One of the side effects of the recent hurricane on the east coast will be the economic consequences. On the national level there is a debate about fiscal policy and the deficit. One party wants to keep revenue the same (no tax increase for anyone) and reduce spending. The other party wants to increase revenue (tax the wealthy) and stimulate the economy with a jobs or infrastructure spending package. The first group maintains that the over spending of the last decade is the greatest threat to the long term economy and must be reined in this second. The other side contends that with massive unemployment we need to get people to work to stimulate the economy first and the subsequent growth will create the additional revenue to reduce our borrowings in the long run. This is why Hurricane Irene becomes so interesting.
The storm caused enormous damage from North Carolina to Vermont. The near term economic effect will be to increase spending at the state level to repair bridges, roads and other infrastructure. The states will be forced to borrow and increase their budget gaps in the immediate future to fund this. The second part will be increased jobs for electricians, carpenters, plumbers as people need to repair their homes and businesses. The money for this will come from insurance companies which serve as a proxy for the wealthiest Americans. Insurance companies have saved or stored money in their investment portfolio and the size of the claims following the storm will recycle their savings to people who must spend the money immediately. The storm will force investment money into the economy at a fairly rapid rate. This will enable us to measure whether the stimulus theory is valid or whether the deficit reduction party is right.
Over the next ten to twelve months look to the economies of the affected states as to retail sales (Lowes, Home Depot, etc), state tax receipts both income and sales, and housing activity one year from now.