Flirting with Disaster: The Inherent Problems with FEMA

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Executive Summary

The federal government’s top‐​down disasterresponse system is fundamentally flawed. The federalgovernment usually has neither the incentivenor the information needed to effectively coordinaterelief management. Thus, the best reforms tothe Federal Emergency Management Agencywould take control away from the federal government,not give it more.

Effective disaster relief efforts have to overcomethe problems of bureaucracy, coordination, andadverse incentives. Nonfederal relief suppliers — particularly those in the private sector — are able toovercome those problems. FEMA — a top‐​heavybureaucracy that cannot effectively allocate reliefresources and subjects its decision makers to allthe wrong sorts of incentives — suffers an inherentand unique inability to solve those problems.

In addition, the power to control relief fundsencourages federal policymakers to help ensurereelection by spending that money on key politicaldistricts. States that are politically importantto the president in his reelection bid usually havea significantly higher rate of disaster declaration.States represented on the congressional oversightcommittees for FEMA receive significantlymore money for disasters than do states not representedon those committees.

The best reform Congress could undertakewould be to decentralize and depoliticize thetask of disaster relief management by taking thefederal government out of the disaster reliefprocess altogether. Short of that, Congressshould enact reforms that restrict the federalgovernment’s role to only those activities thatenhance the ability of the private sector to moreeffectively respond to disasters.

Russell S. Sobel and Peter T. Leeson

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.