Financial Toll From 9/11 'Depends on What You Count'

Written by Steve Brown

(CNSNews.com) — The human toll from the September 11, 2001 terrorist attacks may be incalculable, but the effort to measure the financial cost continues, despite many complications and a price tag that keeps escalating.

James Lewis, a senior fellow with the Washington, D.C.-based Center for Strategic and International Studies (CSIS), explained to CNSNews.com that coming up with a figure was not the kind of thing that lends itself to "neat" accounting.

David Heyman, one of Lewis' colleagues at CSIS specializing in homeland security, agreed that pinpointing 9/11's financial toll was difficult. "That's the $64,000 question, isn't it?" Heyman asked. "It all depends on what you count."

"The International Monetary Fund (IMF) put the costs at $21 billion and said that it would slow growth in the U.S., so there would be continuing costs over the next few years," Lewis said.

He also mentioned General Accounting Office (GAO) estimates of as much as one-half of 1 percent of the gross domestic product (GDP). Both IMF and GAO estimates covered homeland security considerations only, not military costs.

"It doesn't sound like a lot, but when you're talking about a $10 trillion GDP, it would translate into the billions of dollars," Lewis said. "So we're looking at a cost that would be $20 to $30 billion probably, and continuing costs for the foreseeable future."

Throwing in military operation costs, Lewis said, the total would be "well over" $100 billion.

A March report by the Center for Strategic Budgetary Assessments, relying on Office of Management and Budget (OMB) figures, examined the White House Fiscal Year (FY) 2004 budget request from the Department of Homeland Security for $41.3 billion.

James Jay Carafano and Steven Kosiak, authors of the report, explained that $23.9 billion of the total request was allocated to the newly created Department of Homeland Security (the department would also receive $12.2 billion for other missions, such as maritime safety).

Another $6.7 billion would go to the Department of Defense (DoD), for its homeland security-related programs and activities, with the remaining $10.7 billion being divided between the departments of Health and Human Services ($3.8 billion), Justice ($2.3 billion), Energy ($1.4 billion), and other departments and agencies.

Among the conclusions drawn in the report were that the FY 2004 request for homeland security represented "at best" a modest increase in real (inflation adjusted) terms from the FY 2003 level.

"The exact size of the administration's FY 2003 request for homeland security is unclear. Last year, the administration indicated that its request for FY 2003 included $37.7 billion for homeland security (plus $8.5 billion for combating terrorism overseas)," the report explained in a footnote.

"But in its most recent budget submission, the administration put the cost of the FY 2003 request at about $41 billion. It is unclear what accounts for this apparent discrepancy, but one possibility is that the OMB has modified the definitions it uses to categorize various programs and activities."

Calls to the OMB were not returned.

"It would provide essentially no real increase from the level requested for FY 2003. As such, it marks the end of a period of rapid growth in funding for homeland security programs and activities," Carafano and Kosiak wrote. "Between FY 2001 and FY 2003, funding for homeland security increased by some 240 percent (excluding funding provided through emergency supplemental appropriations)."

Finally, the report pointed out that the administration's plan for homeland security appeared to differ significantly from its plans for defense. "The FY 2004 request for homeland security is roughly one-tenth the size of the proposed budget for national defense. Moreover, under the administration's latest proposal, funding for defense is projected to grow by some 12 percent in real terms between FY 2004 and FY 2009," the report stated.

"Few would suggest that the United States should spend as much money on homeland security as it does on defense, but some might question the relative balance between these two priorities reflected in the administration's budget request."

Heyman pointed to other factors that might be considered in figuring 9/11 costs. "If you're talking about the so-called war on terror, costs go from outside of our borders to include stopping the terrorists abroad and that includes such things at the Iraq campaign, the Afghan campaign, and post-conflict reconstruction costs," Heyman said. "There are also direct costs associated with securing our borders, having to do with things like additional inspections abroad, container security, private sector costs to airline security, etcetera."

In addition to what he called "guns, guards, and gates" – the direct costs inside U.S. borders – Heyman mentioned the rising costs of insurance and high-tech businesses, including terrorism-related factors in their stock risk assessments. He also pointed to "multiplier effects."

"Taking a very simple model, let's say you had a particular firm lose a dollar in revenue for having to close down on 9/11," Heyman said. "For every dollar that firm is no longer able to bring in and spend on its own operation, there's a multiplier effect on other firms that it buys toilet paper from, electricity from, that it buys consulting from or outsourcing from. So there's more than just the specific accounting loss of the dollar from the firm that was attacked."

Lewis said President Bush's request for another $87 billion to meet the costs of the mission in Iraq probably includes the costs of military force deployment, along with increased expenditures by police and fire departments nationwide.

"Finally, I think there's the cost to airlines and shipping companies as they have to do things now that they didn't have to do two years ago," Lewis said.

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