NCPA - National Center for Policy Analysis


July 10, 1997

President Clinton signed a bill in June 1997 authorizing $5 billion for the Federal Emergency Management Agency (FEMA) disaster relief program. However analysts say what is really needed is a fundamental change in the FEMA program that pays people to build in notoriously disaster-prone areas and is damaging to the environment:

  • A March 1997 report in Idaho Statesman on the recent deluge by the Boise River, concluded that FEMA's National Flood Insurance Program (NFIP) has made development in risky areas economically attractive.
  • Scott Faber, a conservationist with American Rivers, says that in the 1960s there wasn't much development in flood-prone areas because it was too risky for insurance companies to underwrite it.
  • But, with NFIP's backing, not only is it less risky, it's economically attractive and now far more people live in flood plains.

FEMA is running a national campaign to get even more people to buy into the NFIP and expand its financial resources. But one agency analyst says its a Ponzi scheme that is running dry. The program charges a person only $300 a year for up to $250,000 in property damage coverage, whereas a private insurance company would charge $10,000.

FEMA Director James Lee Witt insists that the NFIP is a self-supporting program. Yet, according to budget analysts, the NFIP is in debt to the U.S. Treasury by almost one billion dollars. In addition, American taxpayers currently face more than $250 billion in exposure from NFIP policies.

James Bovard (Competitive Enterprise Institute), "More Flood Damage, Courtesy of FEMA?," Washington Times, July 10, 1997.


Browse more articles on Tax and Spending Issues