2005 September 07 Wednesday
Hurricane Katrina Costs To Run Into Hundreds Of Billions Of Dollars

The New York Times reports federal government costs for Hurricane Katrina might rise to $100 billion.

WASHINGTON, Sept. 6 - The federal government's costs related to Hurricane Katrina could easily approach $100 billion, many times as much as for any other natural disaster or the $21 billion allocated for New York City after the terrorist attacks of Sept. 11, 2001.

"There is no question but that the costs of this are going to exceed the costs of New York City after 9/11 by a significant multiple," predicted Senator Judd Gregg, Republican of New Hampshire and chairman of the Senate Budget Committee.

Administration officials said today that rescue and relief operations in Louisiana and Alabama are costing well over $500 million a day and are continuing to rise.

Less than four days after Congress approved $10.5 billion in emergency assistance, White House officials said they would be asking for an even bigger amount in the next day or two.

I haven't seen cost estimates for the local and state governments.

The next appropriation might add $40 billion to the $10 billion already appropriated.

President Bush intends to seek as much as $40 billion to cover the next phase of relief and recovery from Hurricane Katrina, congressional officials said Tuesday as leading lawmakers and the White House pledged to investigate an initial federal response widely condemned as woefully inadequate.

One week after the hurricane inflicted devastation of biblical proportions on the Gulf Coast, Senate Democratic leader Harry Reid, D-Nev., said the total tab for the federal government may top $150 billion. At the same time, senators in both parties said they suspect price gouging by oil companies in the storm's aftermath.

Federal government costs could go as high as $200 billion.

The federal government could spend as much as $150 billion to $200 billion caring for the victims of Hurricane Katrina and rebuilding from its devastation, according to early congressional estimates -- a total bill that would far surpass the initial costs of recovering from the 9/11 terror attacks and could put Katrina on track to become the most expensive natural disaster in American history, the (paid-restricted) Wall Street Journal reports in Wednesday editions.

Note that a lot of those costs come from what are basically welfare payments. How long will all the people who lost housing in New Orleans get to live in the federal dole? That will determine how high the pay-outs will rise. Unfortunately the drunken sailor spenders in Washington DC and the pundit elite fools around them want to resurrect the big urban welfare spending programs of the past in response to black lawlessness. Hey, welfare didn't work last time. The welfare state contributed to the decline of families and neighborhoods in urban areas. Are we doomed to repeat this mistake?

Bush's agenda looks to be in tatters. The disaster made him even more unpopular and simultaneously added huge costs to the federal budget. Bush and the Republicans in Congress want to repeal the estate tax which would reduce federal revenue by $70 billion per year. That just got politically much harder to do. The need to appoint a second Supreme Court justice and deal with the expensive aftermath of Hurricane Katrina lower the odds of enacting many Bush policy initiatives.

About $100 billion in property sits in the flooded areas.

At least 150,000 properties have been flooded in New Orleans this week, surpassing the previous U.S. record from flooding and levee failures on the Lower Mississippi river in 1927, which inundated 137,000 properties, RMS said.

The value of physical property in the flooded areas is approximately $100 billion, RMS estimated.

A property tax on that $100 billion in flooded properties could have been used to pay for a much better levee system. But is that valuation on just New Orleans area property or does that include flooded Mississippi property as well?

Will the economy have a smaller loss than the government?

Paul Getman, chief executive officer of Economy.com, estimates the economic loss from the hurricane that devastated New Orleans and a swath of communities along the Gulf Coast will total around $175 billion.

Most of that _ $100 billion _ is damage to homes, businesses, roads, bridges, levees, telecommunications, water and sewer systems and other public infrastructure, he said. Another $25 billion is the cost of disrupted economic activity. Larger energy bills faced by consumers and businesses make up the other $50 billion.

Insured losses might add up to only $25 billion.

"This is far and away off the charts in terms of other natural disasters," Global Insight spokesperson Jim Dorsey said.

Global Insight projects insured losses from Katrina will top $25bn.

"But a lot of folks down there are uninsured so it's conceivable that the real loss figure could double or triple to upwards of $75bn," Dorsey said.

New Orleans was a dumb place to locate a federal government center that generates paychecks for half a million federal employees.

The Agriculture Department, which had 1,427 employees at its National Finance Center in New Orleans, also has not heard from all staffers, said Ed Loyd , the department's press secretary. "We are anxious to know they are safe," he said.

The National Finance Center handles a large part of the federal payroll, sending out checks and making electronic bank deposits for about 500,000 government employees. The center, aware that Katrina could swamp New Orleans, worked through a weekend to get checks out to employees before the hurricane hit Aug. 29.

The United States government should systematically move work centers out of coastal cities that are at risk of getting hit by hurricanes. No purpose (aside, perhaps, from handing out pork to Congressional districts) is served by locating most US agencies in high risk areas. Some functions such as FBI offices and US attorney offices have to get located around the country in highly populated areas because those populations need those federal workers. But for many other functions locations which have high natural disaster risks should be avoided.

We are entering a long term cyclical upswing in hurricane activity that will span the next few decades. At the same time a large migration to coastal regions is building up more structures to get wrecked when hurricanes hit coasts. So we face more such expensive hurricane disasters in the coming years.

Share |      By Randall Parker at 2005 September 07 02:19 AM  Politics Money

Derek Copold said at September 7, 2005 6:34 AM:

In light of current events, maybe we should take time to thank Robert Byrd for trying to move the federal government to W. Virginia. And here we thought it was just him pork-barreling!

Rick Darby said at September 7, 2005 8:18 AM:

Immediate rescue and relief must go on, regardless of the cost. Beyond that, our representatives in Congress ought to scrutinize very carefully what the money is being allocated for.

Why should businesses that failed to insure themselves be made whole by taxpayers' money?

How much of the federal dosh will go into putting large numbers of spongers and criminals back on permanent dole?

How much of the money will be administered by local white-collar crooks who will take their percentage?

I'm sure other readers can add to the list of ways that post-Katrina aid could become the biggest boondoggle in history.

Proborders said at September 7, 2005 9:16 AM:

Randall, Bush might appoint Attorney General Alberto Gonzales to the Supreme Court of the United States.

"Bush's Gonzales quip creates a stir: President may have tipped his hand in jokingly singling out attorney general" is posted here (American Patrol Report currently links to the article from its main page).

Jay Z said at September 7, 2005 10:46 AM:

I think more urban spending on libraries, hospitals, infrastructure, and schools
probably won't prove disastrous. It's spending on welfare programs for unmarried
women with lots of children that caused so many of the problems we've got today.
Hopefully we won't try for that again.

Engineer-Poet said at September 7, 2005 2:02 PM:

Maybe if we paid for reversible sterilization of every woman who comes to a hospital pregnant, unemployed, unmarried and under-educated, we'd make a dent in this.  Let's create an expectation of developing the necessities for raising children well before bringing (more) children into people's lives.

John S Bolton said at September 7, 2005 3:54 PM:

There does need to be some kind of serious punitive response. To reward such failure as the horrific breakdown of solidarity and community of values as occurred, among the population and officials of NO, is to ask for more of the same. Are we going to have a new marielito type crime wave? This liberal nightmare also comes from their view that without police oppression, they would have something like Rousseau's Emile, a noble savage. Man, without freedom from aggression, is like the blacks in the convention center, and the stupider and more violent the group liberated from bourgeois oppression happens to be at the outset, the worse the breakdown. If anyone doubts that the left is trying to destroy civilization, look what happens when they get to do things their way.

Stephen said at September 7, 2005 4:19 PM:

So, if reconstruction would cost the government ~200 billion, while the actual value of the property in the zone is only ~150 billion, wouldn't it be smarter for the gov. to just compulsorily acquire the lot and save themselves 50 billion? The nation gets a new wetland national park plus the comfort of knowing that they won't need to dip into their pocket the next time a levy breaks; the ex-residents get a windfall payment that allows them to start elsewhere; nature gets to do what it has been trying to do and will inevitably succeed in doing - inundate the low lands.

Everyone wins.

Bob Badour said at September 7, 2005 5:04 PM:


Well, the slumlords will win, for sure. How many of those too stupid and too poor to leave do you suppose own their own homes?

Stephen said at September 7, 2005 5:16 PM:

Bob, that's true - allocate an extra 10 billion to pay off the tenants. It'd be an interesting sociological study - what happens if you give a large number of multi-generational poor a shit load of cash (say, enough to buy a median priced house outside a capital city with a year's worth of spending money left over) and tell them to go out and make a life for themselves?

How many would make it into the lower middle classes, how many would drink it, how many would snort it. By what percentage would crime rates drop (perp or victim) among that group? Would average IQ change?

Hugh Angell said at September 7, 2005 5:38 PM:

I had thought about the slumlords doing well but my guess is that it will be the slumlords
in other cities who will benefit from federally provided rent. I heard an apartment owner
from Colorado today on Glenn Beck's radio show boasting of her altruism by 'taking in' 10
families. She described how her rental agent, Julio, the maintenance man and everyone
spent the weekend getting the apartments ready. I just bet. If you have 10 vacancies and
just one maintenance person you don't sound like a person with hundreds of thousands of
units. Just a person with 10 vacancies! Paint em, rent em out at top dollar with the feds
picking up the tab and if the crime rate soars in the neighborhood over the coming months,
well you don't live there.

On the bright side I suspect that the torrent of federal and charitable spending for the
'victims' of Katrina will put a damper on the mad rush to fund Tony Blair's "war on African
poverty". The famine in Niger and the looming one in Zimbabwe are off the front pages and
unlikely to return. After the tsunami relief, Live8 and now Katrina I just bet a lot of
people are getting donor fatigue. I know I am and I don't donate.

John S Bolton said at September 7, 2005 5:52 PM:

The public commentators who keep insisting on nonjudgementally getting aid to the needy are reading themselves outside of morality. If the people who caused the need, especially the NO officials who fled or otherwise defaulted on their responsibilities are not excoriated, more malfeasance will be gotten away with, and morality gets subverted possibly even worse than before.

crush41 said at September 7, 2005 6:47 PM:

You just answered the question posed in your recent post Should New Orleans Get Rebuilt And Who Should Pay For It?".

I had thought about the slumlords doing well but my guess is that it will be the slumlords
in other cities who will benefit from federally provided rent.

More than just the slumlords Hugh. The $2000 debit cards doled out by the gov't to the refugees are flowing into Houston Walmarts and MacDs. It's pretty lucrative at a local level. Katrina only accelerated (greatly) the desertion of New Orleans.

I like Stephen's idea. The city was a financial burden before and now that deadweight has been accentuated greatly--no use in profligate rebuilding. It would probably bring in more through tourism as a nature reserve than it had as a destination for moral decadence of the worst order.

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