By Dan Adkins

"We must keep things in perspective. The U.S. economy will continue to grow as long as we do not do anything stupid."

-- Christopher Waller,
Gatton Endowed Chair in Macroeconomics and Monetary Economics

Dec. 18, 2001 (Lexington, Ky.) -- The sheer size of the United States economy should reduce the long-term impact from the Sept. 11 terrorist attacks, a University of Kentucky economist said today.

"The U.S. economy is enormous. We have a national income of nearly $10 trillion dollars a year, we have around 130 million workers, we invest $1.7 trillion per year in physical capital and we engage in nearly $800 billion of international trade," said Christopher Waller, Gatton Endowed Chair in Macroeconomics and Monetary Economics.

"We must keep things in perspective. The U.S. economy will continue to grow as long as we do not do anything stupid," Waller said. He said an American retreat from world trade would injure the economy.

During 2001, the nation's economy slowed significantly during the first quarter, but the slowdown appeared to be bottoming out by the end of the second quarter, Waller said.

However, despite an initial improvement during the third quarter, the recession took hold as workers and consumers showed uneasiness. Those concerns took new form after Sept. 11.

"The terrorist attacks on New York City and Washington, D.C., were the types of shocks that economists could never dream of," Waller said. "The major effect on the economy from the terrorist attack is the creation of tremendous uncertainty about the future. It is this uncertainty that is wreaking havoc on the economy," he said.

Waller said the U.S. military response in Afghanistan may boost the economy by relieving fears over a sustained terrorist war on the U.S.

"This may well be a situation where the U.S. military does more for American economic confidence than any fiscal or monetary stimulus ever could," he said.