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Thursday, January 10, 2013

Apocalyptic Finance 101: NJ and NY Hurricane Relief

1938 Hurricane Damange in Rhode Island
In 2012 the budget for the entire US State Department was $43.5 billion dollars (see this).

The damage bill for New Jersey, according to Governor Christy is $60.4 billion dollars or about seven days of US Government spending.

Now this is for a storm which lasted for some twelve hours - from the time it stopped moving north, turned west, and made landfall.  After it made landfall the damaging winds, as I posted about here, quickly moved off to the west.

New York, on the other hand, needs some $42 billion according to this NY Times article.

So, between just these two states, this storm cost the US taxpayers about $100 billion USD in one twenty four hour period or a little over $1.1 million USD per second.

That's a little over ten times what the federal government spends each day ($9.6 billion per day).

The damage about fifteen (15) times the damage of the 1938 New England Hurricane in dollars.

My guess is that in 1938 there wasn't much in the way of federal disaster relief beyond reducing or delaying tariffs or taxes due.

People cleaned up the mess themselves.

After all, they built their homes in areas which had suffered significant hurricane damage in the past.  (There is a long history of New England hurricanes dating back into the 1700's.)

Similarly in areas like North Carolina's Outer Banks.

However, at least in the Outer Banks, they build houses on stilts so that store surges are less of a problem.  There was a new inlet along the Outer Banks created by a Hurricane Irene in 2011.  The Oregon Inlet was created by a significant storm in 1846.

All and all hurricanes wreak significant damage on the Atlantic coast of the US each year.

So why is does it cost the US $100 billion dollars in damage for a storm that hits the NYC area?

One reason is poor planning.  Since the storms are infrequent no one cares to ensure that the structures and infrastructure can handle the problems a significant storm would cause.

And why should they when the mighty US government can simply allocate 2% of the GDP to fix the problem?

Well, at least this time, there are some problems: Congress is busy with its own significant debt problems, for one.

Until fairly it was your problem if you built your house were bad things were likely to happen to it.  That's why people invested a lot of effort in not building near coastlines and other known-to-be dangerous locations.

Hurricanes happen frequently enough that someone in each generation remembers the damage.

Yet in NJ and NY people have simply not bothered to be responsible and build where ever they thought it would be a good idea regardless of the consequences.

And now it becomes our personal responsibilities to "save" NJ and NY from themselves and their lack of planning.

Of course, its also unlikely that there will be a detailed accounting of exactly what this money is spent on.  Much will go to "lubricate" the wheels of progress, I'm sure.

Sadly people today are simply stupid.

Stupid enough to build fancy homes where storms can simply wipe them out.  But, they figure, the US government will bail them out...  but perhaps the reluctance of the Congress to rush to spend money on these victims is a sign of the future.

A sign that money is not as free as it once was.

So people continue to build and live in flood zone, earthquake zones, on top of faults, and so on.

No need to worry about insurance because the full faith and credit of the US government will cover all sins.

Interestingly, speaking of financing what we cannot afford, as we reach the next debate on "raising the debt limit" we will hear about "default" and how the US government will "default" if the debt limit is not raised.

However, the government takes in some $200 billion dollars per day currently in direct (tax, etc.) revenue.

The government would "default" only if it chose to pay internal bills rather than the $20 or so billion per month it owes currently in interest on US bonds.

So, like with everything else, its all about choice.

Choices to make expedient, feel-good decisions over the right decisions.

Just like with NY and NJ.

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