Smaller government isn’t always cheaper

at 03:03 PM ET, 12/01/2011

One of the ways that Senate Republicans want to pay for their $120 billion extension of the payroll tax cut, as Suzy Khimm notes below, is by shrinking the size of the federal civilian workforce 10 percent through attrition. As federal workers retire, they won’t get replaced. The basic theory here seems to be that fewer bureaucrats will translate into less government spending. But is that always true? Not necessarily. As it turns out, shrinking the federal workforce can sometimes lead to more spending than would otherwise be the case.


(Win McNamee/Getty Images)
It’s worth noting that the size of the federal civilian workforce has remained roughly static — hovering around two million workers — since the 1960s. (The Pentagon has shrunk somewhat since the Cold War and other agencies have grown slightly, especially Homeland Security.) As John Gravois points out in the Washington Monthly, that’s striking given that the size of the U.S. population has grown roughly 100 million over the same time frame. What’s more, Congress has heaped greater and greater responsibilities on the government over the years. One could just as easily wonder if the federal workforce is currently too small rather than too large.

But is it possible that having fewer government bureaucrats can actually make the government more efficient — that those remaining workers can just do more with less? The evidence isn’t particularly encouraging on this score. To take one example, in 1996, the GOP Congress ordered a 25 percent cut by 2000 in the number of federal employees who were working on defense acquisitions — the folks who negotiate, oversee, and audit the military’s contracts. When the 2000s rolled around, and the Pentagon suddenly found itself fighting two wars, those extra employees were missed.

A 2009 GAO report found that the cost overrun on the average weapons system went from 6 percent in 2000 to 25 percent in 2009 — reaching $296 billion that year. The GAO blamed “shortages of acquisition professionals … degradation in oversight, delays in certain management and contracting activities, increased workloads for existing staff, and a reliance on support contractors to fill some voids.”

Gravois points out quite a few other examples where understaffed regulatory offices ended up being overwhelmed and fail to prevent big (and costly) disasters. The Minerals Management Service was famously emaciated and ended up unable to avert the BP Gulf oil spill. The undermanned SEC, which lost 10 percent of its staff between 2005 and 2007, turned out to be incapable of overseeing Wall Street in the years leading up to the financial crisis. Perhaps the SEC couldn’t have stopped the subprime mess even with more personnel. But having the agency operate with a bare-bones staff seems to have whittled the odds of prevention down dramatically.

In a different vein, if the federal government does slice down its workforce, it’s likely to carry out more tasks via private contractor. For a long time, this was thought to save money, on the notion that workers in the private sector make less than government workers with inflated salaries. But this assumption turns out to be awry. In September, a study from the Project on Government Oversight found that private contractors tend to make 83 percent more, on average, then federal employees get paid to do comparable tasks.

In any case, there’s not really a hard-and-fast rule here. It’s possible that some government offices or positions are largely bloat and could be hacked away with little harm done. Conversely, other agencies could function better with more workers (the IRS could better crack down on tax evasion, for instance). But big, blunt cuts to the federal workforce aren’t always guaranteed to save money in the long run.

 
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