NCPA - National Center for Policy Analysis

Y2K Cut To Half Price

November 18, 1999

The Commerce Department is estimating that overhauling computers to make them Y2K compliant will only cost U.S. industry and governments $100 billion -- less than half of what most experts were predicting earlier. That works out to $365 per person.

  • The department also predicted that Y2K problems pose no threat to economic expansion -- which will hit a record 107-month run if it lasts into February.
  • Federal Y2K spending -- once projected to reach $30 billion -- will come in at only $8.5 billion.
  • About 94 percent of the $100 billion has already been spent.
  • The bad news is that unresolved Y2K glitches will still bankrupt many small businesses and disrupt some trade.

Other experts, however, question the Commerce Department's conclusions -- calling them sugar-coated pills designed to calm public fears.

Deutsche Bank Securities chief economist Ed Yardeni -- one of the first to issue widely-reported pessimistic warnings about Y2K's potential for serious damage -- is saying that there is still a 70 percent chance for a recession.

Some Y2K-related costs were not included in Commerce's figures. For example, many companies fixed their Y2K problems by replacing old computers with new ones. That isn't included because it is impossible to calculate how much of that would have been spent anyway.

In a related development, parents who anticipate being called in to work on Y2K compliance by their employers face a double-barreled problem.

If both must go to the office, what do they do about children who are home from school for the holidays? Baby-sitters and day-care workers are already in short supply and some school districts are closing for an extra week so personnel can work on their own computers. Anticipating the problem, some companies are handing out booklets with suggestions of how to cope -- and keeping mental-health experts on hand to launch stress-reduction workshops.

Source: Del Jones, "Y2K's Cost a Bargain at $100 Billion," and Stephanie Armour, "Y2K Has Stressed Workers Saying 'Y Me?'" both in USA Today, November 18, 1999.


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