Given the extent and damage of the most important natural disaster in the United States in the last hundred years, an article referring to Hurricane Katrina and, most significantly, to the extent of the damage, to the reconstruction possibilities and to the bearing these will carry on the US fiscal policy and the US fiscal deficit, the article Hurricane Katrina upends American fiscal policy1 is appropriate to explain relationships between governmental spending and overall fiscal policies, as well as the impact on national fiscal policy.

             The article refers strictly to the impact on the US economy and US fiscal policy that Hurricane Katrina has brought about. As cynical as this may be, the logical relationship between Katrina, governmental spending, fiscal policy and, in the end, economic growth in the US, is quite simple to explain. The hurricane has brought about huge amounts of losses in the US economy, losses that need to be counterbalanced by governmental policies, naturally financed by governmental spending. The articles refers to the programs that President Bush has referred to in his speech on September 15, most notably, tax breaks, educational and training grants and federal reimbursements. .

             On the other hand, Katrina will also bring about a reduction of the economic growth that the US has been experiencing in the last couple of years. This is due mainly to a certain increase in energy prices and a threat of overall inflation (despite relaxing results in terms of growth in consumer prices). The article mentions the term stagflation as explaining inflation with a slow economic growth. .

             The article, analyzing the effects of Katrina on US inflation, economic growth and fiscal policy, allows us to draw some significant conclusions in this sense, relying on the data presented and on the fiscal theories at hand. .

             As such, the first conclusion one may draw is that Katrina will certainly imply a large amount of reconstruction costs.