How Will West Coast Wildfires Impact the U.S. Economy?

The plumes of smoke have pushed air quality to hazardous levels forcing residents to stay indoors. Now some of the dirtiest air on Earth is wafting along the Pacific Ocean from Los Angeles up to the Canadian border. Millions of people are at the mercy of merciless flames.

So far, well over 5 million acres have burned across California, Oregon, Washington State and neighboring Idaho. Many of the fires are still not under control and tens of thousands of people have been forced to leave their homes and at least 27 people have died. Many of the survivors have nothing to come back to.

In August, California was pummeled by an incredible heat wave. Temperatures in Death Valley reached 130 degrees Fahrenheit, "possibly the hottest temperature ever measured on Earth," according to the New York Times.

Not surprisingly, up until now most of the talk has been about climate change and how the fires may impact the U.S. presidential election. On September 14, Joe Biden called Donald Trump a "climate arsonist." Ominously one day later, smoke from some of the fires was actually visible above Washington, D.C.

When the smoke finally clears, the economic impact of so much destruction will be at the top of many people's list.

Counting Up the Losses

The costs around wildfires are multifold. Besides the irreplaceable loss of life and the enormous costs to put out the fires, there are many tangible elements like the damage to vehicles, homes and other buildings. These costs can be roughly calculated by looking at insurance claims.

Over the years, all of the top 10 costliest wildland fires in the country have been in California. The costliest of all was Camp Fire in 2018, which set insurers back over $8.5 billion, according to numbers tallied by the Insurance Information Institute.

But the Camp Fire was just one fire. Reinsurer Munich Re estimates the costs for all the wildfires that year to be over $20 billion. So far this year's fires should bring in a similar calculation.

Currently in California alone, thousands of structures have been damaged or destroyed. The state is known for building on steep slopes in rural areas surrounded by forests that are hard to access. And since the fires are still burning with no end in sight, it is impossible to tell how many will be damaged in the end and what the final costs will be. Add to that the fact that not everything is insured, and many things are underinsured and the actual costs get a little fuzzy.

Counting the Tourists

It is important to remember that these numbers just include personal property. Damage done to public lands like parks is not added in. What is a single tree worth or a beautiful forest view in a state park anyhow?

What can be calculated though is how many tourists stay away based on past visitor numbers. The West Coast is world-famous for its natural wonders, wine country and lively cities, so there is no worse publicity than burning trees and a sky filled with smoke to keep tourists away.

These frightening images have gone around the world and made a deep impression. A bad reputation is hard to get rid of. The travel industry was already suffering because of COVID-19 restrictions, now a recovery on the West Coast will be even harder.

Fear and Loathing in LA and Beyond 

Other elements more difficult to tally are the costs of things that didn't happen like canceled flights, trains stopped in their tracks, workers on sick leave with respiratory problems, long-term health issues and other lost economic activity, either because a shop or warehouse burned down or there is no one left there to buy the goods.

Personal safety is also something to consider. Though U.S. housing sales are on a high, after so many natural disasters California may soon been seen as too dangerous a place to live or do business. In the end people may leave the coast for other, safer places.

Rebuilding is a lot of work and some may not be up to the challenge and may never come back as happened in New Orleans after Hurricane Katrina in 2005. Higher insurance premiums for risky areas could help with these decisions.

In many ways these wildfires could not have come at a worse time. Besides scorched land, the coastal states will have less money to spend since their economies have been hit by coronavirus-related downturns. California in particular is dependent on global trade and needs huge sums of cash to run the state, invest in more costly firefighting and beat COVID-19.

Not Out of the Woods

The wildfires in California have gained a lot of attention because of the apocalyptic sky around San Francisco. Yet 2015 was the worst year for wildfires, according to numbers gathered on annual wildland fires in the U.S. by the National Interagency Coordination Center. That year there were over 68,000 fires that destroyed over 10 million acres in the U.S. In a close second place is 2017. Looking at the decades of collected data, the general trend is pointing toward ever more fires.

So far this year, the fires have not reached the level of 2015. Still experts point out that current higher temperatures, droughts and shorter winters all add to the possibility of more fires. A report issued by the National Interagency Fire Center on September 15 outlined the problem.

"Generally, most areas across the West received less than 25% of average precipitation in August. The precipitation received was mostly associated with thunderstorms and provided little benefit," according to the report. Not only that, temperatures were generally 2-4 degrees Fahrenheit above normal.

This all means that the traditional fire season is longer than in the past. Frighteningly, in California it has now been extended to cover all 12 months. For years there has not been a month without a wildfire. These extra firefighting missions cost a lot in terms of manpower and equipment and take time away from fire prevention.

California Has Huge Economic Impact

California has the highest economic output of any American state, accounting for around 14% of the entire country's tab. Add in Oregon, Washington State and Idaho and the region accounts 19% of U.S. output. With increasing temperatures, climate change and less cash to invest because of the current downturn, the area needs to prepare for more uncontrollable fires.

Residents and businesses there will need to put fear aside and get used to higher insurance premiums and stricter building codes, or move to less turbulent places. The hot glow of embers may permanently reshape the dynamic West Coast and turn it an unwelcoming place — that would be an economic tragedy and make these wildfires truly costly.