"Some sort of explosion has ripped through the Alfred Murrah Building..."

"It was the third bombing incident in Atlanta in seven months..."

President BILL CLINTON: Terrorism is the enemy of our generation.

[Security-person at incident site]

"Evacuate the area please! Go on, get the cameras out of the way. Go! Go!"

MORTON HALPERIN: We are panicked and we are allowing our civil liberties to be eroded.

Amb. PHILIP WILCOX: Terrorism is a clear threat to our national security.

[Spokesperson at Khobar Towers, Saudi Arabia]

"We had a couple -- had rooftop sentries on that particular building behind us."

MELVIN GOODMAN: Terrorism is a problem for US and for US interests, but I think the problem has been exaggerated.

NARRATOR: How big a threat is terrorism? And how should the United States as the world's leading democracy respond?

NARRATOR: For years, Americans felt relatively safe from terrorism. It was always something that struck "over there," far from our shores. Then came the New York World Trade Center bombing in 1993...Oklahoma City...the bomb at the Atlanta Olympics.

A growing sense of outrage and vulnerability led Congress to pass the 1996 Anti-Terrorism Act, which authorized over a billion dollars in government spending to counter the perceived threat. And increasingly, the military has been called on to combat terrorism both at home and abroad.

GEN KRULAK: It is this recognition that there is a threat out there, that the enemy that we're facing is going to be more and more asymmetric in their attempts to attack our weaknesses and we need to be prepared.

NARRATOR: Today many believe that America and much of the world is under seige by agents of terror.

AMB. WILCOX: Terrorism is a clear threat to our national security.

NARRATOR: As head of the State Department's Counter-terrorism Division, Ambassador Philip Wilcox coordinates federal anti-terrorism policy.

AMB. WILCOX: Although it kills and wounds a relatively small number of people, the political, psychological damage and the economic cost of terrorism is very, very high.

Prof. GOODMAN: Terrorism is a problem for US and for US interests, but I think the problem has been exaggerated.

NARRATOR: Professor Melvin Goodman served as an intelligence analyst for the CIA for 20 years, specializing in the Soviet Union.

Prof. GOODMAN: I don't believe it is a national security threat, for example. I don't think there are vital interests that are really at stake right now in terms of the challenge that terrorism presents, and I think there has been an overreaction.

NARRATOR: What exactly constitutes a "threat to national security?" During the Cold War, the possibility of a nuclear war that could destroy the United States certainly qualified. Does terrorism rank as the same order of threat?

Dr. HALPERIN: The number of terrorist acts are isolated and don't pose a systematic threat to our survival the way Soviet nuclear weapons did, for example.

NARRATOR: A noted scholar of the security establishment, Morton Halperin served on President Clinton's National Security Council staff before becoming a senior fellow at the Council on Foreign Relations.

Dr. HALPERIN: I think there's a search now for a substitute for international communism or the Soviet Union to justify high levels of defense spending and other kinds of actions in the world, and terrorism is a piece of that. It goes with nuclear proliferation, and rogue states, in general, and I think that threat has been enormously exaggerated.

President CLINTON: [at George Washington University, 5 August 1996.]

"Just as no enemy could drive us from the fight to meet our challenges and protect our values in World War II and the Cold War, we will not be driven from the tough fight against terrorism today. Terrorism is the enemy of our generation and we must prevail."

NARRATOR: Recent events such as the Oklahoma City bombing have etched an indelible mark on the public consciousness and created a sense of urgency about responding to terrorism. But what are current trends? The State Department report "Patterns of Global Terrorism," provides some answers.

AMB. WILCOX: There is a clear trend toward a decline in the number of acts of international terrorism involving the territory of citizens of two or more states. The number has declined from 665 in 1986 to between 290 and 300 in 1996. In the space of a decade, the number has dropped by over half.

NARRATOR: "Moreover," according to the report, "about two-thirds of these attacks were minor acts of politically-motivated violence against commercial targets which caused no deaths and few casualties." On the other hand, domestic terrorism -- involving people of only one country -- is on the rise in many countries with volatile political situations.

AMB. WILCOX: The number of casualties in countries like Algeria, Sri Lanka, Pakistan and India is very, very high and greatly exceeds the number of casualties, the number of incidents in international terrorism.

NARRATOR: In the United States, however, acts of domestic terrorism have fallen dramatically, according to the FBI, from a high of 51 incidents in 1982 to one in 1995, the latest year for which numbers are available. However, that one incident, the bombing of the federal building in Oklahoma City, represented a disturbing trend in both international and domestic terror.

AMB. WILCOX: Even though the number of acts has diminished, the number of casualties has risen. Terrorists are using more potent explosives. They are more ruthless. They're killing more people.

NARRATOR: A growing concern today is the possibility of terrorists obtaining nuclear, chemical or biological weapons -- known as "weapons of mass destruction."

WALTER LAQUEUR: We enter an age in which individuals, a small group will be able to inflict great havoc.

NARRATOR: Walter Laqueur has written extensively on the history of terrorism and coined the phrase "post-modern terrorism" in an article in Foreign Affairs.

DR. LAQUEUR: If you look at what, you know, the victims of terrorism, there wasn't a single incident in which more than 300 people were killed. Now in this new age, potentially thousands and perhaps hundreds of thousands could be killed.

NARRATOR: Part of the problem in addressing terrorism has been the difficulty of defining the term. The FBI defines terrorism as "the unlawful use of force or violence against any persons or property to intimidate or coerce a government, the civilian population, or any segment thereof in furtherance of political or social objectives."

The bureau then proceeds to exclude bombings of abortion clinics from its count. Instead, labeling violence by antiabortion extremists as "politically-oriented crime." Nor does it count numerous attacks on state officials by militia extremists.

KAREN MATTHEWS: I was attacked and beaten by two men. I was knocked to the floor, slashed with what I believe to be a knife, kicked repeatedly, punched, and finally, a gun was placed to my head and the trigger was pulled several times. My assailant said that I was a messenger to all recorders that if we did not begin to do our jobs and record their documents, this would happen to them, too.

[News Report]: "The flames were first spotted at the First Missionary Baptist Church in Enid, Oklahoma before dawn..."

NARRATOR: Also excluded from the FBI's terrorism list are hate crimes, such as the recent series of church burnings and the bombing of a gay dance club in Atlanta.

[News Report]: "Five people were injured, more than 100 startled. Two bombs exploded at the Other Side Lounge. The second one, perhaps meant to harm police and rescue workers, was detonated by a police robot."

NARRATOR: The FBI did not respond to our request for an explanation of why these events are excluded.

The State Department uses a different definition.

AMB. WILCOX: The term terrorism has been used very loosely to describe different kinds of evil activity. We define it narrowly as "violence carried out for political reasons against noncombatants." There are many other kinds of crime and violence which we do not define as terrorism. It's important for us to have a precise definition, so that we can use our laws to go after terrorists and to prosecute them.

DR. LAQUEUR: There is no definition of terrorism, nor can there be. Any attempt to have a definition is doomed because every terrorism is different. It's different according to history, to tradition, to political culture, and so on.

NARRATOR: Thus the saying, "One person's terrorist is another's freedom fighter." The State Department lists seven countries -- Cuba, Iran, Iraq, Libya, North Korea, Sudan and Syria -- as state sponsors of terrorism, thereby subject to economic sanctions.

AMB. WILCOX: The states which we have designated under the law as sponsors of terrorism are those which have demonstrated a clear and continuous pattern of support for international terrorism. And we make an objective judgment, without fear or favor.

NARRATOR: But some question whether such a list can be truly objective.

Dr. HALPERIN: I think, in general, lists like this are a mistake because they inevitably get caught up in our overall relations with countries. And so, you end up using a double standard, depending on what overall relations we have with countries.

NARRATOR: North Korea, for example, has not been associated with a terrorist incident in over a decade. The report itself allows that "Cuba no longer actively supports armed struggle in Latin America" or elsewhere. But the fact that Cuba once aided guerilla movements fighting for political change in Latin America -- just as the United States did with the contras -- keeps it on the list.

Prof. GOODMAN: I have a lot of problems with this application of "rogue state" to nations we have problems with. I think it's part of this American tendency to demonize the opposition or demonize actors where we have legitimate grievances.

NARRATOR: Growing international cooperation has significantly reduced the amount of state-sponsored terrorism.

AMB. WILCOX: You'll find a very solid commitment to counterterrorism among the Arab and Islamic states of the world, with a few exceptions, because they understand that they, too, are at risk from terrorism.

Let me add that Russia is strongly committed to international cooperation in counterterrorism today and they're a close partner of the United States in this area.

NARRATOR: Increasingly, acts of terror are perpetrated by lone extremists or small groups without state sponsorship, making them harder to track. At the same time, technology has given them more powerful tools to work with. The Internet provides access to bomb recipes to anyone with a computer.

[News Report]: "All day Monday Tokyo residents were asking themselves and each other who would commit these acts of indiscriminate murder and why."

NARRATOR: Many fear that the sarin gas attack on the Tokyo subway in 1995 was a precursor of things to come. Indeed, while we were producing this program, a suspicious package containing an alleged bacterial agent triggered an emergency response that shut down a section of Washington, D.C. for hours while authorities sealed off the area and decontaminated victims as a precaution.

Local TV Reporter (Wash., D.C.): "Is this something that could be used in biological warfare?"

Official at Scene: "I don't know because it has not been I'd as of yet."

Reporter: "But the way it's labeled."

Official: "It has not been ID'd. We are in touch with various agencies that will assist us in ID'ing the product."

NARRATOR: It later proved to be a hoax. But the fear of such an attack has led some in Congress to seek additional military capability to respond.

Rep. CURT WELDON: (R-PA)

"I have here a teaspoon. If this teaspoon were filled with sarin gas, in a proper dispersal mode, it could kill 5000 people."

NARRATOR: The Marines have formed a Chemical/Biological Response Force designed to counter such an incident. In an effort to drum up public support for additional funding, the unit recently staged an exercise in response to a mock chemical attack on Capitol Hill.

After the exercise, defense contractors eagerly displayed a variety of high-tech gadgets designed to help counter this new threat.

Rep. WELDON(at Chemical/Biological Response Force exercise):

"We in the Congress on the National Security Committee are going to continue to plus up funding to make sure that the commandant's team is in place, that perhaps we can develop maybe a second or a third team."

NARRATOR: Indeed, the Congress has shown a growing willingness to "plus up funding" -- congressionalese for "spend more tax dollars" -- to fight the perceived terrorist threat.

NEIL LIVINGSTONE: What we see right now is that anti-terrorism funding hides a whole variety of sins.

NARRATOR: Neil Livingstone has written nine books on terrorism and runs a crisis management consulting firm.

MR. LIVINGSTONE: Any agency that wants to get on the bandwagon here can show up and say, lookit, we want to do this for anti-terrorism purposes.

NARRATOR: The Anti-Terrorism Bill of 1996 sprinkled more than one billion dollars among 30-some federal agencies. The military, the FBI, and the Federal Aviation Administration got the biggest chunks. But even such unlikely places as the Veterans Affairs Department, the Smithsonian Institution, and the Fish and Wildlife Service got a piece of the action.

Dr. HALPERIN: Typically, what happens is an event occurs like the Oklahoma City bombing and every agency takes out all the things they ever wanted to do, re-labels them terrorism. The Congress is then anxious to show that it's responsible, that it's doing something, and so it passes a bill like that.

NARRATOR: When TWA Flight 800 exploded in July 1996, Middle Eastern terrorists were widely suspected. The president launched a commission on aviation safety that came up with anti-terror recommendations costing over $400 million. But the evidence suggests that terrorists had nothing to do with the crash of Flight 800.

Prof. GOODMAN: The United States has always needed a threat or a North Star to guide its policies. There was a period in the fifties and sixties, and even into the seventies, when it was no longer true, that the threat was international communism.

NARRATOR: In the early 1980s, American policymakers such as Secretary of State Alexander Haig and CIA Director William Casey used the phrase "Soviet-sponsored terrorism" with such regularity that it took on the ring of unquestioned truth.

Prof. GOODMAN: The evidence showed overwhelmingly that the Soviets were not involved in international terrorism.

NARRATOR: From his position inside the CIA, Goodman saw how policy could be manipulated for political goals.

Prof. GOODMAN: Casey manufactured an intelligence estimate to make the case for the Soviet role. And that estimate was a politicized document. It was warped. It was slanted. It skewed the evidence. And it did control American thinking for the 1980s.

Casey clearly thought that by painting the Soviet Union as the sponsor of all terrorism, it would be a lot easier to justify the massive increases in the defense budget.

NARRATOR: Today, seven years after the collapse of the Soviet Union, the United States is still trying to identify new enemies to justify big security budgets.

Prof. GOODMAN: So, international terrorism becomes one of these mantras that policy leaders can use to create more spending opportunities and appropriation opportunities in dealing with the Congress.

NARRATOR: How much does the government spend to counter terrorism? It's hard to say, exactly, because many programs have more than one function. Plus, intelligence activities are classified.

AMB. WILCOX: I would reckon that the US Government spends somewhere between four and five-hundred million dollars a year in counterterrorism activities, per se, but there are much larger expenditures in activities which support that counterterrorism apparatus.

NARRATOR: According to a Pentagon spokesperson, the Defense Department alone spends between three-and-a-half and four billion dollars a year to combat terrorism. Much of this goes for defense security, or "force protection," to prevent future attacks such as the June 1996 bombing of the Khobar Towers barracks in Saudi Arabia, which killed 19 airmen. The military is also tasked with an offensive role in countering terrorism.

AMB. WILCOX: There are times when traditional diplomacy and law enforcement is not enough and where we do need military means to rescue victims of terrorism and to prevent acts of terrorism, or even to retaliate against terrorist acts against the United States.

NARRATOR: While the US military is prohibited by law from participating in domestic law enforcement, it is increasingly using anti-terrorism programs to get involved in civilian affairs. At the 1996 Olympics in Atlanta, the military spent an estimated $47 million putting troops on the ground for security purposes. Despite the extraordinary precautions, a terrorist bomb exploded in Centennial Park in the heart of the Olympic Village.

Also in the name of fighting terrorism, the Army's Special Operations Command has carried out mock raids in 21 American cities over the past three years. Arriving unannounced after dark with a dozen or more unlit helicopters, hundreds of dark-suited commandos descend ropes on to abandoned buildings. In Houston, one of the helicopters crashed in a suburban neighborhood.

Fox News Broadcaster: "The Army helicopter rolled over as it tried to land during military war games on state prison property in Sugarland. There are hundreds of homes within eyesight of the scene, but residents had no idea the manuevers were taking place because the Army had not told them.

"Meantime, downtown Houston and the ship channel will be the sites of more war games during the next week. The Army says small charges and training ammunition will be used in abandoned buildings."

NARRATOR: Outcries from angry citizens, terrified by the apparent invasion, forced the Army to cut short some of the exercises.

Mayor BOB LANIER, of Houston:

"If I were living closeby and somebody told me they were going to -- there was shooting out there, yeah, it would bother me."

NARRATOR: The Army claims it needs to practice in authentic urban settings to prepare for dealing with terrorists abroad. But for conspiracy-minded Americans, already wary of government involvement in our private lives, these activities lend credence to their fears of "black helicopters" and "federal jack-booted thugs" and could possibly fuel future acts of anti-government terrorism.

Prof. GOODMAN: The shibboleth of state terrorism could become an excuse for compromising American liberties, and I think this is something we should be on guard against. It's a legitimate problem and there are responses that we're going to have to make, but we should be very leery of the tradeoffs with regard to American liberty and American spending.

NARRATOR: In March 1997 the Pentagon began a program to train police and emergency workers in 120 US cities on how to deal with terrorist incidents involving chemical or biological weapons.

H. ALLEN HOLMES, Assistant Secretary of Defense:

"To demonstrate its commitment in future years, the Department of Defense is seeking $49.5 million in Fiscal Year 98 to continue our domestic response preparedness program, which will take several years."

NARRATOR: There is certainly merit in properly equipping local emergency teams to deal effectively with toxic events, such as the one simulated in the Marine demonstration on Capitol Hill. But some in Congress seem eager to institutionalize the military role.

INTERVIEWER: Do you envision sometime in the future the local authorities would be able to handle this without the military being involved?

REP. WELDON: I think we're probably best always having the military prepared to come in.

Dr. HALPERIN: I think the military's role in the United States in dealing with terrorism or any other crime should be extraordinarily limited. I think there are situations, if you're dealing with chemical weapons attacks, for example, or nuclear material -- which I think is unlikely, but not impossible -- in which you may want to call in technical experts from the military. And I think it is possible to do that in a way that doesn't violate any of the fundamental principles of the Constitution, but the military ought not to be in the business of law enforcement.

NARRATOR: The commander of the Marines' Chemical-Biological Response Unit echoes that sentiment.

LCOL ARTHUR CORBETT: "We believe that the terrorists begin to win when we begin to violate our own Constitution, so we never want to do that. We want to make sure that we are always brought in to assist the local authorities. We want to make sure that the American people understand that we are filling a gap in capability until the local authorities constitute that capability.

"But we're fully aware of the fact that America is most safe when federal forces are in their barracks. And we only come out of the barracks because the locals ask us to assist them doing something that they see is beyond their capability."

NARRATOR: Americans are proud of the nation's legacy of openness, yet growing fear of terrorism has made the United States increasingly obsessed with security. An eerie silence permeates Pennsylvania Avenue in front of the White House, closed to traffic since 1995 for fear of a truck bomb. Metal detectors and searches have become commonplace at public events.

MR. LIVINGSTONE: If you had talked to the average American a quarter of a century ago and said to get on a plane, you may have to be searched, you may have to, you know, raise your arms out and have someone scan you with a body wand, you'll have to walk through various types of detectors, your luggage will have to pass through detectors, your other bags will be screened, your bags can be opened at random, you can be pulled out of a line because you fit a certain type of profile, I think we would have been horrified. Now we accept this.

NARRATOR: Ironically, many in the Congress who in the past have called for reducing the role of government in Americans' lives are leading the charge to expand government powers in the name of anti-terrorism.

Dr. HALPERIN: The terrorism bill contained many provisions relating to searches, relating to deportation, relating to habeas corpus, which had almost nothing to do with it, which were thrown in there as a way of being tough on terrorism.

Dr. LAQUEUR: If there should be in the future some very serious, major attacks, then there will be an overwhelming demand for severe limitation of our freedoms, simply because many people, or most people even, say that if order and freedom collide, then order is more important. Which may be regrettable, but that is one of the facts of political life.

Dr. HALPERIN: Just as during the Cold War we allowed the fear of communism to erode our basic constitutional procedures and our adherence to them, now we are unfortunately allowing the fear of terrorism to do the same thing.

NARRATOR: Many believe that the best hope for further reducing international terrorism is through active diplomatic engagement overseas in efforts to address the conditions that fuel political violence.

AMB. WILCOX: The US cannot have effective counterterrorism abroad without a well-funded, aggressive foreign policy across-the-board, because we have to have good diplomatic relations with other governments if we're going to get their cooperation. We have to have US engagement in conflict resolution because various kinds of political and economic, ethnic, nationalistic, religious conflicts give rise to violence and terrorism.

NARRATOR: And on the home front, much of today's terrorism is made in the USA. Rather than looking for new enemies to fight and rogue states to blame, perhaps America needs to take a long, hard look in the mirror and confront the aspects of our society that breed these acts of terror.

ADM SHANAHAN: With the Cold War over, we stand at a rare and fortunate period in history when the United States faces no systematic threats to its vital interests. The military is now casting about for new missions to justify continued high levels of spending. The fact is, terrorist acts are declining. Yes, caution and vigilance are still called for. But if we overreact, we open the door to expanding government interference in our daily lives. But whittling away at freedoms in the name of anti-terrorism, we will eventually find that we have destroyed the very values that the military is ordained to protect.

For "AMERICA'S DEFENSE MONITOR," I'm Jack Shanahan.