Terrorism Tax

In what is becoming a recurring event, multiple Islamic terror attacks occurred over the weekend. In what is becoming a recurring reaction, democratic leaders in the location of the terror attack twist themselves into pretzels to avoid labeling the attack as terror and outright refuse to associate it with radical Islam. Uber-progressive Mayor Bill DiBlasio of New York City hung on the phrase "intentional violence" until he became a laughing stock and finally admitted the obvious.

Barack Obama (who has so far remained silent on the weekend's attacks)and his probable successor, Hillary Clinton, take the same position on Islamic terrorism, beginning with their refusal to call it that. With the arrogant certainty of politicians who have been wrong on virtually every aspect of foreign policy on their watch, they tell us that "you're more likely to be killed by lightning than in an terror attack" and "radical extremism" (their term for Islamic terror) does not represent "an existential threat." Both statements are half-truths (the most dangerous kind) and represent a willful attempt to misrepresent the threat we face.

In a fascinating post, John Robb discusses a "terrorism tax" that is imposed on countries and/or cities that absorb a number of small, but deadly terror attacks (e.g., France in recent months). He writes:

Although Europe has suffered terrorism before, this time it's different. Instead of big and relatively infrequent terrorist attacks, these new attacks are small, numerous and geographically dispersed. This change is a big deal, because it makes it possible for terrorists to turn attacks into "a tax" that depresses economic activity by imposing new costs and changing economic behavior. Here's some of the theory from my 2004 article on it:

A terrorism tax is an accumulation of excess costs inflicted on a city's stakeholders by acts of terrorism. These include direct costs inflicted on the city by terrorists (systems sabotage) and indirect costs due to the security/insurance/policy/etc. changes needed to protect against attacks. A terrorism tax above a certain level will force the city to transition to a lower market equilibrium (aka shrink). So, what is that level? Here's what they concluded:

• Singular terrorist events (black swans), like 9/11, do not impact city viability. The costs of a singular event dissipate quickly. In contrast, frequent attacks (even small ones) on a specific city can create a terrorism tax of a level necessary to shift equilibriums.
• In the labor pooling model of city formation, a terrorism tax of 7% will cause a city to collapse to a lower equilibrium. Labor pooling equilibrium reflects the benefits of aggregating workers in a single location. Workers get higher wages and more choices. Firms get stable wages (no one firm can deplete the market) and more candidates.

In the core-periphery model of city formation, a terrorism tax of 6.3% will push a city to a lower equilibrium. The core-periphery model is based on transportation costs. Firms generate transportation savings by concentrating in a single location next to suppliers and customers. Customers and workers glean the benefit of lower transportation costs by locating near jobs and goods.

At the local level, the tax manifests with decreased tourism, increased local costs for policing, and the inherent economic damage that results during and after an attack. In the United States, localities have experienced these things, but the impact, so far, has been relatively minor.

At a federal level the tax is different. We spend billions of dollars on the Department of Homeland Security, a federal bureaucracy whose effectiveness is open to question. We waste hundreds of millions of person hours standing in security lines at airports and at major events.

So when Obama or Clinton talk about lightning or existential existence, they might have the decency to be honest with the public and mention a terrorism tax that is corrosive on our culture as well as our finances. Since Barack Obama and Hillary Clinton have never seen a tax they didn't like, you'd thing they'd be honest about this one.