How Natural Disasters Quietly Benefit Trump’s Agenda

A map from this morning. One of the biggest dangers from Hurricane Florence is heavy rain, even in inland areas that are not used to flooding.


Emergency Federal Disaster Spending Opens A Backdoor To The Construction And Infrastructure Funding He Craves, But Congress Otherwise Refuses To Give Him


The Washington Post points out that the President sometimes appears “strangely exuberant” when describing incoming storms and other potentially calamitous events. We also noted the President does not spare the superlatives in describing the awesomeness of various storms, fires, etc. His musings about Hurricane Florence, rapidly approaching the East Coast in the vicinity of the Carolinas are no exception. Watch by clicking on the photo.


The National Oceanic and Atmospheric Administration this morning revised the path of the hurricane slightly further South. Heavy winds coming early tomorrow morning and landfall later in the day or early Friday.


Hurricanes, floods, forest fires, are horrific events in which people often lose their homes, their livelihoods, sometimes their lives. The lasting impact is not lost on us. At the same time, like almost everything, they also produce economic challenges and opportunities.

Earlier this week, the Congressional Budget Office issued a report about the soaring U.S. budget deficit for fiscal year 2018 up until now, and in it were some pretty interesting numbers. The one most people focused on was the 33-percent surge in the overall deficit to $895-billion, a lot of it due to a 30% decline in corporate tax receipts, a result of the massive corporate tax cut–and this at a time when the economy is booming so tax payments would normally be going up! The CBO also points out that despite taking some blows from the White House “never believe the CBO“, the projections it made at the beginning of the year are turning out to be just about right.

But never mind all that: today we’re looking at a different number in the CBO report. And that’s the $21-billion the Department of Homeland Security went over budget, an increase of nearly 50%, according to the CBO, mostly due to activities related to disaster relief. Of course, both FEMA and ICE fall under DHS, so some of that money may have gone to the White House’s more aggressive approach to its “zero tolerance” immigration policy too.

And Congress so far has allocated $130-billion to cover 2017 natural disasters including Hurricanes Harvey, Irma and Maria, and California wildfires. And according to a report from the Wharton School of Business (Trump’s alma mater): “much of the funding is for repairing and rebuilding public facilities and infrastructure“.

According to NOAA, the total cost of 16 separate billion dollar weather-related disasters last year was $306.2-billion, by far a record amount. So what does that mean? It means a good portion of the damaged and destroyed properties that make up the bulk of that dollar figure has been, is being, or will be rebuilt, either through private insurance or federal programs.

But don’t natural disasters hurt economic growth by slowing industrial production, causing layoffs and displacement, and reducing consumer spending in impacted areas? They do. But evidence shows that’s often erased and then exceeded by economic activity from rebuilding efforts, which much of the time is kindled by federal funds.

The Federal Reserve Bank of St. Louis, for instance, did a major study of Hurricane Katrina and found GDP in the New Orleans area fell shortly after the storm but recovered quickly, and exceeded pre-storm levels within a year. Sadly, the housing crisis and Great Recession then came along as a second blow to the city, from which it’s taken a lot longer to recover.

The St. Louis Fed also gives examples from Hurricane Harvey: for instance, so many people’s cars were destroyed by floods that auto sales skyrocketed in the weeks following the storm. The report notes: “only very large disasters that are followed by political upheaval have long-term negative effects on economic growth.” At the same time, the Fed concludes: “as reconstruction begins, GDP may increase; but there is still loss.” And it quotes the economist Frédéric Bastiat, who said: “destruction is not profit.”

But maybe in some cases it is. The St. Louis Fed illustrates its point by saying if a bridge somewhere gets washed out by natural disaster and is replaced, that means a crumbling bridge in another city will now not get the funds to be repaired. But what if that bridge was never going to get rebuilt anyway? Because that’s the situation we’re in right now.

And there is a chance, all over this country that we could see a disaster like the one that just happened in Italy, where a bridge everybody knew was dangerous collapsed and 43 people died.

Trump every once in a while tries to promote his ideas for a major infrastructure bill–it in fact was a campaign promise–but it keeps falling flat. But we all know the President loves to build, so it won’t be dormant forever. He also clearly sees it as another form of economic stimulus, and doesn’t seem to care nearly as much about budget deficits as he does about trade deficits.

Most of the stories about his plan refer to a $1.5-trillion value. But that’s not how much the federal government would shell out. It would have to kick in about $200-billion. That money would be used to prime the pump by providing incentives and loan guarantees to local governments and private-public partnerships.

We’re not saying whether that’s good or bad. Too much falling into the hands of private business seems pretty dangerous to us. Too much more deficit spending after that humongous corporate tax cut also seems perilous. At the same time, crucial infrastructure issues are not being addressed, and need to be, somehow.

Emergency spending on rebuilding a disaster area won’t change Trump’s chances of getting a comprehensive infrastructure bill passed. At the same time, who’s going to say no to disaster relief funding? (Actually lots of Republican Members of Congress have, but not enough to block it.)

But any type of massive construction project is a form of economic stimulus even if it comes on the heels of great destruction. So even though it’s indirect, Trump is at least getting some of what he wants. (Actually, more than half by our count. A lot better than he’s doing with “the wall”.)

Anyway, most of the projects Trump discussed as part of his infrastructure plan did not involve building completely new roads, bridges, airports, etc. Instead they involved repairing, improving, replacing badly decaying facilities. Which in a sense are also the results of disaster, just instead of one fell swoop, coming in the form of creeping neglect.