What Must Be Done
It was a day like no other in U.S. history. Sept. 11, 2001, marked the end of American global innocence, the probable onset of real recession, and perhaps even the fading of the country's anything-is-possible economic exuberance. The comfort of living safely far from danger across deep oceans may now be over. A devastating terrorist attack has hit at the heart of the nation's economic and military power: the World Trade Center near Wall Street in New York City and the Pentagon in Washington, D.C., just miles from the White House. A nation that entered the 21st century confident and optimistic about the future has seen that future altered.
Americans are used to seeing images of carnage, chaos, and death on TV, but in faraway Sarajevo or Beirut, not at home. A country reeling from unexpected economic decline now must cope with mad terrorism from the sky. Growing financial uncertainty is compounded by increasing worries about personal and family safety.
These twin blows to the economy and national security will seriously shake the nation's confidence. In the months ahead, they threaten to throw the U.S into despair and recession. If fear and uncertainty prevail, how can people be expected to spend and invest for the future? If hijackers can steal commercial jets and crash them into high-profile, trophy buildings, how safe can people feel to fly--or even work in ordinary skyscrapers? Federal Reserve Chairman Alan Greenspan said in the 1998 financial crisis that "when events become too complex and move too rapidly, human beings become demonstrably less able to cope." He's right.
The job immediately ahead for the Bush Administration and the Federal Reserve is clear: They must address this national crisis and restore confidence as quickly as possible. They must reassure the U.S. and the world that they will deal with the damage, manage the threat, and bring the country to a safe harbor. More than just America's economic prosperity is at stake: The whole concept of a free, democratic, international society built on an open global economy is under attack. This fight cannot be lost.
This is what should be done:
Economic Management. The Fed must flood the economic zone with liquidity as quickly as possible. It has already announced it will keep its discount window open to any financial institution that needs it. It must also stand ready to make markets where none exist, bolster the dollar, and coordinate measures with other central banks. The European Central Bank in particular must end its hesitant and confusing behavior and lower interest rates. This is not the time to worry about inflation. Greenspan is an experienced hand at this drill, and he is performing well in instilling confidence in the financial markets.
Presidential Leadership. President Bush must do the same in the political sphere. Uncomfortable showing emotions publicly, stiff before a TV camera, the unseasoned President must find it within himself to project an image of caring healer and fierce protector to the people of America. He must also engage internationally. There is no way the U.S. can combat terrorism without the support of overseas allies in Europe and the Middle East. Bush's unilateralist worldview, reinforced by his close advisers, cannot work in a world where global cooperation is necessary to battle global terrorism. A President who simply walks away from issues considered important by allies, such as global warming, undermines their willingness to help when the chips are really down. But Europe must do its part. France and Germany have consistently undermined U.S. efforts to contain terrorism in the Middle East by, in effect, trading with the enemy. And moderate Arab governments have continually allowed extremists to inflame anti-Israeli and anti-American passions.
Washington Consensus. The partisan debate over defense in Congress should end. America's vulnerability to fanatics bent on destruction is revealed in all its dark horror. Discussions about strategy and tactics are about to replace disagreements over funding levels and Social Security "lockboxes," as they should. The failure of the nation's huge intelligence apparatus is profoundly disturbing. Suddenly, the missile threat from "rogue states" seems quite real. And the need to field a new army of spies and intelligence agents to track down and destroy terrorism is clear. All this will require higher defense spending and new budgetary priorities.
Corporate Leadership. Chief executives should play a leadership role in this time of national trauma. Around the country, people will soon be grieving for loved ones lost on the hijacked planes or in the destruction of the World Trade Center twin towers. Most of the dead were working when tragedy struck. Chief executives who come forward to offer support and counseling to suffering employees will generate long-lasting loyalty. CEOs and Wall Street should try to place employment and the short-term bottom line in context during this difficult hour and realize that as the business cycle turns--and it will with rates falling and the government spending more--profits will return. In that way, companies can help maintain the fabric of America in this period of economic and political crisis.
How the U.S. fights terrorism may well turn out to be even more important than the will to fight it. Government electronic surveillance and intrusion into individual private lives may be necessary, but it could chill the freedom so essential for a creative, iconoclastic entrepreneurial society to prosper. Issues of encryption and wiretapping have to be handled intelligently. It appears that a new trade-off between such freedom and safety is in order. But it is the most delicate of balances on which the future depends.
It is easy to exaggerate how different America will be after this attack. After all, this is not the first time tragedy has struck the nation. But as the military pulls its dead out of the Pentagon and firefighters and police search for bodies in New York while mourning their own losses, it is hard to believe that America will ever be quite the same again. The shape of the new millennium is finally revealed, and it is sobering to behold.