Tropical Storm Isaac’s impact on the Republican National Committee underscores the vulnerability of our fragile economy to outside events. With a paltry 1.5 percecnt economic growth, we’re possibly one natural disaster away from sliding back into an official recession.
The nation’s immediate thoughts and concerns are focused on those directly impacted by these events. As Hurricane Katrina remains seared into Americans’ hearts and minds, images of a cyclone swirling across the Gulf of Mexico is particularly sobering. Doubly so because we know that black and brown communities—disproportionately effected by natural disasters—still have yet to recover fully. The demographics of New Orleans may have been altered forever by Katrina.
But hurricanes and all natural disasters are national economic events. Even relatively weak storms can do a lot of damage. An estimate by economist Peter Morici puts Hurricane Irene’s damage, which impacted 25 percent of the US economy last year, at $30 billion. Irene wreaked the most havoc as a Tropical Storm and not a hurricane. The monster storm Katrina did close to $200 billion in damage and shaved almost a full point off national economic growth in 2005. A hurricane of that magnitude could easily send our 2012 economy reeling.
Disasters in the Gulf of Mexico have another critical economic impact, beyond the first wave of destruction. They drive up the price of oil.
One out of every 4 barrels of petroleum produced in the US come from the gulf. 4 out of 10 barrels of oil refined in the country are produced in that region. Disruption of production and processing increases the price of gas at the pump, and puts additional downward pressure on the economy. Bloomberg estimates that every one cent increase on a gallon of gas removes $1 billion in spending power from consumers. Hurricane Katrina caused waiting lines to form at gas stations across the country.
The bottom line is that storms pack a wallop for local communities effected by them and for the nation as a whole. Washington’s inability to get its act together and get our economy back on track leaves us all exposed. The events in Tampa and across the south this week highlight the point in a way that cannot not be ignored.