Yesterday, in a subscription-only Wall Street Journal column, Brian Wesbury usefully reminded us that the terrorist plans to do serious harm to the US economy miserably failed:
The terrorists of 9/11 had bigger plans than just killing people and blowing up buildings. They hoped that the attacks would send shock waves through the American financial system and severely harm the U.S. economy. In December 2001, Osama bin Laden said that the attacks had “shaken the throne of America and hit hard the American economy at its heart and its core.”
The economy was already in recession on 9/11, and was theoretically vulnerable. At the time of the attacks, industrial production had fallen for 11 consecutive months, new orders for durable goods were down 8.5% from the previous year, retail sales were barely growing and the unemployment rate had jumped by a full point to 4.9%.
For the most part this recession had gone unrecognized. In July 2001, The Wall Street Journal’s semiannual survey of 54 economists found only five with forecasts of negative real GDP growth. The attacks changed this quickly.
Roughly two weeks after 9/11, a Bloomberg survey found 22 out of 30 economists predicting recession. Many feared that the direct and indirect costs of security would reduce profits and productivity, consumer spending would slow sharply, deflationary pressures could worsen, and fearful businesses would lower investment, boost inventories and think more local and less global.
But someone forgot to turn out the lights. Retail sales, excluding autos, were higher in October 2001 than they were in August. Real GDP expanded at an annualized rate of 1.6% in the fourth quarter of 2001, and since then has grown at an annual real rate of 3.2% — roughly equal to the 50-year average.
What a great story: The vibrant U.S. economy takes a tremendous blow and not only remains standing, but rebounds almost immediately.