Perilous
Times and Climate Change
Natural Disasters Cost US. Tens Of Billions In Economic
Losses
This year’s record-breaking tornadoes, floods, droughts and
wildfires will cost the country tens of billions of dollars in
economic losses -- and these estimates are expected to climb as
the Mississippi flooding and severe drought in Texas continue into
the summer.
Economists disagree about the precise figures -- with the
estimates varying by billions -- but most agree that $10-15
billion in losses are conservative calculations. Severe weather in
April alone -- the month when record-breaking tornadoes tore
through much of the Southeast and killed more than 300 people --
cost the country $12 billion in economic losses, according to
Steven Bowen, a meteorologist with the Impact Forecasting team of
Aon Benfield, one of the world’s largest insurance brokers.
The cost estimates for the flooding in Louisiana and Mississippi
range from $3-9 billion, and the ongoing Texas drought, which
began in November and has caused more than 10,000 wildfires across
the state, has so far cost between $1.5 billion and $3 billion in
crop and cattle losses.
As the flooding and drought continue, government agencies say that
it’s impossible to predict the long-term economic impact of the
losses, which include thousands of homes and buildings destroyed
by the tornadoes, casinos and ports along the Mississippi
temporarily closed, millions of acres of grazing land scorched by
the fires and 1 percent of the country’s cropland currently
submerged in water.
“It’s too early to say what effect this [the flooding] would have
on the national economy,” the Department of Agriculture stated in
a report on May 11. “Regardless, it probably will not be extensive
given the estimated percentage of land affected.”
But even as the long-term effect remains unknown, the short-term
impact is clear: Individuals and small businesses are absorbing
the bulk of these losses, as states, government agencies and
insurance companies help foot nature’s bill.
April’s tornadoes are expected to wipe thousands of mom-and-pop
shops off the map. This region already had a high rate of small
business failure, and before April’s disasters between 6,000 and
8,000 small businesses in Alabama, Tennessee, Mississippi and
Georgia were expected to go under within the year, according to a
report by Dun & Bradstreet, a research company that tracks
small businesses. After the tornadoes, the number jumped to at
least 10,000 shops.
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“Small businesses are definitely going to bear the brunt of this,”
Byron Vielehr, President of Global Risk and Analytics division at
Dun & Bradstreet told HuffPost in a telephone interview.
The businesses won’t fail immediately, said Vielehr, but when they
do it could produce a spike in unemployment and a loss of about a
billion dollars in sales, just from these tornado-stricken small
businesses alone.
The situation of small farmers and ranchers in Texas is similar.
After enduring the driest seven months on record, farmers and
ranchers are being forced to abandon a cycle of wheat crop and
sell off herds.
Texas produces 20 percent of the country’s beef, and cattle
ranchers are being slammed by the combination of scorched land
unable to support grazing, and high feed and hay prices, both of
which were driven up by the drought and the fires.
“For a rancher, at this point he’s going to be losing about 30
percent of the income he would have averaged in the past,” said
Bill Hymen, executive director of the Independent Cattlemen’s
Association, the second-largest coalition of ranchers in the
state. “And that’s not just this year but going forward because of
dwindling seed stock,” he added, referring to the process of fewer
cows leading to the birth of fewer calves in the future.
As is the case in all industries, when a rancher has less pocket
money, that creates a ripple effect in the local economy -- with
Hymen noting that ranchers, who know it’s likely that the drought
will continue through the summer, are buying less and will
ultimately pay less in taxes next year.
Along the Mississippi and Atchafalaya rivers, a portion of small
businesses and farms will likely follow the same course as the
businesses that fell in the tornadoes path. Closed ports and
casinos, too, are losing millions of dollars each day in lost
river traffic, trade and gambling.
Closing the Mississippi river itself causes even more economic
damage. On Tuesday, the Coast Guard closed a 15-mile stretch of
the Mississippi upriver of New Orleans by Natchez Port, a decision
which could lead to losses of hundreds of millions of dollars each
day, said Eric M. Holthaus, researcher at the International
Research Institute for Climate and Society. The Coast Guard said
that this closure is expected to last only a few days, but
Holthaus also imagines a nightmare scenario in which the Port of
New Orleans -- the seat of our country’s agricultural exports and
a handful of oil refineries -- has to be closed.
“I would be talking about trillions of dollars at that point,” he
said.
As long as the Port of New Orleans stays open, which it likely
will, the Federal Emergency Management Agency, commonly known as
FEMA, said that right now there is plenty of money in the $2
billion emergency fund to aid the states hit hardest by the
natural disasters.
FEMA has already approved about $38 million in future storm and
tornado rebuilding assistance, including $9.4 million to
Mississippi, $80 million to Alabama, $6.6 million to Georgia, $5.9
million for Tennessee and $16 million for Arkansas. For the
flooding, FEMA has so far approved more than $11 million,
including $1.4 million for Tennessee, $9 million for Missouri and
$785,000 for Mississippi. As the flooding continues, the FEMA
contribution is expected to rise, and these figures don’t include
other public assistance that the regions will receive, either from
the federal or state level. Insurance companies, too, are paying
out, and April alone produced hundreds of thousands of insurance
claims.
Still, insurance companies and federal agencies aren’t feeling the
hit of $10-15 billion in losses as acutely as individuals, towns
and small businesses.
“If you’re a small town in western Texas that’s lost anything,
that town is going to suffer regardless of how much insurance
money they get in the end. Less money in the community will mean
that all unrelated jobs will take a hit,” said Holthaus, who said
that the same holds true for communities affected by the tornadoes
or the floods.
“During a recession is a bad time for a disaster to hit,” he said.