The Damage One Storm Can Inflict

by Greg Valliere, AGF Management Ltd.

SOMETIMES A MASSIVE STORM can disrupt lives, the economy and the political climate. Such a storm has hit Texas, and it has scrambled the policy outlook on many fronts.

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THIS IS A BIG DEAL FOR JOE BIDEN — perhaps the first real crisis of his presidency. He has declared states of emergency in Texas and other states, and has pledged assistance from FEMA — water, food, blankets, etc. Biden surely must know that natural disasters have been a quagmire for politicians, from George W. Bush to Ted Cruz.

BIDEN’S MAIN PRIORITIES are the distribution of vaccines, which has been slowed by the epic weather crisis, and the passage of a Covid relief bill, which is still on a path to enactment by mid-March. But Biden now has a distraction in Texas, and he probably needs to visit the state by early next week.

THERE ARE SEVERAL IMPLICATIONS OF THIS BRUTAL ARCTIC DISASTER:

First, expectations of a dramatic first quarter GDP rise will have to be scaled back. History shows, however, that a make-up is likely; the second quarter could be red hot.

Second, if infrastructure failures can cripple a state as energy-rich as Texas, it demonstrates the need for upgrades nationwide — and provides fresh momentum for a green-infrastructure bill that will take shape by early summer.

Third, there will be a reassessment of fossil fuels vs. renewable energy. The Wall Street Journal and Fox News mocked frozen windmills, but that was a minor factor in the Texas energy crisis. The laissez-faire Texas regulatory climate, which overlooked the issue of weatherizing natural gas and oil wells, will come under withering review.

Fourth, the largely Republican political establishment in Texas will be portrayed as complicit (or indifferent) over this lack of regulatory oversight. The GOP’s lock on Texas could finally become tenuous.

Fifth, the 2024 presidential ambitions of Ted Cruz — who went to Cancun to “be a good dad” — may never recover. Widely reviled on Capitol Hill by both parties, Cruz may not even keep his Senate seat in 2024; Beto O’Rourke, who distributed food and water this week, would be the favorite in a re-match.

BY MONDAY THE BITTER COLD WILL SUBSIDE, but the memory of this crisis will persist. It could become a metaphor for the need for more regulatory oversight, the threat of climate change, and the country’s inattention to our crumbling infrastructure — even in Texas.

 

 

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The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

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This post was first published at the AGF Perspectives Blog.