Potential Increases in Hurricane Damage in the United States: Implications for the Federal Budget

CBO, Potential Increases in Hurricane Damage in the United States: Implications for the Federal Budget. (2016)

Damage from hurricanes is expected to increase significantly in the coming decades because of the effects of climate change and coastal development. In turn, potential requests for federal relief and recovery efforts will increase as well. CBO has estimated the magnitude of the increases in hurricane damage and the associated amounts of federal aid if historical patterns hold. In addition, CBO examined three approaches to reducing the amount of such federal assistance: limiting greenhouse gas emissions; shifting more costs to state and local governments and private entities, thereby reducing coastal development; and investing in structural changes to reduce vulnerability to hurricanes. The accompanying working paper provides a detailed discussion of the data and methodology CBO used to estimate hurricane damage.

What Are CBO’s Estimates of Hurricane Damage and of Related Federal Spending?

CBO concludes that, over time, the costs associated with hurricane damage will increase more rapidly than the economy will grow. Consequently, hurricane damage will rise as a share of gross domestic product (GDP), which provides a measure of the nation’s ability to pay for that damage. According to the agency’s estimates, expected annual damage currently amounts to 0.16 percent of GDP (or about $28 billion); by 2075, however, that figure reaches 0.22 percent (equivalent to about $39 billion in today’s economy; see figure below). Roughly 45 percent of that increase is attributable to climate change and 55 percent to coastal development.

Estimates of Hurricane Damage, Federal Spending, and the Substantially Affected Population

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