No, wait. The emergent order of the market is awesome, as evidenced by this EconTalk podcast on potato chips.

Earlier this week, the House Armed Services Committee Republican staff released a video using the anniversary of September 11 to argue for higher military spending while pretending that lately we have cut the defense budget. Chris Preble and I rebutted these outlandish claims, and Evan Banks made our comments into a cool video:

Hawks like HASC Chairman Buck McKeon (R‑CA)—who thinks that “power in benevolent hands is a virtue, not a vice,”—pretend that we are about to slash military spending thanks to the Budget Control Act, the deficit deal legislated early last month. Reporters abet them by repeating the White House PR myth that the bill’s security budget cap will cut Pentagon spending by $350 billion over ten years, and writing that the sequestration provision will probably cut another $500 billion. But as I explained here, the BCA will likely produce either a miniscule defense cut in the near term or no cuts at all. That is because I consider a “cut” to mean spending less than we do now, not less than plans say, because agencies other than defense can absorb the cuts required by the security cap, and because the bill encourages lawmakers to move capped base defense funds into the uncapped war bill.

The Senate Appropriations Committee’s proposed funding levels (302b allocations in budget speak) released earlier this week bear out those concerns. Because they come after the BCA, the Senate spending levels are likely to guide those set by the House. Compared to 2011, the committee would cut just under $3 billion from the base defense budget, which is less than one percent. That cut comes entirely from the military construction and family housing account, which was recently bloated by the Base Realignment and Closure (BRAC) process. The senators get another chunk of the $4.5 billion in security spending cuts required by the BCA from State, which would lose $3.5 billion, and Homeland Security, which loses a half billion. The National Nuclear Security Administration and the Veterans Administration get minor increases. For more on these allocations, see Stimson’s The Will and the Wallet blog, especially Matthew Leatherman and Russell Rumbaugh’s recent posts.

So that’s a minor defense cut, right? Maybe not. The Senate appropriators seem to have slipped a larger amount of base defense spending into the war bill (Overseas Contingency Operations funding). The committee’s markup press release brags that it fully funded the president’s war request of $117.8 billion, but then claims that they cut $6.6 billion from that request by trimming funding for U.S. and native forces in Afghanistan. What that most likely means is that the committee, probably in league with the Pentagon, cut the war bill by that amount and shifted the same amount over from the base, keeping the war bill flat and maintaining the fiction of a minor base defense cut. We won’t know for sure until the appropriations bills are published.

The longer term prospects for the BCA cutting defense spending are a story for another time. For now, suffice it to say that the prospects of the bill’s current spending limits staying in place for ten years are slim. Future Congresses easily free themselves from legislative bonds set by prior ones, and democracies with two-to-six-year election cycles can’t stick to ten-year plans.

Peter Schiff’s testimony to a House committee yesterday on the nation’s economic crisis provides a refreshing contrast to the Keynesian-dominated commentary that saturates the mainstream media.

Peter talks about how:

• The president’s jobs plan would create perverse hiring and firing incentives
• Infrastructure investment needs to earn a positive net return else it’s not worth doing.
• The minimum wage increases unemployment for low-skill workers
• Regulation and litigation reduce hiring
• Extended unemployment benefits exacerbate unemployment.

It’s all Econ 101 microeconomics, but it’s often forgotten these days by economists and pundits who only see the world through the lens of “aggregate demand.”

Senator Marco Rubio has just written to Secretary of Education Arne Duncan, requesting that he not break the law. At issue is the administration’s plan to offer states waivers from the No Child Left Behind act if they agree to adopt national standards or pursue other educational goals of the administration. Rubio states that these conditional waivers violate the U.S. Constitution, the Department of Education Organization Act, and the No Child Left Behind Act. He’s right.

As my Cato colleagues and I have noted many times, the Constitution mentions neither the word “school” nor the word “education,” and so, under the 10th Amendment, reserves power over those concerns to the states and the people.

The Act creating the Department of Education is equally clear:

No provision of a program administered by the Secretary or by any other officer of the Department shall be construed to authorize the Secretary or any such officer to exercise any direction, supervision, or control over the curriculum, program of instruction, administration, or personnel of any educational institution, school, or school system… .[Section 3403(b)]

Nor is the NCLB particularly ambiguous:

‘Nothing in this title shall be construed to authorize an officer or employee of the Federal Government to mandate, direct, or control a State, local educational agency, or school’s specific instructional content, academic achievement standards and assessments, curriculum, or program of instruction. [Section 1905]

The Secretary’s conditional waivers from NCLB mandates, in return for dancing as he desires on national standards, seem to violate all of the above. I wonder if any education reporter will have the temerity to ask Arne Duncan on what grounds he believes he is entitled to ignore these laws? Senator Rubio’s letter certainly gives them a golden opportunity to do so.

Political leaders and military commanders will dismiss the Taliban’s recent coordinated assault on the U.S. Embassy and NATO headquarters in Kabul as a “one-off” incident. But the attack is a vivid reminder of how poorly things are going, and why America needs to leave.

By every measure, violence is higher than ever. The coalition and civilian casualty rate for this year is on pace to break the record for last year, which in turn eclipsed the record for 2009, which in turn eclipsed the record for 2008. Spiraling violence came after significant increases in troops and resources. Defiant optimists have claimed that with more troops comes more combat and naturally, more casualties. But to accept that things will get worse before they get better is also a slippery slope: never giving up, no matter the cost, discourages a dispassionate assessment of whether a continued investment is justified. In turn, the longer we stay and the more money we spend, the more we feel compelled to remain to validate our investment. Unfortunately, the conventional wisdom, as expressed by President Obama in March 2009, is that “If Afghanistan falls to the Taliban…that country will again be a base for terrorists who want to kill as many of our people as they possibly can.” We are also told that if America and its allies fail to create a minimally functioning government in Afghanistan, then Pakistan will collapse and its nuclear weapons will fall to the Taliban.

These claims of falling dominoes are all wrong.

First, if Afghanistan were to fall to the Taliban, it is not clear that they would again host al Qaeda—the very organization whose protection led to the Taliban’s overthrow. Besides, targeted counterterrorism measures would be sufficient in the unlikely event that the Taliban were to provide shelter to al Qaeda. Moreover, to declare that Afghanistan can never again be a base for terrorists justifies indefinite war, which does less to serve the American public and more to benefit the private industries that profit from conflict and nation-building. Perhaps the greatest tragedy is that after a decade of war, more than $450 billion spent, and over 1,600 American lives lost, the United States can still be attacked by terrorists. This creates a humiliating situation in which our Afghanistan policy weakens the U.S. militarily and economically and fails to advance its vital national interests.

Second, an endless war of whack-a-mole does far more to inspire terrorists “to kill as many of our people as they possibly can.” In this respect, our political leaders seem to have learned little from 9/11. The unintended consequence of U.S. intervention and meddling is that it serves as a radicalizing impetus. Regardless of what percentage of the Afghan population wants us to rebuild their country, our presence, however noble our intentions, can serve as both a method to combat insurgents and as the insurgents’ most effective recruiting tool. Aside from that “mobilizing militants” dilemma, our elimination of Taliban figures (including shadow governors, mid-level commanders, and weapons facilitators) may very well weaken the Taliban’s chain of command, but it hasn’t resulted in a decrease of Taliban activity. Indeed, the use of IEDs has reached record highs. Worse, the insurgents’ second-largest funding source is the U.S. taxpayer, with stabilization and reconstruction money often being diverted to insurgents to pay them to ensure security. Of course, they then use U.S. taxpayer money to buy bombs and explosives to kill American troops and Afghan civilians.

Finally, U.S. officials are playing with fire if they think these conditions help strengthen neighboring Pakistan. Certainly, Rawalpindi’s self-defeating support of Islamist proxies has not done its country any favors—but neither has the coalition’s presence next door. Continuing to stay the course in Afghanistan inspires the worst strategic tendencies among Pakistani military planners. It also encourages militants to attack NATO supply vehicles entering Afghanistan (nothing new), and has inadvertently contributed to the very instability that leaders in Washington ostensibly seek to forestall. As Karachi goes, so goes Pakistan, and current developments are doing more to push militants from Pakistan’s rural hinterland and into its major cities. Lastly, despite Washington’s nuclear obsessions, a large-scale foreign troop presence in Afghanistan does not resolve the ongoing rivalry between Pakistan and India. In fact, Pakistan has been accelerating its production of nuclear material for bombs and their ability to delivery them over the past several years.

In the end, the current scale and scope of the coalition’s mission in Afghanistan (over 100,000 troops and $120 billion per year from the U.S. alone) stems from overstated fears about what will follow if we fail. Luckily, America and its allies do not have to build a legitimate and stable Afghan government as an alternative to the Taliban. Al Qaeda is a manageable threat, and a conventional, definitive “victory” against them was never possible. Rather than drawing out our withdrawal and fighting an insurgency on behalf of an incompetent and illegitimate puppet regime in Kabul, American leaders should declare “mission accomplished.”

[caption align=right]

Max Boot photo via UPI[/caption]

Sunday’s Washington Post ran a piece about 9/11 called the “pundit scorecard,” and gave Max Boot the “wishful thinking award” for his “Case for American Empire” piece. As the Post article described:

Not since the bombing of Pearl Harbor destroyed American isolationism has a school of foreign policy thought been so discredited as neoconservatism was by the insurgency in Iraq. Yet in the first months after the 9/11 attacks, neoconservative plans to redesign the Middle East found a sympathetic hearing in the White House and among the commentariat. Probably the most romantic neocon was military analyst Max Boot, who believed that the world was desperate for American domination.

“Afghanistan and other troubled lands today cry out for the sort of enlightened foreign administration once provided by self-confident Englishmen in jodhpurs and pith helmets,” Boot wrote in the Weekly Standard on Oct. 15, 2001. Just as the U.S. war in Afghanistan was beginning, Boot was planning other campaigns. “Once we have deposed Saddam, we can impose an American-led, international regency in Baghdad, to go along with the one in Kabul. With American seriousness and credibility thus restored, we will enjoy fruitful cooperation from the region’s many opportunists, who will show a newfound eagerness to be helpful in our larger task of rolling up the international terror network that threatens us.”

Suffice it to say that Boot, a fellow at the Council on Foreign Relations, isn’t happy. In fact, he looks back at the piece and feels pretty good about it. He points out that he had called on Washington to “feed the hungry, tend the sick, and impose the rule of law” in those benighted foreign locales, to at least “allow the people to get back on their feet until a responsible, humane, preferably democratic, government takes over.”

But let’s also recall that in May of 2003 Boot was still pooh-poohing Gen. Eric Shinseki’s admonition that “several hundred thousand” troops would be needed for such an endeavor. Instead, Boot thought that our to-do list in Iraq should include “purging the Baathists, providing humanitarian relief, starting to rebuild, and then setting up a process to produce a representative local government,” and that

This probably will not require the 200,000 troops suggested by Army chief of staff Eric Shinseki, but it will require a long-term commitment of at least 60,000 to 75,000 soldiers, the number estimated by Joint Staff planners.

Just think about that for a second. In 2003, Max Boot was arguing that 60–75,000 U.S. troops could provide security all across Iraq, while simultaneously “purging the Baathists, providing humanitarian relief, starting to rebuild, and then setting up a process to produce a representative local government.”

Grade inflation seems to have gotten out of hand at the Council on Foreign Relations.

I dislike our national obsession with anniversaries and tendency to convert solemn occasions into maudlin ones; to fetishize perceived collective victimization rather than simply recognizing real victims. That kept me from joining in the outpouring of September 11 reflection, now mercifully receding. But I have reflections on the reflections.

The anniversary commentary has, happily, included widespread consideration of the notion that we overreacted to the attacks and did al Qaeda a favor by overestimating their power and making it easier for them to terrorize. Even the Wall Street Journal allowed some of the bigwigs they invited to answer their question of whether we overreacted to the attacks to say, “yes, sort of.”

Unsurprisingly, however, the Journal’s contributors, like almost every other commentator out there, did not define overreaction. It’s easy and correct to say we’ve wasted dollars and lives in response to September 11 but harder to answer the question of how much counterterrorism is too much. So this post explains how to do that, and then considers common objections to the answer.

That answer has to start with cost-benefit analysis. As I put it in my essay in Terrorizing Ourselves, a government overreaction to danger is a policy that fails cost-benefit analysis and thus does more harm than good. But when we speak of harm and good, we have to leave room for goods, like our sense of justice, that are harder to quantify.

Cost-benefit analysis of counterterrorism policies requires first knowing what a policy costs, then estimating how many people terrorists would kill absent that policy, which can involve historical and cross-national comparisons, and finally converting those costs and benefits into a common metric, usually money. Having done that analysis, you have a cost-per-life-saved-per-policy, which can be thought of as the value a policy assigns to a statistical life—the price we have decided to pay to save a life from the harm the policy aims to prevent.

Then you need to know if that price is too high. One way to do so, preferred by economists, is to compare the policy’s life value to the value that the target population uses in their life choices (insurance purchases, salary for hazardous work, and so on). These days, in the United States, a standard range for the value of a statistical life is four to eleven million dollars. If a policy costs more per life saved than that, the market value of a statistical life, then the government could probably produce more longevity by changing or ending the policy. A related concept is risk-risk or health-health analysis, which says that at some cost, a policy will cost more lives than it saves by destroying wealth used for health care and other welfare-enhancing activities. One calculation of that cost, from 2000, is $15 million.

In a new book, Terror, Security, and Money: Balancing the Risks, Benefits, and Costs of Homeland Security,* John Mueller and Mark Stewart use this approach to analyze U.S. counterterrorism’s cost-effectiveness, generating a range of estimates for lives saved for various counterterrorism activities. I haven’t yet read the published book, but in articles that form its basis, they found that most counterterrorism policies, and overall homeland security spending, spend exponentially more per-life saved than what regulatory scholars consider cost-effective.

That is a strong indication that we are overreacting to terrorism. It is not the end of the necessary analysis however, since it leaves open the possibility that counterterrorism has benefits beyond safety that justify its costs. More on that below.

Objections to this mode of analysis have four varieties. First, people have a visceral objection to valuing human life in dollars. But as I just tried to explain, policies themselves make such valuations, trading lives lost in one way for lives lost in another. So this objection amounts to an unconvincing plea to keep such tradeoffs secret and make policy in the dark.

Second, people challenge the benefit side of the ledger by arguing that terrorists are actually far more dangerous than the data says. Analysts say that weapons of mass destruction mean that future terrorists will kill far more than past ones. One response is that you should be suspicious anytime someone tells you that history is no guide to the present. It tends to be the best guide we have, for terrorism and everything else. Our analysis of terrorists’ danger should acknowledge that the last ten years included no mass terrorism, contrary to so many predictions. Another response is that one can, as Mueller and Stewart have, include high-end guesses of possible lives saved to show the upwards bounds of what counterterrorism must accomplish to make it worthwhile. The results tend to be so far-fetched that they demonstrate how excessive these policies are.

A third objection is to claim that some counterterrorism costs are actually terrorism’s costs. Government should spend heavily to avoid terrorism, this logic says, because our reaction to the attacks we would otherwise fail to prevent will cost far more. In other words, if an expensive overreaction is inevitable, it helps justify the seemingly excessive up-front cost of defenses.

One problem with this objection is that it approaches tautology by treating a policy’s cost as its own justification. See, for example, Atlantic writer Jeffrey Goldberg’s recent response to John Mueller’s observation in the Los Angeles Times that more people die annually worldwide from bathtub drowning than terrorism and the article’s suggestion that we might therefore be overreacting to the latter. Goldberg argues, essentially, that we have to overreact to terrorism lest we overreact to terrorism. Then, after his colleague James Fallows points out the logical trouble, Goldberg, without admitting error, switches to argument two above, while failing to acknowledge, let alone respond to, Mueller’s several books and small library of articles shooting that argument down.

Another problem with the inevitable overreaction argument is that overreaction might happen only following rare, shocking occasions like September 11. Future attacks might be accepted without strong demand for more expensive defenses. Moreover, the defenses might not significantly contribute to preventing attacks and overreaction.

The best objection to Mueller and Stewart’s brand of analysis is to point out counterterrorism’s non-safety benefits. The claim here is that terrorism is not just a source of mortality or economic harm, like carcinogens or storms, but political coercion that offends our values and implicates government’s most traditional function. Defenses against human, political dangers provide deterrence and a sense of justice. These benefits may be impossible to quantify. These considerations may justify otherwise excessive counterterrorism costs.

I suspect that Mueller and Stewart would agree that this argument is right except for the last sentence. Its logic serves any policy said to combat terrorism, no matter how expansive and misguided. We may want to pay a premium for our senses of justice and security, but we need cost-benefit analysis to tell us how large that premium now is. Nor should we assume that policies justified by moral or psychological ends actually deliver the goods. Were it the case that our counterterrorism policies greatly reduced public fear and blunted terrorists’ political strategy, they might indeed be worthwhile. But something closer to the opposite appears to be true. Al Qaeda wants overreaction—bragging of bankrupting the United States—and our counterterrorism policies seem as likely to cause alarm as to prevent it.

*Muller and Stewart will discuss their book at a Cato book forum on October 24. Stay tuned for signup information.

(Cross-posted from TNI’s The Skeptics.)