The true costs of Hurricane Irene still unknown
A tree brought down by Hurricane Irene leans against a house on August 29, 2011 in Manasquan, N.J.
Jeremy Hobson: Well as parts of the East Coast clean up from Hurricane Irene, economists, insurance companies and government officials are tallying up the cost of the disaster. And they're coming up with some wildly different figures.
University of Maryland economist Peter Morici is with us now to talk about that. Good morning.
Peter Morici: Good morning.
Hobson: Well I'm seeing a lot of differnt numbers out there for how much this hurricane is going to cost in the end. The Wall Street Journal is saying $12 billion, another estimate says 7 to 10 billion. And you yourself say $45 billion. How do we know which figure to trust?
Morici: Well all of these are estimates. You look at past hurricanes and the kinds of damage that they did to get the property damage. Although it was only a category 1, the flood damage is of enormous magnitude, and very difficult to compute because a lot of it is not covered by insurance. A category 1 normally gives us about $14 billion in property damage. However, because of the flooding, I raised my estimate on property damage to $20 billion. As for the lost business, we'll lose about two days of economic activity over the next two weeks in those areas. So I come up with another $20 to $25 billion.
Hobson: But that seems very specific for something that -- you don't know if somebody's going to go shopping here, or go to a restaurant there -- and figure out what the economic damage will actually be.
Morici: That's true. However, we do know from past disasters that a certain amount of shopping doesn't happen. Some of it gets shifted around, but some of it doesn't happen. Now, a good deal of that business will come back later, but there will be an immediate impact, just like there will be rebuilding. Normally, rebuilding is very costly to a society, but in this case it won't be, simply because we have so many unemployed sources in the construction industry.
Hobson: Do you think that this is going to be something that we will see in the GDP figures that come out -- that this will be a big enough impact from Hurricane Irene that we'll actually see it in our economic growth?
Morici: We're going to get a total rebuilding in my judgment, of about $30 billion -- between rebuilding and folks deciding to do better. That often happens after a disaster -- we actually expand our capital stock. But that'll be spread over many quarters. It'll be spread over two to three years with a tailing effect after that. So, in the first quarter of next year, you see $10 billion -- that's not a lot.
Hobson: Peter Morici, economist at the Unvirsity of Maryland. Thanks so much for joining us this morning.
Morici: Nice to be with you.