NCPA - National Center for Policy Analysis

The Cost of Terrorism

May 15, 2002

How much will the September 11 terrorist attack cost America? The answer will surely be in the range of hundreds of billions of dollars -- and could well hurdle into the trillions.

Counting the value of lives lost as well as property damage and lost production of goods and services, losses already exceed $100 billion. Including the loss in stock market wealth -- the market's own estimate arising from expectations of lower corporate profits and higher discount rates for economic volatility -- the price tag approaches $2 trillion.

Among the big-ticket items:

  • The loss of four civilian aircraft valued at $385 million, the destruction of major buildings in the World Trade Center with a replacement cost of from $3 billion to $4.5 billion, damage to a portion of the Pentagon that will cost up to $1 billion to fix, and cleanup another $1.3 billion.
  • Along with damage to public works, infrastructure and police cars, fire trucks and ambulances, the total assessment of property damage is about $10 billion to $13 billion.
  • In response to the attacks, the entire air transportation network was shut down for two-and-a-half days at a cost of almost $1.5 billion in lost airfares and cargo-shipping revenues.
  • In addition, heightened airport security, sky marshals, government takeover of airport security, retrofitting aircraft with anti-terrorist devices, and increased airport delays will cost upwards of $41 billion.

Observers say the ultimate economic cost of the tragedy will turn on how successfully policymakers cope with the new challenges ahead.

Source: Peter Navarro and Aron Spencer, "September 11, 2001: Assessing the Costs of Terrorism," Milken Institute Review, Fourth Quarter 2001, Milken Institute.

 

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