Economic Effects of Hurricane Katrina

The economic effects of Hurricane Katrina, which hit Louisiana, Texas and Mississippi in late August 2005, were far-reaching. 2006, the Bush Administration had sought $105 billion for repairs and reconstruction in the region, making it the costliest natural disaster in US history. And this does not account for damage to the economy caused by potential interruption of the oil supply and exports of commodities such as cotton. Also, before Hurricane Katrina, the region supported approximately one million non-farm jobs, with 600,000 of them in New Orleans. One study, by Mark Burton and Michael J. Hicks estimated the total economic impact to Louisiana and Mississippi may exceed $150 billion. Hundreds of thousands of residents of southern Louisiana and Mississippi, including nearly everyone who lived in New Orleans, were left unemployed. No paychecks were being cashed and no money was being spent, and therefore no taxes were being collected by local governments. The lack of revenue will limit the resources of the affected communities and states for years to come. Before the storm, the region was already one of the poorest in America with one of the highest unemployment rates. Furthermore, Jim Sensenbrenner, Republican chairman of the House Judiciary Committee, has refused to allow victims of the hurricane to take advantage of any exception to the recent Bankruptcy Reform, a recent bill passed with widespread support of the banking industry that aims to curb abuse of bankruptcy protection by repeat filers and those who are able to repay debts reasonably. "If someone in Katrina is down and out, and has no possibility of being able to repay 40% or more of their debts, then the new bankruptcy law doesn't apply," Sensenbrenner said.

There was also some concern when, on September 8, 2005, President Bush temporarily suspended the Davis-Bacon Act in the affected areas, which allowed for contractors working on Federal construction projects to be paid less than the prevailing local wage. The concerns over these actions were primarily that allowing the government to pay less than the prevailing wage would contribute to increased poverty in the region, which already ranked among the lowest in the nation in terms of household income. The act was later reinstated on October 26, 2005, amid political pressure from both Democrats and Republicans in the United States Congress.