Are deadly tornadoes really the best "stimulus" to be hoped for from the Obama White House, or is the New York Times just desperately looking for economics green shoots as the 2012 presidential elections approach?
In any case, just 10 days after the deadly tornado hit Joplin, Missouri, Wednesday’s off-lead by Michael Cooper, "Reconstruction Lifts Economy After Disasters – New Jobs Are Created to Erase the Rubble," pushed tornadoes as economic stimulus.
Yes, it’s the Keynesian "broken window" fallacy – the discredited theory (dissected in this article about the earthquakes in Japan by FreedomWorks Matt Kibbe) that acts of destruction like tornadoes actually stimulate the economy by forcing spending on things like rebuilding and disaster relief. Money that is spent on rebuilding can no longer be spent on other things.
The story's text box read: "Experts say tornadoes and hurricanes can create a catalyst for renewal." Strange that the Times has never used that pump-priming argument when discussing the war in Iraq.
By contrast, the Times in September 2005 saw Hurricane Katrina as an unmitigated economic disaster for President Bush a few days after it hit: "Hurricane’s Toll Is Likely to Reshape Bush’s Economic Agenda."
Hurricane Katrina is about to blow a hole in the federal budget, and it is already jeopardizing President Bush's agenda for cutting taxes and reducing the deficit. Administration officials told Republican lawmakers on Tuesday that relief efforts were running close to $700 million a day, and that the total federal cost could reach as high as $100 billion.....Though it is still too early for accurate estimates, the costs are all but certain to wreak havoc with Mr. Bush's plans to reduce the federal deficit and possibly his plans to extend tax cuts.
But on Wednesday Cooper wrote about the bright side to tornadoes and flooding across the South.
The deadly tornadoes and widespread flooding that have left a trail of death and destruction throughout the South and the Midwest have also disrupted dozens of local economies just as the unsteady recovery seemed to be finding a foothold.
But a new phase is slowly beginning in some hard-hit areas: reconstruction, which past disasters show is typically accompanied by a burst of new, and different, economic activity. There is no silver lining to a funnel cloud, as anyone who survived the tornadoes can attest, but reconstruction can help rebuild local economies as well as neighborhoods.
But there are already stirrings of economic activity. Home Depot, whose store in Joplin was destroyed, began selling lumber and other supplies from a parking lot there on Tuesday as it prepared to open a 30,000-square-foot temporary store.
No one would suggest that disasters are a desirable form of economic stimulus. But economists who have studied the impact of floods, tornadoes and hurricanes have found that after the initial anguish and huge economic disruptions, periods of increased economic activity frequently follow as insurance money and disaster relief flow in to jump-start rebuilding.
Even as the natural disasters eliminated thousands of jobs, the needs of recovery have created others. Companies like Unified Recovery Group, which is clearing storm wreckage in Alabama and Tennessee, are hiring workers and subcontractors to cart off debris. Construction companies are hiring, too. In Tuscaloosa, James E. Latham, chief executive officer of WAR Construction, said his firm had rehired workers who had been laid off during the downturn and had added new employees to prepare for the work ahead, like rebuilding an elementary school.
As insurance claims are paid, a further economic stimulus lies in the shopping that some people will do to replace lost goods.