Save the Bureaucrats…from the Politicians

If Paul Verkuil was a stock, I would buy him. And if his wonderful keynote address at the Penn Program on Regulation’s 2015 Annual Regulation Dinner were a petition, I would sign it! Verkuil nails it in Save the Bureaucrats. We are living, as he says, in a “neo-spoils” era, but one created by what he has previously described and decried, in his fabulous 2007 book, as a process of “outsourcing sovereignty.” In his keynote address, Verkuil referenced the “killer chart” on the cover of my own my recent book, Bring Back the Bureaucrats, a chart showing that the federal government spends five times what it spent in 1960, adjusted for inflation, but that the federal workforce is smaller today than it was in 1960. I only wish more politicians thought about the killer truth behind that chart; instead, most either deny, ignore, or distort it. For instance, in a speech delivered earlier this summer, Republican presidential candidate Jeb Bush proclaimed “reducing the size of the bureaucracy by 10 percent within 4 years is a realistic goal, saving tens of billions of dollars, and without adding to unemployment.” Bush is no government bureaucracy-basher, but his proposal, like the more radical plans that many Republican members of Congress have concocted for rolling back big government by shrinking the federal workforce, ignores at least eight sets of facts relevant to understanding why we need to “save the bureaucrats” from the politicians. First, when George W. Bush became president, the executive branch employed about 1.8 million civilians (not counting postal workers), which was about the same number as when John F. Kennedy won the White House. And there were more federal bureaucrats (about 2.2 million) when Ronald Reagan won reelection in 1984 than when Barack Obama won reelection in 2012 (about 2 million). Second, eliminating the entire federal civilian workforce would save about $250 billion a year in wages and benefits, or less than the over $300 billion a year that Washington spends on defense contractors and under half of the more than $600 billion a year that it spends on Medicare beneficiaries. Third, the federal government spends more than $600 billion per year on more than 200 grant programs for state and local governments, a ten-fold increase, in constant dollars, since 1960. The post-1960 federal civilian workforce has remained steady, but the state and local government workforce has roughly tripled to more than 18 million. Many state workers function as de facto federal bureaucrats. The largest single item in most state budgets is the federal-state Medicaid program. More than 90 percent of federal environmental protection programs are administered by state and local agencies that together employ many times the U.S. Environmental Protection Agency’s workforce of below 20,000. Fourth, the federal government also has millions of de facto employees in for-profit firms and nonprofit organizations. For example, the U.S. Department of Defense has roughly 800,000 civilian workers – plus the equivalent of some 710,000 full-time contract employees. Likewise, the U.S. Department of Energy spends about 90 percent of its annual budget on thousands of private contractors, who handle everything from radioactive waste disposal to energy production. The nonprofit sector has grown to encompass about 1.6 million organizations registered with the Internal Revenue Service, plus thousands more tax-exempt groups that are not required to register. The registered nonprofits have more than $2 trillion in annual revenues, with roughly a third of that money – and a large fraction of all jobs in the nonprofit sector – coming from government grants as well as fees for services and goods from government sources. Fifth, read the Congressional Record: state and local governments, businesses, and nonprofit organizations lobby incessantly for federal policies, programs, and regulations that they are paid to administer. The proxies rarely lose, which is a big reason why government never stops growing. Federal employees and their unions are not politically toothless but, compared to Washington’s contract- and grant-funded federal proxies, they have had almost nothing to do with the post-1960 growth in federal spending. Sixth, Jeb Bush is right that many federal bureaucrats are “hired, promoted, and given pay increases often without regard to performance;” but it is also often the federal government’s paid proxies – incompetent, overpaid, or corrupt for-profit contractors and the nonprofit grantees – not federal civil servants, who are behind performance problems on chores as distinct as handling plutonium, approving pesticides, and containing forest fires. There is no empirical evidence that outsourcing saves money, and a small but growing body of evidence shows that it actually costs more than it would to have government workers supply the same services. Seventh, the most catastrophic government performance failures have typically occurred when federal agencies had too few, not too many, full-time workers. For instance, in 2005, we witnessed the Federal Emergency Management Agency’s (FEMA) failed response to Hurricane Katrina, which hit when FEMA had only about 2,100 employees and had recently lost many senior managers. In 2013, we lamented the lame launch of Obamacare health exchanges, which involved scores of contractors and was overseen by the Centers for Medicare and Medicaid Services, an agency with fewer than 5,000 employees. Over the last two years, we’ve been sickened by the scandals at Veterans Affairs hospitals, whose so-called Contracting Officer’s Representatives are too few to properly monitor what its medical centers’ small armies of contractors do. Eighth, many federal agencies are already in dire need of more workers. For instance, by 2025, Social Security beneficiaries will exceed 85 million people, and the Social Security Administration (SSA) will disburse nearly $1.8 trillion a year. But the SSA projects that it could lose a third of its workforce by 2020, when some 7,000 SSA headquarters and 24,000 SSA field employees become eligible for retirement. Unfortunately, in recent years, due to a congressionally mandated hiring freeze, the SSA has been unable to fill positions left open by employee retirements. In sum, as Verkuil suggested, today’s federal civil service is overloaded, not bloated. We have too few federal bureaucrats monitoring too many federal grants and contracts, and handling too many dollars spent hiring others to do the work of the federal government. And we do a terrible job recruiting, training, and rewarding those who do venture into our federal civil service. Terrible! Here is one little Verkuil-inspired challenge to Jeb Bush and other presidency-seekers who favor cutting the flat-for-decades federal workforce as a way to cut costs and shrink government: Do you also favor cutting the federal for-profit contractor workforce, and, if so, by exactly how much and in what specific programs? I expect few politicians would favor cutting the outsourced bureaucracy. Maybe Verkuil and I and others who see things as we do should save our breath. But we won’t. The country can’t afford any longer to neglect its bureaucrats! This essay is the second in a four-part Regulatory Review series, Good Government Requires Good People