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How 9/11 affected the US economy

GOBankingRates logo GOBankingRates 9/11/2017 Andrew DePietro
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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 wrought, take a look at this cost breakdown.

Physical Damage

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.

When flights American Airlines 11 and United Airlines 175 destroyed the Twin Towers, $8 billion was lost in just the cost of the buildings, according to a 2011 report by The New York Times. In New York alone, loss of life and the destruction of infrastructure amounted to $14 billion, according to the 2015 Global Terrorism Index.

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 $74.8 billion in 2017 dollars, according to adjusted numbers from The Times.

Impact on Airline Industry and Tourism

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: $7 billion in losses to the airline industry in 2001 alone, reported the Fiscal Times. Even more alarming, between 2001 and 2010, the airline industry suffered losses totaling $74 billion, according to Travel Weekly.

Although airlines recovered fairly quickly, 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 2017, the TSA’s budget is $7.6 billion.

The Sept. 11 attack sent shockwaves through the U.S. tourism industry. In the two weeks following the attack, the tourism 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.

Homeland Security and Defense Spending

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 15 years, and the budget for fiscal year 2017 totals $41.3 billion. Homeland Security and related increases in defense spending due to the 9/11 attacks amounted to $589 billion by 2011 alone, which is the equivalent of $640 billion in 2017 dollars, according to The New York Times study.

The scale of how much money the U.S. has spent on domestic security is hard to grasp. The Institute for Economics and Peace estimated that from 2001 through 2014, U.S. domestic security expenditures totaled $1.1 trillion, about $73 billion a year on average.

Also Read: Here’s How Much It Costs to Secure Trump Tower

Taxes and Monetary Policy

The death toll of the Sept. 11 attacks amounted to nearly 3,000 people, according to the 9/11 Memorial and Museum, including the 19 hijackers. Thousands more were injured in the destruction as well. 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.

The 9/11 attacks disrupted taxes, including an incredible $3.5 billion decline in the state of New York in the first 18 months after the event, according to a 2002 report prepared by DRI WEFA for the New York State Senate Finance Committee. Beyond the state 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.

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 and near collapse of the housing market, banking industry and financial system.

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 war in Iraq (2003 to 2011). Most U.S. troops were scheduled to be withdrawn from Afghanistan by the end of 2016. However, in August 2017, President Donald Trump announced his intent to continue the war on terror in Afghanistan.

As of December 2014, the total cost for the war on terror totaled $1.6 trillion, according to the Congressional Research Service. At that time, operations in Afghanistan came at a cost of $686 billion and accounted for 43 percent of the total cost of the war on terror. Waging war isn’t cheap, peaking at an annual cost of $195 billion in fiscal year 2008 before dropping to $95 billion in fiscal year 2014.

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 war in Iraq cost $815 billion through the end of 2014, accounting for 51 percent of the $1.6 trillion, according to the CRS.

Escalation and Stalemate

Attempts to stop ISIS are ongoing. The coalition campaign against ISIS from August 2014 to July 2016 ran up a daily bill of up to $12 million, or roughly $8.7 billion total, according to the Institute for Economics and Peace.

The global economic cost of terrorism peaked at $51.51 billion in 2001 before dropping by roughly 85 percent in 2002 to $7.65 billion. As the war on terror expanded to include the war in Iraq, so did the economic cost: from $5.42 billion in 2003 to $20.44 billion in 2007. With the U.S. drawdown from Iraq in 2011, the global cost has jumped rapidly, surpassing the 2001 total and hitting $89.6 billion in 2015.

Though the CRS calculated the cost of war to be $1.6 trillion, other experts believe it to be higher. A 2013 study by the Harvard Kennedy School on the war on terror included long-term medical care and disability compensation for service members, veterans and families, military replenishment as well as social and economic costs. That study calculated the total cost of the war on terror to be between $4 trillion and $6 trillion.

Read More: What a Conflict With North Korea Might Cost

This article originally appeared on GOBankingRates.com: Ways 9/11 Impacted the US Economy

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