War against terror could cost $100 billion

NEW YORK -- Rarely in the history of conflict have such high costs added up so quickly.

Just two weeks after the terrorist attacks on New York and Washington, airlines plan more than 80,000 layoffs, the world appears poised for recession and some congressional estimates say the United States could need an additional $100 billion for the war against terror and related costs. A conflict could set the global economy back by $160 billion this year, according to one private economic forecasting company.

War has in the past helped to strengthen weak economies like the one America is mired in. World War II pulled the United States out of the Depression as industry mobilized to build warplanes and other military hardware. The Vietnam War spurred an economic boom in the 1960s.

But as President Bush has repeatedly stressed, this will be a war unlike any in history. There likely won't be any full-scale deployments of ground troops or massive arms buildup to track down Osama bin Laden, the No. 1 suspect in the Sept. 11 terror attacks.

If the U.S. military attacks Afghanistan and captures bin Laden, it's unclear where the United States will retaliate next. Predictions of how long a war may go on and how much it might cost vary widely.

U.S. bearing cost

In today's dollars, World War II cost $4.71 trillion and the Vietnam War cost $572 billion, according to the Congressional Research Service.

The most recent conflict, the Persian Gulf War in 1991, cost $80 billion adjusted for inflation, according to Congress' research arm -- but 90 percent of that was picked up by other nations like Saudi Arabia, Kuwait and Japan. That isn't expected to happen this time since the United States is retaliating for attacks that took place on its soil.

"I think the first thing to recognize is this time we're the ones who are going to bear the cost. That enhances the impact on the U.S. economy," said Marshall Goldman, a professor of international economics at Wellesley College.

Such uncertainty has made divining the economic road ahead an unusual challenge.

Economists agree the terror attacks struck the already weak U.S. economy hard, at least in the near term. With consumer confidence waning and businesses laying off thousands and putting expansion plans on hold, a recession -- two quarters in a row of negative economic growth -- seems all but inevitable.

Stock market investors sent the Dow average plunging 14.3 percent last week, its worst one-week tumble since the Depression. While the market partly recovered on Monday, analysts say sentiment remains extremely shaky.

A deeper U.S. downturn is likely to hurt the entire $32.3 trillion world economy. DRI-WEFA, an economic forecasting company based in Lexington, Mass., now sees world economic growth at 1.5 percent this year, half a percentage point lower than it had predicted before the terrorist attack. That would lop $160 billion off the world economy.

Lift could offset losses

Yet higher government spending may eventually spur an economic lift, helping industry sectors like security to offset plunges in others like tourism, said the company's chief economist, Nariman Behravesh. By 2003 growth will be back to its 3.5 percent annual rate of recent decades, DRI-WEFA predicts, as consumers lured to low interest rates start buying cars and houses again. But the company warns of one large caveat -- the rosy forecast depends on assuming no more catastrophic terrorist attacks.

"There are powerful forces of recovery in place," said Behravesh. "We will see a strong rebound in the U.S. and global economy."