American history has been shaped by hurricanes. Florida was colonized by Spain and not France because of a hurricane.
More importantly, the ever-present threat of hurricanes in the Caribbean caused France, an ally of the United States in the Revolutionary War, to reposition its fleet from the Caribbean to ports in what is now the state of Virginia. When Gen. Charles Cornwallis moved his army to Jamestown on a peninsula of Virginia, the French fleet was well positioned to blockade his forces and compel his surrender to the army of George Washington.
Today, Hurricane Milton is fast approaching the western Florida coast, with winds of more than 140 mph, and will likely make landfall in the Tampa-St. Petersburg area, which is low-lying and vulnerable to storm surges. A 10-15 foot storm surge is forecasted to hit the greater Tampa region. In fact, very damaging water surges are expected as far south as Naples, over 200 miles south of Tampa.
I live in this area. I am under a mandatory evacuation order. Milton’s physical devastation is expected to be severe. The economic damage will also be significant. Businesses and government operations are already closing. However, Hurricane Milton will also muddle economic data and complicate monetary policy for the Federal Reserve as it determines how many more interest rate cuts are necessary to achieve the much talked about “soft landing.”
What makes economic modeling so difficult is that Florida and the Appalachian regions of Georgia, South Carolina, and North Carolina just suffered catastrophic damage from Hurricane Helene. The Southeast is being hit with a devastating one-two punch. The Federal Reserve Board will be flying blind for the next few months. Weather is increasing economic and market risk. Milton may alone cause $175 billion in damage.
Politics, too, will be affected by the hurricanes. Helene caused unimaginable damage across Appalachian Georgia and North Carolina, a region where former President Donald Trump is very popular. Will voter turnout be lower because of the hurricane? Will Trump lose Georgia and North Carolina because of Helene? Maybe.
Back-to-back hurricanes might also change Florida’s long-term economic trajectory. There is already talk of falling home values along the coasts. Will financial services companies such as Goldman Sachs and JP Morgan decide not to make significant new investments in Florida? A hurricane in 1926 and another hurricane in 1928 significantly delayed Florida’s economic development. The Great Depression came early to Florida.
Finally, the devastating effects of Helene and Milton are already causing some traditional Republicans to rethink the role of government. People are already complaining about the lack of funding for the Federal Emergency Management Agency and about the organization’s apparent arrogance and incompetence in certain relief efforts.
After the Nov. 5 elections, more money will almost certainly be appropriated for FEMA, which will increase deficits. Homeowners in Florida are already demanding help regarding skyrocketing home insurance rates.
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Will hurricanes change the presidential election? Will hurricanes increase the permanent size of government? Will hurricanes put upward pressure on interest rates?
Helene and Milton could be black swan events.