This is a pain but I’m sure it’s there for protection but when testing locally, I don’t need it. This article pointed me in the right direction and I found my solution in the comments.
Open the terminal. CD (change directory) to your current wordpress installation and type this:
sudo chown -R www: .
The ‘.’ is the current directory. After typing this and hitting enter I can now freely install and delete plugins without WordPress Security breathing down my neck.
Note: I have the latest incarnation of Mountain Lion.