06 Sep 2002 Measuring the Costs of September 11th
What have we lost since September 11th? We are all infinitely more aware of just how quickly thousands of people can die at the hands of terrorist murderers. On that horrible day, the lives of three thousand fathers, mothers, husbands, wives, and children were abruptly and tragically ended. We all watched it in living horror. During the past year, with that knowledge we readily sacrificed some of our cherished freedoms. We continue to debate how many more liberties we will yield in the name of domestic security, but we have already given up much.
In economic terms Gross Domestic Product measures the big picture. During the three quarters following 9/11 our economy grew at rates of 2.7%, 5.0%, and 1.1%, sequentially. The first two quarters following the tragedies saw surprising growth, but more recently, that growth slowed rather dramatically.
During the three months following 9/11 the Federal Reserve quickly reduced the Fed Funds target from 3.5% to 1.75%. The Congress moved expeditiously as well to provide assistance to the airline industry. The government money spigots were opened wide to finance the nation’s security and defense needs. But it is becoming apparent that these measures are not having the same simulative effect on our economy as in past recessions, so what else is going on?
The airline industry is the most obvious sector of our economy hurt by the events of September 11th. Since the attacks, U.S. airlines have lost $9.7 billion and about 82,000 jobs. US Airways Group Inc. sought bankruptcy protection and UAL Corp. may be next. A second wave of job cuts and other operations cost-cutting measures are coming as they prepare to pay more for airport security. Delta Air Lines Inc. Chief Executive Officer Leo Mullin said in an interview that industry wide losses are forecast to exceed $5 billion this year because both air travel and fares have dropped since the Sept. 11 attacks. Increased customer-service fees, ticket taxes and security-gate obstacles may undermine any recovery in travel demand, and carriers will have to seek affordable war-risk insurance to replace an expiring government program.
Another obvious victim of 9/11 is American productivity. Since the attacks, business focus has been on security at the expense of research and development, competitiveness, cost-cutting, and other profit-enriching endeavors. Private industry spent $55 billion a year on security before the Sept. 11 terrorist attacks, according to the president’s Council of Economic Advisers. That cost could double, the group estimates.
The Federation for American Immigration Reform in making their case for reforming this country’s immigration policies offered the following statistics.
Loss of wealth destroyed: $70 billion
Loss of corporate profits: $50 billion
Loss of production: $100 billion
Loss of federal revenue: $80 billion
Legislated recovery costs: $75 billion
Legislated stimulus costs: $100 billion
Total estimate: $480 billion
The total of $480 billion is about 5% of this country’s annual GDP, or more than federal, state, and local governments spend on education at all levels combined, or about $1,700 for every man, woman, and child in America, according to FAIR. More than 300,000 Americans have lost their jobs since 9/11.
The city of New York has suffered greatly. Some 13 million square feet of prime office space downtown was destroyed – a total equal to the entire office space inventory of Atlanta or Miami according to the Associated Press. An additional 30 million square feet of office space was damaged. The economic impact of the World Trade Center attack could reach $95 billion and cost 83,000 jobs in New York, according to a report by the city’s financial manager.
The federal government will spend $29 billion on “homeland security” this year, up from $17 billion last year. Next year, the amount will rise to $38 billion according to BusinessNews.com. Postmaster General John Potter told a Senate subcommittee that the Sept. 11th terrorist attacks in New York and Washington cost the U.S. Postal Service about $50 million.
From Sept. 11th through the end of 2002, states will have spent $6 billion on security, according to the National Governor’s Association. Massachusetts spent an extra $47 million on antiterrorism measures such as extra police details and concrete barriers around key buildings. Cities will have spent $2.6 billion, according to the Conference of Mayors. States and municipalities’ budgets were strained before 9/11. The new costs mean higher taxes or fewer services.
Here are a few other less publicized changes in our lives according to recent AP news story:
- Ratings for cable news stations and evening news programs higher than they were.
- Immigrants detained and sometimes deported through secret proceedings.
- Libraries and bookstores must provide law enforcement officials with records regarding patrons’ reading habits.
- More security at some office buildings; backpacks and other bags checked at sporting events and theme parks.
- Universities are required to give law enforcement agents names, addresses, grades and disciplinary records of students from some countries.
- Police officers and firefighters are popular action figures and Halloween costumes.
As we prepared these statistics I could not help but be amazed at how resilient our economy and our citizens have proven in the wake of September 11,2001. New York and Washington residents have begun rebuilding their lives and businesses. New York has seen an 8% increase in tourism. Airlines are considering novel new alliances to improve business and cut costs. Business managers are finding innovative ways to provide increased security at lower costs. There are early signs that federal, state, and municipal governments are availing themselves of the marvels of the technological revolution as they strive to increase efficiency and employee productivity. While cutting government programs may be political suicide, we can hope that maintaining them with diminished tax dollars will become an election prerequisite.
The events of mass terror in this country have cost in ways we will not fully understand for years to come. The effects will likely reverberate well into the future. However, the greatest loss we must all strive to prevent would be a diminished national moral obligation to defend and promote freedom and democracy both at home and throughout the world; and because it is so integrally connected, our confidence in our capitalistic way of life. As we remember the tragic losses of a year ago and those following, recognizing that we are all victims of terror, let us strive to correct the policies that promote terror while we improve the best in us. God Bless America.