The Federal Emergency Management Agency (FEMA): Floods, Failures, and Federalism

Federalism is supposed to undergird America’s system of handling disasters, particularly natural disasters. State, local, and private organizations should play the dominant role. Today, however, growing federal intervention is undermining the role of private institutions and the states in handling disasters.

In a new paper, Cato’s Director of Tax Policy Studies, Chris Edwards looks at the Federal Emergency Management Agency’s (FEMA)’s response to major disasters, and argues that policymakers should reverse course and begin cutting FEMA.

In The Federal Emergency Management Agency: Floods, Failures, and Federalism,  Edwards argues that Congress should cut FEMA’s multi-billion dollar budget to end the agency’s long-running record of disorganized and wasteful spending. Edwards determines the agency’s large and growing budget consists mainly of counterproductive and inefficient aid programs that should be eliminated. Instead, he argues that state and local governments, and the private sector, should fund disaster preparedness and relief.

“Ultimately,” says Edwards, “the agency should be closed down by ending aid programs for disaster preparedness and relief and privatizing flood insurance.”

FEMA’s performance in disaster response is historically plagued by poor decision-making, wasteful spending, and excessive bureaucracy. FEMA spends roughly $2.5 billion a year on grants to state and local governments for disaster preparedness but these funds are often wasted on low-value activities. Cities have used preparedness grants to buy hovercrafts, underwater robots, and other fancy equipment that are rarely used.

FEMA also administers the National Flood Insurance Program (NFIP), which was designed in 1968 with the purpose of helping property owners in flood-prone areas purchase government-backed insurance. Edwards determines that rather than reducing the nation’s flooding problems, the NFIP has likely made flood damage worse by encouraging more development in hazardous areas. In recent years the program has accumulated more than $24 billion in debt because revenues it received as insurance premiums are insufficient to pay out NFIP claims. Even worse, this debt has been accumulated to subsidize beach homes for America’s well-to-do.

FEMA routinely flouts laws that allow the federal government to intervene in disasters only if “effective response is beyond the capabilities of the state and the affected local governments.” The solution is for FEMA funding for disaster aid to states and individuals to be ended and flood insurance privatized, activities which represent more than 90 percent of FEMA’s current budget. The remaining activities unique to FEMA, such as flood mapping, continuity of operations, the public alert system, training programs, and technological and radiological hazards preparedness could then easily be moved to other agencies.

Interested in learning more? Read the paper….