. The result is an edifice that, far from preventing terrorist assaults, actually makes us more vulnerable by diverting resources from worthier projects.

How did this happen? There are four chief reasons.

1. The Oversight Problem

Homeland security spending occurs in an environment that is highly conducive to waste, fraud, and abuse, starting with the Department of Homeland Security (DHS) itself. When the department was created, proponents argued that we'd get an entity with sole fiscal responsibility for the government's efforts against terrorism, thus increasing transparency, enhancing efficiency, and facilitating information-sharing. Instead, the opposite happened.

Notwithstanding its name, DHS' activities are not strictly directed at protecting the homeland. Of a fiscal year 2006 budget of $41 billion, the department will spend only $27 billion on activities related to homeland security. The remaining $14 billion finances activities ranging from Coast Guard rescues to hurricane aid.

Conversely, much homeland security spending takes place outside of the department. The total amount directed to homeland security activities in fiscal year 2006 is roughly $50 billion. But $23 billion of that will be spent by departments other than DHS. Not surprisingly, a large portion--$9.5 billion--goes to the Department of Defense. But other funding decisions are more curious. Why, for instance, are the Environmental Protection Agency, the Commerce Department, and the National Aeronautics and Space Administration receiving homeland security funds?

With the money split between so many departments and programs, DHS and Congress cannot conduct effective oversight. The new department has authority over the agencies that were subsumed into it, whether or not it makes sense for them to be combined, but not over the many more security-related entities that remain outside its auspices. For example, the secret service, which is almost exclusively in charge of the president's security, was moved from the Department of Treasury to DHS, while the Federal Bureau of Investigation remains inside the Department of Justice with no DHS oversight.

Even more important, though, is Congress' failure to match the consolidation of DHS with the consolidation of its oversight of the DHS' constituent parts. Even after the combination of more than two dozen agencies, committee chairs have been unwilling to relinquish much of their jurisdiction over the 22 agencies and activities transferred to DHS. As a result, last year alone the leaders of DHS had to appear before 88 congressional committees and subcommittees.

Agencies are always aggressive advocates for expansion of their budgets and aggressive defenders of their statutory mandates. With so much of the spending so diffused, the current structure simply invites waste.

2. The Magic Word "Security"

Effective oversight is especially important in this area, given the political effect of the phrase homeland security, which tends to short-circuit skepticism. Even DHS activities unrelated to homeland security are apt to see their funding increase, on the assumption that they have something to do with the function indicated by the department's name. Programs that Congress might not approve if they were outside DHS now sail through because of their affiliation. In Christmas 2004, for instance, the department handed out $153 million to programs offering food and shelter for the poor, a significant increase from the previous year's budget. In September 2004, the Senate attached $2.9 billion to the fiscal year 2005 homeland security bill for disaster aid to farm states affected by droughts, floods, and freezes.

The surge in spending to strengthen homeland security has given lawmakers many opportunities to indulge in their common passions: bragging about protecting the country from terrorists and directing federal funds to their home districts. Federal coffers are wide open to fight terrorism, and lawmakers are predictably pushing projects allegedly aimed at protecting their constituents. 2002's infamous $190 billion farm bill, renamed the Farm Security and Rural Investment Act, is a good example of such congressional hornswoggling.

Despite promises by appropriators to pass a pork-free homeland security bill and a presidential ban on earmarks forbidding lawmakers from slipping their pet projects into the bill at the last moment, Congress loaded the fiscal year 2006 homeland security bill with earmark projects having nothing to do with homeland security, and President Bush signed it. Among these projects: $7.9 million for investigations of missing and exploited children; $102,000 to promote public awareness of the child pornography tip line; $203,000 for Project Alert, a drug use prevention program for schools; $15.8 million to enforce laws against forced child labor; $500,000 to continue steel tariff training, a program "to ensure Customs and Border Protection (CBP) enforcement of U.S. trade laws benefits from the expertise of the steel industry in classifying steel goods"; and $15 billion for bridge alterations in Mobile, Alabama; LaCrosse, Wisconsin; Chelsea, Massachusetts; Galveston, Texas; Morris, Illinois; and Burlington, Iowa.

3. Failure to Prioritize

If power companies invested in infrastructure the way DHS and Congress fight terrorism, a New Yorker wouldn't be able to run a hairdryer but everyone in Bozeman, Montana, could light up a stadium. Efficient expenditures concentrate limited resources on the most cost-effective initiatives; not every need is worth funding, and the greatest priorities and risks must be addressed first. But because Congress is more interested in politics than security, it gives every threat, every state, and every interest group a share of the homeland security pie, regardless of risk.

It doesn't take a security expert to realize that some anti-terror expenditures are more cost-effective than others. Simple cockpit barricades, which the airline industry has now installed at relatively low cost, can prevent all 9/11-style attacks. In contrast, the burgeoning U.S. system for screening the bags of every airline passenger has already cost $18 billion during the last four years but will do little to prevent 9/11-style hijacking. Nor does the screening system prevent the destruction of airplanes, since it doesn't systematically check carry-on bags or air freight for explosives.

Another example: Congress insists that DHS hand out ever greater portions of its budget to "first responder" programs--essentially federal funds for state and local police and fire departments. But as James Carafano has shown in a 2005 study for the conservative Heritage Foundation, a dollar spent on preventing the next terror attack is vastly more cost-effective than a dollar spent recovering from it.

That's not to say it isn't prudent to prepare for an attack. But federalizing first-responder programs accentuates the incentive problems that already plague the political process. When such programs are a state responsibility, legislators have a strong incentive to accurately assess the risk and potential damages to their states. They have to decide whether to spend more on homeland security or on other accounts. When these programs are funded at the federal level, by contrast, a congressman from Wyoming has no incentive to admit that his state is not a likely target or that flit ever were a target, the damages would be limited. He has no incentive to turn down federal money and even less incentive to volunteer taxpayers' dollars for other states.

To make matters worse, Congress provides every state with a guaranteed minimum amount of grant money regardless of risk. As a result, rural, less-populated areas receive a disproportionate amount of money. Of the top IO grant recipients, only the District of Columbia also appears on a list of the 10 places most at risk of attack.

The theory underlying the grant distribution formula is that terrorists could strike anywhere. That's true. But not every target is equally likely or equally important. By trying to protect us everywhere, Congress ensures that we're adequately protected almost nowhere.

The lack of risk-based funding, combined with the absence of federal terrorism preparedness standards or a goal to guide the expenditure of funds, has resulted in some ridiculous uses of terrorism preparedness grants. We've seen $63,000 spent on a decontamination unit that is stored in a warehouse in rural Washington because the state does not have a hazardous materials team to use it; $350,000 spent by a small volunteer fire department in Virginia on a custom-made fireboat; $1.5 million spent by Grand Forks County, North Dakota (population 70,000), to buy decontamination tents, a semi-armored van, two trailers equipped with gear for responding to weapons of mass destruction, and more biochemical suits than there are police officers to wear them; $500,000 spent by Outagamie County, Wisconsin (population 165,000), to buy chemical suits, generators, rescue saws, disaster response trailers, emergency lighting, and a bomb disposal vehicle; and $557,400 spent by North Pole, Alaska (population 1,570), on homeland security rescue and communications equipment.

The waste of homeland security funds does not occur exclusively in low-risk cities. Washington, D.C., incontestably one of the most at-risk areas in the country, used the region's first wave of homeland security aid as "seed money" for a computerized car-towing system Mayor Anthony Williams had promised for three years to help combat fraud by private towing companies. The city also used $100,000 in homeland security money to fund the mayor's popular summer jobs program.

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The department's spending has been the subject of many audits, none of which found systemic fraud or abuse. Indeed, many of the questionable purchases made with DHS funds were allowed by department guidelines. To end the discussion there, however, ignores the larger point that the system for disbursing homeland security funds is based on warped priorities. While the audits did not find systemic problems, some of their specific recommendations reinforce the impression that the system is a joke. The DHS inspector general's audit of first-responder grants declares that "efforts to monitor and measure the impact of first responder grants needs to be improved." The inspector general's report on the Port Security Grant Program notes that many grants were given to projects that "appeared to be for a purpose other than security against an act of terrorism."

Spending $58,000 on a rescue vehicle capable of boring through concrete to search for victims in collapsed buildings in Colchester, Vermont (population 18,000), may be permitted by DHS guidelines, but are those guidelines appropriate? And while there may be ways to justify spending homeland security funds in this location, does anyone really believe that Vermont, North Dakota, and Wisconsin are the front lines of the war on terror?

Instead of stopping the flow of money to low-risk areas, Congress created another pot of grant money called the Urban Area Security Initiative. The program's backers said it would allocate money based on an objective evaluation of risks and that political considerations would not be allowed to intrude.

So what happened? In early 2003, Congress announced that it would pay $100 million in Urban Area Security Initiative money to seven high-risk cities--New York, Washington, Los Angeles, Seattle, Chicago, San Francisco, and Houston. Immediately, members of Congress started receiving calls from urban officials who felt they had been unfairly left out. The list of qualifying cities started to expand. By May 2003, the number of most-at-risk cities had grown from seven to 30. That was followed by an increase in funding from $100 million to $700 million. Today more than 80 cities and mass transit agencies, including Indianapolis, Louisville, and Columbus, are getting extra homeland security cash out of an $830 million budget.

4. Preventing Yesterday's Attack

Inappropriate security spending is often a knee-jerk reaction to the news of the day. The surest way for a mode of transportation to get a boost in federal funding is to be attacked by terrorists.

Within days of 9/11, Congress ordered a federal takeover of airport passenger screening and created a 45,000-employee bureaucracy. Protecting the country against hijackings became the priority, and the Transportation Security Administration (TSA) became the key player.

The TSA's budget reflects Congress' overreaction. Its $5.9 billion represents more than IO percent of homeland security spending and more than 15 percent of DHS' budget. Its funds exceed those of the FBI or the Secret Service. And although Congress originally charged the TSA with protecting all modes of transportation, it has done little beyond aviation. More than 90 percent of the TSA's budget request for fiscal year 2006 is devoted to air transport. The TSA has established itself as a multibillion-dollar centralized bureaucracy whose main function is to guarantee that security screeners, many of whom barely speak English, spend endless hours harassing pilots, confiscating dangerous mustache scissors, and pawing grandmothers and children.

At first mass transit received its security funding through the broad State Homeland Security Grant Programs. Transit officials complained that little of the money would make its way to them because they had to compete with first responders and many other competitors. But when coordinated bombings on the Madrid train system killed 191 people in March 2004, Congress immediately created a separate $150 million grant program for transit and rail security.

In the aftermath of the two attacks on the London subway system last July, lawmakers proposed still more money for public transit systems. Sen. Judd Gregg (R-N.H.) suggested an increase of $100 million. Sen. Charles Schumer (D-N.Y.) talked of $200 million. Sen. Richard Shelby (R-Ala.) called for a $1.2 billion increase, and Sen. Hillary Clinton (D-N.Y.) upped it to $1.3 billion. That was nothing compared to the $6 billion requested by William Millar, president of the American Public Transport Association.

Yet if the London bombings teach us anything, it's that throwing money at transit security is unlikely to have any impact. After decades of combating Irish Republican Army terrorists, the London subway system is known to be one of the best protected in the world, but the large public investment in surveillance did not prevent the two terrorist attacks. The second incident occurred even while the system was in maximum alert mode. Experts agree that options are limited, if not nonexistent, for preventing such strikes. So why spend money on it?

Fortunately, lawmakers never got around to increasing transit security funding. Only a few weeks before they passed their homeland security spending bill, the Gulf Coast was devastated by Hurricane Katrina. Because they have the attention spans of 2-year-olds, members of Congress immediately turned all their attention to firefighters and natural disaster preparedness. During the debate on the spending bill, dozens of amendments were introduced to increase funding for everything from natural disaster relief efforts to firefighters. Among other things, lawmakers included an amendment (ultimately defeated) that would have provided $1.7 billion more for first responders and for disaster planning and mitigation.

The Alternative

It's hard to see how we are safer from terrorist attack now that the Princeton, New Jersey, Fire Department owns Nautilus exercise equipment, free weights, and a Bowflex machine, all paid for with homeland security grants.

If Congress were serious about homeland security, it would scrap the requirement that every state be guaranteed a part of the homeland security budget, abolish all grants to state and local governments, ban all earmarks from homeland security bills, and create better oversight for its homeland security spending. These steps would help root out wasteful spending and ensure that funds were allocated based on risk rather than politics.

In 2004 the members of the independent, bipartisan 9/11 commission stated that the current system is in danger of turning homeland security funding into "pork-barrel" spending and making security subsidies just another state entitlement program. They suggested that homeland security funding be based strictly on an assessment of risks. While mainly ignored by lawmakers, their conclusions did trigger public debate. Greater public outrage about the deeply flawed spending process may have encouraged DHS to become a stronger advocate for reform ideas unpopular in the pork-hungry Congress.

Indeed, the greatest potential for reform today is coming from DHS. Following the 9/11 recommendations, it has started pushing for a complete overhaul of the grant formula and a more risk-based approach to homeland security in general. A possible sign of that new attitude is the Transportation Security Administration's recent decision to allow passengers to carry some knives onto airplanes. It certainly isn't enough, but it's a step in the right direction. Meanwhile, the department's inspector general has produced several extensive reports exposing bad practices and suggesting ways to curb wasteful spending. If Congress is waiting for guidance before it acts, it need wait no longer.

But that might be wishful thinking. Congress, by nature, is an inefficient institution driven by self-interested politicians. Wasteful spending is par for the course. And if it is sad that lawmakers treat homeland security the same way they treat everything else, it certainly isn't surprising.

Selected Examples of Wasteful Homeland Security Spending

* $200,000 for Project Alert, a school-based drug prevention program

* $7,100,000 for forensic support and grants to the National Center for Missing and Exploited Children 

* $100,000 for the Child Pornography Tipline

* $10,000,000 to Intercity Bus Security to improve security for operators and passengers by providing bus security enhancements and training to bus companies and others

* $22,000,000 to the trucking industry security program to promote security awareness among all segments of the commercial motor carriers and transportation community

* $2.5 billion for "highway security," which consists of building and improving roads

* $50,000,000 to provide an exercise program that meets the intent of the Oil Pollution Act of 1990

* $38 million to fully coverall remaining fire claims from the Cerro Grande Fire in New Mexico

* $20,000,000 to renovate the Nebraska Avenue Headquarters of the Department of Homeland Security

* $500,000 for a homeland security program at the Morehead State University Institute for Regional Analysis and Public Policy

* $22,800 for Mason County, Washington, to buy six radios that are incompatible with county radios

* $30,000 for a Tennessee high school to have a defibrillator on hand for a basketball tournament

* $98,000 for training courses by the Tecumseh, Michigan, fire department--that no one attended

* $557,400 to North Pole, an Alaska town of 1,570 people, for homeland security rescue and communications equipment

Sources: DHS Inspector General reports, press accounts

Veronique de Rugy ([e-mail]) is a research scholar at the American Enterprise Institute 

Risk vs. Reward

Cities facing the        Entities receiving
highest risk of a        the most homeland
terrorist attack         security funding
                         per capita

1    New York, NY        Virgin Islands            $104.35
2    Chicago, IL         Guam                        90.36
3    Washington, DC      Northern Marina Islands     54.00
4    San Francisco, CA   Wyoming                     3,774
5    Los Angeles, CA     American Samoa              37.54
6    Boston, MA          District of Columbia        34.16
7    Philadelphia, PA    Vermon                     31-43
8    Houston, TX         North Dakota                30.82
9    Newark, NJ          Alaska                      30.18
10   Seattle, WA         South Dakota                26.32

Source: Author's calculation based on Office
of Domestic Preparedness, "Fiscal Year 2004
Homeland Security Grant Program" and Rand's
2005 Study "Estimating Terrorist Risk."