How Disasters Fuel the US Economy

Bloomberg

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00:01Every disaster has a long tail of a number of years and because we have

00:07disaster after disaster after disaster that means we have a lot of long tails

00:12going on at any given moment. This is sort of at the heart of the American

00:16economy in a way. Disposability and there's nothing like a hurricane to make

00:21something disposable. What that adds up to is a national economy that is spending

00:26more and more of its resources, always recovering from disasters.

00:38In the 90s, storms were in many cases less intense or less frequent or their targets on the ground

00:46were smaller because there wasn't as much development. Month after month after month

00:52for this year, that figure on a rolling 12 month basis has been closer to a trillion dollars.

00:59It's really become important. If you look at the percentage of GDP growth 20 years ago,

01:04it was almost minuscule. U.S. GDP has grown from about 9 trillion to 29 trillion dollars

01:10this century. About 36 percent of that can be attributable to industries that are helping

01:16people prepare and repair. I think it's completely invisible to people.

01:25We have increasingly built buildings in dangerous places. We have not put in the level of building

01:34codes. We're building buildings in the way of danger. Inadvertently, we rely on this a lot more than

01:40we know. There's a tendency sometimes to oversimplify things and it's like, oh, it's just climate change or,

01:47oh, it's just development. It's a lot of things. It takes a lot of ingredients. There's been government

01:52money. There's been people building in dangerous zones, coastal zones, flood zones. But then there's

01:58the third piece of it, which are bigger and more powerful storms. And those three things combined are

02:05what's driving this economy. So the prepare and repair index on the Bloomberg professional service

02:12is a list of about 100 companies. You can say that they benefit from these events. We're talking about

02:19insurance. We're talking about construction. Large global engineering contractors and environmental

02:25remediators. It's Home Depot and Lowe's. It's Ferguson Plumbing. We really mobilize after an event like this,

02:34after a natural disaster or crisis and make sure that we're mobilizing truckloads of water,

02:41portable showers, generators, fuel trucks to make sure that not only do we take care of our associates

02:47in the area, but we're also part of the recovery effort for the market in the community. There's been

02:53consistent and steady growth in the prepare and repair index on pretty much any slice of the last 10 years

03:02or so. They've looked at that and placed those companies and the benefits they've gotten

03:09from prepare and repair against the S&P index and it's outperformed.

03:16An emergency presidential declaration loosens up federal funds to pay for certain aspects of cleanup,

03:24particularly emergency aspects. There's a number of buckets of finance that become available

03:32or in recent decades have become available to people in disaster-stricken areas.

03:37There's philanthropic money that comes in. FEMA will get a presidential disaster declaration

03:43that turns on a huge tap of federal money. It must be matched by 25 percent, at least state money.

03:50So all of a sudden you have huge amounts of federal and state money pouring in. President Trump has been

03:55very clear that he'd like to get rid of FEMA altogether and that he'd like to throw it back to the states.

04:01When there's a problem with the state, I think that that problem should be taken care of by the state.

04:07Because federal funding has started to fall off pretty dramatically in the last five to 10 years,

04:13there's a lot of money that's going to go missing from this economy that places are going to have to

04:18figure out how to replace.

04:19There is a law in place that does require federal spending. Now, it is up to the president on whether

04:29to declare a presidential disaster. But Trump has slowed those way, way down.

04:36If there isn't resources in a community for people to rebuild their homes, they'll move. Businesses won't come back.

04:43Every hit to a local population could have a bad effect on the tax base. So a county or a city has to

04:53raise money through the bond market, but their income is less certain.

04:57We can see in coastal areas that basically people get bought out. They can't afford to rebuild because

05:04their insurance doesn't cover the cost of rebuilding. So they sell to much richer people

05:10who can afford to hold the property, to build very fancy buildings on it, and then sell it to people

05:16who can afford the very important expensive insurance.

05:19There's an old cliche in climate science that there's three ways you can deal with climate change.

05:25You can prevent it, you can prepare for it, or you can have suffering.

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