The Department of Homeland Security (DHS) could soon issue a regulation with serious ramifications for taxpayers, drivers and government officials. The agency is considering requiring all driver\u2019s licenses to be embedded with computer chips, which will be more costly and less secure than upgrading the existing technology for licenses.Passed in May 2005, the Real ID Act for the first time set federal standards for authenticating and securing state-issued driver\u2019s licenses. DHS, which has no previous experience in making ID cards on a massive scale, is charged with setting forth the regulations to implement the new requirements. While states technically are not forced to accept the federal standards, any refusal to comply could hinder their residents\u2019 ability to get a job, receive Social Security or travel by plane. Real ID was tucked into a massive spending bill and passed without any congressional debate; however, it is clear that Congress intended DHS to base its regulations on the states\u2019 existing best practices. DHS has two options for licenses:magnetic stripes or two-dimensional bar codes; or contactless integrated circuits such as radio frequency identification (RFID) chips. Whichever alternative is used, the new system will place a heavy burden on state and local governments, especially departments of motor vehicles. States will now have to verify birth certificates, federal immigration documents and Social Security numbers with the appropriate federal departments, build a database to store and secure identification documents and train personnel to use the new system. Fees and taxes will have to be increased to cover whatever costs are not paid for by the federal government.But computer chip technology would be the far more expensive of the two options. Citizens Against Government Waste examined the issue in its October 2005 report, Real ID: Big Brother Could Cost Big Money. The total cost of issuing new licenses with embedded computer chips to 196 million drivers could reach $17.4 billion, or $348 million per state. The average cost of a license would shoot from between $10 to $25 to more than $93. Computer chips could be even more expensive than estimated because the chips are brittle and licenses containing them would likely need to be replaced more frequently than non-chip licenses. In addition, the life expectancy of the rapidly-changing technology could require frequent and expensive infrastructure upgrades. DHS must be mindful of lessons from past government attempts to build complex information systems that ended in complete failure. The most costly example in terms of dollars and security was the FBI\u2019s Virtual Case File (VCF). The system was supposed to replace an antiquated file system that relied on hard copies with an electronic system instantly accessible to every field agent and office. In June 2001, the FBI budgeted $170 million for the building and implementing of VCF. Doubts were raised about the project as early as 2003, yet the FBI pressed on and authorized a $17 million testing program in 2004, even though it was clear by then that the system would never work. When VCF was scrapped in March 2005, the FBI had wasted $104 million. Subsequent reports exposed numerous blunders with the VCF project, including under-qualified FBI personnel, poor oversight and inadequate planning. Further complicating things, the FBI opted to build a customized system from the ground up rather than use readily-available commercial software.DHS is poised to repeat this mistake if it opts for chip-based licenses. Infrastructure at departments of motor vehicles is dominated by machines that read 2-D technology. No state currently uses chips in its licenses and few foreign countries have adopted the idea. A chip mandate would force some states to shelve millions of dollars of investment into their own security solutions and start over from scratch. According to National Conference of State Legislatures (NCSL) Transportation Committee Director Cheye Calvo, \u201cState officials don\u2019t want DHS to choose one security solution for all states. They prefer trying different techniques with various business partners.\u201d Even more troubling than the financial cost is the potential invasion of privacy. RFID chips have the memory to store every detail about a person, including health records, family history and bank and credit card transactions. RFID chips can also be remotely accessed by a hand-held scanner, raising the risk of identity theft. In contrast, non-chip licenses have to be physically read and therefore physically stolen to be compromised. In the wake of recent controversy over the federal government\u2019s domestic spying program, chip-based licenses could also multiply the opportunities for abuse. If DHS mandates computer chips, it might try to pacify privacy concerns by restricting the categories of data that can be stored on the cards. But any such rule could be amended by subsequent action. After all, the Real ID Act is interpreted by many observers as a major step toward a national ID card and it passed with nary a whisper of public warning or debate. With that excess chip capacity in place, there\u2019ll be no shortage of ideas for using it. \n\nDHS is not facing a question of cost versus security. Currently, 49 states use reliable and cost-effective magnetic stripes or 2-D technology and their residents have had minimal identity theft problems related to their driver\u2019s license. States have been making substantial progress in securing and authenticating driver\u2019s licenses with innovations such as holograms and digital watermarks. The National Conference of State Legislatures estimates that it will cost states a total of $9 to $13 billion over six years to comply with Real ID regulations based on current techniques. Requiring computer chips could double that amount.. At an NCSL seminar in Chicago on December 7, 2005, many of the speakers and attendees expressed concern that the DHS would adopt RFID chips. Several states have taken formal action to stop chips from being used in driver\u2019s licenses. In May 2005, the California state Senate passed legislation that would prohibit the use of chips in driver\u2019s licenses and several other forms of identification. West Virginia and New York recently ruled out chip technology for their new driver\u2019s license programs. Douglas Thompson, manager of driver licensing in West Virginia, told Card Technology magazine that the cost of computer chips for licenses "would have been astronomical." In the same article, the New York Department of Motor Vehicle\u2019s director of investigations pointed to the ripple effect of costs on government and commercial establishments: For chip technology to be effective, police departments, airports and bars would have to install RFID readersThe Real ID Act is an example of an unfunded mandate; that is, it does not specify a precise amount to be allocated to the states to help meet the new federal standards. In other words, the entity making the policy is not responsible for its enforcement, cost and any unrelated consequences that result. Therefore, DHS has an incentive to accentuate the perceived positives of RFID chips and overlook the negatives. In the realm of technology, the dangers of unfunded mandates are magnified by the unpredictable nature of IT projects and shifting standards. Department of Homeland Security officials must avoid falling victim to technological "overreach." RFID technology is useful and appropriate for applications such as cargo and automatic tolls. But requiring an embedded chip in every driver\u2019s license is a terrible idea. With the government\u2019s long history of technological ineptitude, the task is daunting and invites all manner of snooping, theft and abuse. DHS should keep costs and technology difficulties to a minimum by choosing cost-effective and proven methods that are being used in most states today.Thomas A. Schatz is the president of Citizens Against Government Waste.