The Effect of Presidential Economic Policy on the Economy

Natural Disasters' Economic Impact

Natural Disasters Are a Bigger Threat Than Terrorism

Updated September 28, 2020

Natural disasters are damaging events that include extreme weather such as blizzards, droughts, floods, heat waves, hurricanes, lightning strikes, tornadoes, and tsunamis. They also include non-weather events such as earthquakes, mudslides, volcanoes, and wildfires. In the short term, they cost homeowners and insurance companies billions. They raise food and gas prices.

2018 was the fourth-costliest year for natural disasters in history, according to Munich Re. They cost $160 billion, of which only half was insured. The worst damage came from U.S. Hurricanes Michael and Florence and Asian Typhoons Jebi, Mangkhut, and Trami. They cost $57 billion, of which $29 billion was insured. California wildfires cost $24 billion with insured losses of $18 billion. There were 29 events that cost at least $1 billion each. In June 2019, Congress passed a $19.1 billion disaster aid package.

The 2017 natural disaster season was worse. They cost the U.S. economy a record $306 billion. There were 16 events that cost more than $1 billion each. Both years were above the inflation-adjusted overall loss average of $140 billion and $41 billion in insured losses.

In the long term, the largest disasters slow regional economic growth for decades. Bridges, roads, and utilities are destroyed. Homeowners who aren't covered by insurance go bankrupt. Many can't rebuild and must move elsewhere.

The U.S. president can declare a state of emergency for communities overwhelmed by a natural disaster. That action releases a wide range of federal aid to individuals, nonprofit organizations, and public agencies. Each type of disaster triggers different kinds of federal assistance.

Global warming increases natural disasters. The United Nations Refugee Agency found that the number of natural disasters has doubled in the last 20 years. The impact on productivity can last decades after an event. One reason is that between 30% and 60% of disaster survivors experience post-traumatic stress disorder.

Here are some the most destructive natural disasters.

Japan's Earthquake and Tsunami - $360 Billion

Japanese Rescue Workers (Photo:Kiyoshi Ota/Getty Images)

Japan's economy was dealt a devastating blow by the 9.0-magnitude earthquake and tsunami that pummeled the country on March 11, 2011. An estimated 20,000 died or went missing and 500,000 were displaced. It cost Japan $220 billion.

It damaged the Fukushima nuclear power plant. It leaked radiation into the Pacific Ocean. Radiation showed up in local milk and vegetables.

Hurricane Katrina - $160 Billion to $250 Billion

woman with dog after Hurricane Katrina — Lana Seymour and her dog Fifi peer out from their house to survey the damage in the French Quarter after Hurricane Katrina blew through the area early on August 29, 2005 in New Orleans, Louisiana. Photo by Chris Graythen/Getty Images

The National Hurricane Center estimated Hurricane Katrina's damage at $125 billion, with $80 billion in insured losses. That's $160 billion when adjusted for inflation.

Hurricane Harvey - $125 Billion

Hurricane Harvey rescue — Joe Dodson, a Korean era Marine veteran, gets a lift on an air boat out of his flooded neighborhood after it was inundated with rain water, remnants of Hurricane Harvey, on August 28, 2017 in Houston, Texas. Photo: Scott Olson/ Getty Images

Hurricane Harvey was a Category 4 storm that hit Texas on August 25, 2017. It caused $125 billion in damage. It affected 13 million people from Texas through Louisiana, Mississippi, Tennessee, and Kentucky. As many as 88 people died from the storm.

Hurricane Maria - $90 Billion

Hurricane Maria damage — A local resident cleans debris near his damaged home in an area without electricity on October 15, 2017 in San Isidro, Puerto Rico. Puerto Rico is suffering shortages of food and water in many areas and only 15 percent of grid electricity has been restored. Puerto Rico experienced widespread damage including most of the electrical, gas and water grid as well as agriculture after Hurricane Maria, a category 4 hurricane, swept through. Photo by Mario Tama/Getty Images

Hurricane Maria was a Category 5 storm when it hit Dominica on September 19, 2017. On September 20, it devastated Puerto Rico, home to 3.4 million Americans. Even though it had been downgraded to a Category 4 storm, it still cost $90 billion in damage. The death toll is 2,975.

Hurricane Irma - $50 Billion

Hurricane Irma was the most powerful Atlantic hurricane in recorded history. It was a Category 5 storm when it made landfall on Barbuda on September 6, 2017. Its winds were 185 miles per hour for 37 hours. That's longer than any storm ever recorded. It hit southern Florida on September 10, inflicting $50 billion in damage. If it had hit Miami instead, the damage could have totaled $300 billion

Hurricane Sandy - $65 Billion

Superstorm Sandy destruction — Six weeks after Super Storm Sandy hit Union Beach, New Jersey, half of a house still stands in the waning light of a clear day with a hopeful holiday wreath hanging on the front door - December 19, 2012. Photo: Keith Getter/Getty Images

Hurricane Sandy hit New Jersey on October 29, 2012. It had been downgraded to a tropical storm, but still did $65 billion in damage. That's $70.2 billion in today's dollars.

Most of the damage was because of 12 1/2 foot storm surges. It damaged or destroyed more than 650,000 homes and eight million customers lost power. The storm killed 159 people.

Hurricane Ike - $30 Billion

Hurricane Ike cost $30 billion or $34.8 billion in 2018 dollars. It damaged pipelines in the Gulf of Mexico and destroyed offshore oil rigs. All 22 Texas land-based oil refineries were shut down. Disruptions in supply, prompted the government to open the Strategic Petroleum Reserves.

Hurricanes Andrew Through Allison

Hurricane Irene Damage — Billy Stinson (L) comforts his wife Sandra Stinson (C) and daughter Erin Stinson as they sit on the steps where their cottage once stood before it was destroyed by Hurricane Irene August 28, 2011 in Nags Head, North Carolina. Photo by Scott Olson/Getty Images

Hurricane Andrew was a Category 5 storm that hit Florida in 1992. It destroyed $26.5 billion in property or $47.8 billion in 2018 dollars. Its record 16.9-foot storm tide flooded Biscayne Bay.

Hurricane Ivan hit Alabama and Florida in 2004. This Category 3 storm caused $20.5 billion in damage.

Hurricane Wilma was a Category 3 storm that did $24.3 billion in damage in today's dollars. It pummeled Florida in 2005 with winds as high as 120 miles per hour.

Hurricane Rita hit Louisiana and Texas in 2005. The Category 3 storm damaged $18.5 billion in property.

Hurricane Charley was a Category 4 storm when it hit Florida in 2004. It damaged $16 billion in property.

Hurricane Irene was a Category 2 storm when it hit North Carolina on August 26, 2011. Irene killed at least 48 people and left up to 3 million people without power in New York City. Property damage was $13.8 billion. University of Maryland economist Peter Morici estimated total economic impact at $45 billion.

Hurricane Matthew left $10 billion in damage when it hit in 2016. It was a Category 1 storm that hit the southeastern United States.

Hurricane Frances was a Category 2 storm that left $9.8 billion in damage. It hit Florida in 2004.

Haiti Earthquake - $8.5 Billion

Rosena Favecal, earthquake survivor, at the Red Cross medical observation tent inside General Hospital on February 8, 2010 in Port-au-Prince, Haiti. Rosena Favecal, earthquake survivor, at the Red Cross medical observation tent inside General Hospital on February 8, 2010 in Port-au-Prince, Haiti. (Photo by Kim Badawi/Getty Images)

At least 200,000 people were killed by the 7.0 magnitude earthquake that ravaged Haiti in January 2010. The Inter-American Development Bank estimated that it cost $8.5 billion in damage to Haiti's economy. The earthquake made the country's gross domestic product shrink 5.1%.

Tornado Outbreak - $5 Billion

The largest tornado outbreak in U.S. history occurred April 25-27, 2011. In that week, 305 twisters damaged several different regions, breaking the 1974 record of 148 tornadoes. The outbreak caused $11 billion in damage.

Researchers at National Aeronautics Space Administration found that global warming is creating more tornado activity. It increases the number of strong updrafts that incubate tornadoes.

Iceland Volcano - $5 Billion

Iceland's volcanic eruptions threaten the aviation industry. When air traffic in Europe slows, it threatens more than just passengers. Drug companies, time-sensitive high-tech imports, and premium products such as fine Scotch whiskeys all sit on the tarmacs when airports are closed.

Iceland's Grimsvotn volcanic eruption threatened air traffic in Scotland, Ireland, and France. The 2010 Eyjafjallajökull volcano eruption reduced European air traffic for seven days.

U.S. Wildfires - $2.5 Billion

In 2018, more than 58,083,000 wildfires burned 8.8 million acres. The Camp Fire in Northern California wiped out the town of Paradise. It killed 85 people, making it the deadliest in California history. The fire is also the most destructive. It burned 153,336 acres and destroyed 18,733 buildings. It was the costliest natural disaster in the world causing $16.5 billion in damage. The U.S. Forest Service spent a record $3.1 billion fighting the 2018 fires.

The frequency of western U.S. wildfires has increased since 1970. Recent wildfire intensity and frequency is worse now than it’s been in the past 10,000 years.

Mississippi River Flood - $2 Billion

The 2011 Mississippi River flood was one of the the worst in history. It was estimated it would cost $2-4 billion to repair the damage.

Between 1980 and 2013, U.S. floods created more than $260 billion in damages. They are responsible for 90% of all U.S. natural disasters declared by the president. There are 2,500 chemical sites located in America's flood zones. Of those, 1,400 are in areas at high risk. These don't even count the Superfund sites.

The Dust Bowl - $1 Billion

The Dust Bowl was the worst drought in North America in 1,000 years. It devastated the Midwest in the 1930s, worsening the Great Depression. Unsustainable farming practices worsened the drought’s effect.

The drought killed the crops that kept the soil in place. Winds raised clouds of dust that deposited mounds of dirt on everything. It covered houses, killed livestock, and caused pneumonia in children. At its worst, the storm blew dust to Washington, D.C.

Flu Pandemic

The 1918 influenza pandemic killed 50 million people worldwide in a year. One out of five or 500 million people got sick. In the United States, one out of four got sick. Of those, 675,000 died, or 0.9% of the population. It hit young men the worst, causing the loss of breadwinners. Scientists had not yet discovered viruses, so there was no prevention or treatment.

In some cities, like Philadelphia, bodies lay along the streets and in morgues for days. In cities like Little Rock, commerce declined. Mines and factories closed due to a shortage of able workers.

The influenza spread was caused by World War I’s massive troop movements and close living quarters. The H1N1 virus continued to circulate as a seasonal virus worldwide for the next 38 years.

According to the World Bank, a recurrence today would cost $800 billion and kill many more people. One reason is that a greater percentage of people live in urban areas, facilitating the flu’s spread.

How Global Warming Increases Natural Disasters

Global warming is increasing the frequency and severity of natural disasters. Between 1981-2019, the Earth's average temperature rose 0.18 degrees Celsius each decade. This might not seem like much, but that's double the rate for the years between 1880 and 2019.

Higher temperatures are causing drought, wildfires, and deforestation. The result? More frequent and severe natural disasters.