How 9/11 Affected the US Economy
The tragedy of Sept. 11, 2001, is still an undeniable turning point in recent U.S. and world history. After years of relative peace and economic prosperity during the 1990s, the 9/11 attacks brought the full impact of terrorism to U.S. shores — and the results seriously affected the U.S. economy.
Determining how much the Sept. 11 terrorist attacks cost the U.S. is grim work. Whether you’re looking at physical damage or indirect effects, calculating the economic toll of the attack only makes you realize how much it changed the American way of life. To fully grasp the financial havoc the 9/11 attacks brought, read on to see the cost breakdown.
Cost of Losing the World Trade Center
When flights American Airlines 11 and United Airlines 175 destroyed the World Trade Center’s twin towers, $8 billion was lost in just the cost of the buildings, according to a 2011 report by The New York Times. That figure doesn’t include the computers, furniture and cars that were in the building, which were worth an additional $6 billion, according to the report.
Cost to the Companies in the WTC
Even before the War on Terror began, the Sept. 11 attacks dealt a harsh blow to America’s financial standing. The World Trade Center towers housed more than 400 businesses, some of them top-tier financial firms. Companies with offices in the towers included Bank of America, Lehman Brothers and the Commodity Futures Trading Commission.
All of the businesses damaged in the attacks were forced to relocate, resulting in $22 billion in losses due to business interruption, The New York Times estimated.
Cost of the Loss of Life
The value of life lost in 9/11 is $24 billion, according to The New York Times report. That accounts for the estimated $10 billion the people who died at the World Trade Center would have earned throughout their working lives if their lives had not been cut short.
Cost To Rebuild
The cost to replace New York’s buildings and infrastructure that were destroyed in the attacks totaled $21.8 billion, CBS News reported. Additionally, it cost $500 million to repair damage to the Pentagon in Washington, D.C.
Overall Cost of the Physical Damage
When you factor in the loss of equipment, infrastructure, utilities, injury, value of life and cleanup, the physical toll of the Sept. 11 attacks was $55 billion, or $62.2 billion in 2019 dollars, according to adjusted numbers from The Times.
That includes the $8 billion for the towers themselves; $6 billion for the computers, furniture and cars at the World Trade Center; $5 billion for damages to other buildings; $6 billion for infrastructure including the PATH train, subway, phones and electricity; $24 billion for the value of life lost; $5 billion for injuries to emergency responders and others who were exposed to toxic fumes and dust; and $1 billion for cleanup.
Cost to the Airline Industry
The 19 Al Qaeda terrorists used commercial airplanes as their weapon of choice. Not surprisingly, fear of flying gripped Americans in the aftermath of 9/11. The result: $19.6 billion in losses reported by the U.S. air industry from 2001 to 2002, according to the International Air Transport Association. Even more alarming, between 2001 and 2010, the airline industry suffered losses totaling $74 billion, according to Travel Weekly.
Cost of Added Security at Airports
The effects of the tragedy on airlines and air travel continue to be felt today, with the cost of the Transportation Security Administration falling on American taxpayers. For 2020, the TSA’s proposed budget is $7.79 billion.
Cost of Lost Time at Airports
Increased security at airports means extra waiting time, which, according to The New York Times, could cost as much as an additional $10 billion a year. That means in just the 10 years following 9/11, the lost time at airports cost an additional $100 billion.
Cost of Car Accident Deaths
Following 9/11, many people chose to drive to destinations they would normally fly to. Some did so out of fear and others because they did not want to deal with the added wait times at airports due to increased security measures.
Because more drivers were on the roads, that led to more potential for car accidents. According to a study published in the journal, Applied Economics, as many as 2,300 driving deaths could be attributable to the Sept. 11 attacks. The New York Times estimated that these deaths cost a total of $19 billion.
Cost to the Tourism Industry at Large
The Sept. 11 attack sent shockwaves through the U.S. tourism industry. In the two weeks following the attack, the industry reported a loss of $2 billion. Equally alarming, more than 335,000 people lost their jobs in tourism between 2001 and 2002, according to a case study by Finland’s Centria University of Applied Sciences.
Overall, The New York Times estimated that 9/11 led to $61 billion in losses to the travel industry — not including losses in airline travel.
Cost of Aiding Victims and First Responders
Shortly after the terrorist attacks, Congress passed the Victims of Terrorism Tax Relief Act of 2001 to provide tax relief for victims and first responders who were injured or have developed illnesses related to the attack.
In July 2019, President Donald Trump signed the 9/11 Victim Compensation Fund bill. It will provide $10.2 billion over the next 10 years toward healthcare compensation for police officers, firefighters and other first responders. Many developed respiratory diseases and other health issues after inhaling toxic fumes from the destroyed World Trade Center buildings. Supporters of the bill include Sen. Kirsten Gillibrand and Jon Stewart.
Cost of Insurance Losses
The attacks resulted in a total of $40 billion in insurance losses, including property, business interruption, aviation, workers compensation, life insurance and liability insurance, CBS News reported. Sept. 11 is responsible for the largest property and casualty claim in history, according to a report by the Congressional Research Service.
Cost to the Local and Federal Economies
The 9/11 attacks disrupted taxes, including an incredible $3 billion decline in the city of New York in the 2002 and 2003 fiscal years, according to a report by the Comptroller of the City of New York. Beyond the local level, the 9/11 attacks led the Federal Reserve to lower interest rates. This might have helped avoid a major economic downturn at the time, but the cheaper, easier access to money caused bigger problems later on, the BBC reported.
Cost to the Stock Market
Following the attacks, trading on Wall Street was paused for a week. When trading resumed on Sept. 17, 2001, stocks dropped sharply — the Dow Jones’ biggest one-day point loss at the time. The 684-point drop wiped out billions of dollars in value from top American corporations, the Chicago Tribune reported.
Cost to the GDP
The immediate impact of the 9/11 attack on the U.S. real GDP was a 0.5% decrease in 2001, according to a working paper published by the U.S. Department of Homeland Security in 2009. The paper cited a previous study that found that, historically, the outbreak of external war or internal conflict has a significant negative impact on GDP growth in the year of the event, which explains why 9/11 could have had significant, short-term macroeconomic consequences.
Fortunately, the GDP was able to recover to the pre-9/11 forecasted level by 2002, the report found.
Cost to the Job Market
The U.S. Department of Homeland Security working paper also concluded that the Sept. 11 attacks resulted in an 0.11% increase in the unemployment rate, which amounts to a reduction in employment by 598,000 jobs.
Unlike the GDP, which bounced back fairly quickly from the attacks, the negative impact on unemployment was still apparent in 2009, the report concluded.
Cost to the Housing Market
This, in addition to the terrorist attacks and other factors, fueled rapid debt creation and asset inflation, particularly in the housing and real estate markets. It came to an abrupt end in late 2007 and 2008, with the deflationary spiral that included the implosion of the housing market, banking industry and financial system.
Effect on the Recession
The recession began in March 2001, and the Sept. 11 attacks extended the recession by causing the economy to retract 1.7%, according to GenFKD. The recession officially ended in November 2001, but the Dow Jones continued to drop for the next year.
Cost of Homeland Security
Spending on domestic security grew drastically after Sept. 11. The Department of Homeland Security was created in 2002 as part of the Homeland Security Act, which gained support in the wake of 9/11.
Initially, Homeland Security had a budget of $19.5 billion. Fast forward 17 years, and the budget for fiscal year 2020 totals $51.7 billion. Homeland Security and increases in defense spending related to the 9/11 attacks amounted to $589 billion by 2011 alone — $675 billion in 2019 dollars — according to The New York Times study.
Cost of National Intelligence
As of 2011, The New York Times estimated that 9/11 resulted in $110 billion of national intelligence spending for domestic intelligence efforts only. That number factors into the overall figure of $589 billion spent on increased homeland security and related costs.
Cost of the War on Terror
Beginning with Operation Enduring Freedom in October 2001, the U.S. waged war for well over a decade, including the War in Afghanistan, which started in 2001, and the Iraq War (2003 to 2011).
As of November 2018, the total cost for the war on terror totaled $5.9 trillion, according to the Watson Institute of International & Public Affairs at Brown University. Waging war isn’t cheap, peaking at an annual cost of $190 billion in fiscal year 2008 before dropping to a low of $59 billion in fiscal year 2016.
Cost of Operation Iraqi Freedom
The U.S. launched Operation Iraqi Freedom in March 2003. The U.S. State Department justified the war in Iraq in the context of the 9/11 attacks, the global war on terror and idealistic hopes of liberating the country from Saddam Hussein’s dictatorship.
Today, Iraq is still embroiled in conflict; now it’s fighting the terrorist group ISIS. The Iraq War cost the U.S. $822 billion as of the fiscal year 2019, according to the Brown University report.
Cost of the War in Afghanistan
The war in Afghanistan officially came to an end in December 2014, though at the time, former President Barack Obama announced that 10,800 U.S. troops would remain in the country. In January 2019, the U.S. and Taliban began working toward an agreement that would withdraw the remaining troops from Afghanistan.
According to the Brown University report, operations in Afghanistan have cost a total of $975 billion from the start in the fiscal year 2001 through fiscal year 2019.
Cost To Fight ISIS Now
Attempts to stop ISIS are ongoing. The coalition campaign against ISIS began in August 2014 and has run up an average daily bill of $13.6 million, or roughly $14.3 billion total as of June 2017, according to the Department of Defense.
Costs for Veteran Care
As of 2010, 1.25 million service members had been discharged from Iraq and Afghanistan, becoming veterans, according to a hearing of the Committee on Veterans Affairs. The report presented projected costs for medical care and disability compensation for the veterans created by these wars from 2001 to 2020 as ranging from at least $589 billion to as much as $934 billion.
The Cost of Terrorism
The global economic cost of terrorism reached $65 billion in 2001 before dropping by roughly 80% in 2002 to $13 billion. As the war on terror expanded to include the war in Iraq, so did the economic cost of terrorism: from $10 billion in 2003 to $43 billion in 2007.
With the U.S. drawdown from Iraq in 2011, the global cost has jumped rapidly. It surpassed the 2001 total and hit a high of $108 billion in 2014, according to the Institute for Economics & Peace’s 2018 Global Terrorism Index.
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Gabrielle Olya contributed to the reporting for this article.
This article originally appeared on GOBankingRates.com: How 9/11 Affected the US Economy
