Question: How the 9/11 Attacks Still Affect the Economy Today
Answer: The 9/11 attacks had both immediate and long-term economic impacts, some of which continue to this day. The attacks caused the Dow to drop more than 600 points, the 2001 recession to deepen, and led to one of the biggest government spending programs in U.S. history -- the War on Terror.
9/11 Attack Facts
On the morning of September 11th, terrorists hijacked four planes at Boston's Logan airport. Their goal was to cripple the U.S. economy by destroying its centers of power: Wall Street, the Pentagon and the White House. The first two planes successfully hit their targets: American Airlines Flight 11 crashed into Tower One of the World Trade Center at 8:46 am, and United Airlines Flight 175 crashed into Tower Two at 9:03 am. By 10:05 am, millions of television viewers saw Tower Two collapse, and Tower One follow it at 10:28 am. Tower 7 collapsed at 5:20 pm.
Meanwhile, American Airlines Flight 77 crashed into the Pentagon at 9:37 AM. The building collapsed at 10:10 am.
The terrorists planned to fly United Airlines Flight 93 into a key U.S. target like the Capitol building or White House. At 9:23 am, after the World Trade Tower crashed, dispatcher Ed Ballinger texted all flights he was following, including Flight 93, "Beware any cockpit intrusion two a/c hit World Trade Center." Five minutes later, the terrorists killed the pilots and took control of the plan. By that time, at least 10 of the passengers had talked to loved ones via cell phone, and knew of the World Trade Tower attacks and their probable fate. At 9:57, the brave passengers attacked the terrorists. Flight 93 crashed into the fields of Pennsylvania at 10:03 am, killing all 30 people aboard.
9/11 Death TollNearly 2,600 people died at the World Trade Center, 125 died at the Pentagon and 256 died on the four planes. The total death toll of 2,975 surpassed that at Pearl Harbor in December 1941. (Source: 9/11 Commission Report; CBS News, "Official 9/11 Death Toll Climbs by One," September 10, 2009)
The stock market closed for four trading days after the attacks, the first time since the Great Depression. (In March 1933, President Franklin D. Roosevelt closed the markets for two days, as part of a bank holiday to prevent a run on the banks.) The stock market reopened on September 17, 2001. The Dow promptly fell 7.13%, closing at 8,920.70. The 617.78 point loss was the Dow's worst one-day drop ever.
The 9/11 attacks aggravated the 2001 recession, which started in March 2001. The economy had contracted 1.3% in the first quarter, but had bounced up 2.7% in the second quarter. The attacks made the economy contract 1.1% in the third quarter, extending the recession. The 2001 recession was caused by the Y2K scare, which created a boom and subsequent bust in internet businesses.
Although the recession was officially over by November 2001, threats of war drove the Dow down for another year, until October 9, 2002, when it closed at 7,286.27, a 37.8% decline from its peak. No one knew for sure if the bull market had begun until the Dow hit a higher low on March 11, 2003, closing at 7,524.06. Unemployment continued to climb until June 2003, when it reached 6% -- the peak for that recession.
War on Terror
On September 20, President Bush called for the War on Terror. In his speech, he said “Americans should not expect one battle but a lengthy campaign, unlike any other we have ever seen.” Then he put it into action.
Bush launched the War in Afghanistan to find and bring to justice Osama bin Laden, the head of the al Qaida organization that master-minded the 9/11 attacks. The Afghan War did not cost much initially –- $20 billion, plus $13 billion to launch Homeland Security. However, on March 21, 2003, President Bush sent troops into Iraq. He said the CIA had found weapons of mass destruction, and that Iraq's leader, Saddam Hussein, was aiding al Qaeda operatives. In its first year, the War in Iraq cost twice as much as the one in Afghanistan -- $50 billion compared to $30 billion for FY 2003. And the costs kept mounting. By the end of Bush's term in office, the War on Terror cost $864.82 billion. This was in addition to increased Defense Department and Homeland Security spending.
President Obama increased spending for the War on Terror, although he didn't call it that. In just three years he requested $477 billion –- more than half the actual Bush War on Terror initiative that lasted eight years. The true War on Terror costs have been more than $1.5 trillion. This was just for Overseas Contingencies Operations. It doesn't count all military spending, which was $618 billion for FY 2014 alone.
The biggest economic impact of the 9/11 attacks was how the higher defense spending led to the U.S. debt crisis. Without the War on Terror, the debt would be a manageable $15.5 trillion or less ($17 trillion minus $1.5 trillion. Furthermore, the War on Terror meant that less funds were available for stimulus programs to boost the country out of the 2008 financial crisis. Fewer jobs were created, which meant less tax revenue, further boosting the debt.
High debt levels became a crisisin 2011, where tea party Republicans balked at raising the debt ceiling. Instead of cutting military spending, they called for severely limiting Medicare benefits. This led to the first-ever downgrade of U.S. debt by Standard and Poor's.
In 2013, they again refused to raise the debt ceiling, or fund the government. this led to a 16-day shutdown, and global fears the U.S. would default. Instead of focusing on job creation, they focused on austerity measures which kept economic growth lackluster. Article updated April 4, 2014