Krugman based this claim on the often repeated and absurd premise that the expense to replace what was lost would make people better off than they would have been, had the attacks not occurred.
On September 8, 2011, the New York Times published an estimate of $3.3 trillion dollars for the cost to the United States of the attacks on September 11, 2001:
http://www.nytimes.com/interactive/2011/09/08/us/sept-11-reckoning/cost-graphic.html
Al Qaeda spent roughly half a million dollars to destroy the World Trade Center and cripple the Pentagon. What has been the cost to the United States? In a survey of estimates by The New York Times, the answer is $3.3 trillion, or about $7 million for every dollar Al Qaeda spent planning and executing the attacks.In Krugman's 2001 piece, he made his own guess at a possible cost for the 9/11 attacks:
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Nobody has a dollar figure for the damage yet, but I would be surprised if the loss is more than 0.1 percent of U.S. wealth -- comparable to the material effects of a major earthquake or hurricane.Krugman was off by nearly a factor of 80 there, since the national wealth of the U.S. in 2001 was estimated to be just over $40 trillion dollars, and that $3.3 trillion dollar estimate is just under 8 percent of that total. Here is part of a table from a Federal Reserve study from 2003, entitled 'A Rolling Tide: Changes in the Distribution of Wealth in the U.S., 1989-2001', showing the estimate of total U.S. wealth in 2001:
http://www.federalreserve.gov/pubs/feds/2003/200324/200324pap.pdf
http://en.wikipedia.org/wiki/National_wealth
http://en.wikipedia.org/wiki/Wealth_in_the_United_States
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| From the 2003 Federal Reserve study, 'A Rolling Tide: Changes in the Distribution of Wealth in the U.S., 1989-2001', p.21 |
It is surprising that Krugman did not express hope for more damage, given how consistently he attempts to pretend there are blessings from destruction — regardless of the level of damage, the number of deaths, or the amount of wealth that's lost. As he often does, he wrote here too that WW II ended the Great Depression, so it follows directly from Krugman's insane logic that we should welcome terrorist attacks, since the suffering and destruction they cause, like WW II, make our lives better:
These aftershocks need not be major. Ghastly as it may seem to say this, the terror attack -- like the original day of infamy, which brought an end to the Great Depression -- could even do some economic good.
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| The Statue of Liberty and lower Manhattan skyline as seen in the early morning on September 15, 2001. (AP Photo/Dan Loh) |
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| Firefighters at ground zero carry a dead victim out of the remains of the World Trade Center on September 13, 2001. (AP Photo/Bill Farrington) |
The New York Times study quoted above estimated the cost from the loss of business alone at over $100 billion dollars:
http://www.nytimes.com/interactive/2011/09/08/us/sept-11-reckoning/cost-graphic.html
This estimate was based on how long businesses damaged in the attacks took to relocate (2 to 4 weeks, in many cases) and the decline in air travel through 2003, beyond what might have been expected given the 2001 recession. ECONOMIC IMPACT
$123 Billion
Of course, Krugman's premise here is just one of the world's most popular economic fallacies again, Frédéric Bastiat's, 'The Broken Window'. Krugman certainly isn't alone in repeating this nonsense.
And almost as if Krugman wasn't satisfied in only demonstrating his incompetence as an economist, he goes on to demonstrate his hypocrisy, by attacking others for supposedly exploiting the tragedy to push a political agenda.
Again, Krugman demonstrates his own accusation, as he has a tendency to do. Notice that he wrote this paragraph, attacking a supposed push 'to sell tax breaks ... as a response to terrorism', as exploiting the tragedy —
After the attacks, I found myself wondering whether some politicians would try to exploit the horror to push their usual partisan agendas. Then I chided myself for such an uncharitable thought. But it seems you can't be too cynical; sure enough, the push is already on to sell tax breaks for corporations and a cut in the capital gains tax as a response to terrorism.— immediately after having written this paragraph, where he attempts to sell his own Keynesian agenda to increase government spending as a response to terrorism:
Second, the attack opens the door to some sensible recession-fighting measures. For the last few weeks there has been a heated debate among liberals over whether to advocate the classic Keynesian response to economic slowdown, a temporary burst of public spending. There were plausible economic arguments in favor of such a move, but it was questionable whether Congress could agree on how to spend the money in time to be of any use -- and there was also the certainty that conservatives would refuse to accept any such move unless it were tied to another round of irresponsible long-term tax cuts. Now it seems that we will indeed get a quick burst of public spending, however tragic the reasons.You couldn't make this up. If it is 'exploiting the horror' to argue that it is helpful to let people keep more of their money after a tragedy, why is it acceptable to argue that people should not be able to keep more of their money after a tragedy?
At least Krugman is helpful in being so transparent in his absurdity.
http://www.nytimes.com/2001/09/14/opinion/reckonings-after-the-horror.html
Reckonings; After The Horror
It seems almost in bad taste to talk about dollars and cents after an act of mass murder. Nonetheless, we must ask about the economic aftershocks from Tuesday's horror.
These aftershocks need not be major. Ghastly as it may seem to say this, the terror attack -- like the original day of infamy, which brought an end to the Great Depression -- could even do some economic good. But there are already ominous indications that some will see this tragedy not as an occasion for true national unity, but as an opportunity for political profiteering.
About the direct economic impact: The nation's productive base has not been seriously damaged. Our economy is so huge that the scenes of destruction, awesome as they are, are only a pinprick. The World Trade Center contained 12 million square feet of office space; that's out of 375 million square feet in Manhattan alone, and 3.5 billion in the United States as a whole. Nobody has a dollar figure for the damage yet, but I would be surprised if the loss is more than 0.1 percent of U.S. wealth -- comparable to the material effects of a major earthquake or hurricane.
The wild card here is confidence. But the confidence that matters in this case has little to do with general peace of mind. If people rush out to buy bottled water and canned goods, that will actually boost the economy. For a few weeks horrified Americans may be in no mood to buy anything but necessities. But once the shock has passed it's hard to believe that consumer spending will be much affected.
Will investors flee stocks and corporate bonds for safer assets? Such a reaction wouldn't make much sense -- after all, terrorists are not going to blow up the S.&P. 500. True, markets do sometimes react irrationally, and some foreign markets plunged after the attack. Since then, however, they have stabilized. On the whole it's just as well that our own markets have stayed closed for a few days, giving investors time to calm down; the administration was wrong to put pressure on stock markets to reopen right away. By the time the markets do reopen, the worst panic will probably be behind us.
So the direct economic impact of the attacks will probably not be that bad. And there will, potentially, be two favorable effects.
First, the driving force behind the economic slowdown has been a plunge in business investment. Now, all of a sudden, we need some new office buildings. As I've already indicated, the destruction isn't big compared with the economy, but rebuilding will generate at least some increase in business spending.
Second, the attack opens the door to some sensible recession-fighting measures. For the last few weeks there has been a heated debate among liberals over whether to advocate the classic Keynesian response to economic slowdown, a temporary burst of public spending. There were plausible economic arguments in favor of such a move, but it was questionable whether Congress could agree on how to spend the money in time to be of any use -- and there was also the certainty that conservatives would refuse to accept any such move unless it were tied to another round of irresponsible long-term tax cuts. Now it seems that we will indeed get a quick burst of public spending, however tragic the reasons.
Now for the bad news. After the attacks, I found myself wondering whether some politicians would try to exploit the horror to push their usual partisan agendas. Then I chided myself for such an uncharitable thought. But it seems you can't be too cynical; sure enough, the push is already on to sell tax breaks for corporations and a cut in the capital gains tax as a response to terrorism.
One hopes that the White House will distance itself from this disgraceful opportunism, that it will deliver the bipartisanship it originally promised. But initial indications are not good: the administration developed its request for emergency funding in consultation with Congressional Republicans -- full stop. A Democratic contact says that his party received ''no consultation, no collaboration, virtually no information.''
I didn't want to mention this, but now is the time to draw the line. This tragedy will only be magnified if it is exploited for political gain. Politicians who wrap themselves in the flag while relentlessly pursuing their usual partisan agenda are not true patriots, and history will not forgive them.
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