The Economic Effects of 9/11

The United States of America currently faces a national debt of over 19 trillion dollars, a number that has nearly quadrupled since the 2001. With the collapse of two massive skyscrapers and several other buildings on September 11, 2001, many believe that the attacks on 9/11 triggered the overwhelming financial debt our country faces today. However, David Wessel (2011), a senior fellow in Economic Studies at Brookings, does not agree. In his article “Tallying the Toll on the Economy from 9/11,” Wessel argues that the attacks on September 11 did not spark the recession and did not reduce the efficiency of the U.S. economy. By listing the factors of the economy that the attacks did affect, Wessel debunks common misunderstandings and provides insight as to whether the money spent by the United States government after the attacks helped or hurt the American people.

While the events of September 11th caused massive damage to New York City, Wessel says that the attacks did not cause a weak economy to collapse. Six months prior to the attacks on the World Trade Center, the U.S. economy entered a recession and did not recover from the recession until mid November of that same year (Wessel, 2011). While the attacks on September 11th did not cause the recession, the “attack-related business disruptions impeded recovery of it” as “economic output grew only 1.9 percent in the four quarters following the recession…translating to a loss of $77 billion” (Yerger, 2011). Furthermore, Wessel acknowledges that consumer spending levels along with the stock market demonstrated losses directly after the attacks, but he states that the levels were back to what they were before the attack by the end of 2001. Thus, this information implies that while the attacks initially hindered the economy, the drop in consumer spending levels and the stock market decline did not greatly affect economic conditions as both areas were able to bounce back quickly.

While the consumer spending industry was able to bounce back quickly from the attacks, two aspects of life that not only greatly changed post 9/11 but also took a large toll on the economy include the airline and tourism industries. By comparing the costs of flying pre and post 9/11, Wessel portrays how the cost to fly in the United States drastically rose as airlines prioritized security, spending hundreds thousands to ensure the safety of their passengers. Besides compensating for safety, the number of airline passengers in general decreased due to the higher costs and fear instilled by the attacks. Due to the high number of fixed costs airlines incur, the increase in spending and decrease in flights severely hindered the airline industry. According to a General Accounting Office report released in early October of 2001, the airline industry had already suffered a loss of revenue ranging from $8.9 billion to $13.5 billion in the month after the attack (Feldman 2001). So, while the general public may have thought that they were doing more good by not flying, the American people were actually severely hurting the economy by letting their fear control their economic decisions.

Due to the stricter enforcement of security, tourism to America also took a hit as before the attacks 26 million people from countries other than Mexico and Canada visited the United States while after the attacks that number dropped to below 20 million people (Wessel, 2011). By people not coming to the United States, the airlines did not have the opportunity to make revenue from those flights. However, while tourism from Canada to the United States did not drop because of the stricter enforcement of security, trading from the United States to Canada did, especially for products that travel between the border multiple times before being sold (Martin, 2009). With the increased cost of getting items into the United States, several big businesses in Canada experienced a vast loss in revenue in the years following 9/11.

Another sector of the economy that experienced an elevated level in spending due to the attacks includes government spending with the creation the Department of Homeland Security. Created directly in response to the attacks on the World Trade Center, the Department of Homeland Security has an annual budget of around $41 billion dollars a year (Bovard, 2016), and Wessel points out that the government has spent $360 billion more on homeland security in the decade following the attacks as opposed to the decade before the attack (Wessel, 2011). Because the Department of Homeland Security was designed to protect our nation against terrorism and prevent lethal attacks from happening, most Americans saw this level of spending as justified.

Wessel saves the most obvious of economic costs for last in his article as he discusses the fiscal effects of the war in Iraq in retaliation to the September 11 attacks. While most people criticize the Bush administration for the Iraq war being the main reason behind the spike in the federal debt, Wessel claims that “the war didn’t cause the federal deficit to balloon” (Wessel, 2011). He admits that it has contributed to the deficit greatly, but he states that “war spending was equal to 40% of the 2008 deficit” and “in the years since, recession and stimulus spending overwhelmed war costs as a deficit driver” (Wessel, 2011). So, while the majority of Americans believe that the war completely damaged our economy, Wessel proves that the war was a main cause but not the only reason for the tremendous deficit our nation faces today. Rather, he attributes the majority of the rest of the 2008 deficit to spending on health and retirement. Furthermore, one middle eastern scholar claims that the spending done fighting in Iraq and Afghanistan has added a trillion dollars to the national debt due to the wars being “funded for years with non-budget items” (Zakheim, 2011). By analyzing the national debt and evaluating the part war plays in the national debt, Wessel opens the eyes of his audience and challenges them to question the role of the war in the debt crisis and to question other factors of government spending that have led to the crisis Americans face today.

The economic perspective that Wessel provides during his article “Tallying the Toll on the Economy from 9/11” aids in his audience’s understanding of how 9/11 affected the financial deficit the United States faces. While most think that the attacks on 9/11 and the war in Iraq are to blame for the massive debt, Wessel proves how many other factors are actually to blame.

References

Bovard, J. (2016). The $4 Trillion War on Terror. Reason, 48(2), 24–33.

Feldman, A. (2001). TRAVEL + AIRLINES. Money, 30(12), 94.

Martin, M. (2009). THE TIPPING POINT: EFFECTS OF POST 9/11 BORDER SECURITY ON CANADA-UNITED STATES ECONOMIC COMPETITIVENESS. Canada-United States Law Journal, 34(1), 127–148.

Wessel, D. (2011, September 1). Tallying the Toll on the Economy From 9/11. Retrieved October 30, 2016, from http://www.wsj.com/articles/SB10001424053111903895904576542352036340880

Yerger, D. B. (2011). The Economic Costs of 9/11 on the U.S. Phi Kappa Phi Forum, 91(3), 12–13.

Zakheim, D. S. (2011). What 9/11 Has Wrought. Middle East Quarterly, 18(4), 3–13.