Economics of the War on Terrorism

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The choice to bomb the World Trade Center was more than symbolic. The collapse of the towers coincided with a slowing global economy and was probably intended to cause as much economic as physical harm. The crisis will have deep economic repercussions in a number of areas; while some parts of the economy will be hurt, other sectors may actually benefit, and it is possible that increased defense spending could stimulate the slowing economy in the short run. A global economy requires openness and speed, whereas increased security often entails putting up barriers and walls. The war on terrorism will also dramatically increase security costs at every level. America's distant global commitments may become enormously expensive and draining. The war on terrorism will decrease consumer spending, the stock market, exchange rates, airline costs, and immigration rates. Furthermore, how will a slowing global economy respond and deteriorate the slowing American economy? The terrorist attacks on the World Trade Center will cost New York’s economy up to 105 billion dollars and 115,000 jobs. Allen Hevesi, the city comptroller, did a recent report of the breakdown of some costs: Rebuilding the World Trade Center as smaller buildings will cost 6.7 billion; Repairing and restoring other damaged buildings will cost 5.3 billion; Value of equipment, vehicles, computer systems destroyed will cost 12 billion; Lost wages using estimate of 5,600 people will cost 11 billion; Clean-up and stabilization of WTC site will cost 9 billion; City government overtime, vehicle losses, road building will cost 7 billion; Spending by private owners on repairs will cost 1 billion; Treating injured, loss of income from injuries will cost 3 billion; Lost business and economic activity will cost 21 billion; Lost rent for damaged buildings will cost 1.75 billion; Lost wages because of companies leaving New York will cost 3 billion. The city will need additional federal aid to recover. The long-term impact of the attacks depends on how quickly the nation’s economy recover and the decisions on where to locate by the companies. The city initially paid for clearing the area and the most visible portion of the cleanup, which was nearly a half a million tons of steel, concrete and debris. The World Trade Center attacks were said to be hurting the civilian economy in ways that merely a military engagement like the Persian Gulf War didn’t. MSNBC news reported that because of its global scale and long-term nature, the war on terrorism will cost more than the Persian Gulf War, which totaled about $80 billion in constant fiscal-year 2002 dollars.

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