Saturday 18 November 2017

United States counts the cost of storms

Matthew Bigg in Atlanta

The devastating tornadoes and storms that killed more than 356 people in the southern US this week will complicate efforts by southern states and municipalities to stabilise their finances, but federal assistance should blunt the disaster's economic impact.

The deadly tornadoes hit Alabama hardest, killing 228 people there, and while the cost of damage is yet to be estimated, they struck as the state struggled to balance its $19bn (€12.8bn) budget in the face of falling revenues.

Mississippi, Georgia, Louisiana, Arkansas and Tennessee suffered a less severe toll but those states are also making cuts and spending less to close budget gaps.

The Deep South as a whole has suffered some heavy blows in recent years, such as the Gulf of Mexico oil spill last year and Hurricane Katrina in 2005.

In Alabama, in the short term, income loss, business loss, property damage and loss of sales tax revenue resulting from the destructive tornadoes will hurt that state's revenue, analysts said.

"It's going to be a very significant negative for at least two or three quarters, if not more, for the whole state," said Jennings Marshall, economics professor at Samford University in Birmingham, Alabama.

"Since the economy's already been struggling, if you just take three to four percentage points from the state, that's a big impact."

US President Barack Obama promised strong federal aid when he visited Alabama to see for himself the havoc wrought by the violent storms.

Many of the damaged businesses were insured so when payments kick in it will spark a mini boom that will help state finances, not least by providing employment, analysts said.

In the disaster's wake, Alabama was focused on rescue and recovery, said Governor Robert Bentley, and he welcomed Mr Obama's promise of assistance.

"While I am asking for federal money, the federal government could benefit from our fiscal example," Mr Bentley said, in a reference to the state's efforts to cut costs.

Mr Bentley announced deep cuts in March to education and other spending programmes and the state may lay off 1,000 employees. While its unemployment fell to 9.2 per cent in March, it is still above the national average.

The Deep South's experience of recovery from past disasters provides clues as to what could happen next.

In 2005, Hurricane Katrina flooded New Orleans and caused tens of billions of dollars of damage to Gulf Coast economies. The region is still recovering economically.

Analysts said one determinant of financial impact was the extent to which the damaged area was locked into the state's overall economy.

"Value is more than price or cost. No matter how much you restore everything, there is value in the things that have been lost," said Sam Addy of the University of Alabama.

Sunday Independent

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