Impact Of Terrorism On Economy of United States

Impact Of Terrorism On Economy of United States The federal deficit..

Impact Of Terrorism On Economy of United States

Impact Of Terrorism On Economy of United States

The federal deficit in the fiscal year 2012 was $1,089 billion, which is continuously becoming a burden on the economy of United States since the country decided indulging in war. This war against terrorism started after the massive attacks launched by Al-Qaida against the innocent civilians of United States on 11th September, 2001. This war caused extra burden on the economy of united states, many sectors of the economy started failing like banking sector an manufacturing sector especially vehicles. Other than this, the unemployment rate touched its highest figure hence reducing the purchasing power of people. The non-monetary issues created by this war were a sense of insecurity especially in the countries where these militants were hiding. This war has highlighted the difference in religion to new heights, which had become a major source of unrest in the Muslim world. Many people have tried to diagnose the problem, but got afraid from the rejection by the citizens of United States. We need to understand that the demand for war is a dying concept, the people want security but they also need jobs to fulfill their basic needs. This war on terrorism has been incurring too much collateral damage and the innocent affected people by this war are continuously growing and becoming a revengeful victim. I believe that the war on terrorism may look like solving the security problems for United States but in reality it is a constant burden on economy and creating long-term hatred among the affected people.

The war is never a good option; both the parties suffer the consequences of indulging in a war. The war affects the economy of a country and sets back the development of the country years behind track. The war also has sociological and psychological effects on the nation, people of the affected country never come out from the repercussions of the war and they become mentally inept to become a useful citizen. The war of two countries affects the whole world by the magnitude of its disturbance.

Considering the economics effects of the war on terrorism on United States has made the country suffer from huge losses. The U.S. debt outstanding increased from $5,674 billion to 13,561 billion in a matter of ten years from 2001 to 2010 respectively (Historical Debt Outstanding). The unemployment rate increased from 5.3% in October 2001 to 10% in October 2009, however it is on a decreasing trend and currently the rate is 7.7% which was recorded in November, 2012 (Labor Force Statistics).

The veteran’s benefits have increased from $25 billion to $63.3 billion from the year 2000 to 2011 respectively. The Medicare expenses have increased from $219.1 billion to $545.1 billion from the year 2000 to 2011. The social security expenses have increased from $401.4 billion to $713.3 billion from the year 2000 to 2011. The unemployment insurance rose from $20.7 billion to $108 billion from year 2000 to 2011 respectively. The overall Government social benefits to persons have increased from $1,040.6 to $2,274.3 from the year 2000 to 2011 respectively (Personal Income and Its Disposition).

The recession situation during the 2001-2003 and the start of war with Afghanistan and Iraq gave air to the weak economic conditions. In 2008, United States was spending the highest military spending due to the Iraq war which was 4.3% of the GDP. The Afghan war expenses started to decrease after delegating the controls and powers to Afghan Government, however the most expensive year was 2010 in which United States incurred $297 billion which was roughly equal to 2% of the GDP. The Afghan and Iraq war costs mentioned above does not include the expenses incurred on the interest on war related debts; veterans; reconstruction expenses in Afghanistan and Iraq; and assistance given to Pakistan and other Allies in war against terrorism. In the Afghanistan and Iraq war, the expenses incurred were backed by debts, not like the cold war period when the expenses were supported by raise in taxation. Bush Administration offered tax cuts which lowered the tax revenue by significant figures.

The Iraq war also affected the costs of Oil prices to rise as before the war the cost per barrel was $23 and it went to $140 per barrel during the war. The rise in the prices of oil decreased the domestic demand in United States and increased inflationary pressure all over the world. The repercussions of war made the economic conditions worsen and inflation started to show its damages. The budget deficit restricted the fiscal policies to play its part and raise the demand and due to that United States faced economic crisis in 2008 which affected the whole world. The Federal Reserve helped to sustain the declining economic conditions by decreasing the interest rates, increasing liquidity in the market and lenient banking regulations.

The stock market was performing excellent before the September 11, 2001 attacks and information technology sector was booming but due to the recession and war against terrorism it started failing. The biggest blow the stock market sustained in the period of global financial crisis when the stock market fell at the level of 1997.

According to article in The Washington Post, the war is costing $720 million each day which can be utilized to buy homes for almost 6,500 families or could be spent on health care for 423,529 children or be utilized to install 1.27 million homes with renewable energy (Kari Lydersen, 2007). “To date, the United States has spent more than $2.5 trillion on the wars in Iraq and Afghanistan, the Pentagon spending spree that accompanied it and a battery of new homeland security measures instituted after Sept. 11. Ten years into the war on terror, the U.S. has largely succeeded in its attempts to destabilize Al Qaeda and eliminate its leaders. But the cost has been enormous, and our decisions about how to finance it have profoundly damaged the economy of united states” (America’s costly war machine, 2011).

In the Table 2, the death toll of United States army is shown over the year from 2001 to 2012 in Afghanistan and Iraq. Till now, United States has lost 6,651 precious lives which could have contributed greatly in the development of the country.

Economy of United States

Table   2
US   Causalities of War

Top of Form

YearBottom of Form

























































David Wood in his article says “Military surgeons have performed 1,653 major limb amputations since 2001. The wounded also include the growing number of American troops whose genitals were damaged or destroyed by roadside bomb blasts. Since 2005, almost 1,900 have suffered genital wounds, according to Defense Department data through July 2012. The wounded statistics describe only those with physical wounds. The unseen wounds of war — including post-traumatic stress disorder, traumatic brain injury and other forms of combat trauma — are not included and are harder to track. Since 2002, the Defense Department has recorded 43,299 patients diagnosed with TBI, but many more may have gone undiagnosed. At present, the Department of Veterans Affairs is taking in 4,000 new cases of veterans with PTSD each month” (Iraq, Afghanistan War Wounded, 2012).

I believe that terrorist have destroyed our mental peace and our Government is trying its level best to contain the effects caused by the war on our economy. In my opinion, the United States took a very risky step of indulging in war with Afghanistan and Iraq on such a big scale and due to the costs of this war the economy of United States paid the price. Its industry started failing the investors ran to China and other countries where costs of production were low. The United States should have found a peaceful resolution of the conflict which has been troubling the whole Muslim world for the past ten years. Because of this war every U.S. citizen in any Muslim country is viewed as an oppressor and a general hatred toward Americans has been developing since this war started. Terrorists are using this hatred in recruiting new members in their forces and we have recently seen an example of general hatred towards U.S civilians over the posting of Mohammed movie on YouTube. Any common person could easily understand that it was an act of one person but the Muslim World showed its anger toward United States and U.S. ambassador was killed in clashes. I believe that if we would have pursued a peaceful resolution of 9/11 terrorist attacks then today we would not have been suffering from the tough economic situations and the solution would have lead to a long term resolution of this conflict. Now, the strategy being pursued is not a long term solution, because this war is taking so many innocent lives and creating a mass hatred toward United States and its policies.






Work Cited

Bureau of Economic Analysis, “Personal Income and Its Disposition” [] (accessed 9 December 2012).

David Wood, “Iraq, Afghanistan War Wounded Pass 50,000”, Huffington Post, 25 October 2012, Web 20 November, 2012.

Department of Defense, “Budget of the United States Government, Fiscal Year 2013”

[] (accessed 9 November 2012).

Department of Homeland Security, “Budget of the United States Government, Fiscal Year 2013”

[] (accessed 9 November 2012).

Department of Veterans Affairs, “Budget of the United States Government, Fiscal Year 2013”

[] (accessed 9 November 2012).

Linda J. Bilmes and Joseph E. Stiglitz, “America’s costly war machine.”, The Los Angeles Times, 18 Sep. 2011. Web 9 Nov. 2012.

Kari Lydersen, “War Costing $720 Million Each Day, Group Says.”, The Washington Post, 22 Sep. 2007. Web 9 Nov. 2012.

U.S. Department of Labor, “Labor Force Statistics from the Current Population Survey,” [] (accessed 9 December 2012).

U.S. Government Printing Office “Budget of the United States Government”

[] (accessed 9 November 2012).

Treasury Direct, “Historical Debt Outstanding,” [] (accessed 9 December 2012).

The White House, “Historical Tables”

[] (accessed 9 November 2012).



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