Expensive, Self-Defeating Reactions to Fear and Panic

Posted in: Government

The world is still in the early stages of trying to comprehend the horrors that took place in Paris last week. Unsurprisingly, there has already been a great deal of opportunistic political posturing by those who claim that the only way to keep people safe is to respond to violence with more violence, and to allow fear to crowd out measured judgments. Like any sane human being, I thoroughly condemn those who perpetrated those attacks. I also, however, condemn those who would use the Paris attacks as an excuse to engage in bigotry and inhumanity toward others.

In this column, however, I will take a different tack in thinking about the possible responses to the fears of terrorism that the Paris attacks have renewed. If, contrary to what I think would be our better choices, the United States decides to engage in what is puzzlingly thought of as “muscular” responses to the threat of terrorism, we need to think not only about the consequences for human rights, civil rights, and the Constitution. At some point, we are also talking about money.

American conservatives like to think of themselves as guardians of sound financial management. “Run government like a business,” is a common refrain. “Spending and borrowing are bad.” “We must not feed the beast of big government.” Here, I will argue that, in ways that ought to be obvious but apparently are not, the reflexively violent responses to the fear of terrorism favored by many on the American right are extremely expensive, and ultimately economically wasteful.

The Costs of Diverting Resources to Security and the Military

Several years ago, I delivered a lecture on the high costs of America’s incarceration binge, attempting to describe how much economic waste is involved in the policy choices that have made the United States’ prison population the second largest in the world. I did not, however, emphasize the standard statistics regarding the per-prisoner cost to the government (which, for those who are interested, were estimated in 2012 to be over $31,000 nationwide, rising to $60,000 in New York State and almost $168,000 in New York City). Instead, I began by describing what I called “Three Easy Steps to Destroying Your Economy, While Maintaining Full Employment”:

  1. Put half of your population in prison,
  2. Put the other half of your population to work as prison guards, and
  3. Wonder why your economy is so poor.

The point, of course, was to say that the true measure of prosperity, which economists have agreed upon ever since Adam Smith revolutionized economic analysis in the late 1700s, is the public’s ability to obtain and enjoy the goods and services that they want to consume. The genius of a well-regulated capitalist economy lies in its ability to put people to work producing goods and services, and then allowing everyone to consume the fruits of each other’s labors.

Every person who is not engaged in producing things that other people will want to buy, therefore, is not contributing to the bounty of the economy. In my fanciful example, half of the people are idling away in prison, not working but not counted in the unemployment rate (because that statistic excludes inmates), while the employed people are not producing goods and services. It is a poor economy, because potentially productive labor is being wasted on nonproductive uses. (Building those prisons also means that non-labor resources had been wasted as well.)

Of course, we know that in the real world some amount of labor and economic resources will have to be diverted to security activities, to prevent rampant theft, military invasions, and so on. In that sense, some minimum level of security can appropriately be thought of as contributing indirectly to economic production, by allowing other people to be fruitful in the safety of their homes, businesses, and public spaces. Even so, these benefits of expenditures on security do not mean that security is cost-free. At best, it means that the benefits exceed the costs.

All of which means that the only sensible way to decide how much of our economic potential should be spent on security is by considering how much benefit we receive from every dollar that we spend. In a world that is truly more dangerous, it is quite likely that the cost-benefit balance will change, making some security expenditures sensible that were not sensible previously.

That does not, however, mean that there is no limit to the increased need for security, or that the costs are always worth the diminishing benefits of more and more security. It also suggests that we need to be careful about the different types of security that we buy. For example, many analysts have argued (persuasively, in my judgment) that the changes in U.S. airport security in the post-9/11 era were largely wasteful—requiring Americans to spend time and money to gain benefits that could have been obtained at much lower cost.

Even after we have determined how much more of our economic resources to spend on security of various types, moreover, we must remember that this is still very much a cost to the economy, because every person and resource that we divert into enhancing our security is perforce unavailable to produce the things that people actually want to buy and enjoy. The cost might be justified by the benefits of living in a safer community, but it is a cost nonetheless.

Militarism and the High Costs of a National Security State

In the aftermath of the Paris attacks, we find once again that American conservatives are looking to divert ever more of our resources into spending on security. Although this is in some ways unsurprising, because much of the American right has long supported the military-industrial complex and a more aggressive posture both in foreign conflicts and in domestic policing, there has been some resurgence in the last few years of the anti-interventionist (or, in the extreme, isolationist) wing of the Republican party.

For example, when President Obama agreed to the budget deal in August 2011 that ended the first debt ceiling crisis, the negotiators included what was thought at the time to be a brilliant plan to prevent future political gridlock: If the parties could not agree to a new budget framework before a fixed deadline, the budget would be reduced automatically, indiscriminately and across the board, with military and domestic spending being cut in equal amounts. This is now known as “the sequester,” and it was supposed to scare Democrats (who typically favor domestic spending) and Republicans (who heavily favor military spending) equally.

Much to everyone’s surprise, however, when that deadline arrived, the Republicans in the House were willing to accept the automatic military spending reductions after all. Tea Partiers turned out to be much more interested in cutting spending overall than they were in protecting military spending. In essence, they said that they thought that the government was diverting too many workers and resources into both military and domestic programs. The military spending was apparently not worth it to these anti-spending conservatives, while the domestic spending represented in their minds the diversion of economic resources to support poor people who should be forced to sink or swim on their own. (I strongly disagree with that viewpoint, as both a matter of economic policy and as a question of human compassion, but that is not the issue here.)

In short, one of the longstanding and well-known fissures on the American right has centered around the question of spending on the military. Not every Republican reflexively supports spending more on the Pentagon, and even though many in the party have engaged in subsequent efforts to end sequester-related cuts for the military (but not domestic spending), there has been some support for at least some minimal amount of cost-cutting in the military and security budgets even on the right side of the political aisle.

The response to the attacks in Paris, however, strengthens the hand of those who endorse paying any price in the name of security. This includes, for example, Republican presidential candidate Ted Cruz, who made the disgusting claim that the United States should stop worrying so much about civilian casualties in our foreign military strikes. If we want to bomb areas where we think the perpetrators of evil might be hiding, then in Cruz’s view of the world we should put everything we can into a military response, and accept the deaths of innocents as mere collateral damage.

Senator Cruz, however, is hardly the only person who is calling for the United States to spend, spend, spend on the unachievable goal of absolute safety. Even before the tragedy in Paris, some Republicans claimed that the reason to build a militarized wall on our southern border is to prevent terrorists from coming to the United States via Mexico. Now, of course, we are being told that we must spend more money on all kinds of plans to keep out refugees and even to exclude entire religions from this country, as well as bombing targets in the Middle East. One might understand why French President Francois Hollande would choose to tighten border security at this time, but he is doing so at great cost, and the benefits of doing so are at best speculative.

In any event, the American political conversation has returned to an odd place, where all talk of “wasteful government spending” is forgotten and the federal government is being called upon to do more, to spend more, and to do so in a way that looks like it is working, whether it is actually working or not. That is, it is not enough to say, “Look, we are engaged in a combination of military, humanitarian, and diplomatic initiatives.” Too many people are now saying, in essence, “Damn the cost (in lives as well as dollars), I want to see some explosions, to prove that we’re being tough!”

An Economic Description of “Blowback”

In the end, of course, we often come to find that such decisions to spend money on big, flashy military and security operations have failed to provide enough benefits to justify the costs. Indeed, if the supposed benefits of a spending decision turn out to be negative, then we have actually paid money to make matters worse. Rather than simply having costs that might exceed benefits, we have costs followed by more costs—a perversion that might be called cost-cost analysis.

This is arguably what happened in the aftermath of the last big terrorism scare in the United States. The knee-jerk response to being attacked on 9/11 was, of course, an understandable desire to find those responsible and to make them face justice. That those responsible for the attacks were in large part citizens of countries with which the United States is friendly complicated matters, making it necessary to find ways to prove that we are tough that did not involve attacking our allies.

The superficial get-tough response, by virtue of appealing to strong emotions such as fear and panic, won the political debate, with even most Democrats signing onto cost-cost propositions like the Patriot Act, to say nothing of the wars in Afghanistan and Iraq. Although there was at least some connection between the 9/11 attacks and the government then in control of Afghanistan, that did not automatically mean that attacking the country made sense. Meanwhile, the war on Iraq amounted to, sadly, a vanity project that cost thousands and thousands of lives, beyond the direct economic costs that have already added up to several trillion dollars.

As many analysts have noted, including my fellow Verdict columnist Michael C. Dorf in a recent post on our blog, one of the results of our multi-trillion dollar mistakes in the post-9/11 era has been the creation of the Islamic State, which is apparently responsible for the monstrous attacks on the people of France and Lebanon last week. As he pointed out, “as we quite appropriately share in the grief of our friends in France, we and they should keep in mind that, while the use of overwhelming military force is sometimes a sensible policy, the fact that it is the first thing we think to do in our grief and anger does not mean it is in anyone’s ultimate best interest.”

Professor Dorf’s important words stand on their own, and I do not wish to cheapen them by translating them into the lifeless language of economic wonkery. What I am saying is that, even if we were foolishly and callously to set aside the many important concerns about the innocent lives that might yet be lost and ruined by overreacting and misdirecting our anger in response to the Paris attacks, we might do well to remember that we are now deciding how to spend our precious resources, and that our ultimate goal is to improve everyone’s lives. We have a track record of making these decisions quite rashly in the name of being strong, and those mistakes have weakened us at great human and economic cost. To return to the analogy that I described earlier in this column, putting everyone to work as a prison guard is not the path to prosperity or happiness, and it can make matters go quickly from bad to worse.

Posted in: Government, Tax and Economics

Tags: Legal

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