A cross and the American flag stand where a house once stood and its residents died from Hurricane Katrina. Picture / Reuters
Hurricane Katrina will be by far the costliest disaster in United States history, requiring US$150 billion to US$200 billion ($213 billion to $284 billion) in relief, clean-up and reconstruction spending by the federal Government, and causing the short-term loss of 400,000 jobs.
This desolate picture emerges from preliminary estimates circulating
on Capitol Hill and at the White House.
Although the figures are highly tentative, it is already clear that the damage from the storm will eclipse the US$20 billion bill for the September 11 terrorist attacks and the US$25 billion losses after Hurricane Andrew in southern Florida in 1992 - hitherto the most expensive natural disaster.
In a first study, the authoritative Congressional Budget Office warned that the storm and its aftermath could lop up to 1 per cent off growth in the second half of 2005, which had been forecast at around 3.5 per cent.
This implies lost output of around US$55 billion, based on a US gross domestic product of US$11 trillion - a "significant but not overwhelming impact", the report said.
The office says the storm will cost 400,000 Americans their jobs but this could be offset when reconstruction work gets into full swing, boosting the southern economy in particular.
The financial ripples of Katrina will be massive.
Congress has already approved an initial US$10.5 billion emergency relief package, but President George W. Bush is expected to seek a further US$51.8 billion this week, and possibly as much again later this year or early next.
This virtually guarantees that the federal budget deficit will balloon again.
In July, the White House was predicting that the fiscal 2005 deficit would drop to US$333 billion, from a record US$412 billion the previous year.
But now, with relief spending running at US$2 billion a day, those hopes will be dashed. Next year's deficit is likely to far exceed the US$341 billion predicted two months ago.
The economic repercussions will spread even wider. Oil production in the Gulf, accounting for 25 per cent of US output, is now back up to 50 per cent of capacity, after being 98 per cent shut down by the storm, while politically sensitive petrol prices, after soaring to more than US$3 a gallon, will start to decline.
In New Orleans alone, between 140,000 and 160,000 homes are uninhabitable and may have to be entirely rebuilt.
The storm has created 90 million tonnes of solid waste and debris, some of it toxic. Other cities will require billions of reconstruction spending.
- INDEPENDENT
