Everything’s bigger in Texas, including hurricanes, and Ike was almost the size of the state itself. The storm shrieked overhead and pounded Houston for twelve hours, dumping more than eleven inches of rain, interrupted at the halfway point by the shivery calm of the eye passing overhead. Listening, I thought often of those communities on the coastline suffering the full brunt of the storm; the devastation was going to be horrendous.

Of all weather-related disasters in the United States—tornadoes, lightning, floods—hurricanes cause more than half of the damage inflicted, according to the National Science Board (NSB) in its report Hurricane Warning: The Critical Need for a National Hurricane Research Initiative, and this cost is rising each year. Although it’s tempting to blame that rising cost on inflation, it’s actually caused by the ever-increasing infrastructure being constructed on vulnerable coastlines. Granted that not all hurricane damage occurs on the beachheads, and Ike’s swath of destruction slicing north from Texas all the way to Canada and Greenland is a graphic illustration of that; nevertheless it’s a fact that 50% of the U.S. population lives within 50 miles of a coastline of some description, and with the continued investment in infrastructure in these regions, this escalation of devastation can be expected to continue.

My neighborhood escaped with only shingles and branches down, but Galveston, High Island and the Bolivar Peninsula were smashed, and the people who refused to evacuate may never be found. The Chase Tower, the tallest building in the state at 75 stories, was severely damaged, and showers of glass turned downtown into a hard-hat zone. But the 1,600 offshore platforms and 26 refineries in Ike’s path weren’t battered as much as originally feared, with currently only 49 rigs reported lost or seriously damaged and twelve refineries already restarting.

Effects on GDP

The Houston-Galveston area’s economy will take a hit alongside its people and businesses. Asset losses will require months to tally, with early estimates running between $8 and $18 billion of insurance claims. According to the NSB’s report, actual economic losses due to hurricanes are estimated to be double the insured loss, as unemployment and lost industrial production will also weigh on the area. With three million barrels per day of refinery capacity trying to restart, 93% of the Gulf of Mexico’s offshore crude oil production shut in and more of Houston’s industrial and business facilities without power than with it, that hit to local and national gross domestic product (GDP) could be severe.

The diagonal swath of destruction that sliced across the eastern U.S. will push those costs even higher, and the third quarter national GDP reading will take a hit that could drive it into negative territory. Disaster relief funds will drive up the federal deficit and lower the scorecard even further.

After Katrina and Rita struck the Gulf Coast in 2005, national GDP fell from 3.8% in the third quarter to 1.3% in the fourth.

Of course, the rebuilding of Galveston, Houston and all storm-smashed areas will contribute to GDP readings. Sales of home repair materials, dry goods, ice, take-out food and healthcare services will surge; regional unemployment will fall as construction workers, utility repair workers, engineers, insurance personnel, healthcare workers and fast food clerks are hired to meet each area’s needs. Industrial output will initially slump as electricity and services are restored and employees are diverted from production to clean up and safety checks, but each area will soon be back in business.

Far-Reaching Effects

Research conducted by Bradley Ewing and Jamie Brown Kruse of Texas Tech University suggests that while the short-term effect of a severe storm on regional unemployment figures is adverse, the longer-term effect may be positive as communities rebuild, putting people back to work and constructing a more resilient infrastructure.

However, those who point to that fact as some sort of consolation prize for these areas miss the point. These are not new funds generated from the expansion of the local economy; these are funds diverted from other uses, and discretionary purchases will slump as people concentrate on the necessities. Even if a flattened building is covered by insurance, it’s a loss to the insurance company, making the nation poorer as a net result.

The calculated losses from hurricanes do not include now impossible alternative economic scenarios, and no amount of rebuilding can make up for what is lost. Like the financial fiasco drubbing Wall Street, somebody has to pay for it.