Former al-Qaeda leader Osama bin Laden failed in his lifetime to achieve his goal of “bleeding America to bankruptcy,” but 10 years after the Sept. 11, 2001, attacks, the US is still paying a steep economic price.
The avalanche of spending on military and counterterrorism operations that followed the Sept. 11 attacks — estimated at up to US$4 trillion in foreign wars — combined with sweeping tax cuts under former US president George W. Bush, helped spawn the deficit crisis now roiling the country.
In the name of the “war on terror,” Bush launched the US military into Afghanistan in October 2001 and then into Iraq in March 2003, swelling the Pentagon’s already significant budget.
Photo: AFP
Fueled by war expenses and its response to the financial crisis, Washington’s spending has more than doubled over the past decade, while revenues to pay the bills only grew 10 percent, leading the government to borrow to finance its “war on terror.”
Fast-forward to this year and Washington politics has deadlocked over how to deal with the soaring debt, bringing the country to the brink of default and costing its triple-“A” credit rating from Standard & Poor’s.
The US debt has soared from US$6.4 trillion in March 2003 to more than US$14 trillion today.
In comparison, the al-Qaeda attacks on Washington and New York cost between US$400,000 and US$500,000 to execute, according to the US government’s 9/11 Commission Report.
Bin Laden boasted in an October 2004 video that Arab and Afghan mujahidin fighters “bled Russia for 10 years until it went bankrupt and was forced to withdraw in defeat” from Afghanistan in the 1980s.
“We are continuing this policy in bleeding America to bankruptcy,” he said.
The short-term economic costs of bin Laden’s attacks in New York alone were about US$100 billion in lost jobs, lost taxes, destroyed infrastructure and cleanup, according to figures compiled by the Washington-based Institute for the Analysis of Global Security.
Replacing the destroyed World Trade Center has a US$3 billion to US$4.5 billion price tag, while it cost US$1 billion to fix damage caused to the Pentagon building, the institute estimates.
The greatest expense, however, came not from the destruction wrought on Sept. 11, but from the policy decisions made in response to the attacks.
The Pentagon’s budget grew from 16 percent of US federal spending to 20 percent, as the US Congress financed the costly foreign missions begun by Bush and continued by US President Barack Obama.
At the same time, the US national security and apparatus ballooned at significant cost to include 1,271 state agencies and 1,931 private companies working on counterterrorism programs, according to a Washington Post investigation.
Researchers at Brown University’s Watson Institute for International Studies estimate that the wars in Iraq, Afghanistan and including Pakistan have already cost between US$3.2 trillion and US$4 trillion.
The figure includes commitments to future medical care and disability for war veterans, but does not include interest on war-related debt.
Economists Linda Bilmes and Joseph Stiglitz go further to argue that the 2008 financial meltdown linked to the US mortgage crisis was also “due, at least in part, to the war.”
The pair wrote last year that consequences of the wars and notably higher oil prices linked to the Iraq conflict, drained away money that would have sustained growth and either eased the crisis when the US housing bubble burst or strengthened the nation’s ability to respond to it.
The US government budget was in near-balance at the time of the Sept. 11 attacks. Former US president Bill Clinton even left an US$86 billion budget surplus when Bush succeeded him in the White House in January 2001.
Tax cuts and wars in Afghanistan and Iraq followed.
“The war in Iraq, which had nothing to do with terrorism, was a huge price to pay to get rid of one dictator,” said William Hartung, a defense expert at the New America Foundation. “And whereas in the past the US has financed wars in part with tax increases, that war was launched at the same time as tax cuts.”
Economist Ryan Edwards estimated that without the wars, the ratio of civilian to military spending would be 9 to 10 percentage points lower than it is today.
“War spending is stimulative to an extent, but when financed by deficits and borrowing, the benefits do not seem to be worth the costs,” he said in a study, Post-9/11 War Spending, Debt, and the Macroeconomy, published in June.
The paradox is not lost on Admiral Michael Mullen, the outgoing chairman of the US Joint Chiefs of Staff, who, after a decade of waging the “war on terror,” called the US public debt “the most significant threat to our national security.”
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