My last blog talked about the loss of life associated with Hurricane Ike. Ike’s economic damage will also be large and is not receiving much media attention. I suspect that Ike’s economic damage would still be making headlines if it were not for the larger economic crisis on Wall Street.
Preliminary estimates on Ike put the damage at $8 billion or more, but a precise accounting of the storm’s wrath is far from complete. Texas Lieutenant Governor David Dewhurst told a Senate panel yesterday that the total economic impact from the storm could reach $27.5 to 35 billion in Texas alone. Whatever the final cost, it will be huge.
Will Texas do anything different when rebuilding? In my opinion, probably not much will change. Public officials will likely say we need to build stronger next time which is true. But will residents be allowed to build back bigger-than-ever in areas that can be wiped out again by another significant storm surge? Given that the homes were on private land, past experience suggests that this is likely to happen.
Many of the homes destroyed by Ike’s storm surge were covered by the National Flood Insurance Program (NFIP) which is managed by the Federal Emergency Management Agency (FEMA). In Hurricane Katrina in 2005, FEMA estimated that NFIP claims could exceed $22 billion and noted that in its entire history prior to Katrina, NFIP had paid out a total of only $15 billion. We don’t yet know for sure how much the total claims will be from Ike. But we do know that taxpayers will get stuck with any NFIP debt that is incurred. It appears to me that the Wall Street crisis is not the only crisis that needs to be dealt with.