International terrorism is probably the greatest security challenge America faces today. Policymakers have responded in two ways--going after terrorists abroad and improving security against terrorism at home by boosting homeland security funding. Regarding the latter, total spending directed to homeland security activities will be at least $50 billion for FY2006.Yet, the important question is whether America is getting the maximum level of benefit in exchange for this increase in spending. This paper performs a detailed review of homeland security's spending practices. First, it takes a look at the economics of homeland security spending and contrasts that with the politics of decision-making in this area. Second, it examines the state of homeland security spending. Finally, the paper analyzes how homeland security funds are being allocated and asks whether this is conducive to achieving improved security in the United States. This updated version also includes a review of federal spending to bolster port security.
We conclude that a large portion of homeland security-spending decisions are made on a political basis rather than on a sound cost-benefit analysis, leading to the traditional public choice failures that plague government spending more generally. As a result, homeland security funding is likely to be misallocated, resulting in a less than optimal level of security in America.
Veronique de Rugy is a research fellow at AEI.