Initial Views Differ On Economic Impact Of Terrorist Attacks

ByJohn S. McClenahen The toll on people from this week's terrorist attacks on New York and Washington is palpable, real, and not the sort of thing that seems appropriate to put a price on. But some economists are starting to calculate the impact of the attacks on the overall U.S. economy -- and are coming to quite different conclusions. "It is unlikely that the average American will feel much in terms of their day-to-day life, at least insofar as economic factors such as unemployment or growth are concerned," believes Glenn MacDonald, a professor at the John M. Olin School of Business at Washington University in St. Louis. Specifically he figures the cost of the attacks will not exceed $10 billion, about the cost of the Midwest floods in 1993 or Hurricane Agnes in 1972. "The human and physical capital stock of the United States is enormous, and it will take a lot more than a $10 billion loss to influence it much," he says. There will be a variety of short-term economic consequences to the attacks, including possible stock-market gyrations and an increase in the price of crude oil, he says. But the long-term impact on the U.S. economy "should be minimal," he reiterates. In contrast, Sidney Weintraub, who holds the William E. Simon Chair in Political Economy at the Center for Strategic & International Studies (CSIS), a Washington think tank, says the attacks in the short term likely will worsen a shaky U.S. economy, aggravating a recession he believes was already in the offing. "The critical areas of weakening will be in financial markets and consumer demand, at least until confidence is built up that the [Bush Administration] is up to the task it faces." Murray Weidenbaum, President Reagan's chief economic adviser, a Washington University professor, and a CSIS visiting scholar, is more direct. "The Sept. 11 terrorist attack makes it far more likely that the U.S. will be in recession in 2001 -- if we are not already there."