CBO Releases Sandy Damage Estimate: At $60.4 Billion, It Would Send US Over The Debt Ceiling
At the end of October, as the Tristate Area was being flooded by Hurricane Sandy, one after another Wall Street firm tried to position Sandy virtually as a non-event, with total damage "forecasts" by such "reputable" firms as Goldman Sachs and Bank of America forecasting a total bill between $10 and $20 billion (as anything above that and the Q3 damage to GDP would be far more substantial than their recently bullish forecasts had accounted for, and would also imply a substantial spillover effect into Q1 2013), the same as various insurance companies who had other far more obvious reasons to undershoot on the total damages. We said the opposite, and based on historic damage forecasts, predicted the damage would likely be between $50 and $100 billion. Once again the sellside consensus was wrong and a fringe blog was accurate, as the CBO has just released the Obama administration's full aid request. Bottom line: $60.4 billion, or roughly what one year of what the ultimate tax hike compromise will bring into the government's treasury. Furthermore, if fully funded by debt today, this amount would send the US (which has a $57 billion debt buffer as of this moment) over the debt ceiling immediately.
Expect this number to rise even more before all is said and done.
Sure enough, expect lots of political bickering before this amount, or any part of it, is approved. From Reuters:
Senate Democrats are moving quickly to push through the Obama administration's full request for $60.4 billion in emergency aid for Superstorm Sandy, but a growing number of Republicans are arguing for a smaller initial amount.
The Senate Appropriations Committee released the text of its bill on Wednesday, which seeks to aid East Coast states hit hard when Sandy came ashore on Oct 29. Democratic aides said they are working towards final passage of the measure by early next week.
The quick turnaround effort appeared aimed at gaining the initiative over Republicans who want a slower, more cautious approach, passing appropriations only as the money is needed.
The Congressional Budget Office, in a new report on Obama's $60.4 billion request, estimated that only about $8.97 billion of the total would be spent in 2013, with another $12.66 billion spent in 2014 and $11.59 billion spent in 2015.
"That means there's very little reason to pass the whole thing now - especially since there hasn't been a single hearing on this request," a senior Republican aide said.
The $60.4 billion request is "more money than the annual budgets for the departments of Interior, Labor, Treasury and Transportation combined," the aide added, noting those budgets are subject to multiple hearings.
Republican Senator Jon Kyl of Arizona said on Tuesday that Obama's Sandy request was simply "too much."
"At $60 billion? In this time when we're trying to solve the deficit problem?" he told reporters.
The bottom line, however, is that the creme of the Wall Street crop was once again off by a factor of 300% in a space as short as 1 month: the same people who apparently can "predict" not only US GDP in the 2013-2016 period with decimal comma precision, but the 2022 Greek debt/GDP.