The full paper is available here as an Adobe Acrobat PDF.

Introduction

Congress should direct homeland security funding to programs that provide the greatest return in the most crucial security missions. Since the number of possible attacks is effectively unlimited and the resources we can devote to the fight against terror are limited, spending should not occur without a careful cost-benefit analysis. Most importantly, it is perfectly reasonable to decide not to implement an antiterrorism measure, not because it has no benefit, but because the costs are too high compared to the potential benefits. Of course, programs that are not cost effective should never be implemented.

The greatest threats should be addressed first. The Department of Homeland Security (DHS) should prioritize threats that have a relatively high probability of occurring and pose catastrophic consequences. It should then develop, acquire, and set in place the tools and techniques needed to prevent, respond, or recover from such awful scenarios. By this rubric, nowhere is it more important to develop cost-effective security plans than in the area of maritime security.

According to experts, the U.S. should be concerned about nuclear attack by sea. More than 85 non-proliferation and national-security experts polled for a congressional study estimate that the risk of a WMD attack in the next decade using some sort of nuclear device is as high as 70 percent. And Stephen Flynn, a Senior Fellow in National Security Studies at the Council on Foreign Relations, reported that the CIA has concluded that the most likely way weapons of mass destruction (WMD) would enter the United States is by sea.

This is a serious threat: the Council on Foreign Relations estimates that a less-than-perfect one kiloton nuclear bomb in lower Manhattan would immediately claim 200,000 lives, injure 200,000 more and may kill half the population exposed to radiation few weeks later. A rough estimate shows that the direct economic cost of such a tragedy would run over $1.1 trillion (see table 1).

There is little doubt that our ports offer terrorists vast opportunities to inflict terrible damages on our country. The U.S. maritime system includes more than 360 sea and river ports with more than 3,700 cargo and passenger terminals and more than 1,000 harbor channels along thousands of miles of coastline. Maritime shippers have increasingly concentrated their traffic through major cargo hubs (called megaports) because of their superior infrastructure. Approximately 85 percent of all cargo tonnage exchanged in the United States passes though just 50 seaports scattered throughout the country.

In addition, maritime commerce is essential to America’s economic vitality. As the primary mode of transportation for world trade goods, ships carry more than 95 percent of the nation’s non-North-American trade by weight and 75 percent by value, and 100 percent of the foreign oil imported by the United States. In 2003, waterborne trade contributed about 7.5 percent of the U.S. gross domestic product. Given the importance of maritime trade to the U.S. economy, disruption of that trade would have immediate and significant economic consequences in the United States and also worldwide.

Considering the scope of maritime opportunities for terrorists and the dramatic consequences of a successful nuclear or radioactive attack nowhere is the need for strategic spending more apparent than in the area of maritime security.

In FY2006, President Bush requested a budget of $2.03 billion for port security out of a $50 billion budget for homeland security activities government wide. However, on homeland security issue, the important question is not how much money is spent but rather whether the money is allocated toward the most cost-effective programs. In other words, is America getting the maximum level of benefit in exchange for the spending?

This paper reviews some homeland security port programs. First, it takes a look at the economics of port security spending. Second, it examines how the federal government, mainly through DHS, responds to the two main terrorist threats faced by ports: (1) direct threats on the ports themselves and (2) indirect threats via the transport of dangerous material through ports for use in terrorist plots elsewhere in the country. Third, it analyzes whether DHS is achieving its port security objectives and then whether this spending is conducive to improving port security and security in the United States. Finally, this paper will look whether this allocation demonstrates good prioritizing within homeland security

This paper will show that port security spending appears to occur without risk and cost-benefit analysis, leading to large array of misallocated of spending. For instance, a close look reveals that within port security spending per se possibly less money is appropriated to the highest priorities such as preventing nuclear devices from blowing up in our ports than to nuclear detection on site (when it would already be too late). Also, much of the appropriated money is allocated to ineffective programs or low priority goals such as the Port Security Grant Program or Radiation Portal Monitors. But this prioritizing seems also to be lacking within Department of Homeland Security’s budget.

Allocating money efficiently means that the money appropriated must be spent based on risk analysis. To be most effective, the money should first go to programs preventing devastating terrorist attacks, i.e., intelligence programs. And if experts are correct about the probability of a nuclear attack in our country then the federal government should make protection of stockpiles of fissile materials a priority. Within maritime security, funds should also fund the highest priorities first, like keeping nuclear weapons and terrorists outside of our ports.

Finally, if funds are spent on ports to upgrade security then the money should go first and foremost to critical national ports and terminals--the areas of highest consequence with the greatest vulnerability to terrorist attack--rather than spending a little money in every port. Severely damaging one of these critical ports could not only cause injuries, death, and property damage, but could also disrupt the flow of basic goods into and out of the country. Spending a little money everywhere ensures that we protect nowhere adequately.

Veronique de Rugy is a research fellow at AEI.