THE CATO INSTITUTE HOLDS A BRIEFING ON "ABOLISH THE TRANSPORTATION SECURITY ADMINISTRATION"

SEPTEMBER 30, 2011

SPEAKERS: DAVID RITTGERS, LEGAL POLICY ANALYST, CATO INSTITUTE

JIM HARPER, DIRECTOR OF INFORMATION POLICY STUDIES, CATO INSTITUTE LAURA RENZ, MANAGER OF GOVERNMENT AFFAIRS, CATO INSTITUTE

[*] RENZ: Hi, everybody. We're going to go ahead and get started while you can -- can get your food and get seated, but we can get this -- get this show started.

Thanks for coming today. I'm Laura Reinz with the Cato Institute. And today, we're going to be talking about the Transportation Security Administration and probably larger DHS issues. This handout was at the front, but this is a recently published paper by Dave Rickers about demolishing the Department of Homeland Security. We have a bunch of handouts like this up front and, if you don't get any today, they're available on our website, cato.org.

Our first speaker today is going to be David Rittgers who's a legal policy analyst from the Cato Institute focusing. He concentrates on civil liberties, counterterrorism, and criminal justice issues. Prior to joining Cato, he served in the United States Army as an infantry and special forces officer, including three tours in Afghanistan. He's been awarded the Army Commendation Medal and two Bronze Star medals and continues to serve as a reserve judge advocate.

Following will be Jim Harper, Cato's director of information policy studies. Jim works to adopt law and policy to the unique problems of the information age in areas such as privacy, telecommunications and intellectual property. He was a founding member of the Department of Homeland Security's data privacy and integrity advisory committee and he recently co-edited the book, Terrorizing Ourselves -- How U. S. Counterterrorism Policy Is Failing and How to Fix It. He is also the author of privacilla.org, a Web-based privacy organization and he maintains the online federal spending resource, washingtonwatch.com.

And, with that, I will turn it over to you.

RITTGERS: I will thank you all for coming out. I have to note that, as Laura mentioned, my military affiliation and any comments I make today are certainly mine and not those of the Department of Defense or Army.

So, a brief outline. We're talking about abolishing the TSA, once again, part of the umbrella of the policy announcements I just published, abolishing the Department of Homeland Security. First, we'll talk about the proper federal role in counterterrorism and from that we'll move to the case for privatization in the passenger aviation industry. We'll talk about not just abolishing TSA, but the federal Air Marshal Service, which I think has an emotional hook to 9/11 that we have to talk about. And then I'll give a little plug for my P. A., and I'll hand it off to Jim Harper who will talk about some of the profiling and other identity issues that are involved in aviation security.

So, first, let's ask, what is the proper federal role in counterterrorism, not just in aviation security, but generally? Well, to begin with, I think we have to, especially in these tight fiscal realities we face today, look at drawing the proper lines where we spend federal dollars. So, to begin with, fundamentally, is it a public good? And if it is a public good, we should spend public dollars, but if it's a private good, it should be left it to the private sector.

And commercial passenger aviation is a private good. So, in general principle, if we keep that in the hands of the private sector, we would be allocating resources more effectively.

Also, fiscal federalism is very important. I talk about this in the policy analysis with regard to wasteful federal grant programs where we spend federal dollars to either subsidize or incentivize state spending. We also give out a lot of -- a lot of many millions of dollars in wasteful grants to localities for a lot of unused decontamination equipment. You've probably heard a lot of these stories.

And, finally, we have to scrutinize the cost-effectiveness of whatever dollars we spend. And of the money that we've spent since 9/11 in homeland security, a lot of it's has been wasted. In fact, a recent study by Professors John Mueller and Mark Stuart found that, in order to survive a cost benefit analysis, increased homeland security expenditures since 9/11 would have to deter, prevent, foil, or protect against 1,667 otherwise successful Times Square-type car bombs per year or more than four a day. Now there simply aren't that many terrorists out there, and we've done a good job since 9/11 of shedding our liberties and a lot of dollars in the futile pursuit of perfect safety.

Perfect safety is not attainable. And, so, moving towards the case for privatization, I think we have to admit the fact that a lot of what we do in aviation security is security theater. It is efforts to make us feel safer, but they might not actually make us safer. And I would include in all -- in this removing shoes, liquid quantity restrictions, body scanners, generally security theater. And as a noted security expert, Ruth Schneider puts it, "We'd be better off returning our security to a pre-9/11 regime on the passenger side and focus on airport employee screening because they have access we don't, baggage screening for explosives, and relying on investigation intelligence work to intercept terrorist plots because that's a more effective use of resources, pays bigger dividends on the dollar.

However, there is no bureaucratic incentive to reach this conclusion and to enact these policies. Quite the opposite. In fact, bureaucratic incentives dictate, essentially, fighting the last war and not letting an attack repeat itself. Sort of DMV logic, right? And, because of this, wait times, efficiency, inconvenience to the passengers, ultimate effectiveness are secondary concerns to covering the reputation of the bureaucracy and the people in charge of it.

There's also a general trend, a creep away from a free society. I think it was striking how within a two week period the NFL screening at stadiums because one person snuck a Taser into a football game went from just regular metal detector, magnetometer, screening to enhanced pat downs in a matter of two weeks. I mean, it's just an amazing knee-jerk response that we're sort of programming ourselves into. And I think the only way we're ever going to get to a rational employment of aviation security resources is if we take government out of it because the market will simply do a better job of allocating risk and assessing risk than the government will.

Have we seen some privatization? Well, we have in a form, and this is the screening partnership program. As you probably know, it was created by a ATSA, the authorizing legislation that created the TSA. It started as a pilot program, five airports, to ascertain whether or not it was feasible to do airport security after 9/11 the way that we had always done security, letting airports and airlines provide the security. After that initial five airport test was deemed a success, it expanded to 16 airports. However, that 16 airport count has been capped as the TSA has used -- has moved toward unionization and collective bargaining agreement.

From this, we've seen that private security, or at least contract security, is no less effective than the TSA federalized screeners. And no one on the side of federalizing is pointing towards a lack of effectiveness. And -- and, in fact, in many of the studies we've found that they're more effective than the federalized screeners. There's a bit of a war of numbers here, but, generally speaking, I think we can say that it will not cost more than employing federalized TSA screeners if we were to have the screening partnership program screeners.

A quick rundown. There's a -- there's a lot of data going back and forth, but the initial BearingPoint study found that contract screeners performed consistent or better than TSA screeners and screening costs were marginally reduced in most cases. And the report also noted that, had the airport security directors had the ability to really use all the tools of a -- of a privatized system, they would have been more efficient.

TSA has countered that the screening partnership program, the contract screeners, would be as much as 17 percent more expensive. The GAO has questioned the techniques. It cut it down to 3 percent more expensive, but the TSA has failed to enact all of the data, the number crunching reforms, so there's this war of numbers about how much it'll cost. But I would note that the recent House committee on transportation oversight found that privatizing LAX, the Los Angeles International Airport alone, would save $38 million annually for the taxpayers. And that in some some cases, the contract model can be 65 percent cheaper than TSA employees.

But let's note that the screening partnership program is not privatization. It is an instance where the TSA gives permission to the airport to move towards a contract model. They select the contractor who will provide the security. They dictate the methods by which security is provided. That's not privatization.

And, if we were to actually move to a fully privatized model, all of these costs would be off of the back of the taxpayer and on the flying public because the costs of providing security would be paid for by the costs within the airline ticket that you would buy and not, as it is now, about 25 percent is paid by a TSA fee, $2.50 added to each ticket, and the rest is picked up by the taxpayer.

But, if you were to pass all of it on to the flying public and not the taxpayer, then you would see a -- a significant reduction in costs, wiping out almost all of the federal costs for providing aviation security. Now, there's two routes to do this. First, just outright abolish the TSA and allow for the insurance market to provide the, you know, the -- the -- the fall back if there is a terrorist attack,. And let's admit that terrorists have a great -- airlines have a great incentive to prevent terrorist attacks. Going bankrupt is a great incentive not to allow terrorists on your planes.

And, if there is some squeamishness about allowing the free market to do the work and to allocate risks effectively, the Safety Act can provide some limited liability for certified security providers. So, if the airlines and airports were to get certified, then there would be some cap on liability. But I think that the -- the pure market incentives, don't let your planes get blown up so you don't go bankrupt, is a pretty good model.

So, as we move towards unionization, a few words about that. First, this will be a much more rigid labor model than the one that we currently have. And I think that, you know, even though the initial collective bargaining agreement as -- as agreed upon in the letter put out by Director Pistole at the start of the -- the unionization process, even though it puts some of the full time labor provisions off the table and says we're only going to allow collective bargaining over the part time labor provisions, that's actually a really significant piece of the puzzle because, right now, TSA maintains what is called the National Deployment Force. And this is a pool of TSA screeners that deploy to offset seasonal demand and other labor shortages at the non-FPP, the federalized airports, at a significant additional cost to the taxpayer.

Now, why is it significant? Because you're picking up a federal employee, you're flying them to some other place, you're paying for a hotel room, you're paying a per diem, and you're displacing them from their family.

So, instead of doing that, I think it's obvious that letting the market take care of this and letting those airports who have a seasonal flux use a contractor, use part time contracts to fill that need. I think that's a much more effective and economic -- a better economic model for that piece of the security market for aviation security.

And I'd also note that collective bargaining has not worked out well in other contexts. The Border Patrol has been stung several times with the federal labor relations authority dictating, by terms of collective bargaining, disciplinary issues within the Border Patrol, someone falling asleep at their post. Is that something we can discipline over? Do we have to have a warning letter first? Training issues. So, transporting that into the TSA is actually going to decrease our security and actually increase our labor costs. So, it's just a lose-lose for the taxpayer.

So, I'm going to move on now to the Federal Air Marshal Service and how I think abolishing the Federal Air Marshal Service is important because it makes a significant emotional leap to get past the events of September 11, 2001. I say this because it was a hijacking and we make the emotional connection between a hijacking and an air marshal by saying, "Man, if we just had air marshals on this flight, that wouldn't have happened."

I think that as we go through the facts, we'll see that we have sufficient counter-hijacking resources in place, we do not need the air marshals, and admitting that reality and realizing this is an area where we are strong would undermine some of the -- the inflated terrorist threat that is made about in the media quite frequently.

So, a bit of history about the Air Marshal Service. First, there are a few dozen. I think the number is actually 33 prior to September 11th, 2001, and it grew to over a thousand. The number is classified right now as it should be. As Representative Duncan from Tennessee has noted, we spent $860 million for an average of four -- actually, it's 4.2, but four arrests a year. So, that's $215 million average spent per arrest. That number is now $930 million.

So, the -- so, the map is actually worse, but I think we have to discuss, you know, what's our metric? What's our yardstick for success with regard to the air marshals? Is it arrests or is it deterrence? And should we view them not so much as law enforcement officers because by the time they're making an arrest, a lot of systems prior to the air marshal intervening have broken down, or is it to detour hijacking attempts? And, if the rational is to deter hijacking attempts, then you don't really need a law enforcement officer. You just need a security guard. And if we envision the air marshals as plain-clothes security guards, they actually -- it makes a lot more sense than using federal law enforcement to do that.

So, as I said, the -- the -- the -- you know, there's a lot of time and distance from September 11th 2001, and terrorists have changed tactics, and the tactics employed on that day are not the tactics we see today. We don't see attempts to get into the cockpit by groups of men armed with melee weapons. We see people trying to get secret explosives onto the plane and, because of this change in tactics, airlines are even questioning the utility of maintaining air marshals as they have been employees since 9/11. And they've actually recently asked the Federal Air Marshal Service to please take your officers out of first class because you are using our prime real estate, our most lucrative real estate on the plane, and the threat simply isn't there, you know, necessitating putting your officers between the bulk of the body of passengers and the cockpit.

Well, if the airlines made that -- that leap, then why can't we? So, we should also note that it's not a very effective -- in terms of cost-effectiveness -- getting back to making rational decisions about spending money -- it's not a very good deal for the taxpayers. So, what are the odds of an air marshal stopping a hijacking attempt? Well, right after 9/11, some proposed an Israeli-style, 100 percent coverage. Put an air marshal on every flight. That's actually pretty much prohibitively expensive. And we would spend more than we spend on the whole of the TSA, about $8 billion right now. We would spend actually $9.3 billion to reach 100 percent coverage. So, right now, what we have is 10 percent coverage. And one study, which assumed air marshal presence on 10 percent of all flights, still found the cost of per life saved was $180 million. Now, that is far more than the Office of Management -- Management and Budget recommendation of $1 million to $10 million. $180 million is a pretty extreme amount of money to spend on a per -- per, you know, per life saved basis. However, hardened cockpit doors which we installed right after 9/11 on all airliners are exceedingly cost-effective with an estimated $800,000 per life saved. So, that's a good expenditure of resources.

And I think we should note, just to segue here into what's changed, there are two big changes since 9/11 and actually on 9/11 that changed the rational of hijacking. The first, of course, is the aforementioned hardened cockpit doors, very cost-effective, very good counterterrorism measure to employ. The second is that the passengers know that they have to fight back. We're playing for all the marbles now. We are not going to get hijacked, flown to some remote tarmac, and negotiate for the release of political prisoners. The airlines are now a cruise missile, they're weaponized, and they want to crash them into high value terrorism targets.

So, three quarters of the way through, on Flight 93, the passengers fought back and the unorganized militia took down Flight 93. And, since that time, we've seen in unruly passenger incidence -- we have about 200 a year -- the passengers react. They subdue fellow passengers who -- who try to conduct a terrorist attack. We saw this with both the shoe bomber and the underwear bomber, both tackled by flight attendants and fellow passengers. And, if you just do a Google search on -- on unruly passenger subdued, you'll be astounded how frequently this happens with not just terrorists, but -- but being intoxicated can get you hog-tied by your fellow passengers.

(LAUGHTER)

So, but, if you think, if we are attached to this idea of having armed counter-hijacking personnel on aircraft, the deterrence is actually enhanced if it's privatized. Why is that? Because the entire critique of cost-effectiveness with regard to air marshal is only possible because we live in a pretty open society. So, because their bottom line budget is a matter of public record, we can look at that and say it's pretty cost-effective.

Now, if this was employed by the airlines and Delta had a body of air marshals that they employed like private plain-clothes security guards, Southwest had one, and you know, they would periodically show, you know, an advertisement advertising the -- the prowess of the air marshals in -- in close quarters fires marksmanship, you know, that's good deterrence. And, when you ask how many they have and how frequently they're employed, they just say, "Well, you know, it's just part of our overall operating budget," and you don't know. That's deterrence. And you get that from a private model and not a public one.

I should also note that, in terms of having armed personnel on the aircraft, if you -- if you're attached to thus idea, then the Federal Flight Deck Officer program, the means by which we -- we arm pilots, is a great deal for the taxpayer. We spend $25 million a year on the whole of crew training, including the federal flight deck officer or the armed pilot program, because the pilots volunteer for it and they foot the bill. They travel to the training. They pay for the expenses associated with being qualified for the program. That's a great deal for the taxpayer and, honestly, you know, the skill level required for -- for an armed pilot shooting, you know, shooting at someone breaking through the already hardened cockpit door, which is unlikely, but if it happens, you don't -- you don't really have to be, you know, as -- as proficient as an air marshal to -- to get that done. And I would note that -- that, you know, we have a -- a body of pilots who are willing to do this. Seventy percent of them have some military background. And, so, I think they're -- that they can do that job in a -- in an extremis situation.

So, now, while I have a captive audience and I've got you in your chairs, I'm going to talk about my policy analysis for a little bit. So, I talked first about how the Department of Homeland Security, as an umbrella organization, doesn't make a lot of sense. On Capitol Hill, we always hear this proposal how we need to have one committee that oversees all DHS operations all -- in each chamber. That is a completely unrealistic goal. There are 108 committees that have oversight over DHS. Why is that? Because when you take 22 previously unconnected federal agencies and you stick them under one management umbrella, that requires a lot of oversight. So, this one committee business is completely unrealistic.

And can you imagine, if we did that, the size of that committee? What would the staff look like? So, you would have an unworkable management problem within the staff to supervise the DHS if you were to do that. And, honestly, as a management theory, this is called span of control. The number of subordinates that you can have under one supervisor or, in this case, the number of subordinate agencies you have under one supervisory administrative umbrella.

If this made sense, then in the free market there would be one company -- company, right -- aggregating everyone's goods and services into one place. If this made sense in terms of government, all of the duties and responsibilities in the cabinet would have been lumped together under one person, the secretary of government. It doesn't make sense. We haven't done those things. It's simply an unworkable model.

One part -- the next part of it is abolishing the TSA. I've talked about that. I also go in-depth on waste in federal grant programs, specifically the State Homeland Security Program, the Urban Areas Security Initiative. And then I wind up talking about federal funding for fusion centers. And these are state and local organized intelligence analysis cells that I think spend a lot of money duplicating the efforts of the FBI in counterterrorism and are driven mostly by following the money.

In the recent book by Dana Priest and William Arkin, there's a great section on Tennessee and why they have three fusion centers. Why do they have three fusion centers? Well, they didn't think they needed them, but there was grant money. So, let's have three. So, the bottom line is that there is a much smaller terrorist threat out there than is advertised much of the time and spending our -- our -- our public dollars, our treasure, is an important task of government and I think that abolishing both the Transportation Security Administration and the DHS is a good step in the right direction.

Thank you.

(APPLAUSE)

HARPER: As David said, I want to thank you all for being here. These are important issues to the country, obviously, and complex issues. I think we have a good team at the Cato Institute working on these kinds of issues, counterterrorism and security, from a lot of different angles. Along with David who I think gives an excellent, clear-eyed assessment of things in his -- in his recent policy analysis, "Abolish the Department of Homeland Security," my colleagues, Chris Preble and Ben Friedman and I, over the last three years or so, have been working on counterterrorism policy. We conducted a pair of conferences, one in early 2009, one in early 2010 where we brought in experts from around the country and world on -- on various aspects of terrorism and talked together with them, a two day conference in 2009 and a full day on 2010.

Our book, "Terrorizing Ourselves," which Laura referred to is some of the thinking that goes into counterterrorism. There are a lot of dimensions to this problem and it's a complicated problem, but -- but we're working through them, slowly, but surely, as a nation. Among the chapters in -- in that -- in that book are some chapters on communicating about terrorism which I think are particularly helpful Hill staff. Understand the kinds of messages that people will absorb and that people need to hear about terrorism, in general, and in the event of any -- any kind of emergency. How you and your offices communicate with the public about these things is an important part of securing the nation, not only against terrorism, but against overreaction, which is really the goal of terrorism -- is to cause overreaction.

What we're talking about here today really is -- is a -- a large overreaction. The creation of the Department of Homeland Security, the creation of the Transportation Security Administration, were overreactions. Well-meaning? Of course. A little bit too urgent? Yes, because we didn't know how to respond to this -- this attack on September 11th at the time. We're learning now and I think what we're learning is that some of the reactions we had in the aftermath were overwrought, were that kind of overreaction that we want to withdraw from.

As Laura also mentioned, I was a founding member of the Department of Homeland Security's data privacy and integrity advisory committee. I served on it about six years until maybe a year ago or so. Along with working on -- we were sort of brought in to work on privacy issues, but I can't work on an issue without looking at the whole picture and so I spent a lot of time understanding that agency, understanding the psychology in -- in the Department of Homeland Security and in the Transportation Security Administration. A lot of people, well-meaning to a person, but -- but the incentive structures that face, the -- the things that they do for us, aren't necessarily in the best interest of the country, in total.

We have, after all, life, liberty, and the pursuit of happiness as our -- our national credo. Well, life, is the part of that that refers to security. It's very important, yes. Liberty and the pursuit of happiness are the other side of that, if you will, letting us do what we want to do, letting us go where we want to go, letting us keep our taxpayer dollars to spend as -- as ourselves. So, taking the DHS's advice, which would provide 100 percent security, is not -- is not our role. We have to, in congress and elsewhere, counterbalance the arguments that come forward from security agencies like DHS and TSA.

So, I have asked myself over these years, how would you do airline security? Hey, smart guy, how would you do airline security? And I'll -- I'll tell you a little bit about the thinking that I've put into it and the thinking that I think should go into it. And it all boils down to risk management. Risk management is probably one of the most boring subjects you can find, but I'll bore you -- bore you with it only briefly and go through the thought process that -- that should go into -- to homeland security.

First of course, you've got to decide what you're trying to protect. You've got to choose -- choose what it is that you're doing. That's called asset characterization. Literally, what is it that -- that you're trying to do. A security agency will go too broad. I'm trying to protect America. Well, if you're protecting everything, you're probably actually protecting nothing. So. choose something.

Then the next problem is risk characterization, or risk assessment. Now, that -- that has -- is sort of a four-step process. You need to understand vulnerabilities. Those are weaknesses. Now, lots of things have weaknesses. Airplanes have weaknesses. Airports have weaknesses. Everything has weaknesses. That's not damning. You also have to understand threats and hazards. That's something animated to -- to -- to do some kind of harm. Examine those, understand what they are. With those two in mind, you -- you compare likelihood and consequence. How likely is it that a bad thing is going to happen and how consequential will it be if it does happen?

Now, you can't boil this down to a specific science, but if you have likelihood and multiply it by consequence, that is risk. The process of thinking all this through will basically flow to the top what the most important risks are and what the things are that you should address first.

Responses, also, run a range. Responses include acceptance. In a lot of cases, we accept risk. We do that all the time cross a street against a light, for example. There's a risk we'll be hit by a car, but we're better off on the other side of street even if we encounter that minor risk of -- of a car zooming down the road at us. Prevention, something that makes it impossible for that bad thing to happen. The cockpit door, the hardened cockpit door on an airliner, that's prevention because it's, if not impossible, very, very hard now to access the flight deck of a -- of an airplane. Interdiction is something you do to stop a bad actor, to stop the threat from coming and manifesting itself in place. What we see at airport checkpoints is a lot of interdiction, whether it's well-directed or not is a very open question. And then, of course, there's mitigation. Mitigation is the ability to recover. It's to minimize damage should the bad thing occur. All of these things, all these responses, are choices that you have.

When you go to choose among those, the way to choose among them is to do cost benefit analysis. I actually used to work here in the Rayburn Building in an office just right over there. Title V was my area of expertise, regulatory law. Big cost benefit analysis junky, not that you should live your lives the way I did. Don't make the mistakes I did. But you should understand what cost benefit analysis is and understand that, done well, it will guide government efforts at security just as it will private efforts at security.

Cost benefit analysis is basically about tradeoffs. And, in the security area, it's hard because you're trading dollars for security. You're trading privacy for the feeling of security. You're trading a lot of things that are hard to boil down to equal opposites. You're trying to sometimes determine whether a rock is as heavy as a line is long. But that doesn't mean that we shouldn't try to solve these problems, we shouldn't figure out, what the best way forward is, because not doing cost benefit analysis is most likely going to waste societal resources. We might overspend on security, getting very little bang for the buck, and just throwing dollars, well, out the window of an airplane, if you will.

There are hundreds of millions, if not billions, of dollars on the line. And, so, it's important to do this kind of analysis. You're probably thinking -- or if you're not thinking at all -- suggest that you should think, what do I -- what do I see in the Transportation Security Administration's risk assessment and cost benefit analysis of, say, the strip-search machines, the advanced imaging technology that are so controversial and many of you are probably hearing from your constituents. Well, I'd like to think something about the study management study that the TSA has not done, but the TSA has not done a risk study of this. And it doesn't do risk management studies or cost benefit studies of most of its programs. At least, to be precise, it doesn't do anything that it publishes. The TSA's leadership, the Department of Homeland Security's leadership, in -- in both parties have talked about risk management and talked about risk quite a lot because I think they know they should be doing it, but, essentially, they're not doing it. And GAO reports regularly point out the fact that TSA programs are not based on risk management, are not based on cost benefit analysis. They're just doing what they do.

With regard to the strip-search machines, which again are sort of a hot issue and -- and -- and regularly get attention here on the Hll, there is some good news. The Electronic Privacy Information Center filed a lawsuit a little while back against the TSA about this -- the policy of having these machines in place and the policy of extending their -- their use. The court did not rule in EPIC's favor on the immediate merits, but it made a very important decision as far as risk management goes, I think, in order -- the Transportation Security Administration to do a notice and comment rule making -- that, essentially, means that the TSA has to put its thinking on the record. It has to produce a docket. It has to take comments. It has to review for the public what it's doing and how it decided to do what it does. That means, essentially going through the risk management steps that I talked about. What it means is that, it's -- the quality of its risk management, which now must actually be done -- can be reviewed by a court under a standard called "arbitrary and capricious." Now, that's a fairly low standard, but, at least, it's a standard and, so far, the TSA has not met any standard for implementing the strip-search machines or many other of its programs, among them -- David talked about the air marshals program -- I think the behavior detection officers are a program at TSA that's worth looking at.

BDOs, as they're called, are supposedly trained to spot indicators among travelers of who's up to something bad, whether they're looking around furtively, whether it's sweating, whether you see palpitations in their neck that reflect a heartbeat. Well, there is no study that validates that this is actually a way of figuring out if people are doing bad or planning to do bad to airline security or whether people just had a bad argument with the taxi driver, or whether they're anticipating badly the fact they have to go up to the check point and get patted down in a way that's far too intimate for strangers to do to one another.

The watch lists and I. D. checks at airports, none of the risk management validation that it needs. A program called future attribute screening technology, or FAST, it's BDOs, but with lasers. That's right. We're talking about shining lasers and using cameras that will detect people's bio-rhythms, bio- -- bio-activities to determine whether they plan on doing something bad. There's no science behind this, no good science anyway, and it hasn't been validated by risk management nor has the liquids rule. And we know that there's a potential liquid attack. It's real. Security is real. It's a real deal, real problems. But it hasn't been shown to the public that there's a real attack that merits the liquids rule.

I hear tell -- sometimes -- sometimes, you pick up signals that the liquids rule might be on the way out. It might go. That would be good because it would reflect, without risk management, that the TSA has determined that the liquids rule is too much.

You may remember the puffer machines that came and went. Those machines were going to -- would -- would -- would blow air on a person, collect the air, and then examine the air to see if there was any particulate in it that reflected bomb-making or any other dangerous article. Well, millions and millions of dollars went into the puffer machines and they found that they didn't work at scale. You couldn't get people through the puffer machines. They broke down regularly. Millions and millions dollars wasted because one or two million dollars, if even that, wasn't spent on risk management.

This is stuff that -- that the TSA is not doing. And the TSA may not want to do it because it is a public institution. It's responsive to politics more than actual security. Now, politics often demand security. In fact, politics often demands over-security. But it demands misdirected security. So, the TSA was very good in the -- in its early years at looking for small, sharp objects, like the objects that were used in the 9/11 attack. After Richard Reid, the shoe bomber, I like to say the TSA caught something of a shoe fetish. Now, after the underwear bomber, it got a little closer to us still. Before too long, new innovations in smuggling will bring the TSA yet closer to our lives in ways I care not describe to you today.

So, what are the roles -- what are the roles between public sector and the private sector in doing security? David does -- does a good job of describing them in his paper. I think his -- his -- his thinking is sound. Government provides public goods. It provides the goods that cannot be provided privately, economically. National defense is a public good because no one individual, no corporation, is going to go and defend the entire nation from invaders. We have an army that is a public good for protecting the nation from attack. That's a public good.

Among the public goods in this area that the government can and should provide are the gathering of intelligence, some domestically, but certainly foreign intelligence that -- that indicates where threats may come from. Working with foreign governments to suppress terrorism, that is a role of the federal government. It's a good one and it's an essential one and one that's had a great deal of success.

And, of course, traditional law enforcement, not necessarily at the federal level, but state and local law enforcement, they are there. A lot of their work does counterterrorism without even knowing about it. So people -- people call up the police -- and this is how the -- the -- the London -- the liquid bombing attacks were taken care of. People called up and said, "There's some weird stuff going on near me." The government doesn't have to ask for weird stuff to be reported. When it asks it gets over reporting and then it loses -- it loses track. People, good people, know when something wrong is going on in their communities and they know to call it in. That works. We're all part of this -- this -- this security effort. We work with the government on traditional law enforcement. Obviously, support it.

The private role in security is substantial. And I think the way to think about it is to start with how we secure our own things in our own lives. Do we call the police every time we have something we need securing? No, absolutely not. We live in houses or apartments that have doors. The doors have locks. We close windows. We have dogs. We have alarm systems. We have neighbors who we might tell about the fact that we're going away for a week or two. There are all kinds of things that we do to secure our own selves and our own things long before we call on the government to step in.

And I think our own experience with security is a good analogy for how security should be done for bigger risks or in bigger sets of infrastructure, like airlines and airports. Airlines do have the incentives they need, if left alone, if given liability for failing, airlines do have the incentives they need to secure their operations, to secure their passengers. They lose and they lose big-time if they -- if they don't do those things. They also have to, and this is important, they also have to blend security with all the other interests the passengers have, including privacy and convenience, customer service, ease, all these things. And you're going to get a lot better from privately-provided security from airports and airlines, if it is done, if it's done privately.

David mentioned insurance. Insurance is a very, very sophisticated business. A lot of us don't know about it. A lot of it's really messy in areas like health. But insurers go to great lengths when they're talking about -- when you're talking about large infrastructure and large companies -- they go to great lengths to make sure that they have a handle on the risks that they're -- they're insuring. So, insurers, in this area, will have a role in saying, "Are you doing this? Are you doing that? Let's take a look, every year, every six months, every quarter to make sure your security systems are operational and working -- functioning well. Let's test it." Insurers will do this and reinsurers behind them.

These are all risk management systems, private risk management systems. They operate in a very diffuse environment. It's hard to crystallize and capture how these market forces work to create security, but they do. And I'll refer to you -- I think one of the handouts was a -- was a discussion called transportation security aggravation, TSA. Transportation security aggravations, which you can find on the reason.com website with a -- with a web search on that phrase where I debated with -- with Bob Poole from Reason back and forth about how this stuff is done. And there is lot in that -- in that article about how insurance works, how the tort system works, liability to make sure that the providers of -- of -- of airline, air travel are going to provide a safe experience.

The most important takeaway, if there is one from today -- there are many -- but one of the most important is that there will never be zero risk. There will never be zero risk. Governments often promise zero risk. Some of your bosses may inadvertently try to promise zero risk to constituents. Governments will do that and they'll fail to deliver at a very high cost. The private sector will do its best to manage risks and it'll do that while balancing privacy, comfort, convenience and I think what's probably most important at the airport, courtesy. Something we don't get from the TSA.

Those are my remarks. I applaud David for his -- his paper and his point about the Department of Homeland Security and the TSA. We can do much, much better and I think over time we will.

Thank you.

(APPLAUSE)

RENZ: We, of course, have time for some questions and answers if anyone has a question.

QUESTION: I was interested in knowing how you have viewed the Israeli airline situation and their -- particularly, their use of air marshals effectiveness for them as compared with the -- in the United States?

RITTGERS: Well, let's talk about -- I mentioned the cost and how, you know, expanding to 100 percent coverage would -- would mean a lot -- a lot of more money than we spend currently, tenfold, to $9 billion or so a year per -- everyone says the Israelis do it right. Let's do what Israelis do.

Well, first off, the Israelis -- the airline provides security, not the government. That's El Al. And, second, the amount of money that they spend is -- is significantly more than we spend. On average, we spend about between 6 and $7 per passenger, all told, for security. The Israelis spend between like 56 and $76 per passenger. So -- so, tack on $50 as a surcharge for every plane ticket that you buy and also accept the fact that with the questioning that you go through, that sometimes you just won't fly.

The -- the, you know, the screener, would decide, for whatever reason, and -- and I think, Jim does a good job of -- of -- of saying, you know, making the point that, you might appear nervous to someone not because you're a terrorist, but because you had a rough, you know, rough time with the cab driver getting to the airport. You're going to have to accept the risk that you're going to get there, the screener is going to say, "I don't like the way you look. You're not going to fly today."

And, so, whatever business trip or vacation that you had planned just, you know, cancel it. So -- so, I think Israeli's model is this -- this panacea that, you know, that gets bandied about, but the -- the aviation markets are very different. Ours is much bigger. I think they've got six airports. Much of their flight is international. We've got 450 or so. Much of our flight is internal. So, I -- the two models are -- are very incomparable and actually don't translate well from one to the other.

HARPER: Just to -- just to lend one statistic to that, in the United States, we have about 700 million enplanements per year -- per year. That's someone getting on a plane. Not each one of those has someone passing through security, but if you just take half of those and cost it out at $50, which would be the increase to do -- to do that kind of screening, you're looking at 17 billion 500 million per year. That's about the total cost of taking down, according to a Rand study, of taking down two planes per year. So, it's -it's probably spending that's beyond what security it provides.

RITTGERS: I would also say that -- that -- that if we're going to do that, we'd end up spending about 100 or so billion a year doing it and we'd have an army of about three million TSA agents, which is more than our armed forces. So, just perspective, you know, what's -- what's a bigger federal role, the armed forces or TSA screeners?

RENZ: Yes?

QUESTION: I'm a firm believer in concealed weapons carry. I understand that, in few weeks ago, we had the IHOP (inaudible) getting shot by some lunatic. And, obviously, in airports and airlines you're not allowed to carry a gun unless you're security. Do you think arming, having, allowing concealed weaponry for private passengers would get effective deterrence? HARPER: My answer is a little clever, perhaps. That's not my problem. Airlines should determine whether or not they want to allow people on planes and under what circumstances to have weapons. It's -- it's -- it's not for us to decide. If -- if security is variegated and different airlines have different policies, different airports have different policies, that makes it harder for somebody to plan if they're trying to do something wrong. So, I think I'm with David that -- that the -- the -- the people who fly the plane, many of them with military experience -- I'm -- I think that's perfectly reasonable, but let's let the systems that work for this hash this out rather than take experts, or so-called experts, and try to have them decide for everybody else. Airlines can do that thinking themselves and in a -- in a market discussion with -- with their customers determine what the right amount of weaponry on any plane might be.

QUESTION: Let's suppose that there were a will in Congress to do exactly what you guys recommend today, what kind of transition rules would you recommend? It seems like some of the things it'd be tough to just flip a switch and shut it down. So, how would you manage that transition?

RITTGERS: Yes, if I were going to ramp this down from where we are to a, you know, a market model, I think that first -- first thing you can do is remove the cap on the screening partnership program. So, SPP, the cap on the 16 airports, that should go away. And, actually, the House oversight, transportation oversight committee, report talks about how, basically, all of the Wyoming airports had applications in to -- to transition out of the TSA. There were number of airports who had applications in. And they're just, you know, summarily either denied or drug out for -- for a long period of time.

Opening that avenue I think will -- will let, you know, will start to open the door for people to take ownership of their security and what they're willing to pay for. And I think, as I -- as I mentioned, the -- the Safety Act allows for licensing of Homeland Security, well, security providers, you know, for limiting liability. If -- if there's going to be any -- any federal standards, you could put them in there and make, you know, add that to that -- that piece of the federal code.

I would be wary, though, that we don't just transport what we currently do with the TSA, as disconnected as it is from actual risk management, into the federal code if you're going to do that. I -- I would -- I would -- I would just focus on saying, you know, magnetometer and secondary screening being wands, as a baseline. And then Let the airlines go from there. And I think that, you know, letting the American people look at what is rational security you would find that, I think, that not everyone would be jumping in line to go for the -- the extra screening airline that -- that gives you a pat-down.

QUESTION: So, a little bit more details (inaudible). I mean, would you favor a six-month transition out of TSA or three years or five years or ...

HARPER: I'll tell you, the -- the -- the time period that came to mind for me is one year. That's not based on any study. That's just -- seems to be what makes sense. You -- you -- you pass a law that -- that withdraws the TSA from this area. Airlines, airports, you're going to get this back in a year. They would move quickly to do that. They're -- they're -- a lot would not change. And I think that's important.

We're not talking about doing less security. We're talking about doing much of the same security, but doing it better and -- and weaving it in with a good customer service experience at the airport. There are programs that should just flat go away. I didn't mention in my remarks, VIPR. I forget exactly what that stand for, but it's a -- it's a group of close enough to jack-booted thugs who go around to bus depots and airports and just make a great show of examining -- examining people as if one day there's going to be terrorist there who says, "OK, I give because you came to the bus station today." That needs to go. The Air Marshals Program, I think it should go in -- in pretty short order. Behavior detection officers, no proven value to that, could go straight away. Future attribute screening technology, lots of stuff, there are so many programs within TSA and DHS that could just go away immediately, but, obviously, the stuff that is real security, you transition over. I would guess a year.

RITTGERS: Yes, and I would say that the cost, if you want to talk about the specifics of the cost, you know, if you were to just, say, take the $2.50 that we pay per ticket and --and then -- and then just not route that money through the federal government, but that -- give that to the -- the air carrier that you're flying with and then the remainder of the about 7.50 or so, you know, the $10, total, that you spend on security per ticket, the -- if you're just to let that go to the air carrier, cut out mess, it would actually probably come down to about 7.50 or so per ticket. So, you just pay $5 more per ticket than you pay now and you'd have the rational level of security you need.

Let me say also say a word about -- about VIPR, the Visible Intermodal Prevention team.

HARPER: Thank you.

RITTGERS: Or prevention ..

HARPER: Response.

RITTGERS: Response. Sorry.

That's -- that is -- every single search that they do is -- is -- is either -- it's at the razor's edge of unconstitutional every time they do it. Let me talk about this in terms of bus searches. There is a thing on -- that went kind of viral on YouTube where they roll out VIPR to a bus station in Tampa, Florida. You may have seen this on YouTube, where -- where they bring all of DHS, all of DHS's facets there, and the theory is kind of like -- like the Hercules teams the New York Police Department has where Hercules is this team and they drive around with a bunch of SWAT guys in a black SUV and they drive from terror target to terror target. So, like Wall Street to, you know, I don't know, Twin Towers or wherever and they jump out with assault rifles, just in case terrorists were going to attack at that moment, they would be there, right?

So, the theory is that -- is that you don't have people to cover all these targets, but you would jump around from, you know, from potential target to potential target to deter and then, in theory, get an outweighed -- you know, outsized deterrence for your expenditure. The problem with this is that DHS is actually the single largest employer of federal law enforcement officers in the federal government, right? So, what happens is is they have -- and -- and this is important because the Fourth Amendment, you're not supposed to have searches without probable cause. Well, the Supreme Court has carved out very specialized exceptions in the administrative search and special needs doctrines where if it's, like, a DUI checkpoint or an airport checkpoint, then you can screen for those limited purposes.

But when you do, what they did in Tampa and you have the TSA guy checking for knives and guns and bombs, and then you have the ICE guy asking about your immigration status, and then you have the other ICE guy who does drugs looking for drugs and then you have the local drug guy looking for drugs because, you know, you get more sentencing at marijuana at the state level than the federal. And then you have the other ICE guy who's bulk cash smuggling, which is not -- there is no, you know, special needs exception or administrative search exception for bulk cash smuggling anywhere but the border -- you're no longer just doing transportation security screening, right? You've -- you've just entered a police state and you've cobbled together all of these -- these search exceptions and it's, essentially, a Fourth Amendment disassembly line.

So, you know, right now, there's proposals to -- to -- to expand this program. I think that -- that that is setting us up mentally for, you know, the surrender of a greater number of our liberties and it's completely unnecessary. It's a law enforcement fishing expedition, writ large, and we should stop funding it.

HARPER: Let me -- let me riff on those -- those shows of force that you see from -- from TSA and from -- in New York, in particular. In terms of security and counterterrorism strategy, security is not just one thing. It's actually two things. One, it's the fact of being secure, that is knowing that you're going to be safe, your stuff is going to be safe, all these -- all these other things, whatever it is you're trying to work on. The other is feeling secure. If you can act on the fact that you're secure, you're actually living a free life.

So, if you're in New York City, as an average person -- not someone who studies this every day like David and I do and like you do -- you're in New York City, you're an average person going around live your life, you see these vehicles driving around, people jumping out with guns, you live in fear. You're not living the free life that you're supposed to live because your government has provided you security. What the government is doing is ginning up fear among the populace and not keeping them as free, not providing full measure of security that -- that this stuff is supposed to do. It's security theater. Also, doesn't actually secure anything. Just makes it look like you're being made secure. It's important to understand in a little conflict of interest that exists with the Department of Homeland Security and TSA and government provision of counter-terrorism, in general, we can minimize -- we can't eliminate -- we can minimize this problem by privatizing. But government is the number one source of threat information. Most everybody relies on the government, not necessarily wisely, to know what the -- what the threat level is out there. The government is also the provider of any response to that threat. And, so, what -- what -- what following natural incentives would -- would the government do? Escalate threat, escalate response. This is essentially a conflict of interest in having both the role of information-provider and solution-provider.

So, privatizing security would-would break that up. Because a private entity responsible for its own security is not going to overspend. It's actually going to question, as it -- as it should, it's going to question the threat claims that are made by authority. You get -- with the tension that would exist in that dynamic, you get better security. You'd have better threat information because of the tension. You'd have better security, more cost-effective security because of that tension. We need to take advantage of that, the way our government takes advantage of separation of powers and federalism. Think structurally about these problems. Having the problem -- the threat defined by government and the solution provided by government is a mistake.

RENZ: Yes?

QUESTION: I was just wondering what you thought about getting this changed because I read that, when Michael Chertoff ran DHS, that he was the one who pushed these X-ray machines through and now he is -- I'm not sure what his position is, but he's affiliated with the company that makes the machines. And I've also heard now that they're going to introduce a new machine that's comparable to an MRI, which, outside of a hospital setting, is rather dangerous. And didn't you say that these X-ray machines initially really weren't tested? So, how far is this going to go?

HARPER: Well, your question describes a common -- common dynamic in Washington, D. C., which is the revolving door. Michael Chertoff, I believe you're right, he -- he -- he helped move these -- the strip- search machine through. He now consults for the company that makes strip-search machines. There's lots of that. It goes on all the time. It's part of the reason why you might wisely distrust decision- making in Washington, D. C..

As to -- you've asked several things. As to the security value of the -- of the machines, there may be some. Unfortunately, it's unproven. We don't know yet. We still need to see the science, which is why I think it's so important that the D. C. circuit has required DHS to do a full risk management analysis.

QUESTION: (Inaudible) not if they work.

HARPER: That -- that will be part of a -- of a full analysis. Risk transfer is the technical -- or the risk management term for it. If you've taken a security step and it causes some other problem, that's risk transfer. It could be one person in -- in 100 million, which would be seven per year if your boarded 700 million people on a plane per year. Maybe one person in 100 million gets cancer was of the radiation that comes from the machine, I don't know. I'm not in a position to assess them. People are worried about that and they're right to be worried because I don't trust the decision-making process that has produced these machines.

As to MRIs, I haven't heard anything about that. I alluded in my remarks about the fact that new smuggling techniques will lead to new techniques for discovering smuggling and those may well go inside the body.

RENZ: Perfect. Well, these guys will probably hang around for a little bit, if you have any more questions.

Please join me in thanking our speakers and thank you for coming.

(APPLAUSE)

END