Despite major improvements in the field of terrorist studies, scholars are still baffled by the duration of terrorism, particularly in modern industrial democracies. Why do groups continue to resort to violent tactics to express their political preferences? And what are the most productive policy responses to obstruct terrorist operations while reducing the root causes of the phenomenon? This paper addresses the latter question—namely, the best ways to reduce the root causes of terrorism. Using original data of domestic terrorist group emergence in 196 countries, I argue that governments with high capacity are most likely to produce domestic terrorist groups. However, the emergence and duration of these groups can be mitigated by increased social welfare spending, which tends to (1) ameliorate the major grievances of terrorists; (2) increase the legitimacy of the government in the eyes of the public; and (3) reduce residual public sympathies for violent political expression.