- The Washington Times - Tuesday, February 10, 2009

ANALYSIS/OPINION:

OP-ED:

Rescuing the American economy seems to have crowded out all other issues, including safeguarding the homeland from terrorist attacks.

Lawmakers need to step back and consider that the nearly $1 trillion stimulus bill actually offers an unprecedented opportunity to improve physical as well as economic security.

When House and Senate lawmakers come together in conference in the coming week, they should consider directly targeted but temporary tax credits to promote greater security investments in a wide range of privately-owned infrastructures. These credits would improve public safety while boosting private-sector employment.

Take the chemical industry. Since September 11, there has been widespread recognition that the weaponization of toxic chemicals at industrial facilities poses one of the most significant homeland-security risks, behind only biological and nuclear attacks in terms of potential deaths. For years, Bush administration officials acknowledged that officials argued that voluntary private-sector security efforts alone might not be sufficient, they were loath to regulate the private sector. Those concerns were magnified starting in 2006, when terrorist operatives in Iraq repeatedly sought to weaponize chemical tanker trucks. Congress mandated the Department of Homeland Security to regulate chemical-facility security in 2006. But that provision was temporary, and it fails to address transporting dangerous chemicals. It also overestimates the skills and resources at DHS to enforce regulations. Candidate Barack Obama argued that the “inability to secure these [hazardous chemical] sites is one of our greatest security failures since the September 11th attacks.”

Using the stimulus bill to add smart tax credits to minimum security regulations would create strong incentives for companies to invest in greater security at chemical facilities and in the chemical transportation supply chain. It would increase the number of chemical facilities that find it economically feasible to make significant security upgrades.

Investments should include better perimeter defenses and other access controls, as well as mitigation measures such as improved explosive containment or the retrofitting or replacement of processes and equipment to use less toxic chemicals. Tax policy could also be used as a catalyst for greater adoption of terrorism insurance by the chemical industry, which has had one of the lowest rates of terrorism insurance adoption relative to other critical infrastructure sectors.

Using the stimulus bill to enact tax policy that promotes security investments should be extended to other high-priority sectors as well. The U.S. electric grid and oil and gas refinery infrastructure are brittle and antiquated. Tax policy that leads to investments in a smarter, more secure and resilient energy sector would make the country less vulnerable to disruptions, either natural or man-made. Similar tax credits could also spur investments in cybersecurity, thereby helping to slow or reduce cybercrime, identity theft, corporate espionage, and state-sponsored attacks on U.S. IT networks, all of which have grown exponentially as the U.S. economy has grown more reliant on IT since the technology revolution of the 1990s. U.S. tax policy is used to promote all sorts of national priorities, from homeownership to the development of alternative energy and environmental technologies.

With homeland security at the top of any national priority list, tax policy has been disappointingly absent from discussions on how to make the country safer and more resilient. By using “sticks” while largely ignoring “carrots” when engaging private industry on security matters, Washington is needlessly tying one hand behind its back. Failing to use all the policy tools at our disposal when it comes to homeland security does not make sense.

To do the right thing by deficit hawks, two things should happen. First, critical infrastructure security investment credits should be temporary - say three to five years - in order to limit their long-run impact on the budget deficit. Second, the size of the available tax credit should decrease over that period. This way, companies will be under strong pressure to begin making their investments in the next one to three years, rather than later, as the available tax benefit would shrink for every year that they waited.

President Obama and Democrats would do well to rely more visibly in the stimulus package on tax breaks as a way to spur investments in smarter, more secure and more resilient U.S. infrastructure. An immediate benefit would be to help overcome Republican opposition to infrastructure spending provisions in the current bill: Republicans prefer their fiscal policy via tax breaks rather than direct government spending, and many are opposed to stimulus plans that won’t inject money into the economy until four or five years from now. Furthermore, targeted tax credits for infrastructure and security improvements will give Democrats a more varied toolbox for homeland-security policy that does not rely simply on regulation. This would demonstrate flexibility and creativity in how the Obama administration works with the private sector as a national-security partner.

Security-enhancing tax credits would be a strong step for a party that is too often viewed as unfriendly to business and not active enough in the fight against terrorism.

Daniel B. Prieto is adjunct senior fellow for counterterrorism and national security at the Council on Foreign Relations. He is author of a new report “War About Terror: Civil Liberties and National Security After 9/11.”

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