I saw it fly past in yesterday’s Twitter stream: ‘Hurricane Sandy is a Keynesian’. And I thought, “Hmm.”
Now, don’t get me wrong. There’s no way in hell I’m happy about this storm (in fact, I’d like to send an invoice to oil lobbyists and tell them to split the bill), but I do think there might be a silver lining.
Because the construction industry has been moribund for a while. Now it will explode, and a lot of people who didn’t have jobs will have them.
And those people who have those new jobs will spend money, and that will create more jobs. How many? That depends on how much money the feds put into the recovery. (Don’t forget, Wall Street brokers live in these affected areas, too.)
This story appeared after Hurricane Irene, but it still applies:
When it comes to the larger economy, Irene could provide a hefty stimulus. Analysts are already predicting a big jump in construction and home-furnishings spending as beleaguered homeowners rush to repair and replace property that was destroyed in the storm. Economist Peter Morici estimates that this short-term consumer spending boost will total roughly $20 billion, and suggests that it may have some long-term positive effects. To begin with, he predicts a multiplier effect of about $16 billion as post-disaster spending works its way through the economy. What’s more, as business owners replace destroyed property, Morici estimates that there may be a long-term economic improvement of more than $10 billion.
Other analysts agree; David Kotok, chairman of money management firm Cumberland Advisors, notes that his company is now predicting that fourth-quarter GDP growth may go as high as 3%, fueled by “Billions [that] will be spent on rebuilding and recovery.”
Unfortunately, much of this growth will be dependent upon the political climate. Cumberland assumes that, among other things, “Washington may set aside the usual destructive and divisive partisan political wrangling and act in the interest of the nation.” If this is the case, Kotok emphasizes,federal financial assistance will rush to troubled areas, quickly stimulating rebuilding efforts.
However, if the recent debt ceiling debate demonstrated anything, it’s that “neither snow nor rain” nor the best interests of the country can slow down Washington’s partisan wrangling. When it comes to post-Irene rebuilding, the battle lines have already been drawn: House Majority Leader Eric Cantor (R-Va.) is demanding other federal budget cuts to offset disaster assistance spending, and FEMA is in the middle of a funding crisis that — barring quick action — will undoubtedly delay some rebuilding efforts.
Meanwhile, GOP presidential candidate and U.S. Rep. Ron Paul (R-Texas)reiterated his argument for killing FEMA altogether.
I just don’t see it now. I just don’t see the Republicans lying down on the railroad tracks and letting the train of popular opinion run over them. They’ve done it before, of course, but this time it’s just too many voters. The sensible thing would be for them to call an emergency session of Congress and pass a massive funding bill for the reconstruction.
Or will they throw public opinion to the wind and instead double down on the Cantor Doctrine? Stay tuned.