It took just a few hours for the Sept. 11 attacks on the World Trade Center to destroy a symbol of U.S. capitalism. A decade later, the financial damage still ripples through the economy, as businesses, consumers and the government continue to pay terrorisms toll.
The most visible costs can be seen in the heightened security at airports, government buildings and office complexes. Shipping and insurance rates climbed after those jets rammed into the twin towers, and they havent descended to pre-Sept. 11 levels. The attacks also have something to do with why motorists are paying twice as much for gas as they did before Sept. 11, although other factors, such as the increased consumption of oil in other parts of the world, have played a bigger role.
The economic burden is much larger if the costs of the war on terrorism are included. That crusade increased military spending and drove up the nations deficit, threatening to erode the countrys standard of living and making higher taxes more likely in the future.
I dont think Sept. 11 itself changed the economy that much, says Anita Dancs, an economics professor at Western New England University. Its was how we responded to Sept. 11 that changed the economy.
Experts who have studied Sept. 11s economic impact disagree on the costs that should be factored into the equation.
Thats why estimates about Sept. 11s damages vary so widely, ranging from $35 billion to $4 trillion. The lower estimates confine the costs to the disruptions that occurred during the first few months after the attacks. The higher numbers tie Sept. 11 to the conflicts in Afghanistan, Iraq and Pakistan, along with all the spending and government borrowing required to finance the military.
Its the first time since the Revolutionary War that the United States has relied mostly on debt to finance its wars, says Linda Bilmes, a Harvard University public-finance professor who co-authored a book about the costs of the post-Sept. 11 wars with Nobel Prize-winning economist Joseph Stiglitz. They concluded the wars will cost the United States at least $4 trillion.
Dancs joined about 20 scholars on another study that assumes U.S. would not have ramped up its military spending and waged war in three different countries if not for Sept. 11. The report, released in June, pegs the costs between $2.3 trillion and $2.8 trillion during the last decade.
Those trillion-dollar figures seem like a gross exaggeration to economists who think its wrong to lump the wars and military spending into the ongoing costs of Sept. 11.
The direct costs of the attacks are more like $100 billion $130 billion, according to Adam Rose, coordinator for economics at University of Southern Californias National Center for Risk and Economic Analysis of Terrorism Events. That works out to about 1 percent of the U.S. economys gross domestic product of about $10 trillion in 2001. It was a blip, Rose says.
Investors reached a similar conclusion within a few months of the attacks. After initially plunging 14 percent during the first week after the attacks, the bellwether Dow Jones Industrial Average had rebounded to its pre-Sept. 11 levels by early November. (the Dow Jones Industrial Average is just 19 percent higher nearly a decade later, a paltry gain that illustrates the challenges that the economy has faced during that period).
Rose and other economists dont think its possible to figure out how much Sept. 11 has cost businesses and consumers after 2002 because so much has happened since then. Among other things, there has been a real-estate bubble followed by a mortgage meltdown that led to a financial crisis that fed the Great Recession the most severe economic downturn since World War II.
Bilmes believes some of those problems are part of Sept. 11s legacy. There were many poor decisions made after Sept. 11, she says. The consequences of spending so much on the war left us with weaker economy than we might have had and a financial crisis that was worse than we might have had.
Theres little dispute Sept. 11s aftermath contributed to the higher spending on security and military over the past decade.
The U.S. government has spent an additional $401 billion on security measures spurred by Sept. 11, according to calculation in the report that Dancs co-authored.
Some of that spending on security may have helped the U.S. economy by preventing more terrorist attacks in the country, reasons Brock Blomberg, a Claremont McKenna College economics professor who studies the costs of terrorism. That prevention may have been worth about $60 billion to the economy, or about 15 cents on every dollar spent, says Blomberg, who was not involved in Dancs research.
Businesses also increased their security budgets after Sept. 11, although the total amount is difficult to quantify because its not a figure that even publicly held companies are required to report.
Many companies invested heavily in new technology to improve their technology after Sept. 11, but havent hired more personnel to patrol their buildings, says Dino Iuliano, executive vice president for Planned Security Services. The company provides security in about 200 office buildings in New York and six other Eastern states.