Terrorism and Pork-Barrel Spending

Terrorism and Pork-Barrel Spending
Author(s): R. Morris Coats, Gökhan Karahan, Robert D. Tollison
Source: Public Choice, Vol. 128, No. 1/2, The Political Economy of Terrorism (Jul., 2006), pp.
275-287
Published by: Springer
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Public Choice (2006) 128:275-287
DOI 10.1007/s 11127-006-9054-8
ORIGINAL ARTICLE
Terrorism and pork-barrel spending
R. Morris Coats Gikhan Karahan - Robert D. Tollison
0
Received: 1 February2005 / Accepted: 2 October2005
C SpringerScience + Business Media B.V. 2006
Abstract Thehorrifying,tragiceventsof 9/11 madeAmericansawareof theirvulnerability
to terroristattacksandtriggeredthe creationof the Departmentof HomelandSecurityalong
witha substantialincreasein federalspendingto boththwartterroristattacksandto increase
our abilityto respondto such emergencies.Muchof this largeincreasein spendingwas in
the form of directtransfersto statesand cities throughseveralgrantprograms.Homeland
Securitygrantsmay be used for protectionagainstterroristactivities,therebyenhancing
publicinterests,oras wealthtransfersto stateandlocalgovernments,enhancingthereelection
effortsof incumbents,andthus,privateinterests.
Using 2004 percapitaHomelandSecuritygrantfundingto statesandtheircities, we find
thatthe fundingformulaused for some of the grantprograms,whichallocatesalmost40%
of the fundsin some grantprogramsthrougha minimumpercentto each statewith the rest
allocatedbasedon population,meansthatpercapitafundingis relatedto electoralvotes per
capita,i.e., to the politics of Presidentialre-election.However,the fundingin othergrant
programsis also relatedto some of the dangersandvulnerabilitiesfacedby statesandtheir
cities. Some of the variationin per capitagrantallocationsis also explainedby the amount
of airporttrafficin the stateand the state'spopulationdensity,which are variablesclosely
linkedto the state'svulnerabilityto attack.PercapitaHomelandSecuritygrantallocations,
however,do not seem to be relatedto the closenessof the 2000 presidentialrace.
Keywords Pork-barrel
spending - Public-interest
theory - HomelandSecuritygrants
0
PatriotAct
R. M. Coats (CE)
Departmentof Finance and Economics, Nicholls StateUniversity,Thibodaux,LA 70310 USA
e-mail: [email protected]
G. Karahan
Departmentof Finance and Economics, Nicholls State University,Thibodaux,LA 70310 USA
e-mail: [email protected]
R. D. Tollison
The John E. WalkerEconomics Department,Clemson University,Clemson, SC 29634 USA
e-mail: [email protected]
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Public Choice (2006) 128:275-287
1. Introduction
Like otherexogenousshocks,the 9/11 attackon U.S. targetsopenedup the possibilitiesfor
wealthtransfersas publicpolicy towardterrorismemergedin the aftermathof the horror.
Underits newly consolidateddomainthe Departmentof HomelandSecurity(DHS) now
parcelsout grantsandfinancialsupportto stateandlocal governmentalentitiesrepresenting
thepoliticalmanifestationsof thesepolicies.Thesegrantscovera varietyof homelandsecurityfronts,includingfireandpolice expenditures,civil defense,andotherrelatedactivities.
Of course,the threatposed by terrorismis not uniformacrosspoliticalgeographyso thata
fully rationalizedhomelandsecurityprogrammightsimplyignorethe issue in Thibodaux,
Louisianaor Clemson,SouthCarolinaand focus effortswherethe threatis greater.As we
democlearneda long time ago, however,this is not how a geographic-based
representative
racyallocatesresources(Buchanan& Tullock,1962).Thatthe most highly-valuedpolitical
uses of resourcesarenot the sameas theireconomicuses is a truismin publicchoice.Votes
must be boughtin Louisianaand SouthCarolina,and in most every statewhereterrorism
may be a minimalthreat,to supportfundingfor New YorkCity,wherethe dangeris readily apparent.This processof politicalexchangemeansthat Thibodauxand Clemsonwill
get some new fire trucksor communicationsequipmentthat they may not need for comThis
batingterroristthreats,but ratheras a way to greasethe proverbialporkbarrel.1'2'3
and
in
of
choice
is
well
established
both
theoretical
(Weingast,
Shepsle,
analysis
type public
Johnsen,1981)andempirical(Faith,Leavens,& Tollison,1982)literatureandfor executive
andlegislativebranchbehavior(Anderson& Tollison,1991a).In bothcases politicalactors
are seen as buyingvotes with the publicpursein the pursuitof reelection.The richnessof
thisapproachis apparentin its robustresults,especiallyin explainingthepursuitof electoral
votes in presidentialpolitics(Wright,1974).
In additionto thewastedueto themisdirectionof fundsto lowerpriorityareas,wastealso
occursbecausewealthtransferprogramsgenerateordinaryrent-seekingcosts. Veroniquede
Rugy (2004, p.19) mentionsthatin 2004 severalthousandofficialscame to Washingtonto
grants,as well as a multitudeof firefightersandmanyother
lobbyfor largerfirst-responder
officialsto protestthe size of theirgrantsrelativeto others.
The fact thatthe DHS allocatesgrantsacrossstatesandreportsdataon the same allows
us to test the pork barrelhypothesisin the political responseto terrorism.In short,we
examinewhatdrivestheseallocations- publicinterest,porkbarrel,or both.Ourapproachis
admittedlysimple,boththeoreticallyandempirically.We cannotclaimto presentdefinitive
results.However,the resultsarein keepingwith otherworkalongthese lines so thatin this
respectthey are not unusualat all. The homelandsecurityprogramis just one of a long
'Politicians, of course, recognize what is transpiring.Mayor Bloomberg of New YorkCity has complained
that small and remote states and territoriessuch as Wyoming and AmericanSamoa are receiving homeland
securityfunding out of proportionto any objective "need"for such monies. Respondingto such complaints,
fundsin the 2005 budget(afterthe presidentialelection) areapparentlybeing shiftedtowardthe nation'slarger
cities (Lipton,2004).
2Firstrespondersarenot alone in seeing the opportunityof homelandsecurity
grants.Academicianshave also
participatedin homelandsecurityrentseeking. The Departmentof HomelandSecurityhas establishedvarious
universitycenters at the University of SouthernCalifornia,Texas A&M, and the University of Minnesota.
Each of these institutionshas multiplepartners(see US Departmentof HomelandSecurity 2005).
3We shouldprobablynot overplaythe seeminginsignificanceof Thibodauxas a recipientof HomelandSecurity
funds, as LOOP,the nation'slargestpetroleumportfacility, andmuch of the infrastructurefor offshoreoil and
gas productionin the US are located in the Houma-ThibodauxMSA, which would probablyqualify the area
for critical assets.
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Public Choice (2006) 128:275-287
277
line of programsthatrepresentthe infusionof "marginal"
fundsinto the politicalprocessin
real
and
to
both
threats.
The
Clinton
administration
perceived
response
passeda crimebill to
add 100,000police officersto the streetsnationwide.Whatexplainswherethe moneywent
- some measureof the value of electoralvotes or the local crimerate?Homelandsecurity
expendituresrepresentyet anothercase. In termsof presidentialpolitics was the program
designedto affectthe 2004 electionor to combatterroristthreatsor most likely both?
2. The literature
The literatureon executivebranchbehaviordatesfromWright's(1974) abovecited paper.
He examinedthe allocationof New Deal spendingacrossU.S. statesas a functionof thelocal
severityof the GreatDepressionanda measureof the valueof the state'selectoralvotes to
PresidentRoosevelt.Using a measureof closeness-weightedelectoralvotes, he foundthat
politics mostly trumped"need"in the allocationof these monies. Andersonand Tollison
(1991a)follow up Wright'slead by addingtenureon the HouseandSenateAppropriations
Committeesto the empiricalanalysis,findingagainthatpoliticsoutweighedlocal economic
conditionsin the processof metingout New Deal funds.4
Othersimilarapproachesto explainingexecutivebranchbehaviorincludeAndersonand
Tollison(1991b)on unioncasualtiesin theCivilWar,BramsandDavis(1974)on presidential
campaigningandelectoralvotes, Colantoni,Levesque,andOrdeshook(1975) on the same
subject,andGrier,McDonald,andTollison(1975) on executivevetoes.
Thesestudiesemployvariousmeasuresof a state'selectoralvotes to proxytheirpolitical
valueto a presidentialcandidate.Theseincludecloseness-weightedelectoralvotes (perhaps
weightedby the standarddeviationof the vote of the last severalpresidentialelectionsin
a state),aggregateelectoralvotes, the rankorderof electoralvotes, and electoralvotes per
capita.Ingeneral,stateswithmoreelectoralvotes(largerstates)havemoreinfluencein these
models.
The readershouldalso keepin mindthatthe systemof electoralvotes is a uniquelyU.S.
institution.It basicallyoperatesso thateach statehas electoralvotes equalto its numberof
representatives
plus two senators.In all but two states,a presidentialcandidatewins all of
a state'selectoralvotes by winninga pluralityin the state.The two exceptionsare Maine
and Nebraska,where the electoralvotes associatedwith the representativesare given to
the candidatewinning a pluralityin that congressionaldistrict,while the electoralvotes
associatedwith the two senatorsaregiven to the candidatewho wins a pluralityin the state
(Kuhn,2004). The Collegeis thusa statejurisdictionalwinner-take-all
systemwhereinthe
presidentis electedby theElectoralCollegeratherthanthepopularvote.This systemclearly
makesit advantageousfor presidentialaspirantsto seek electoralvotes wherethe expected
payoffis greater.
3. The legislativeprocess for appropriatingdiscretionaryfederal funds
In the U.S., federallegislationmay be proposedin severaldifferentways. Legislatorsmay
originatebills, of course,but laws may be proposedby citizenspetitioningthe Congress
directlyor throughtheirstatelegislatures.Taxbills mustoriginatein the Houseof Representatives.Fora bill thatappropriates
fundsto be spentthroughtheadministration,
discretionary
4Also see Couch and Shughart(1998).
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Public Choice (2006) 128:275-287
however,suchlegislationis partof the ongoingbudgetaryprocess,wherethe presidentproandtheHouseandSenateAppropriations
posesa budgetforeachadministrative
department,
Committeeof the
Committeestakeup the President'sbudgetproposals.TheAppropriations
to
the
chamber
sends
the
each
administrative
subcommittee
for
department
respective
budget
of
both
the
House and
to
oversee
that
The
subcommittees
assigned
particulardepartment.
SenateAppropriations
Committeesholdhearingson the sectionof the budgetthatallocates
fundsfor particulardepartmentsand calls witnesses,which usuallyincludesthe Secretary
of the department
for whichthe subcommitteehas oversight.In the subcommittees,thebudget proposalsare debated,items are approvedor not, and allocationsmay be increasedor
decreased.Afterthe respectivesubcommitteesapprovea budget,they sendit forwardto the
Committeethathearsthe reportsof the varioussubcommittees.The ApproAppropriations
priationsCommitteethenhas a chanceto amenditemsin thebudget,anda bill is thensentto
the entirechamber.Aftereach chamberpassesthe budget,thereis likely to be some differencesbetweenthe HouseandSenateversionsof thebudget,at whichtimethebill is sentto a
ConferenceCommittee,whichhasmembersfrombothchamberswheredifferencesbetween
the bills areresolvedandthensentbackto the respectivechambersfor finalapproval.
The committeeprocessis one way in which representativedemocraciesdeal with the
rationalignoranceproblemthat Downs (1957) discussed.By specializing,legislatorsare
able to gain expertisein particularareas.Becausecertainsubcommittees,such as the AgricultureSubcommittee,play such an importantrole in some districtsmore thanothersdo,
interestshavea highincentiveto get on theAgriculture
legislatorswho representagricultural
Subcommittee.As a result,subcommitteesoftencometo be dominatedby highandinelastic
demandersof the outputof the agenciesthattheyoversee(Wildavsky,PP. 17-18).
The majorityparty'sleaderschose Committeechairswho runthe committeemeetings
with substantialagenda-settingpowers.Minoritymembersareaffordeda voice on the committeesby theirvoting poweras well as powersaffordedthe rankingminoritymemberin
callingwitnessesandcontrollingpartof thedebatein thefull chamber.Oncommitteechairs,
Woodrow Wilson5 wrote in his book, Congressional Government:
Power is nowhereconcentrated;it is ratherdeliberatelyand of set policy scattered
amongstmanysmallchiefs. It is dividedup, as it were,into forty-sevenseigniories,in
andits chairmanlord-proprietor.
eachof whicha StandingCommitteeis thecourt-baron
Thesepettybarons,someof themnota littlepowerful,butnoneof themwithinthereach
of the full powersof rule,may at will exercisealmostdespoticsway withintheirown
shires,andmay sometimesthreatento convulseeven the realmitself. (Wilson([1885]
1968p. 59)
Since Wilson's time, however,congressionalleadershippositions,such as Speakerof
the House,havegainedpowerat the expenseof the committeechairs(IridisEncyclopedia,
2005a). In the House of Representatives,senioritydeterminedchairsuntil 1975, but party
caucusesnow selectcommitteechairs,andin the 1990stermlimitswereplacedon committee
chairs(ibid.).Still,tenureplaysa rolein powerandinfluence.IntheSenate,committeecontrol
is primarily,butnotcompletely,determinedby seniority,andthe Senatealso limitschairmen
to fourterms,or 24 years(IridisEncyclopedia,2005b).Senatechairshaveenormouspower
becausethey can effectivelykill bills fromgoing to the full Senatefor approval(ibid.).
5Not only was Wilson the U.S. presidentduringWorldWarI and during the establishmentof the Clayton
and FTC Acts, the income tax and the FederalReserve system, but was also a professorof jurisprudenceand
economics at Princeton,where he later served as president.
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Public Choice (2006) 128:275-287
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4. Homelandsecurity grant programs
Inthewakeof theterroristassaulton thePentagonin Arlington,VirginiaandtheTwinTowers
of the WorldTradeCenterin New YorkCity on September11, 2001, Congresspassedthe
U.S. PatriotAct of 2001, which authorizedseveralgrantsto increasehomelandsecurityto
be given out to stateandlocal governments.The PatriotAct, however,requirescontinuous
fromCongressforthefundingunderthePatriotAct of 2001 (U.S. PublicLaw
appropriations
107-56, 2001, Sec. 1014).
Underthe HomelandSecurityAppropriations
Act of 2004, there are five majorgrant
programsofferedto cities andstates:the StateHomelandSecurityProgram(SHSP),theLaw
EnforcementTerrorism
PreventionProgram(LETPP),theCitizenCorpsProgram(CCP),the
UrbanAreaSecurityInitiative(UASI),and the UASI TransitSecurityGrantsProgram.All
of thesegrantsareawardedunderthe Officeof DomesticPreparedness.
Section 1014 of the
PatriotAct of 2001 establishesStateandLocalGrantPrograms(nowthe SHSP,SETPP,and
undertheOfficeof StateandLocalDomesticPreparedness
CCP)to be administered
Support
of the Office of JusticePrograms(ibid.). These grantsare to be used by state and local
governments"to enhancethe capabilityof Stateand local jurisdictionsto preparefor and
respondto terroristactsincludingeventsof terrorisminvolvingweaponsof massdestruction
and biological, nuclear,radiological,incendiary,chemicaland explosive devices."(ibid.)
The PatriotAct establishedminimumsof .75%of totalgrantallocationfor statesand .25%
of total grantallocationsfor the territories(U.S. VirginIslands,AmericaSamoa,Guam
and the NorthernMarianaIslands)underthe State and Local GrantsProgram(now the
fashion(ibid.).
SHSP),so that39.25%of the totalawardis allocatedin thisacross-the-board
The remaining60.75%of the funds for the SHSP,LETPP,and CCP grantsare allocated
to the state'sshareof populationin 2002 (Officeof DomesticPreparedness
proportionately
For
the FY 2004 grants,the Office of DomesticPreparednesscombinedthe
2004a, p. 2).
administration
of the SHSP,LETPP,and CCP with a single application.These threestate
grantprogramsare allocated$2,200 million in total, with $1,685 million going to SHSP
grants,$500 million going to the LETPPgrants,and $35 million going to the CCP grants
(ibid.).
The Departmentof HomelandSecurityAppropriations
Act of 2004 gives the Department
of HomelandSecurity$725 million in discretionarygrantsfor high-threat,high-density
urbanareas(Officeof DomesticPreparedness
2004b,p. 2). In 2004, the HomelandSecurity
Departmentdevoted$50 millionto the TransitSecurityGrantsProgramand the remaining
$675 millionfor the generalsecurityof high densityurbanareas(ibid.).Eligibilityfor the
mass transitgrantsis basedon a formulathatconsideredridershipandtotalroutemiles and
was limitedto heavyandcommuterrail systems(ibid.).The $675 millionfor generalurban
basedon a rankingof the resultsof a formulawhichis
securityis allocatedproportionately
basedon currentthreatestimates,criticalassetswithinthe urbanarea,andpopulationdensity
(ibid.).
5. Frameworkof analysis
Weseekto explaintheallocationof DHSgrantsacrossU.S. states.Thenullhypothesisis that
theseallocationsareindependentof politicsanddeterminedby factorsrelatedto the threatof
terrorism.Toproxythe latterconditionswe employsuchmeasuresas the numberof nuclear
powerplantsby stateand stateincome.To proxypresidentialpolitics we use measuresof
electoralvotes andelectoralclosenessby state.
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Public Choice (2006) 128:275-287
We seek to discoverwhetherthe politicalresponseto terrorismis simply yet another
spendingspreepromptedby anexogenousshockto thebodypolitical(theattack),orwhether
our democracyis takingcare to defenditself in a sensiblefashion.6In otherwords,does
our system of presidentialpolitics cause terrorismresourcesto be over-allocatedto states
predictedto be importantin the next election while being under-allocatedto states less
importantto reelectionefforts?
Ourtheoreticalframeworkis also simple.Government
expandsorcontractsin thewakeof
exogenousshocks,as the case maybe. The 9/11 attacksurelyqualifiesas suchan event,the
atthe9/11 Commissionto thecontrarynotwithstanding.
The
Mondaymorningquarterbacks
DHS is a well behavedagentof politicalactorssuchas the president.Politicalactorsseek to
be reelected.In thisregardthepresidentis chosenby theElectoralCollegewherein,as noted
rule.How,then,will the
above,most statesallocatetheirelectoralvotes by a winner-take-all
candidates
their
and
(and
colleagues)campaignandallocateresources
president presidential
in orderto be reelectedor elected?Clearly,she will ignorestateswhereshe is certainto lose
andcertainto win. Effortswill be devotedto attractvotersin close statesandto stateswith
moreelectoralvotes pervoter.The public-choicehypothesisstatesthatterrorfundswill go
to these states;the public-interesthypothesissays thatthe fundswill go wherethe threatof
futureattacksis greatest.The use of formulasfor allocatingfunds,however,limitsfunding
discriminationalthoughthe formulasthemselvesaresubjectto politicalinfluence.
The exogenous-shocktheoryof governmentis not new.It simplysays thatanytimethere
is a significantchange in relativeprices, the vote-maximizingregulator(Peltzman1976)
will step in to takeadvantageof the newly availablewealthtransferopportunitiesbetween
winnersand losers.The formerare cost-effectivedemandersof transfers;the latterarenot
(why spend$1 to save $0.10?). Exogenousshockscome in all formsand sizes. The Great
Depression,OPEC'srise in power,inventions,naturaldisasters,the financialcollapse of
largecompanies,andstill othercases all begetmoregovernmentinvolvementin an effortto
mitigatelosses andattenuategainsto the affectedparties.
Some of the 9/11 effects in this regardhavebeen obvious.The airlinesandthe victims'
familiesstandoutin thisregard.Nonetheless,thereactionof thepoliticalsectorto 9/11 is not
so obvious.Has ourdemocracyactedto defenditself rationally,or arewe simplyusing9/11
as yet anotherexcuse to feed at the publictrough?The importanceof the answeris clear.If
the publicchoice hypothesishas supportin the data,then we mightbe betteroff spending
oureffortsin reformingourpoliticsratherthansimplyreformingourintelligence-gathering
activities.
6. Empirical model
Wepostulatea simpleempiricaltest of the porkbarrelhypothesis.Namely,
1) HomelandSecuritySpending= f (Income,ElectoralVotes,Closeness,Density,Emplaned,Nuke,Coast,and Border)
where:
HomelandSecuritySpendingis the naturallog of per capitahomelandsecuritygrants
allocatedto the statesandtheircities in 2004;
Incomeis the naturallog of percapitastateincomein 2003;
6
Indeed, are we overreactingto the threat?There appears,after all, to be little interestin terrorisminsurance
outsideof a few majormetropolitanareas,so why fund anti-terrorismprogramsin Boise? The marketis saying
one thing, and the governmentis doing another.
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Public Choice (2006) 128:275-287
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ElectoralVotesis the naturallog of electoralvotes per capitain thatstateafterthe 2000
of Congress;
decennialreapportionment
Closenessis thenaturallog of theabsolutedifferencebetweentheRepublicancandidate's
vote percentagein 2000 and50 percentby state;
Emplanedis the naturallog of personsemplanedpercapitaby statein 2000;
Densityis the naturallog of the populationdensity7in 2002 by state;
Nukeis a binaryvariablefor statesthathavenucleargenerationcapacityin 2002;
Coastis a binaryvariablefor stateswith oceanfrontage;and
Borderis a binaryvariablefor statesthatsharea borderwith Mexicoor Canada.8
The dependentvariable,HomelandSecuritySpending,is the log of thepercapitafederal
homelandsecurityspendingforthe2004 fiscalyearforeachof thefiftystatesandtheDistrict
of Columbiafromfivegrantprograms:thethreeCounterTerrorism
Grants(sumof the SHSP,
LETPP,and CCPgrants),the UrbanArea SecurityGrants,andthe TransitSecurityGrants
2004c, 2004d,and2004e.9Thesegrantsaccountfor only
(Officeof DomesticPreparedness
partof homelandsecurityspending.Variouslocal, state and federalagencies also spend
Homelandsecurityfunds. The DHS itself spendslarge sums directlyfor both homeland
securityactivitiesas well as activitiesthatarenot for homelandsecuritypurposes(de Rugy,
2004). Grants,however,arethe most visible fundsto whichincumbentscanpoint.
WeusetheIncomevariablemostlyas a controlvariable.TheBureauof EconomicAnalysis
(2004) providesthe per capitaincomeby state.Wallis(1996) notes thatstateswith higher
per capitaincomes often receive more federalgrantmoney.As Wallis (1996) points out,
federalgrantsoftengo to richerstatesbecausethesestatesaremoreableto providematching
funds for federalgrants.Anotherinterpretation
of our Incomevariableis that stateswith
levels
of
are
income
to
higher
per capita
likely have greaterlevels of capital,as capital
increaseslaborproductivity,
andthus,percapitaincomes,so thatstateswithhigherpercapita
incomesprobablyhavemoreassets(in bothphysicalandhumancapital)to lose. Underthe
of the variableas measuringdifferencesin capital,ourIncomevariableis a
interpretation
publicinterestmeasure.
Our two main politicalvariablesare Electoral Votesand Closeness.In previouswork
(Wright,1974;Anderson& Tollison,1991a),thesetwo variablesarecombinedintoa single
measureof closeness-weightedelectoralvotes andwerenot consideredseparately.We estimatethe separateeffectsof thesetwo variables.ElectoralVotesaccountsfor the importance
of the stateto the reelectionof the president.Closenessmeasuresthe chancethat a small
changein votes withinthatstatemightchangethe outcomeof the presidentialrace in that
rule.10Electoralvotes
state,as moststatesallocatetheirelectoralvoteswitha winner-take-all
areallocatedbasedon thesumof senatorsandcongressmenandcanbe foundin theU.S. FederalElectionCommission(2003). Witheach statehavingonly exactlytwo senators,smaller
7 Alternatively,we could use the log of the inverseof populationdensity in orderto have all of the populationrelated variablesin per capitaterms,but with the log transformation,this merely results in changing the sign
of the DENSITYvariablescoefficient, while leaving all other coefficients unchanged.
8HomelandSecuritySpending,Emplaned,andElectoral Votesuse 2002 Censuspopulationfiguresas theirdenominator.Forthose interested,ourdataset may be downloadedat http://www.nicholls.edu/mcoats/HSgrants.xls.
9There were two grant amounts, $795,280 each, given underthe headings, "NY-PortAuthorityof NY/NJ"
and "Phil-NJ-PATCO."
We have allocatedthese two figuresequally between New Yorkand New Jersey and
Pennsylvaniaand New Jersey,respectively.The maximumpercentageerrorin our dependentvariabledue to
our ad hoc allocation of these port authoritygrantsis less than 1 percentfor each of these threestates.
10 As noted
previously,MaineandNebraskause allocatetheirelectoralvotes by giving one vote to the plurality
winnerin each congressionaldistrictand two votes for the pluralitywinnerstatewide.
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Public Choice (2006) 128:275-287
stateswill have moreelectoralvotes for the sizes of theirpopulations.The least populous
state,Wyoming,has 3.83 times the numberof electoralvotes per capitaas California,the
mostpopulousstate.Also notethatthe numberof electoralvotesa statehas, like thenumber
of congressmen,is an integer,whichwill also causevariationin electoralvotes permillion
persons.While largerstates,such as Californiaand New York,are expectedto get higher
absoluteallocations,smallerstates,such as WyomingandVermont,areexpectedto receive
moredollarsperperson.
The ElectoralVotesvariablecan be thoughtof in anotherway: one that also involves
anotherpublic-choiceexplanation,butbasedon congressionalinsteadof presidentialpolitics.
Bills to pass,bothhousesmust
ForthePatriotAct andtheHomelandSecurityAppropriations
approvethe bills. Whenfundscan be foughtover,whetherthe fundsarehomelandsecurity
grantsor armedforcesbases, the longerCongresssquabblesover how to dividethe funds,
fewer otherbills get passed, reducingthe other special-interestlegislationCongresscan
of a fixedsum
produce.So delayingthepassageof one bill is costly.Thegameof distribution
lacks a core. In each chamberof the Congress,a rathereven distributionof fundsis likely
to havefocal-pointproperties.We can thinkof the problemherein termsof whatDixit and
modelwherethetotalvaluedecays,
Skeath(1999,pp.531-34) referto as analternating-offers
andgradualdecayleadsto a moreeven splittingof the totalfundswithineachchamber.The
formulaforthethreestategrantprograms,withroughly40%basedon anevensplitof 0.75%
of thetotalforeachstateandtheremaining60%basedon population,is thenwhatone would
expectfrombargainingbetweenthe Senateandthe Houseof Representatives.
Closeness,as measured,is actuallya negativemeasureof closeness,sinceit measuresthe
differencein the vote of the Republicancandidatefor presidentfrom all othercandidates.
Since we hypothesizea positiverelationshipbetweencloseness and spending,we should
expecta negativerelationshipbetweenourvotedifferencemeasureandspending.Thesource
for ourClosenessvariableis the U.S. Bureauof the Census(2004-5b).
The events of 9/11 that launchedthe Departmentof HomelandSecurityutilizedcommercialairlinersas missiles targetedat the Pentagonandthe WorldTradeCenter,pointing
out the vulnerabilityof our airportsfor terroristattacks.The numberof personsemplaned
measuresthe amountof air traveloriginatingin the state,which we find in dataprovided
Statistics(2000)."1Even thoughthe UASI transportation
by the Bureauof Transportation
grantsfundonlypassengerrailinsteadof airtravel(increasedairportsecurityis fundedfrom
othersources),largeairportsdo requiregreatersecurityandmonitoringoutsidethe airport,
as airlinershave long been targetsof terrorists.It is thenexpectedthatthe numberof persons emplanedprovidesus with anotherpublic-interestvariableshapinghomelandsecurity
spending.
Populationandpopulationdensityin 2002 (Bureauof Census2004-5a; LandandWater
Areaof States2000). Infoplease.com2000 wereused in the fundingformulafor Homeland
Securitygrants.12One reasonfor includingdensityin the fundingformulais thata single
terroristattackis likely to be morecostly in termsof lives lost in moredenselypopulated
areas,makingpopulationdensitya public-interestmeasure.
CongressmanChrisCox (R-CA)noted"Thesystemis still flawed.It is at the intersection
of threatand vulnerabilitythatour money shouldbe directed.But rightnow we are using
analysis."(Lipton,2004) Ourthreebinaryvariablesarelikewisebasedon
seat-of-the-pants
I
Delaware'semplanedpassengercount includes only nonscheduledpassengers.
12See Page 2 of the grantapplicationpackage, Office of Domestic
Preparedness(2004d), for a discussion of
the formulaand informationon the years of the US Census data on populationand density.
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Public Choice (2006) 128:275-287
283
vulnerabilityand threat.Since the nation'snuclearpowerplantscould release dangerous
levels of radioactivetoxic materialsif attacked,protectingsuch plantsis expectedto be a
high priority.If funds are allocatedbasedon threatsand vulnerabilities,we would expect
higherper capitaspendingon homelandsecurityin the 31 stateswithnuclearfacilitiesthan
in the 19 stateswithoutnuclearpowerplants(EnergyInformation
Administration
2004). The
and
are
used
to
show
Border
of
for
Coast,
binaryvariables,
points potentialentry foreign
terroristsotherthanairports;entryby landandby sea areextremelydifficultto protectand
shouldbe positivelycorrelatedwithper capitaspendingon homelandsecurity.
Torecap,porkbarrelpoliticsshouldleadto higherpercapitaspendingin stateswithmore
electoralvotes per capitaand wherethe vote differenceis smaller.Spendingon matching
grantsshouldalso be higherin statesthatare more likely to agreeto partiallyfund them,
usuallythe states with higherper capitaincomes.Higherper capitaincomes can also be
viewedas indicatinggreatercapital,requiringgreaterprotection.Thegrantfundingformulas
arepartiallybasedon populationdensity,andso spendingwill be greaterin stateswithhigher
populationdensities.Productiveuses of the grantswould suggest that homelandsecurity
spendingis positivelyrelatedto Density,Income,Emplaned,Nuke,CoastandBorder.
7. Regressionresults
We estimateourmodelwith OLS usingSAS Institute,Inc (1999). The modelestimatesare
shownin Table1. We see thatit is importantto controlfor incomewith high-incomestates
receivingmore moneyper capita.We also see thatper capitahomelandsecurityspending
is higherin states with more passengersemplanedper capita,so that spendingis related
to humanairporttraffic.Populationdensityis also importantwith more denselypopulated
statesreceivingmoremoneypercapita(or stateswithgreaterareapercapitareceivingfewer
dollarspercapita).
On the otherhand,the dangerposed by nuclearplantsin the countrydoes not seem to
be a high priorityfor homelandsecuritygrantdollars,as stateswith nuclearplantsget less
Whilethe statesbordering
spendingperperson,andthisnegativerelationshipis significant.13
Mexico and Canadado receive more homelandsecuritydollarsper capitathanthose that
do not have such borders,the relationshipis insignificant.This could be due to the federal
fundsthroughtheDHS'sU.S. Border
governmentallocatinghomelandsecurityborder-patrol
Patrol,ratherthanenlistingstateandlocal police in helpingto performthis function.Onthe
otherhand,stateswith coastlinesreceiveless moneyper capitathaninlandstates,and this
relationshipis almostsignificant.
Thoughthe resultsdo not contradicteitherhypothesis,so that both explanationshave
merit,the resultssuggestthatthe pork-barrelor public-choicehypothesishas a significant
effect at the margin.Of our two presidentialpoliticalvariables,ElectoralVotesand Closeness, only ElectoralVotesseems to be relatedto homelandsecurityspending(we see that
ElectoralVotesis veryhighlyrelatedto homelandsecurityspending),withan elasticitythat
is significantin its magnitudeas well as beingsignificantstatistically.Holdingothervariables
constant,a 1 percentrise in electoralvotes per capitaseems to increasehomelandsecurity
spendingpercapitaby 1.3percent.It thusappearsthatobjectivefactors,suchas stateincome
13
Foiling plannedattacksis likely to be superiorto protectingindividualtargetsaccordingto de Rugy (2004).
She also suggests that other governmentor private sources may be more efficient in protectingindividual
targets. Still, it is curious that we find a significantly negative effect of the presence of nuclear generating
facilities insteadof no significanteffect of either sign.
Springer
284
Public Choice (2006) 128:275-287
Table 1 Homelandsecuritygrantallocationregressionestimates
Variable
Coefficient
t-value
p-value
Intercept
Income
Electoralvotes
Closeness
13.851
0.512
1.288
-0.002
0.025
0.040
-0.115
-0.061
0.044
6.08
2.96
16.69
-0.09
1.82
2.28
-2.25
-1.49
1.01
51
0.93
85.33
<.0001
0.0051
<.0001
0.3116
0.0763
0.0276
0.0300
0.1439
0.3175
Emplaned
Density
Nuke
Coast
Border
N
Adjusted-R2
F
and personsemplaned,as well as politicalfactors,play a role in anti-terrorfunding.The
variableis very significantbecauseof the large stateminimums
per-capita-electoral-votes
in the fundingformula,but we suggesthere thatits use in the formulamay be due to the
importanceof small statesin the determinationof electoralvotes or becauseof bargaining
Thepoliticaleffectwe findappearsto
betweenthe Senateandthe Houseof Representatives.
votes
in
of
electoral
terms
percapitabutnot in closeness.Some variables
aggregate
operate
be expectedunderthe public-interest
what
would
have
the
from
hypothclearly
wrongsign
esis (Nuke,for example).Overallwe are able to explaina largeamountof the variationin
Departmentof HomelandSecuritygrantsacrossstates.
We estimatedthe modelwith variousmeasuresof ourvariables,butfindthatthe overall
patternof resultsis consistentwith thosein Table1.1415 We also estimatethe modelwith a
differentmeasureof the dependentvariable,using only the stategrants,the grantsin State
HomelandSecurityProgram,the Law EnforcementTerroristPreventionProgramand the
CitizenCorpsProgram,excludingtheUrbanAreaSecurityInitiativeandUrbanTransitGrant
funds.Whatwe find fromthis model is thatalmostall of the coefficientsare insignificant
except for Nuke and Electoral Votes,with the lattervariablehaving a coefficientwith a
t-valueabove 30. The variable,ElectoralVotes,explainsalmostall of the variationin the
14To examine the robustness of our model, we ran the model under alternatespecifications, logged and
"unlogged"measures of the variables,per capita and total measures of the variables, and with the Border
(Borders,2005) and Coast (Coastlinesof the United States, 2005) andNuke (NuclearEnergyInstitute2004)
variablesmeasuredas dichotomous and as continuous variables(miles of borderswith Canadaor Mexico,
andmiles of Atlantic,Pacific or Gulf of Mexico coastline). These variousspecificationsare largelyconsistent
with the model we presenthere. In a model where all of the variables,includingthe Coast, Borderand Nuke
variables, are measuredin per capita terms, the Coast variablebecomes significantlynegatively while the
Border variablebecomes significantlypositive, but the VIF for those two variablesexceed ten, so we place
no value on their "momentary"significance.The model is ratherrobustacross various specifications.These
otherresults are availableupon request.
15To our basic model in Table 1 we added several variablesto measure Congressionalpower, such as the
combined tenureof a state's Republicanson the House AppropriationsCommittee,the combinedtenureof a
state's Democratson the House AppropriationsCommittee,whetheror not a state had representationon the
HomelandSecurityAppropriationsSubcommittee,whetheror not a state had a Senatoror Congressmanwho
was partof the official leadership,anddummiesfor Senaterepresentationon the SenateAppropriationsCommittee and the Senate's HomelandSecurityAppropriationsSubcommittee.For the most part,the coefficients
of these variables are insignificant.However, if Electoral Votesis droppedfrom the model, the two House
AppropriationsCommitteetenurevariablesbecame negatively significant,but this seems spuriousat best.
Springer
Public Choice (2006) 128:275-287
285
stategrantallocations,becausethe formulaallocates40%of the fundsacrossthe boardand
60%by population.The coefficientsof the variables,Density,Income,andEmplaned,all of
whicharesignificantlypositivein thefull modelsuddenlybecomeratherinsignificantin the
"stateonly"grantsmodel.In otherwords,only in thecase urbanareagrantsareaddedto the
statetotals,do we see a public-interest
explanationin HomelandSecuritygrantdistributions
emerge.
So we end witha half-filledglass of water.Politicsmattersto the allocationof anti-terror
funding,but thereare some public-interesteffects revealedin the data as well, especially
for the two urbanareagrantsprograms,whichhaveformulasthattakethreat,criticalassets,
populationdensity,andtrainmass transitinto account.Still, muchof our spendingto fight
terrorismmaybe wastefuleven if it is spentin areasof threats.Forinstance,de Rugy(2004)
suggeststhatthe largesums spentto check everypassengerandall baggagefor protecting
against9/11 style attacksmaybe less efficientthantrainingandarmingpilots andthe use of
fortifieddoorson cockpits.
Our analysisso far has also been limitedby looking at the ways in which the federal
governmentallocatesgrantfundsto combatterrorism.Anothermarginfor fundsto be misallocatedoccursin the ways thatstateandlocal governmentsallocatedthe fundstheyreceive
fromthefederalgovernment(VictoriaAdvocateOnline2005). Forinstance,recentnewshas
suggestedthatin one state,New Jersey,a statewithDemocraticmajoritiesin bothlegislative
chambersandwitha Democraticgovernor,Republicanareasreceivelittlehomelandsecurity
grantfunds(Hepp2005). Whiletherecouldbe a legitimatereasonfor theNew Jerseypattern
of spending,thisnews itemat leastunderscoresanotherway in whichwastefulallocationof
thesefundscan occur.
8. The politics of closeness and grant allocationby formula
As economists,we normallythinkof competitionas a goodthing.Yetin politics,thismaynot
follow.Closenessin electionsmakesindividualvotesmoreimportant,increasingthevalueof
payingattentionto andtakingcareof marginalvoters(Karahan,CoatsandShughart,2006).
As electionsbecome closer,electoralcompetitionrampsup the "price"paid for marginal
votes,thecostof governmentspirals,andtherangeandextentof thepoliticalsectorincreases.
As we arelearning,thisprocesscan be quiteexpensive,notjust in fightingthe waron terror,
butacrossthe boardin termsof governmentprograms.
Therearetwo wayspresidentialracescanbe close butonly one wayis measuredhere,the
within-statecloseness.Eventhoughwithin-stateclosenessdoes not seemto be relatedto the
allocationof homelandsecuritygrants,a presidentialelectioncan still be close in termsof
overallelectoralvotesacrossall states.If a presidentialraceis expectedto be close in overall
electoralvotes,it is morelikelythatpresidentialpoliticalfactorswill dominatetheallocation
process,ratherthancongressionalpoliticalfactors,such as congressionalleadership.If key
congressionalraces,especiallythosein whichthe currentmajorityleadershipareparticipating, aremoretenuousthanthe presidentialrace,thencongressionalpoliticscoulddominate
the allocationprocess.
As de Rugy (2004 p. 17) pointsout, the allocationformulasused for some Homeland
Securitygrantsdo muchto "disconnectthe fundingfromthe risk of being attacked."Still,
formulasarenot withoutpurposeandallocatefundsin a particular
pattern.Grantallocations
made throughformulafundingreducethe abilityof the politiciansto discriminatefinely,
leavingthemwith less perfectformsof politicalallocation.Whileallocationformulaslimit
the ability of politiciansto allocate funds in line with definitionsof the public interest,
Springer
286
Public Choice (2006) 128:275-287
they may also limit the rent-seekingwaste associatedwith wealthtransferprograms.Just
as a monopolistchargingthe same price in differentmarketsbut facing differentcosts of
servicepracticesa formof price discrimination,allocatingthe same fundsacrossdifferent
jurisdictionsforprotectionagainstterrorists,whenthethreatof terroriststrikesandpotential
damagevarieswidely,is anotherformof pork.
Some funds are clearly spent in a mannersupportingthe public interesttheory,while
otherfundsseem to go to "buy"consent.Clearly,this is not a Paretooptimalallocationof
spending- we have governmentfailure.We can improveuponthe way fundsare spent,at
least to the same extentthatimprovementscan be madeto reducethe waste from various
marketfailures.Remainingis the questionof how to reformthe politicalsystemto reduce
this wastewithoutcreatingwasteelsewherein the system.
andother
WethankCharlesRowley,MarkCrain,GordonTullockandWilliamShughart
Acknowledgements
heldatGeorgeMasonUniversityLaw
on thePoliticalEconomyof Terrorism
in theConference
participants
of
School,on 24-25 May2005. We wouldalso like to thankAmberRippyandWandaBuxto,librarians
andMichaelKurthat McNeeseStateUniversitywhoprovidedassistance
theDequincy,LA PublicLibrary,
wereevacuated
for
finaleditingwhileCoatsandKarahan
andInternetconnectionsas thispaperunderwent
Katrina.
Theusualcaveatapplies.
Hurricane
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