Your post only focuses on risk of death, and from that standpoint I agree 100% that it is rational to spend money elsewhere.
However, people are fundamentally irrational and emotional. It would be irrational to stop flying due to 9/11. The risk of an attack on your flight is negligible. Yet, airlines lost a lot of passengers due to 9/11! If a second successful attack occurs, many people would lose their confidence not only in airlines, but in their government to protect them.
The government is really in a lose-lose situation here. Do nothing, and they are perceived as weak on terrorism. Do what people say they want the gov't to do - protect the airlines - and suddenly more invasive searches are required. Either way, they will have a very vocal group against them.
However, people are fundamentally irrational and emotional. It would be irrational to stop flying due to 9/11. The risk of an attack on your flight is negligible. Yet, airlines lost a lot of passengers due to 9/11! If a second successful attack occurs, many people would lose their confidence not only in airlines, but in their government to protect them.
The government is really in a lose-lose situation here. Do nothing, and they are perceived as weak on terrorism. Do what people say they want the gov't to do - protect the airlines - and suddenly more invasive searches are required. Either way, they will have a very vocal group against them.