Cutting Federal Workforce Costs Money?

The most likely cuts in federal spending are likely to actually increase the deficit over time.

In a piece titled “More Bureaucrats, Please,” Washington Monthly editor John Gravois proclaims, “Washington’s budget hawks want to decimate the federal workforce to shrink the deficit. It will have the opposite effect.”

His argument is pretty straightforward:

The problem is that, as employers go, the federal government is in fact pretty exceptional. A corporation can shed workers and then revise its overall business strategy accordingly. A strapped city government can lay off a few street sweepers and then elect to sweep the streets less often. But federal agencies are governed by statutory requirements. Unless Congress changes those statutes, federal agencies’ mandates—their work assignments—stay the same, regardless of how many people are on hand to carry them out. Medicare checks still have to go out within thirty days of a claim, offshore oil wells still need to be inspected, soldiers in Afghanistan still need to be provisioned, Social Security databases still need to be maintained, and on and on. “It raises the hairs on my neck when I hear people say we’ve got to do more with less,” says John Palguta, a vice president for policy at the Partnership for Public Service, a nonprofit focused on the government workforce. “The logical conclusion is we’re going to do more with nothing.”

In practice, cutting civil servants often means either adding private contractors or—in areas where the government plays a regulatory function—resorting to the belief that industries have a deep capacity to police themselves. (This idea, of course, has taken some dings in recent years.) And though contractors can be enormously useful, they too have to be, well, governed. “You can cut and cut and cut and try to streamline the government workforce, but at some point you lose the ability to oversee the money that you’re spending, and that puts everything at greater risk,” says Don Kettl, dean of the University of Maryland’s School of Public Policy. “The opportunities for program failure and waste of public dollars grow exponentially.”

This rings true to me. After retiring from the Army, my dad became a Department of the Army civilian. He lived through a couple rounds of reductions in force and other belt-tightening measures. The consequence was a combination of fewer people doing the same amount–if not more–work and passive aggressive work slowdowns. As in the private sector, management can take on a “you’re lucky you still have a job” attitude during lean periods.

Additionally, I worked for a short time as a DoD contractor and was shocked at how reliant the bureaucracy I worked for was on their contract staff. In many cases, the civil service supervisors simply had no way to actually supervise the contractors in their charge because they lacked the technical expertise to do so.

It’s also worth noting that contractors are, essentially by definition, more expensive than their civil service counterparts. But contractors work on something close to an at-will basis whereas civil servants quickly attain career status and the right to employment. So, the theory goes, contractors are cheaper in the long run because their contracts can go away when the job’s done. That’s all well and good: If the contract isn’t essentially permanent.

The obvious retort to Gravois’ argument, then, is that Congress–the institution that would enact the personnel cutbacks–should simultaneously cut back on the statutory requirements by eliminating or curtailing government programs and services. But, he argues, even that is problematic. Indeed, he argues, “Strange as it may sound, to get a grip on costs, we should in many cases be hiring many more bureaucrats—and paying more to get better ones—not cutting their numbers and freezing their pay. Because in many parts of government, the bureaucracy has already crossed that dangerous threshold beyond which further cuts can only mean greater risk of a breakdown.”

He harkens back to the Clinton-Gore National Partnership for Reinventing Government, which he believes was the impetus for crossing the aforementioned threshold. His focus is on drastic cuts to the acquisitions workforce in the DoD and elsewhere.

It turned out to be a case of modernization gone horribly awry. At roughly the same time as the Defense contract management workforce was being hollowed out, the military was reorganizing itself around a vastly increased dependence on outside contractors. The balance of “acquisitions” was shifting from the relatively straightforward purchase of goods (Gore’s ashtray) to the more sophisticated enlistment of services (the rapid construction of a field power station). And the weapons systems that the Pentagon was buying were only becoming more technologically complex. If anything, the workforce needed beefed-up expertise. “A lot of people in acquisition and procurement were people with a high school education,” says John Kamensky, a senior fellow at the IBM Center for the Business of Government who was among the leaders of Reinventing Government. “What we needed was people with degrees who knew how to manage contracts.” But instead the workforce simply eroded.

Again, this comports with my own limited experience as a DoD contractor. While the people in the GS-15 and Senior Executive Service positions tended to be highly qualified, those in the middle management ranks were often spinning their wheels, having skill sets too narrow for the jobs they had been moved into.

(Having briefly tried to get in on the civil service side of the house, however, I can attest that the hiring process didn’t help much, either. In the private sector, a one-page resume and a one-page cover letter tends to be the entirety of the application. In the government sector, the application can be dozens of pages. Furthermore, the process, by design, privileges those already in the system, preferring people who have done a related job one rung down the latter to outsiders with vastly more education and suitability.)

Regardless, Gravois argues, the upshot of all this is too few people doing the necessary screening, leading not only to interminable delays in acquisitions–he cites the FBI’s infamous, never-ending search for a modern web-based case management system–but abuses as contractors essentially audited their own contracts.

And, while not obviously acquisitions related, he points to cutbacks in Minerals Management Service inspectors right as offshore drilling was taking off as a viable strategy and cutbacks at the Security and Exchange Commission while the financial sector was booming. He offers zero evidence that the BP oil spill or the global financial crisis would have been averted absent these cutbacks but it’s hard to argue from hindsight that we didn’t need better oversight over these industries. And, certainly, the costs of dealing with these crises far exceeded whatever short-term savings were realized from cutbacks.

So . . . this means we can never cut back Federal spending? Well, not exactly.

On the one hand, Gravois believes that we do need a bigger federal workforce:

The average voter may imagine federal bureaucracies as overstaffed, full of people leaning on their rakes and sharpening their pencils. But the truth is, most agencies are, if anything, understaffed. The government has grown tremendously in its spending and scope since the 1960s, and the population of the nation has grown by a margin of 100 million people, but the size of the federal workforce has remained remarkably static at about 2 million. Since coming into office two years ago, the Obama administration has bumped up staff levels by about 100,000, in part through “in-sourcing”—bringing back into the civil service inherently governmental work that had been farmed out to contractors. If this leads to better management, it could well mean a stanching of some of the cost overruns and regulatory failures that have been causing the government to bleed red ink. Today’s mindless demands for austerity, however, could reverse this trend.

On the other:

This is not to say that there aren’t big bureaucratic reforms that need to be made that could lead to people losing their jobs. Many agencies, for instance, exhibit excessive layering in their management ranks (think job titles that start with “deputy-” or “under-“). And if Congress and the administration could agree to lift some of the outdated procedural requirements and redundant reporting demands that are the bane of the average civil servant’s life, it might be possible for agencies to fulfill their mission as well or better with fewer people.

But reforms like this almost never happen. Instead, what you usually get are demands like what we’re now seeing in Congress for across-the-board cuts in the workforce. This is often accomplished through attrition and incentives for early retirement. But the people most likely to walk away in those cases are the ones most confident of their ability to land a job in the private sector—in other words, often the best employees. Another method is to leave decisions about cutting up to the leaders of the agencies themselves. But as some veterans of Reinventing Government learned, that can have the effect of simply consolidating inertia in the managerial ranks. “Headquarters isn’t ever gonna cut itself,” says John Kamensky. “Headquarters cuts field.”

That’s certainly true. Then again, cutting out a few senior managers isn’t exactly going to lead to significant cost savings. (That’s not to say it’s not worth doing on efficiency grounds; just that it’s not going to solve the problem.) And, while I’m all for cutting red tape–who isn’t?–I’m skeptical there’s enough of it to substantially lower the cost of government.

He argues that we should hire more, better people in key revenue-producing or cost oversight agencies:

A wise first move would be to double the size of the OMB. More and better staff at revenue-producing agencies like the IRS would also make sense. The SEC will need a big boost in personnel in order to fulfill the new demands of last year’s financial reform legislation, which wisely calls for the agency to oversee derivatives trading and other potentially destabilizing aspects of the financial world. And our best hope for controlling the burgeoning costs of Medicare and Medicaid—the biggest drivers of long-term federal deficits—lies in new, yet-to-be staffed bureaucracies whose founding is authorized in last year’s health care reform law.

A more aggressive IRS is unlikely to be politically popular but a larger OMB (and GAO, for that matter) likely make sense. But, again, I’m skeptical that these changes would significantly reduce the budget.

The only way to really save money is to demand less from government. Obviously, a much smaller Defense budget–to realign ourselves to the reality of a world with no peer competitors–would be a significant place to start but, alas, military spending is enormously popular with both the voters and the Members of Congress in whose districts all that money gets spent. Radically controlling health care costs is the other big ticket item. But, aside from a single-payer system–something for which there is not exactly a lot of demand at the moment–costs are likely to continue skyrocketing.

The bottom line, then, is that politically popular cuts are likely to have little impact–if not actually increasing the budget over time. And the cuts that could actually have major impact are politically unpopular and thus unlikely to happen. It’s a classic Mexican standoff.

FILED UNDER: Economics and Business, US Politics
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. DC Loser says:

    I worked in and around the DoD acquisition business from the late 80s until recently. What you said about the hollowing out of the contracting technical oversight expertise in the government is spot on. When I started in the late 80s, we still had the ability to scritinize contractor performance and deliverables. By the late 90s, most government acquisition agencies were left to trust the word of the contractors because they no longer had the in house corporate memory and expertise to do their independent assessment of performance. It was literally the pigs feeding at the trough, and contractors submitting an avalanche of paperwork to overwhelm the overseers. Then you had the corruption of those in the government who were supposedly charged to ensure we got what we paid for. Darlene Druyan is exhibit A. The acquisition system is broken and costs running sky high. I don’t know that there is political will to fix the system.

  2. john personna says:

    Add to that list “Bad Privatization.” We saw it here when Southern California Edison was split in two (generation company and distribution company). It allowed looting at that level, and lead to the later Enron scandal.

    Just because something is off the public (or quasi-public) books doesn’t mean it is automatic savings from there on out.

    When I see that Minnesota is planning on selling off their small power plants, for universities and such, I cringe.

  3. john personna says:

    BTW, this goes hand in hand with the benefits problem, right? Government sheds jobs not because annual pay is so much higher than a contractor but because the total compensation is lower, without the benefits.

    So, lowering benefits allows a larger government workforce, right?

    I suggest this should be a counter-intuitive conservative agenda: more, lower-paid, government workers.

  4. Murray says:

    Like you I worked both in the public and private sector, and John Gravois’s argument rings true to me as well.

    Generally speaking, from what I witnessed, public sector employees don’t “live of the dole” as to many hacks proclaim, but perform as well as in the private sector and have plenty of work that just has to be done.

  5. ratufa says:

    Of course, many of the things that you describe as drawbacks are seen as features by a large number of the people who want to do these types of budget cuts. Want to lower the regulatory burden on business? It’s easier politically to use the budget to cripple enforcement than directly amend/repeal laws concerning workplace safety, food quality, clean air/water, etc. Plus, since we have a political party that often touts government incompetence as a reason to vote for them, even when the incompetence occurred when they were in power, government failures can be used as a campaign issue, later.

  6. steve says:

    Good observations James. I think a lot of this goes back to a fundamental refusal to acknowledge the real source of increased federal government spending, entitlements. The common perception of big government is what exists in the non-defense discretionary budget. That is where the bureaucrats live. So, this becomes the target for cuts. Uninformed, or disingenuous, people think that cutting this area will solve our budget problems.

    The real problem lies in the checks that are going out in entitlements. In theory, this could be almost entirely computerized. We could have very few government employees working in Medicare or Social Security, but it would matter little, spending would still increase because it is the checks going out that constitute the huge fraction of their spending.

    BTW, I really liked the point about contractors becoming permanent. That is what I saw in the military when I left, even on the medical side. We paid two or three times what we paid active duty military for the same services. In theory they could be cut anytime. In reality, they were permanent.

    Steve

  7. Fred says:

    Your opinion ignores the obvious: The Federal Bureaucracy is involved in too many areas that are beyond the limitations put on Federal Government by our Constitution. And as a result spending manpower and $$ that are better retained and controlled by individual citizens.

    Cutting back on Fed employees is just the first necessary step in reining-in a run away government.

    If you want examples, just look at the FCC/Internet issue or the EPA/Greehnouse has issue. Clearly efforts of Federal employees trying to expand their role and control beyond that authorized by law.

    I say cut them off and save the Republic.

  8. Murray says:

    @Fred

    You completely missed the point. If you don’t change the legislation to reduce the workload according to reduction of workforce, all you will get is sloppy service.

    BTW: The EPA is pushing on greenhouse gas issue under order of the supreme court.

  9. John Burgess says:

    There is a way to cut government, but it’s not a particularly popular one: Get rid of entire departments. I’m unable to understand why we need a Dept. of Education at all. Its budget comes in around $16 billion. Take a third of that, give it directly to the states to use as they see fit, and you’ve an $10 billion savings and tens of thousands fewer federal employees. Don’t contract out the programs and functions, get rid of them entirely.

    I’m not able to call to mind any great successes coming out of the Department. The level of education K-12 certainly isn’t a stunning example. Let the 50 states work for their own solution; 50 testbeds is better, IMO, than one monolith telling the states how it ought to be done.

    Take a look at this list of federal agencies. Do we need each and every one of them? Each comes with its own administrative train, headquarters staffing, real estate, etc. Cannot some of them simply be written down? Do we still need regional commissions? Botanic gardens are nice, but do they need their own agency? Mightn’t they be folded into the Smithsonian?

    Do we still need a Friendship Commission with Japan? How about that TVA? Aren’t those states and areas electrified yet?

    Granted, many of these agencies and departments are small: each closing would represent only small savings. In the aggregate, though, we are talking billions. You know the saying: ‘”A billion here, a billion there, and pretty soon…”

  10. James Joyner says:

    @John Burgess:

    I agree we could achieve significant savings–albeit nothing close to solving our deficit–by closing departments who aren’t, in my judgment, needed. But there’s just not the political will to do that.

    Shuttering the Department of Education, which Jimmy Carter had just cleaved out of the old HEW, was one of Ronald Reagan’s campaign promises in 1980. It’s still talked about in conservative circles 31 years later. But we hadn’t even come close to actually doing it.

  11. Hey Norm says:

    Look…this is just part and parcel of a truly misguided effort by so-called conservatives who either have little understanding of economics, or are intentionally trying to do harm to the economy. Since the November election when Republicans, claiming to be fiscally re-born, gained control of the House they have:
    Increased the deficit by forcing the extension of the Bush Tax Cuts for the wealthy,
    Voted to increase the debt by repealing the ACA
    Proposed slashing 700,000 to a million jobs thru spending cuts,
    And proposed significantly cutting the GDP with the same cuts.
    So let’s review…increase debt, cut employment, reduce growth.
    When does the fiscal responsibility start?

  12. John Burgess says:

    I recognize that closing things down takes political balls. There seems to be a severe shortage of that these days, even without getting into the political demographics of federal employee voting patterns. Nor am I grinding a political ax when it comes to the Dept. of Education. I just do not see it as a necessary federal government function.

    Here, btw, is the Wall St. Journal on redundant federal programs.

  13. James Joyner says:

    @John Burgess:

    It never ceases to amaze me how hard it is to muster the political backbone to make obvious cuts. Aren’t we still subsiding helium for dirigibles?

  14. DC Loser says:

    End all agricultural, energy (oil, coal, ethanol) subsidies for a start. Redo tax code to disallow most corporate accounting gimmicks. Impose a flat tax. Etc….

  15. Hey Norm says:

    @ John Burgess

    Thanks for the link.
    I applaud Coburn for pushing for the report, and the Administration for steps already undertaken. Obviously more can be done. But it should be done in a sensible manner…not in the manner we are seeing from the House.

  16. steve says:

    James- Notice how you and Burgess are muttering about trivial parts of the budget? What is it about conservatives, who claim to support smaller government, from constantly avoiding the Medicare issue?

    Steve

  17. James Joyner says:

    @steve

    See the penultimate paragraph of the post:

    The only way to really save money is to demand less from government. Obviously, a much smaller Defense budget–to realign ourselves to the reality of a world with no peer competitors–would be a significant place to start but, alas, military spending is enormously popular with both the voters and the Members of Congress in whose districts all that money gets spent. Radically controlling health care costs is the other big ticket item. But, aside from a single-payer system–something for which there is not exactly a lot of demand at the moment–costs are likely to continue skyrocketing. [emphasis added]

    And, also, the caveat “albeit nothing close to solving our deficit” in my comment to John. And John, who devoted a career to the Foreign Service, knows the score, too.

    That we can’t solve the budget deficit entirely by getting rid of the time honored “fraud, waste, and abuse” doesn’t mean we shouldn’t try to in fact get rid of those.

  18. Dave Schuler says:

    Aren’t we still subsiding helium for dirigibles?

    We sure are. Also mohair for military uniforms (mohair hasn’t been used in military uniforms for decades).

    But steve, above, is right. Bickering about the discretionary budget is like debating how many angels can dance on the head of a pin (it’s a pointed example, so to speak). Entitlements is where the wheel meets the road.

  19. Herb says:

    The only way to really save money is to demand less from government.

    Yeah, like stop demanding they bust unions?

  20. James Joyner says:

    @Herb

    The discussion here is about the federal government.

    As to Wisconsin, they’re trying to declaw the unions that negotiate against them for higher wages, so it’s a pretty legit cost savings measure. I’m dubious about the tactics being used but not the longer term goals.

  21. jwest says:

    James is correct in the fact that if you don’t change the way the government works, you will need more people to do the work. However, if we allow the work to proceed the way it is currently being done, we all need our heads examined.

    Since my direct interaction with a government bureaucracy was with the FBI (which I would hope would be one of the more advanced agencies of our government), I will cite an example from the Uniform Crime Report section. Bear in mind that the reason for the existence of this group is to provide congress and the public with a compilation of crime data from all states in a uniform manner. Here is the current Automated Data Processing (ADP) Programming Guidelines for State UCR Programs/Direct Contributors (Version 2.0). This was written in 1983, but this document is dated 01/19/2011 and is the guideline used today.
    http://www.fbi.gov/about-us/cjis/ucr/additional-ucr-publications/automated-data-processing-programming-guidelines

    Having spent a great deal of time with these reports, I can attest to the fact that a simple, easy to use system could be constructed from off-the-shelf database products that would allow every reporting agency to collect and transfer data in a fraction of the time and labor this existing system uses. The problem is, there is no incentive for the government workers to design or even suggest a change like this, because it would eliminate dozens of positions on the UCR staff and at a minimum, hundreds of positions in law enforcement agencies across the country.

    Every agency in the U.S. government is filled to the brim with examples such as this, but as with the UCR data, there is no incentive for anyone (except the taxpayer) to change things. If we accept the premise that James lays out, nothing will ever change.

  22. Herb says:

    “The discussion here is about the federal government. ”

    Well, I had a few more examples more germane to the feds, but went with what’s hot right now, mostly to make a point.

    Forget union busting. What about the demand that we have an impenetrable border? Or the demand that we protect the unborn? Or the demand that we provide certain middle eastern countries with freedom and democracy? Billionaires demanding tax cuts during a budget crisis?

    I’m all for “demand less,” but I just think it should be an across the board kind of thing.

  23. matt says:

    I’m unable to understand why we need a Dept. of Education at all.

    That’s because you cannot be bothered to educate yourself at all. The department of education is a tiny part of government with 5000 employees. The primary functions of the Department of Education are to formulate and administer federal funding programs involving education, such as college financial aid, collect data on US schools, and to enforce federal educational laws regarding privacy and civil rights. What’s funny is you’ve probably quoted data gathered by the DE in arguments against it.

    What I find truly hilarious is your assumption that creating 50 bureaucracies to replace 1 is somehow going to be cheaper and more effective.

    How about that TVA? Aren’t those states and areas electrified yet?

    Seriously you need to shut up and do a little research. You’re either completely ignorant about the government departments you’re talking about or you’re being intentionally disingenuous…

  24. hal lockhart says:

    Well, here’s a place to start. Just today, the GAO issued a report on federal government duplications. Here’s an excerpt from the CNN Money website:

    Among the duplications listed in the report, the GAO found 80 programs that provide services for “transportation-disadvantaged persons.”
    Washington’s budget follies

    The GAO also identified 82 programs aimed at improving teacher quality spread across ten different federal agencies. “Proliferation of programs complicates federal efforts to invest dollars effectively,” the report states flatly.

    The effectiveness of the government’s many economic development efforts, including over 100 programs to improve surface transportation, were also questioned by the GAO.

    The report said addressing duplicative efforts by the Environmental Protection Agency and the Treasury Department to boost domestic ethanol production could save up to $5.7 billion annually.

  25. matt says:

    Look my grandpa who made jack shit as a high school teacher who had to work in a local canning factory during the summer could of made a lot more in the private sector but stuck it out as a teacher because he loved his students. My experience through him was that the local school had a great deal of freedom outside of giving the students some standardized tests.

  26. matt says:

    As someone that is an Illinois native I gotta say that ethonal is a scam…

  27. Trumwill says:

    Increased the deficit by forcing the extension of the Bush Tax Cuts for the wealthy,

    Of course, extending any of the Bush Tax Cuts increased the deficit. Extending them for those under $250k a year actually costs more than extending them for those over that amount. According to the New York Times budget widget, over twice the amount.

  28. James Joyner says:

    @Herb

    What about the demand that we have an impenetrable border?

    I think it’s futile under the circumstances. But securing the border is a primordial function of the national government.

    Or the demand that we protect the unborn?

    Almost entirely a state function and, again, perfectly reasonable if you accept the premise that the fetus is a human life. And I’d imagine a negligible cost.

    Or the demand that we provide certain middle eastern countries with freedom and democracy?

    I oppose this policy, although I support the theoretical outcome. This is actually expensive and made possible only by a massive Defense budget and huge standing armies.

    Billionaires demanding tax cuts during a budget crisis?

    Well, it’s their money. And there are only 403 of them in the whole country.

    I think there’s an argument to have the wealthy pay a higher percentage, given historical rates and current demands. But it’s not the first place I’d look for solutions.

  29. Herb says:

    “But it’s not the first place I’d look for solutions.”

    I would say that the federal payroll is not the first place I’d look, either…

  30. James Joyner says:

    @Herb

    I would say that the federal payroll is not the first place I’d look, either…

    That’s rather the point of the post…

  31. Herb says:

    Fair enough.

  32. Um, ok, keep all the employees, but restore their salaries to, say, 1999 levels. How about that? I mean, that’s one thing bizness people do when times are tough to try and hold on to everybody.

    Oh, and that whole billionaires thing is so much horseshit. When you note there are 403 billionaires your talking about assets — not income — unless we are going to start taxing wealth instead of income. How many people actually made a billion dollars last year?