The dramatic stimulus plan has finally reached Oklahoma City. I’m not talking about the Economic Recovery Act of 2009. I’m talking about the Weather and Destruction Act of 2010 (WDA).
This morning the City reported a 15.08 percent increase in sales taxes for the month of July 2010, year over year. It seems the devastation and destruction inflicted upon us in May and June had a silver lining, the mass consumption of building supplies and auto parts in the hundreds of millions, if not more than a billion dollars.
My response was not of surprise but what took so long? I expected June 2010 sales tax numbers to be more robust than they were. But I think this lag was a function of the insurance process where casualties had to be assessed and estimates and settlements made.
The good news is that the source of a lot of this money was from insurance claims and therefore represented “new money” which would not have otherwise been in the economy. Therefore it didn’t have to come from people’s salaries and wages which were still available to spend on other things. The additional good news is that I think we are only about a third of the way through the process as most roofing companies and auto repair shops have waiting lists which extend well into the fall. So I would expect the August through October results to be equally as robust.
The bad news is that this is (hopefully) a one-time event and therefore will have a positive impact only over a limited time. While I believe the economy is generally improving, I don’t think we can expect 15.08% year over year increases indefinitely into the future. The other bit of bad news is that since the source of most of this “stimulus” was insurance proceeds, I think we can expect to repay this over the long term.
However, as is the case with any good stimulus program, the purpose is to “prime the pump” to put enough money back into the economy to get real sustainable sales back to a level of long-term growth. Maybe WDA will be enough to do the trick.
