The Political Economy of Terrorism || Terrorism and Pork-Barrel Spending

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  • Terrorism and Pork-Barrel SpendingAuthor(s): R. Morris Coats, Gkhan Karahan and Robert D. TollisonSource: Public Choice, Vol. 128, No. 1/2, The Political Economy of Terrorism (Jul., 2006), pp.275-287Published by: SpringerStable URL: http://www.jstor.org/stable/30026645 .Accessed: 15/06/2014 06:36

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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 0 Gikhan Karahan - Robert D. Tollison

    Received: 1 February 2005 / Accepted: 2 October 2005 C Springer Science + Business Media B.V. 2006

    Abstract The horrifying, tragic events of 9/11 made Americans aware of their vulnerability to terrorist attacks and triggered the creation of the Department of Homeland Security along with a substantial increase in federal spending to both thwart terrorist attacks and to increase our ability to respond to such emergencies. Much of this large increase in spending was in the form of direct transfers to states and cities through several grant programs. Homeland Security grants may be used for protection against terrorist activities, thereby enhancing public interests, or as wealth transfers to state and local governments, enhancing the reelection efforts of incumbents, and thus, private interests.

    Using 2004 per capita Homeland Security grant funding to states and their cities, we find that the funding formula used for some of the grant programs, which allocates almost 40% of the funds in some grant programs through a minimum percent to each state with the rest allocated based on population, means that per capita funding is related to electoral votes per capita, i.e., to the politics of Presidential re-election. However, the funding in other grant programs is also related to some of the dangers and vulnerabilities faced by states and their cities. Some of the variation in per capita grant allocations is also explained by the amount of airport traffic in the state and the state's population density, which are variables closely linked to the state's vulnerability to attack. Per capita Homeland Security grant allocations, however, do not seem to be related to the closeness of the 2000 presidential race.

    Keywords Pork-barrel spending - Public-interest theory - Homeland Security grants 0 Patriot Act

    R. M. Coats (CE) Department of Finance and Economics, Nicholls State University, Thibodaux, LA 70310 USA e-mail: morris.coats@nicholls.edu

    G. Karahan Department of Finance and Economics, Nicholls State University, Thibodaux, LA 70310 USA e-mail: gokhan.karahan@nicholls.edu

    R. D. Tollison The John E. Walker Economics Department, Clemson University, Clemson, SC 29634 USA e-mail: rtollis@clemson.edu

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  • 276 Public Choice (2006) 128:275-287

    1. Introduction

    Like other exogenous shocks, the 9/11 attack on U.S. targets opened up the possibilities for wealth transfers as public policy toward terrorism emerged in the aftermath of the horror. Under its newly consolidated domain the Department of Homeland Security (DHS) now parcels out grants and financial support to state and local governmental entities representing the political manifestations of these policies. These grants cover a variety of homeland secu- rity fronts, including fire and police expenditures, civil defense, and other related activities. Of course, the threat posed by terrorism is not uniform across political geography so that a fully rationalized homeland security program might simply ignore the issue in Thibodaux, Louisiana or Clemson, South Carolina and focus efforts where the threat is greater. As we learned a long time ago, however, this is not how a geographic-based representative democ- racy allocates resources (Buchanan & Tullock, 1962). That the most highly-valued political uses of resources are not the same as their economic uses is a truism in public choice. Votes must be bought in Louisiana and South Carolina, and in most every state where terrorism may be a minimal threat, to support funding for New York City, where the danger is read- ily apparent. This process of political exchange means that Thibodaux and Clemson will get some new fire trucks or communications equipment that they may not need for com- bating terrorist threats, but rather as a way to grease the proverbial pork barrel.1'2'3 This type of public choice analysis is well established in both theoretical (Weingast, Shepsle, and Johnsen, 1981) and empirical (Faith, Leavens, & Tollison, 1982) literature and for executive and legislative branch behavior (Anderson & Tollison, 1991a). In both cases political actors are seen as buying votes with the public purse in the pursuit of reelection. The richness of this approach is apparent in its robust results, especially in explaining the pursuit of electoral votes in presidential politics (Wright, 1974).

    In addition to the waste due to the misdirection of funds to lower priority areas, waste also occurs because wealth transfer programs generate ordinary rent-seeking costs. Veronique de Rugy (2004, p.19) mentions that in 2004 several thousand officials came to Washington to lobby for larger first-responder grants, as well as a multitude of firefighters and many other officials to protest the size of their grants relative to others.

    The fact that the DHS allocates grants across states and reports data on the same allows us to test the pork barrel hypothesis in the political response to terrorism. In short, we examine what drives these allocations - public interest, pork barrel, or both. Our approach is admittedly simple, both theoretically and empirically. We cannot claim to present definitive results. However, the results are in keeping with other work along these lines so that in this

    respect they are not unusual at all. The homeland security program is just one of a long

    'Politicians, of course, recognize what is transpiring. Mayor Bloomberg of New York City has complained that small and remote states and territories such as Wyoming and American Samoa are receiving homeland

    security funding out of proportion to any objective "need" for such monies. Responding to such complaints, funds in the 2005 budget (after the presidential election) are apparently being shifted toward the nation's larger cities (Lipton, 2004). 2 First responders are not alone in seeing the opportunity of homeland security grants. Academicians have also

    participated in homeland security rent seeking. The Department of Homeland Security has established various

    university centers at the University of Southern California, Texas A&M, and the University of Minnesota. Each of these institutions has multiple partners (see US Department of Homeland Security 2005). 3 We should probably not overplay the seeming insignificance of Thibodaux as a recipient of Homeland Security funds, as LOOP, the nation's largest petroleum port facility, and much of the infrastructure for offshore oil and

    gas production in the US are located in the Houma-Thibodaux MSA, which would probably qualify the area for critical assets.

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  • Public Choice (2006) 128:275-287 277

    line of programs that represent the infusion of "marginal" funds into the political process in response to both real and perceived threats. The Clinton administration passed a crime bill to add 100,000 police officers to the streets nationwide. What explains where the money went - some measure of the value of electoral votes or the local crime rate? Homeland security expenditures represent yet another case. In terms of presidential politics was the program designed to affect the 2004 election or to combat terrorist threats or most likely both?

    2. The literature

    The literature on executive branch behavior dates from Wright's (1974) above cited paper. He examined the allocation of New Deal spending across U.S. states as a function of the local severity of the Great Depression and a measure of the value of the state's electoral votes to President Roosevelt. Using a measure of closeness-weighted electoral votes, he found that politics mostly trumped "need" in the allocation of these monies. Anderson and Tollison (1991a) follow up Wright's lead by adding tenure on the House and Senate Appropriations Committees to the empirical analysis, finding again that politics outweighed local economic conditions in the process of meting out New Deal funds.4

    Other similar approaches t