How terrorism affect our economy Essay

Terrorism and terrorist activates are never intended to target an economy directly, instead it is designed to scare people who, overwhelmed by there trepidation destroy there own economy. The pliant economy of United States was misjudged in contrast with the September 11 terrorist attacks. Despite an estimated $120 billion of damage and a great deal of anxiety, one year following the 9/11 attacks considerable recovery was recorded in U. S economy. A disagreement between the Economists world wide has been shaping up over the affects of terrorism on the economy of USA, many feel that because acts of terrorism are usually aimed towards small portions of the stock of capital of a country so effect on economic activity are not very large(Enders and Sandler 2006). On the other hand, consciences of terrorism on the economy under pragmatic estimation suggest large and long term affects (Terrorism and the World Economy 40). If we review the federal budgets between FY 1998 and FY 2001 $ 48. 3 billion where available in surplus. Attacks of September 11 originated a blow to the economy of Manhattan, but not to that of Boston or Chicago. Terrorism creates a pessimistic affect on industries like air travel, hotels and insurance at large, but if we review economy’s overall performance, investment and demand shifted to other industries-especially when Federal Reserve eased credit in order to calm post-Sept. 11 markets. The immediate and the fore most impact that originate due to terrorism is the development of Paranoia attitude towards the economy through restrictive air travel and raising uncertainty, economy is drifting into a phase of recession. U. S economy has been diminishing even further after U. S invasion in Afghanistan and Iraq. Another way terrorism affected our economy is the lift in oil price which proved to be an economic jolt over the American nation who is now linking this oil situation with the upcoming elections and political agenda of American presidential candidates. The most direct damage that terrorism brought to our financial system is the deficit of U. S. government budget, which was a record of 413 billion dollars in 2004. A slight drop of $198 billion in deficit is being predicted by CBO for FY 2009 which is expected to increase moderately by 2010. If we analyze the reports released by CBO we will realize the shocking increase in the expenditure of war on terrorism over the last few years, federal finances for the department of home land security, and ever mounting cost of government beneficial social sachems such as medical & health care and social security has halted economical development. Economists are predicting an inevitable increase in red ink taxation; this is resulting in an increasing cost of housing and other basic amenities which is ultimately decreasing the consumption power of an American. (CBO) Terrorism creates a general sense of insecurity, this brings a huge expanse on U. S federal budget in shape of home land security dept, Congressional Budget Office (CBO) estimates that federal resources devoted to homeland security activities were a total of about $41 billion in 2004, roughly double the amount allocated to those activities before September 11, By 2007 Spending for the Department of Homeland Security increased by about 6 percent, to $42. 7 billion this money was required to further strengthen the borders and aviation security. General Seance of insecurity also slowed the pace of economic growth in 2007; economists strongly feel that it will slacken further in 2008. According to CBO, the consistent problems in the housing and financial markets and the high price of oil has curbed spending on household and businesses this is also ensuing decrease in the growth of GDP. Laws and policies developed to control terrorism has overwrought federal resources to a total of $2. 9 trillion for 2008, while the revenue will total $2.7 trillion, which will result in budget deficit of $219 billion, this situation will be worsening with the additional $30 billion required to sustain military activates in Iraq and Afghanistan. (CBO 10) As a consequence American nation is facing a decline in funds allocation for national health dept, education, and Environment protection, the 2007 financial budget favored spending on defense which brought an overall decline in resources allocated for developing U. S social welfare programs Another worrying line of attack in which terrorism is affecting U. S economy is the current decline of the U. S dollar. By 2007, an 8% decline was recorded in U. S dollar’s performance in index compared to its six largest trading partners. According to the predictions made by Stephen Malyon, (a currency strategist at Scotia Capital in Toronto) the current weakness in dollar should persist for the first two quarters of the current financial year, while a rise of $1. 55 in Euro against dollar was also anticipated by him. (Ellis 2008) Terrorism creates an anxiety in the midst of American people who quite frequently hear about terrorist threats and the on going war on terrorism, while a general sense of insecurity has detained the business community, and this has created a lack of confidence among the main stream investors. Terrorism has also put the burden of humongous expense that the nation had to face in shape of Dept of home land security, ever since Sept 11, while this dept controls almost all issues related to national security and U. S intelligence, an increase in the federal resources and funds devoted towards this department, and as a consequence every year a considerable decline is recorded in social benefits such as education and national health care. Other affects of terrorism on American economy at large are the red ink taxes, increase in oil cost and the decline in dollar value; all of this is contributing towards decreasing the purchase power of an average American. Economists worldwide agree that the negative aspects and the decline in U. S economy is the cost that USA is paying for the war on terrorism. More over a large number of political & economical analyst feel that the issue of terrorism is being propagated by the American presidential candidates in there political agendas which is a major cause of nervousness among the nation. Many argue today about United States aggressive strategy to counter terrorism has been a mistake and think that a defensive strategy would have been a more appropriate choice in terms of the affects of terrorism on U. S economy. Work Cited; †¢ Enders Walter and Todd Sandler. The Political Economy of Terrorism. 1st ed. Cambridge, England: Cambridge University, 2006. †¢ Abadie, Gardeazabal. â€Å"Terrorism and the World Economy. † (2007): 40. †¢ Orszag, Peter R. United States, CBO. The Budget and Economic Outlook:Fiscal Years 2008-2017. Washington, DC: CBO, 2007. †¢ Ellis, David. â€Å"Dollar’s slide. † It’s the economy, stupid (2008 )