Freeman

IT JUST AIN'T SO

Disaster Response Restores Confidence in Government?

JANUARY 04, 2012 by TYLER WATTS

In a memorable episode of the cult-classic cartoon series “The Tick,” the title character is seen in the local café regaling fellow superheroes with his latest adventure, in which he single-handedly stopped an alien plot that would have sucked the earth into a black hole. Skeptical, one of the other heroes responds, “Can you prove any of this?” Hesitating, The Tick simply exclaims, “We’re all still here, aren’t we?”

In like manner several commentators are singing the praises of the federal government lately, claiming that in the wake of recent natural disasters, federal agencies like the Federal Emergency Management Administration (FEMA) have done a fantastic job.

The Washington Post’s Dana Milbank is typical of the pro-government cheerleaders. “Big Government finally got one right,” writes Milbank of FEMA’s response to Hurricane Irene. Arguing that “the federal government can still do great things,” Milbank reckons that FEMA’s response to Irene should help restore the public’s sagging confidence in government. Yet despite this stellar government performance, wouldn’t you know, FEMA faces budget cuts at the behest of those scornful Tea Partiers in Congress. Thus instead of improving the federal government’s image in the eyes of citizens, FEMA’s newfound brilliance is liable to go unnoticed.

I’ll concede that Hurricane Irene was FEMA’s best showing ever. (We’re all still here, aren’t we?) This sudden outbreak of governmental competence notwithstanding, Milbank’s appraisal of FEMA as a model of salubrious big government is flawed on economic grounds. Resting his newly buttressed faith in big government on a sample size of n=1, Milbank precludes some highly relevant comparisons. Perhaps FEMA functioned well for once, but should we take this as the new normal for FEMA, or the exception to the rule? And even if we can count on a better FEMA, is federal government-centered emergency response the best we could possibly have?

It’s easy to say FEMA was better this time than in its dismal past. The agency’s infamous blundering response to Hurricane Katrina (a truly epic category 5 storm) would be comic if it weren’t so tragic. Bureaucratic ineptitude led to a hesitant response, as federal officials actually halted emergency supplies and workers coming into New Orleans in the days after the storm. FEMA arguably contributed directly to Katrina’s death toll of over 1,800 by blocking or overriding local evacuation efforts. FEMA’s top-heavy D.C. bureaucracy was roundly criticized as, well, a disaster.

In stark contrast, a slew of nonfederal response initiatives, from local government authorities to mega-corporations, brought in all manner of people and supplies quickly and effectively, where they were needed most. As Freeman contributor Steven Horwitz has amply documented, companies like Walmart were far more efficient and proactive than the centralized FEMA bureaucracy in getting relief goods to the people in need.

Horwitz and others have noted that incentive structures facing different organizations explain the difference between successful and bungled relief efforts. Those in decentralized competitive situations, such as retailers like Walmart, have the localized knowledge of what goods are needed and where, as well as profit-and-loss incentives motivating them to act on this knowledge. Folks in centralized bureaucracies, on the other hand, naturally lack intricate knowledge of the local details and tend to be motivated by political concerns in distributing the resources they do have.

The divergent results after Katrina are not surprising. While FEMA bureaucrats were halting relief convoys, misdirecting their own supplies, and hosting phony press conferences to placate the media, Walmart, Home Depot, and others were tracking the storm and massing supplies days in advance. They delegated authority to local store managers, some of whom took drastic steps to get their stores open and supplies flowing immediately.

Politicians’ knee-jerk response to government failure is, naturally, to increase their own budgets. But with bureaucracies facing such systematically bad incentives, increasing their budgets is not guaranteed to improve results. Nonetheless, Milbank frets about as-yet-unspecified potential cuts to FEMA’s budget. To put his worries into perspective let’s look at FEMA’s spending record over the last few years. In 2005—a year of at least three major hurricane strikes in the United States—FEMA spent around $4.8 billion. By 2010, a year with many hurricanes (but none making landfall in the United States), FEMA’s budget had been pumped up to a whopping $10.4 billion, and it was on pace to meet or exceed that number last year.

So FEMA’s budget has doubled since Katrina, and only now do we see basic competence, in relatively quiet disaster years? If FEMA faces another really harsh hurricane season—a repeat of 2005—and drops the ball again, does this mean its budget will again need to be doubled, to $20 billion? I can see the dollar signs in the bureaucrats’ eyes already. Indeed, as Public Choice economics predicts, and former Obama White House chief of staff Rahm Emmanuel conveniently admitted, big-spending bureaucrats like those in FEMA have strong incentives to “never let a crisis go to waste.” They thrive on crises as a primary rationale for larger budgets, even if they played a big hand in making such crises worse to begin with.

In light of this it’s not at all surprising that the number of “major disaster” declarations has been rising over time, even in years when nature is relatively calm. FEMA had already declared 78 disasters by the fall of 2011, 30 more than the mega-storm year of 2005. Because disaster declarations are a prerequisite for unlocking federal disaster funds, it’s not surprising that FEMA finds ways to define disaster down, or that the number of declarations goes up for election years and in politically sensitive swing states (tinyurl.com/5usys7s).

In reality FEMA’s seemingly fantastic response to Irene is likely a product of media hype. The storm had basically fizzled out by the time it hit densely populated areas. Recall that Irene had weakened to a mere tropical storm by the time it reached the Jersey shore, and the main effect on the mid-Atlantic and New England states was torrential rain—not nearly as severe as the massive storm surge and catastrophic flooding from Katrina. Yes, there were power outages and locally severe flooding with Irene, but such are common in the United States. Private businesses and local authorities responded well, as they always do. Milbank offers no compelling reason to believe that a bloated FEMA bureaucracy is essential, or even beneficial, in helping these responses along.

ASSOCIATED ISSUE

January/February 2012

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TYLER WATTS

Tyler Watts is an assistant professor of economics at Ball State University and the winner of the 2012 Beth A. Hoffman Memorial Prize for Economic Writing.

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