About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 1 (November 27, 2001)

handle is hein.crs/crsahtn0001 and id is 1 raw text is: Order Code RS21076 November 27, 2001 The Economic Effects of Spending on Homeland Security Brian W. Cashell Specialist in Quantitative Economics Government and Finance Division Summary As a result of the terrorist attacks of September 11 the cost of domestic security has risen. The only straightforward way to measure the cost of security is to add up the expenditures for labor and capital that are devoted to the provision of security. In the case of air travel, security services paid for by the airlines are an intermediate good; that is, they are an input to the production of air travel rather than output, and are not counted separately in gross domestic product (GDP). The money spent on security is a cost of production and so would be reflected mainly in the price index for air travel, and in overall price indexes to the extent that air travel contributes to total production. Because of the increase in labor and capital required to produce a safe trip, the productivity of airlines would also suffer a one-time decline. The same is true for security expenditures by any firm engaged in the production of other goods and services. In contrast, when the government pays for security services, it is as a final consumer and those expenditures are counted explicitly as part of GDP. Any increase in those expenditures will thus appear as both nominal and real contributions to GDP. The only enduring effect will be a shift in the share of employment and of expenditures devoted to security. Relative to the size of the overall economy, these costs are likely to be fairly small. This report will not be updated. One direct result of the terrorist attacks of September 11 is that the cost of domestic security has risen. That increased cost is likely to be in the form of increased outlays on the military, as well as increases in spending for domestic law enforcement, public safety, and private security services. Some industries, such as the airlines, will be more affected than others but there will be nationwide effects because domestic security is a public good and much of the increased cost will likely be borne by taxpayers. In light of the current international political environment, it seems likely that many of the factors motivating the demand for increased domestic security will persist for some time. Given that there is going to be a sudden and substantial increase in spending on public safety and security what, if any, are the macroeconomic consequences likely to be? Congressional Research Service +* The Library of Congress CRS Report for Congress Received through the CRS Web

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most