TO: Rep. Alexandria Ocasio-Cortez
FROM: Donald F. Kettl and Paul Glastris
DATE: July 1, 2021
RE: Only You Can Save the Federal Government
It may seem audacious, even patronizing, for two moderate-ish Baby Boomers like us to be offering advice to you, the most influential leader of the Millennial left. But we come in peace, with a message we urge you to consider because, as Princess Leia said to Obi-Wan Kenobi, you’re our only hope.
You and other progressive leaders have bold ideas for how government can help people and save the planet. The Green New Deal. Medicare for All. Free college. A massive investment in public housing. We aren’t in full agreement with that agenda, but that’s not our point. Our point is that to achieve your goals, you’re going to need a federal government as robust as your ideas. And right now, you don’t have it.
Instead, the government agencies you’ll need to carry out your policies are a disaster waiting to happen. Like the infrastructure you and others rightly say needs rebuilding, our federal bureaucracies are a patched-together mess that can barely handle the weight of the burdens already placed on them.
This is not your generation’s fault. It’s ours (though in fairness the two of us have long been sounding the alarm). For decades, leaders in Washington, led by conservatives but with acquiescence from liberals, have adopted an anti–civil servant mentality that has frozen the ranks of government workers while vastly expanding the role of private contractors. As a result, federal agencies have sunk deeper and deeper into dysfunction.
Someone needs to challenge that broken political mind-set. No one has a better track record of changing such political paradigms than you. This memo is our attempt to convince you to make rebuilding the federal bureaucracy one of your core issues—and, by extension, central to the agenda of the progressive left.
If you do, you’ll be able to highlight yet another sector of contemporary capitalism that is predatory and out of control: federal contracting. You’ll also create an opportunity to expand America’s unionized workforce by hiring
hundreds of thousands of civil servants—jobs that by all rights should go to your generation of young Americans. And you’ll provide political space for Joe Biden to make needed reforms that can advance policies you and he agree on.
But if you don’t, your policy vision for a better America will be deeply threatened, and possibly even doomed.
Consider your proposal to pay for the Green New Deal by raising marginal tax rates on high-income Americans. That’s the right tax policy. But we don’t have a bureaucracy now that can collect all the taxes you think should be due.
The reason is a years-long assault by Republicans on the Internal Revenue Service. In 2004, George W. Bush’s administration turned the job of collecting the hundreds of billions of dollars that tax scofflaws owed Uncle Sam over to private collectors, with the idea that they could do a better job than federal workers. The private collectors brought in money—but just $86 million, and most of that was from easy-to-collect cases that began running out after just a few months. Then the IRS brought the work back in-house, and its agents collected almost two-thirds more money in just a few months, and it came from the harder cases the private companies had left behind. Relying on private tax collectors actually ended up costing the federal government money.
But the Republicans weren’t done. They slashed 20 percent of the IRS’s budget and 22 percent of its staff from 2010 to 2018. For people making more than $1 million, the number of tax audits dropped by 72 percent—and the money the IRS collects from audits fell by 40 percent.
In April, Biden’s new IRS commissioner, Charles Rettig, told Congress that the agency is leaving on the table $1 trillion a year in uncollected taxes because it doesn’t have enough staff. Fixing the problem, Rettig said, would require “consistent, timely, adequate, and multiyear funding,” especially for more staff. Otherwise, he admitted, “we do get outgunned. There’s no other way to say it.”
The Biden administration supports an $80 billion boost to the IRS budget, to increase its staffing by two-thirds. That, administration officials hope, would help the agency collect perhaps $700 billion in taxes owed over the next 10 years. And if Congress doesn’t increase the IRS staff? A ProPublica story on the IRS budget cuts suggested that “now is a good time to cheat on your taxes.”
In fact, just about every progressive aim will be weakened by a lack of skilled in-house personnel. Consider the government’s handling of the refugees who surged at the Mexican border this spring, treatment you called “barbaric and wrong.” The Office of Refugee Resettlement has the job of housing them. In 2019, it had only about a hundred employees working on refugee support services. Who does the frontline work—and who runs the shelters we see on television? Contractors, of course. It might not make sense to have government employees be in charge of all the shelters, but the office’s employees have been stretched to the limit in negotiating these contracts. In fact, administration sources told Reuters, the government’s response has been slowed by “an unwieldy bureaucracy of contractor-run sites.” The result has been clear for all to see.
How about Medicare and Medicaid? The Government Accountability Office estimates that the two programs accounted for $103.6 billion in improper payments in 2019. It’s little wonder that the federal government has such a hard time keeping the programs under control. The agency running them, the Centers for Medicare and Medicaid Services, has about 6,200 employees, which might sound like a lot until you consider that they manage $1,081 billion, or about one-quarter of the entire federal budget. Divvied up, that’s about $174 million per CMS staffer. Who is responsible for paying the bills, monitoring the quality of care, and transmitting funds to state governments? Contractors, of course. The administrative labyrinth of these programs is one that very few people understand and almost no one can manage well. There can be no “Medicare for All” until we straighten out the problems in our current “Medicare for Some” program.
Many of the agencies that manage the programs you care most about took big hits during the Trump administration. The number of employees in the Department of Labor is down 11 percent. In the State Department, the number of staff fell by 9 percent. Education shed about 8 percent.
Major science research offices struggled to stem the hemorrhage of talent. The Agriculture Department’s research arm had only 50 percent of its funded positions filled after the Trump administration decided to move it to Kansas City. The shift, former White House Chief of Staff Mick Mulvaney said in a moment of candor, proved a “wonderful way” to push the federal government’s scientific talent out the door.
With luck, hard work, and the sizable budget increases he’s won, Biden may be able to replace most of the talent the government lost during the Trump years. But that will barely begin to solve the larger federal workforce problem.
Federal civilian employment now stands at 2.1 million people, about the same as in 1966, and it hasn’t fluctuated much along the way. But over the same period, the U.S. population has grown by 68 percent and federal spending has quintupled, accounting for inflation. Meanwhile, government’s work has become far more complex. It has added entire agencies, like the Environmental Protection Agency, the Department of Homeland Security, and the Department of Energy.
There are two reasons why the number of federal workers has flatlined over the past six decades. Republicans have been distinctly unsuccessful in cutting federal programs—and often have been complicit in increasing them—but they’ve found that attacking federal employees is a useful proxy battle in the war for controlling government. Democrats have been too afraid of being labeled as apologists of big government to fight back very hard. As a result, the two parties have reached a quiet understanding. Government can grow, as long as it doesn’t grow
To make up for the artificially created shortfall in civil servants, the federal government has had to vastly expand its contractor workforce, not just to build hardware like rockets and fighter jets but also for services, ranging from security to program planning. Big firms like Booz Allen Hamilton and McKinsey, and a host of small companies most people have never heard of, provide this help. But a lack of transparency surrounding federal contractors means that the exact size of this workforce and how much taxpayer money it accounts for is impossible to measure precisely.
Of course, there’s nothing wrong with using contractors, within reason. Sometimes they can bring needed expertise, like the ability to design complicated information technology systems. It’s often valuable to bring them in for short spurts of intensive work.
But we’ve long relied on service contractors beyond the point of reason. We now have contractors who do more or less the same work as civil servants, sitting in the same offices, for years on end, typically at far higher cost, often using government email addresses so it’s impossible for anyone on the outside to know whether they’re dealing with a government official or a contractor. We have contractors who oversee contractors, contractors who write policy for government officials, and federal contract managers who are too few in number and too outgunned in skills to manage it all.
As ICE expanded its efforts to accelerate the deportation of refugees during the Trump administration, it turned to the global consulting firm McKinsey for help. The company proved enormously helpful, even ghostwriting a document extending its own $2.2 million contract with the agency, making the case for why it should continue in the role and outlining what its responsibilities would be. The New York Times reported that one ICE official, concerned about whether McKinsey’s role was stretching too far into work that government officials themselves should be doing, asked an agency contracting officer, “Can they do that?” The officer responded, “Well, it obviously isn’t ideal to have a contractor tell us what we want to ask them to do.”
And when a federal contracting officer in the General Services Administration raised questions about a Mc-
Kinsey contract, the company found a more accommodating GSA manager who not only approved the deal but increased it by tens of millions of dollars. The agency’s inspector general concluded that the second federal manager had “violated requirements governing ethical conduct.” And the top consulting companies are making billions in revenue. Booz Allen’s chief executive makes 20 times the salary of the president of the United States. That comes directly from American taxpayers, because 96 percent of the company’s revenue comes from U.S. government contracts.
Contracting out can also be a costly decision. A 2010 study by the Project on Government Oversight looked at 35 different government occupations, and in 33 of them federal government employees were less expensive than comparable contractors, even accounting for federal benefits. In the case of “claims assistance and examining” work, contractor rates were almost five times higher than the cost of having federal employees do the job.
After decades of the “no more bureaucrats” political feedback loop, private contractors working for the federal government now outnumber federal employees by a factor of more than two to one, as estimated by the New York University professor of public service Paul C. Light. That’s right: There are more than twice as many contractors working for the federal government as there are federal employees. The result has been an endless parade of stories about cost overruns and policy snafus, which get blamed on Washington—and on incompetent
What we ultimately need is a massive increase in the number of civil servants in the federal government—
upward of one million more by 2035, according to the eminent political scientist and scholar of government John DiIulio. Exacerbating the hiring challenge is the fact that within the next few years, three in 10 federal employees will be eligible to retire. In some agencies, the problem will be much greater, including the Department of Housing and Urban Development, the EPA, the National Aeronautics and Space Administration, and the Treasury Department, where the number will be more than 40 percent. In the federal government, there are more tech workers over the age of 60 than under 35.
The real story is that the federal government struggles to deliver on its good intentions. And that’s the fate that awaits the programs you’re championing, unless we get our collective act together, and do so soon.
There’s no better example than the crash-on-launch of the Affordable Care Act website. The administration had hired a vast network of private firms, with 62 contracts and task orders, according to the GAO’s count, to build the site, but failed to connect them or oversee their work, despite early warnings (from another contractor, of course) that there would be trouble down the road. Democrats had fought for decades to expand health insurance to all Americans, and just six people—not six million, but six—were able to sign up on the first day.. The site was eventually fixed, but Republicans have capitalized on its initial problems ever since.
No one was killed or injured by the website crash, but the same can’t be said of the Trump administration’s disastrous response to Hurricanes Irma and Maria in Puerto Rico. There are many reasons why aid arrived so agonizingly slowly to the island, from bureaucratic hurdles the Trump administration deliberately put up to the territory’s lack of voting representatives in Congress who might have advocated on its behalf. But a major cause was staffing levels at the Federal Emergency Management Administration. On September 21, 2017, the president signed a disaster declaration putting FEMA to work delivering desperately needed supplies and equipment. But, as is usually the case in major disasters, FEMA didn’t actually do the work; it hired a private contractor. The result was a disaster within a disaster. Supplies that islanders needed within days took an average of 10 weeks to reach embattled citizens. Along the way, the agency at least temporarily lost track of 38 percent of the shipments, worth more than a quarter of a billion dollars. When food supplies eventually arrived, many of the boxes were full of junk food. The Department of Homeland Security’s inspector general concluded that the mess cost the government $179 million in cost overruns, with another $50 million in costs labeled “questionable.”
Thanks to the hollowing out of the federal government’s talent and the outsourcing of work to contractors, the rate of highly visible breakdowns has increased, as Light, the NYU professor, has found, from 1.6 per year during the Reagan administration to 4.3 annually under Trump. That ratio is likely to rise under Biden and future administrations—unless we step in, now, to begin to address the underlying staffing issues.
None of this is news to the Biden administration. Many of its key officials served under Barack Obama, who took a stab at fixing the problem. What they accomplished, and didn’t, provides cautionary lessons for the road ahead—and the vital role you can play.
During the 2008 presidential campaign, candidate Obama said he was “concerned by the rising number of government contractors that are often unaccountable and often less efficient than government workers.” As president, he pledged to “restore effective oversight of the government contracting process and reduce our nation’s increasing dependence on private contractors in sensitive or inherently governmental functions.” That last part was especially important. The GAO has warned for years that contractors were gradually taking on basic policy decisions that erode government’s basic ability to govern.
After Obama won the election, his Office of Management and Budget came up with tougher language to define these “inherently governmental” services and to pull more work into government. The strategy reduced the ratio of contract and grant employees to federal civilian employees, from 3.38 to 1 to 2.34 to 1, Paul Light writes in his book The Government-Industrial Complex. Obama’s team found allies on Capitol Hill among the Democratic majority as well as pragmatic Republicans like Ohio Senator George Voinovich.
In 2010, however, Democrats lost their congressional majority, moderates like Voinovich retired, Tea Party crusaders took over, and the politics of in-sourcing got tougher. One reason was the ensuing budget standoffs and cuts (remember sequestration?). In theory, bringing more work in-house saves the government money. In practice, federal managers often prefer to hire contractors, especially at times of budget uncertainty, even though they are going to cost more money. Because the federal hiring process is so badly broken, bringing on new employees can take months, even years. So, too, with the process of getting rid of poor performers. When managers don’t know what their budget is going to be next year—and sometimes next month—they turn to contractors, who can be brought in and gotten rid of more quickly, regardless of whether they do a better or worse job.
Another obstacle is that federal contractors have a great deal of clout in Washington, thanks especially to their campaign contributions. In 2011, the Sunlight Foundation found that, out of the 41 companies that had made the largest campaign contributions during the previous two decades, 33 had federal contracts. (The Center for Responsive Politics also discovered that more than half of the 63 contractors that made contributions to Trump’s inaugural won multimillion-dollar contracts during his first year in office. Six companies hadn’t received any contracts in 2016 but got new business following their donations. Even more dark campaign contributions undoubtedly flowed into the system.)
These well-funded efforts slowed Obama’s in-sourcing efforts. The Defense Department, for instance, originally said it wanted to bring 10,000 workers back into the federal government. After hitting about 3,000 employees, it stopped. Needless to say, the Trump administration, reverting to GOP form, reversed the Obama policy and spent four years contracting more work out, with the contractor workforce growing by approximately 1.4 million people, Paul Light concludes. Meanwhile, the Trump administration worked aggressively to erode the bargaining rights and civil service protections of federal employees.
While the Biden administration has jettisoned most of Trump’s anti-union executive orders, it hasn’t yet signaled whether it will take a run, as Obama did, at reducing the government’s dependence on contractors and significantly expanding the civil service workforce. With Democrats holding the narrowest of majorities in Congress, Republicans preparing a massive assault to take control of both houses in 2022, and the possibility that we’ll be right back to battles over government shutdowns and budgetary brinksmanship, the administration may decide that this is one battle it doesn’t want to fight.
When it comes to the functioning of its agencies, the federal government is in a cyclical political rut. We’re dug in so deep that it’s going to take decades to get us out. But get out we must. And the key to doing so, we believe, is patient, visionary leadership from progressives like you.
Unlike moderate Democrats, you and your allies aren’t afraid of the “big government” label. You can use that freedom to advocate for the reforms—both short and long term—that we need.
You can begin by demanding that Biden take two executive actions without delay.
First, you should insist that Biden direct his agencies to calculate the total size of the workforce supporting the government’s work—federal government employees, along with those working on federal contracts and grants. Right now, we know a lot about federal employees, including how many people are on the payroll in every federal agency; what they’re paid; how many hours they work; their race, gender, and ethnicity; and more. However, we know very little about their contractor counterparts.
Second, you should call on Biden to issue an executive order requiring that any company receiving 10 percent or more of its revenue from federal contracts or grants should disclose its dark money contributions, especially donations through super PACs and independent groups that skirt campaign contribution laws. The Obama administration considered just such a plan, and Biden supported it, but the president never pulled the trigger. Biden should, in order to bring more transparency to the business of government.
Over time, these two simple and straightforward steps could have a significant impact. It’s a truism in politics that you can’t change what you can’t count. In any debate about what the right mix is between civil servants and contractors, the latter have an inherent advantage. It’s hard to even engage journalists, academics, elected officials, and citizens in a discussion if we don’t have reliable numbers for both sides of the civil servant/contractor divide. The same is true for dark money contributions from federal contractors. Only by revealing the extent to which these firms are funneling funds to independent expenditures, pay-for-play advocacy groups, and others can we begin to know who is manipulating whom behind the scenes.
There are longer-term fixes that should be on your reform to-do list as well. We need a two-year budget cycle, so federal managers can better predict how much money they’ll have to spend down the road. They’ll be less prone to hiring contractors if they know they can count on being able to support more federal staffers over the long-
We also need to make it easier for government managers to hire the best people—and let people go who don’t produce results. Almost everyone in Washington agrees that the federal hiring process is broken and that the government loses too many good applicants—especially eager young applicants—because job listings are impossible to navigate and because hiring officials take 100 days, on average, to hire new employees. The people that the federal government most needs, especially in information technology and contract management, have lots of other choices. We don’t want to lose the next generation of workers to other employers who can move more aggressively to hire talent. And we can’t avoid the problems of contracting without having enough workers, with the right skills, working in government to support the public’s mission.
The answer isn’t to expand government service contracting, as the private sector would like, or to scrap civil service protections, as many Republicans have long dreamed about and as many federal employees—and their unions—dread. The answer is for the Biden administration to solve three core government HR problems.
First, put on a full-court press to fix the hiring process overseen by the Office of Personnel Management—a better website, faster processing, and more pooled announcements so the best candidates in any category are easy for hiring managers across the government to find—so that the government doesn’t drift into contracting because it’s simply the least painful option.
Second, create new avenues for bringing in needed talent. The problems the federal government is dealing with are changing so fast that federal managers often don’t want to be locked into permanent decisions about new employees’ skills. And, for that matter, many prospective employees, especially among Millennials and Gen Zers, can’t imagine working for life in any organization. You should sponsor a bill to create a pilot project to allow federal agencies to hire the employees the government needs the most, especially in information technology, customer service, and contract management, for five-year renewable terms. That would increase the flexibility of federal agencies, reduce the risk of budget uncertainties, and slash the incentives to hire contractors just because it’s easier and simpler (even if it’s often more expensive).
Third, update the federal merit system in ways that are fair to employees and work for managers. The problem isn’t that federal employees have too many rights and protections; it’s that exercising these rights takes far too long. In the case of the Merit Systems Protection Board, which is charged with hearing appeals, exercising those rights is impossible, since the MSPB hasn’t had a quorum for four years and hasn’t had any members for two. The reason Republicans give for continuing this administrative blockade is that they want to make it easier to fire poor-performing feds. In fact, the federal government fires poor performers at roughly the same rate as—though far more slowly than—equivalent private-sector positions. We should follow the Partnership for Public Service’s recommendation: Improve the government’s system for assessing the performance of government employees and create a one-stop shop for grievances and appeals, to make it possible for the government to deal with all the issues on the table, swiftly and in one pass.
Of course, federal unions won’t like this any more than private contractors will like the steps toward transparency. But perhaps, with your help, they can be convinced to accept these reforms as part of a deal that allows them to recruit new union members from the hundreds of thousands of new federal employees we desperately need. Biden has already issued an executive order encouraging union representation of government workers—and saying that federal agencies should be a “role model” for all employers. You have the chance to put that to work.
In the end, what’s most important is that you personally embrace the goal of a bigger and better federal bureaucracy. Official Washington will see it as heresy. But your base of millions of young progressive voters could quickly come to see it for what it really is: common sense. And it could open the door for many of them who want to help as part of a new legion of public-spirited federal employees.
In recent years, the energy on the left has been all about big policy ideas, with very little thought given to their implementation. A century ago, that wasn’t the case. Progressive leaders in the early 1900s fought for the rights of workers, environmental protection, and better education. But they also focused, in equal measure, on making sure that the government was populated by experts and run well enough to make their programs work. Today’s progressives won’t have a chance of winning in the long run unless they embrace both parts of the progressive legacy. It’s up to you to lead the way.