Economic Impacts of the World Trade Center and Pentagon Attacks. (Forum on Emerging Issues)

By Ford, William F. | Business Economics, October 2001 | Go to article overview

Economic Impacts of the World Trade Center and Pentagon Attacks. (Forum on Emerging Issues)


Ford, William F., Business Economics


Business economists have new responsibilities and opportunities to help their organizations cope.

This note presents a preliminary assessment of the major impacts on the U.S. economy flowing from the World Trade Center and Pentagon attacks. (1) It includes analyses of the attack's immediate and likely longer-term effects on the economy, at both the macro- and microeconomic levels. The note closes with a brief discussion of the new responsibilities and opportunities the attack has engendered for business economists. Because only a few weeks have passed since the event, much of the ensuing discussion may best be viewed as a rough sketch of tile main lines of inquiry that business economists are likely to pursue as the actual short-term and likely longer-term effects of the attack come into sharper focus.

Even at this early stage of recovery from the attack's initial impacts, it is clear that our nation is embarked on a significant transition in its basic socioeconomic milieu. Before the event, our economic environment was clearly not terror-immune. But it was relatively terror-free compared to some other advanced and many emerging economies. Thus, consider what will probably happen if and when political scientists create a terror-threat scale, assigning relatively terror-free countries (such as, say, Canada and Switzerland) low scores of one or two; while heavily terror-prone societies (such as Israel and Sri Lanka) receive scores of 9 or 10. On such a scale, its is quite likely that the U.S. has moved from, say, the 2-3 range of perceived terrorism threats to, say, the seven or eight level. That transition, in turn, causes major shifts in both the macro and microeconomic milieus in which American households, governments, and corporations play out their assigned economic roles. It also is likely to give rise to significant secular changes in our role in the world economy.

Near Term Impacts

At the macroeconomic level, NABE's forecast panel (October 2001) has concluded that the near-term outlook for our economy has turned sharply negative, with the majority holding that the U.S. economy is now and will be in a recession for the third and fourth quarters of 2001. The attack itself has caused a drop in consumer confidence and employment loss in the transportation, tourism, and entertainment-related industries.

Because each one-tenth of a percent reduction in GDP growth erases about $10 billion of output, the lost growth in the re-forecast far exceeds the estimated $20-plus billion in direct costs of the attack, even in the short-run. Unemployment, reflecting its usual role as a lagging indicator, is also now virtually certain to breach the six percent level. Corporate profits also continue to decline, as a nascent cyclical surge of corporate cash crises and bankruptcies mounts, while venture capital financing has fallen to historically low levels. (Wall Street Journal, 10/8/01 and 10/9/01) Finally, the attack's impact on the stock market has of course erased hundreds of billions of aggregate market value of listed U.S. companies

The only relatively bright spots on the aggregate demand front lie in the consumer and government spending arenas. Although consumer confidence trends have been generally negative since the attack, retail sales have continued to register small but positive gains on a year-over-year basis, thus far. And fiscal stimulus, at the federal level, has already risen sharply as both disaster recovery and military spending increases have surged, while tax collections are lagging. The fiscal-drag effects of federal surpluses have thus been mitigated while the Federal Reserve is doing its part in fighting the recessionary impacts of the attack by driving short-term real interest rates to near-zero and by pumping in huge amounts of bank reserves.

On the microeconomic level, the attack has dealt well-publicized and severe short-term blows to a number of major industries including the airlines, hotels, travel agencies, upscale restaurants, the entertainment sector, and suppliers of goods and services to those industries. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Economic Impacts of the World Trade Center and Pentagon Attacks. (Forum on Emerging Issues)
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.