Policy Analysis No. 573

Flirting with Disaster: The Inherent Problems with FEMA

By Russell S. Sobel and Peter T. Leeson
July 19, 2006

Executive Summary

The federal government’s top-down disaster response system is fundamentally flawed. The federal government usually has neither the incentive nor the information needed to effectively coordinate relief management. Thus, the best reforms to the Federal Emergency Management Agency would take control away from the federal government, not give it more.

Effective disaster relief efforts have to overcome the problems of bureaucracy, coordination, and adverse incentives. Nonfederal relief suppliers— particularly those in the private sector—are able to overcome those problems. FEMA—a top-heavy bureaucracy that cannot effectively allocate relief resources and subjects its decision makers to all the wrong sorts of incentives—suffers an inherent and unique inability to solve those problems.

In addition, the power to control relief funds encourages federal policymakers to help ensure reelection by spending that money on key political districts. States that are politically important to the president in his reelection bid usually have a significantly higher rate of disaster declaration. States represented on the congressional oversight committees for FEMA receive significantly more money for disasters than do states not represented on those committees.

The best reform Congress could undertake would be to decentralize and depoliticize the task of disaster relief management by taking the federal government out of the disaster relief process altogether. Short of that, Congress should enact reforms that restrict the federal government’s role to only those activities that enhance the ability of the private sector to more effectively respond to disasters.

Read the Full Policy Analysis

Russell S. Sobel is the James Clark Coffman Distinguished Chair in Entrepreneurial Studies and Peter T. Leeson is assistant professor of economics at West Virginia University.