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CRS-5
Management and Budget, for FY2004, the Administration requested $52.7 billion for
funding to combat terrorism. This was 83% more than the $28.8 billion enacted in
FY2002. Fourteen agencies had requested more than double their FY2002 level. The
largest increases were for Homeland Security ($23.9 billion) and Defense ($15.2 billion).9
Including the FY2004 Supplemental Request, Defense has received $51.7 billion for
Operation Enduring Freedom in Afghanistan and $100.1 billion for Operation Iraqi
Freedom.'0 The FY2005 supplemental for $25 billion is for both operations. For
reconstruction in Afghanistan, the United States has provided $3.3 billion, and other
nations have pledged $4.5 billion. For reconstruction in Iraq, the United States has
committed $20.9 billion, and other nations have pledged $14.4 billion."
In a 2002 study on the economic consequences of terrorism, the Organisation for
Economic Cooperation and Development pointed out the trend toward stepped-up security
spending among the industrialized OECD nations. The OECD has not yet published data
for 2003 and budgets for 2004, but in 2001 and 2002, defense expenditures were
increasing worldwide. In U.S. dollars, defense expenditures in 2001 and 2002 were,
respectively, $464 and $515 billion for NATO, $22 and $24 billion for non-NATO
Europe, $44 and $48 billion for Russia, and $133 and $141 billion for East Asia and
Australasia.12 It is not clear how much of this increase in defense expenditures is for
security or how much is being spent on more homeland security in non-defense budgets
in other nations.
Increased Costs of Commerce and Reduced Travel
Another channel of effect from 9/11 is increased private sector costs arising from a
heightened perception of the threat from terrorism and the increased probability of and
costs of such attacks should they occur. Some of this is reflected in rising insurance costs,
enhanced measures to ensure security of shipments, and in reduced travel and tourism.
What cannot be measured is the decrease in productivity by individuals arising from lost
time, greater hassles, and general anxiety caused by the new security environment. In
Europe, 36% of companies recently surveyed expected terrorists to deliberately target
their organization or staff - 93% believed that the war in Iraq had increased that threat.
Yet the survey found that 77% of organizations spend less than two percent of their global
revenues on security.13
Following 9/11, in the United States, terrorism insurance for property virtually
disappeared or prices soared. In 2002, prices moderated, particularly after Congresspassed the Terrorism Risk Insurance Act. With this federal backstopping of insurance
9U.S. Office of Management and Budget. 2003 Report to Congress on Combating Terrorism.
September 2003.
10 CRS Report RS21644, Defense Funding by Mission for Iraq, Afghanistan, and Homeland
Security: Issues and Implications.
" CRS Report RL31833, Iraq: Recent Developments in Reconstruction Assistance.
12 International Institute for Strategic Studies. The Military Balance: 2003-2004. Oxford
University Press. pp. 335ff.
13 Rand Europe. Businesses Indicate Significant Growth in Fear of Terrorist Attacks, Study
Shows. [http://www.rand.org/news/press.04/05.10.html]
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Nanto, Dick K. 9/11 Terrorism: Global Economic Costs, report, October 5, 2004; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metacrs7725/m1/5/: accessed July 17, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.