Cost of 9/11 and its aftermath: $5 trillion

Beyond the human toll, the financial impact to the nation has been huge. Add up spending on the Iraq and Afghan wars and domestic security, long-term care for veterans and the impact on the deficit, and the total is expected to be staggering.

By RPrichard Sep 7, 2011 12:51PM

By Merrill Goozner, The Fiscal Times


The U.S. launched a global war on terror after the 9/11 terror attacks on the World Trade Center and the Pentagon, the most deadly strikes against domestic targets by foreigners in U.S. history. Beyond the incalculable human cost of nearly 3,000 civilian lives and the subsequent deaths of more than 6,000 soldiers, 2,300 contractors and hundreds of thousands of Afghan and Iraqi soldiers, policemen and civilians, the fateful choices made after the attacks had profound ramifications for the U.S. government and continue to be a major contributor to its fiscal woes.


If you include both the next decade's interest payments on the debt-financed wars and future veterans' benefits, the total cost of the wars in Iraq and Afghanistan is now estimated to reach more than $5 trillion.


The human and emotional costs of 9/11 can never be measured. What price does one put on the nearly 3,000 innocent lives lost, or the hundreds of thousands of soldiers, contractors and civilians who died or were maimed during a decade of war triggered by the suicidal assaults by 19 Al-Qaeda terrorists, who bore nothing more deadly than box cutters?


Then there are the intangible costs. What monetary value does one put on the erosion of national confidence, the restrictions on civil liberties or the psychic dread of a seemingly endless war on terror? What would you pay for the right to board an airplane in peace?


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The price of a war on terror

But some costs can be measured. They are largely government costs, the ones that flowed directly from the policy decisions made in the weeks and months after the most deadly foreign-led assault on U.S. soil in the nation's history. They included the decision to halt the police-like action in the mountains of Tora Bora that might have immediately captured or killed Osama bin Laden, Al-Qaeda's ringleader.


The decision to launch a wider war on terror, which included the claim that Iraq's dictator, Saddam Hussein, harbored hidden Al-Qaeda cells and was building weapons of mass destruction, entailed huge social and economic costs. That illusory accusation led to an eight-year war that is only now coming to a close.


The unleashing of the U.S. military abroad also triggered a tidal wave of funding for the traditional military-industrial complex. Before 9/11, Defense Secretary Donald Rumsfeld had promised a leaner, meaner war-fighting machine, with fewer soldiers bearing better high-tech weapons at lower cost. That vision was replaced quickly with the biggest buildup of military hardware since the 1980s as the Pentagon's budget more than doubled to nearly $700 billion -- about as much as it spends on Social Security -- in less than a decade.


The expansive overseas war on terror was coupled with its domestic equivalent -- an explosion in domestic spending on anti-terror activities. It included beefed-up federal bureaucracies to protect homeland security and massive spending on contractors to provide services such as protecting computers from hackers, protecting ports from smugglers and protecting air travelers from hijackers. It also included, at least for a time, hefty grants to state and local governments for first responders in local police and fire departments, which was doled out, as federal grants often are, to every congressional district in the country, with only passing regard to the ones most likely to face a terrorist threat.


The deficit impact

The final and more enduring cost of the war on terror was the decision to put the entire enterprise on the national credit card. Not only did the Bush administration and Republican Congress reject raising taxes to pay for the new war spending, but it pushed for and won huge tax breaks for the well-to-do and the middle class. The Bush administration even had its own version of guns and butter, successfully giving Medicare beneficiaries an unfunded drug benefit that helped cement President George W. Bush's re-election victory in 2004.


In the last four budget years of President Bill Clinton's term in office (fiscal years 1998 through 2001), the U.S. ran a $559.3 billion surplus. In the succeeding eight years (fiscal years 2002 through 2009), the U.S. ran a $3.5 trillion deficit. Even if you exclude the $1.4 trillion deficit of 2009, when the economy was in free fall from the financial crisis, the Bush administration racked up more than $2 trillion in deficits despite unemployment's falling below 5%, thanks to the housing bubble.


About the time President Bush was declaring "mission accomplished" and Rumsfeld was estimating the war in Iraq would cost $60 billion at most, Columbia University economics professor Joseph Stiglitz, who later won the Nobel Prize, estimated the wars in Iraq and Afghanistan would eventually cost more than $1 trillion. Although he was vilified by the administration, Stiglitz vastly underestimated the eventual toll.


Pentagon spending, including special appropriations for wars, went from $305 billion in 2001 to $694 billion in 2010. If you take that 2001 spending and hold it steady (allowing for increases in inflation and economic growth so the military stayed at the same share of the national economy as before 9/11), there would have been $1.6 trillion less in military spending in the past decade. As it was, military spending of all federal outlays over the decade rose from 15.6% to 19.3%.


The total costs

Looking only at the past in calculating the costs of 9/11 and not the future costs of the ongoing conflicts, especially in terms of veteran support and benefits, is a myopic view. Three years ago, Stiglitz estimated the wars' final costs at $3 trillion to $5 trillion. Last week, he wrote that latter estimate was probably substantially underestimated.


"With almost 50% of returning troops eligible to receive some level of disability payment, and more than 600,000 treated so far in veterans medical facilities, we now estimate that future disability payments and health care costs" will total $600 billion to $900 billion, he wrote. "But the social costs reflected in veteran suicides (which have topped 18 per day in recent years) and family breakups are incalculable."


Stiglitz's estimates were recently corroborated by a study conducted by the Watson Institute for International Studies at Brown University, which concluded the total cost of the two wars to date at $3.2 trillion to $4 trillion, including future veteran benefits. However, it didn't include an estimated half trillion dollars in additional war spending over the next few years, or another $1 trillion in interest payments on the increase in the national debt.


The cost-of-war authors also cautioned that future veteran benefits may be underestimated. Beyond the 6,000 U.S. troops and 2,300 contractors who have died in Afghanistan and Iraq, nearly 70,000 allied troops have been wounded.


While the high ratio of wounded soldiers to deaths is testimony to the remarkable battlefield medicine capabilities of the U.S. military, those successes have also left behind large populations of severely disabled veterans who will likely need special medical, psychological and social support throughout their lives. As of fall 2010, there had already been 550,000 disability claims registered with the Veterans Administration, and a recent RAND study found 26% of returning troops had mental health problems.


The costs are already skyrocketing. Claims for veteran benefits and health care have more than tripled in the past decade, rising to an estimated $141 billion this year. The rate of increase -- 9.7% per year on average -- compares with just a 4.2% annual average increase in the 1990s, when government agencies had to deal with the aftermath of the much shorter and less deadly first Iraq war.


Homeland security budgets have seen a similar increase, more than tripling in the past decade to an estimated $48.1 billion this year. This includes $5.5 billion for the Transportation Security Administration, which didn't exist before 9/11. The U.S. has spent more than $600 billion on homeland security in the past decade, according to Chris Hellman of the National Priorities Project.


International aid and humanitarian assistance have also jumped sharply in the past decade, reaching $19 billion in 2010, or nearly three times the level spent during Clinton's last years in office. Some of the increased spending can be attributed to the Bush administration's stepped-up efforts to combat deadly diseases in the developing world, such as AIDS, tuberculosis and malaria. But the government, including the Obama administration, also spent more than $5 billion in economic assistance to Afghanistan last year and plans to spend even more this year as the U.S. seeks to wind down its military presence.


"The choice the U.S. walked through after 9/11 was the door to war," said Neta Crawford, a professor of political science at Boston University, who coordinated the war cost project. "The U.S. saw it as an act of war. But international law sees it as a crime. To treat terrorism as a crime would have entailed a much more intensified law enforcement response.


"It wouldn't have been cheap," Crawford said. "But it would not have cost as much in dollars, and certainly not in lives."


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