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EconoMeter: What's the economic legacy of 9/11?


Sunday, September 11, 2011

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Kelly Cunningham, National University System

Answer: Yes

Responding to the 9/11 attacks led to private sector investment being redirected for increased government spending. Paying for the wars and related increases of defense and homeland security have been quite economically costly. Wholly financed by borrowing further crowded out private sector spending, while the Fed’s decisive actions to cut interest rates after the attacks and maintain them for extended periods also contributed to the housing asset bubble and eventual financial meltdown. While the wars did not cause the financial crisis, they were undoubtedly contributing factors in creating the conditions for the current substantial U.S. debt problems.