Saving the Civil Service Act

— 79 — Central Personnel Agencies: Managing the Bureaucracy What is needed at the beginning is a freeze on all top career-position hiring to prevent “burrowing-in” by outgoing political appointees. Moreover, four fac- tors determine the order in which employees are protected during layoffs: tenure, veterans’ preference, seniority, and performance in that order of importance. Despite several attempts in the House of Representatives during the Trump years to enact legislation that would modestly increase the weight given to performance over time-of-service, the fierce opposition by federal managers associations and unions representing long-serving but not necessarily well-performing constituents explains why the bills failed to advance. A determined President should insist that performance be first and be wary of costly types of reductions-in-force. Impenetrable Bureaucracy. The GAO has identified almost a hundred actions that the executive branch or Congress could take to improve efficiency and effec- tiveness across 37 areas that span a broad range of government missions and functions. It identified 33 actions to address mission fragmentation, overlap, and duplication in the 12 areas of defense, economic development, health, homeland security, and information technology. It also identified 59 other opportunities for executive agencies or Congress to reduce the cost of government operations or enhance revenue collection across 25 areas of government.20 A logical place to begin would be to identify and eliminate functions and pro- grams that are duplicated across Cabinet departments or spread across multiple agencies. Congress hoped to help this effort by passing the Government Perfor- mance and Results Act of 1993,21 which required all federal agencies to define their missions, establish goals and objectives, and measure and report their per- formance to Congress. Three decades of endless time-consuming reports later, the government continues to grow but with more paper and little change either in performance or in the number of levels between government and the people. The Brookings Institution’s Paul Light emphasizes the importance of the increasing number of levels between the top heads of departments and the people at the bottom who receive the products of government decision-making. He esti- mates that there are perhaps 50 or more levels of impenetrable bureaucracy and no way other than imperfect performance appraisals to communicate between them.22 The Trump Administration proposed some possible consolidations, but these were not received favorably in Congress, whose approval is necessary for most such proposals. The best solution is to cut functions and budgets and devolve respon- sibilities. That is a challenge primarily for Presidents, Congress, and the entire government, but the OPM still needs to lead the way governmentwide in managing personnel properly even in any future smaller government. Creating a Responsible Career Management Service. The people elect a President who is charged by Article 2, Section 3 of the Constitution23 with seeing that the laws are “faithfully executed” with his political appointees democratically linked to that legitimizing responsibility. An autonomous bureaucracy has neither — 80 — Mandate for Leadership: The Conservative Promise independent constitutional status nor separate moral legitimacy. Therefore, career civil servants by themselves should not lead major policy changes and reforms. The creation of the Senior Executive Service was the top career change intro- duced by the 1978 Carter–Campbell Civil Service Reform Act. Its aim was to professionalize the career service and make it more responsible to the democrat- ically elected commander in chief and his political appointees while respecting the rights due to career employees, very much including those in the top positions. The new SES would allow management to be more flexible in filling and reassigning executive positions and locations beyond narrow specialties for more efficient mission accomplishment and would provide pay and large bonuses to motivate career performance. The desire to infiltrate political appointees improperly into the high career civil service has been widespread in every Administration, whether Democrat or Republican. Democratic Administrations, however, are typically more successful because they require the cooperation of careerists, who generally lean heavily to the Left. Such burrowing-in requires career job descriptions for new positions that closely mirror the functions of a political appointee; a special hiring authority that allows the bypassing of veterans’ preference as well as other preference categories; and the ability to frustrate career candidates from taking the desired position. President Reagan’s OPM began by limiting such SES burrowing-in, arguing that the proper course was to create and fill political positions. This simultane- ously promotes the CSRA principle of political leadership of the bureaucracy and respects the professional autonomy of the career service. But this requires that career SES employees should respect political rights too. Actions such as career staff reserving excessive numbers of key policy positions as “career reserved” to deny them to noncareer SES employees frustrate CSRA intent. Another evasion is the general domination by career staff on SES personnel evaluation boards, the opposite of noncareer executives dominating these critical meeting discussions as expected in the SES. Career training also often underplays the political role in leadership and inculcates career-first policy and value viewpoints. Frustrated with these activities by top career executives, the Trump Adminis- tration issued Executive Order 1395724 to make career professionals in positions that are not normally subject to change as a result of a presidential transition but who discharge significant duties and exercise significant discretion in formulating and implementing executive branch policy and programs an exception to the com- petitive hiring rules and examinations for career positions under a new Schedule F. It ordered the Director of OPM and agency heads to set procedures to prepare lists of such confidential, policy-determining, policymaking, or policy-advocating positions and prepare procedures to create exceptions from civil service rules when careerists hold such positions, from which they can relocate back to the regular civil service after such service. The order was subsequently reversed by President

— 76 — Mandate for Leadership: The Conservative Promise to delay. With the proper limitation of labor union actions, the FLRA should have limited reason for appeals. The EEOC’s federal employee section should be transferred to the MSPB, and many of the OCS’s investigatory functions should be returned to the OPM. The MSPB could then become the main reviewer of adverse actions, greatly simplifying the burdensome appeal process. Making Civil Service Benefits Economically and Administratively Ratio- nal. In recent years, the combined wages and benefits of the executive branch civilian workforce totaled $300 billion according to official data. But even that amount does not properly account for billions in unfunded liability for retirement and other government reporting distortions. Official data also report employment as approximately 2 million, but this ignores approximately 20 million contractors who, while not eligible for government pay and benefits, do receive them indirectly through contracting (even if they are less generous). Official data also claim that national government employees are paid less than private-sector employees are paid for similar work, but several more neutral sources demonstrate that pub- lic-sector workers make more on average than their private-sector counterparts. All of this extravagance deserves close scrutiny. Market-Based Pay and Benefits. According to current law, federal workers are to be paid wages comparable to equivalent private-sector workers rather than compared to all private-sector employees. While the official studies claim that federal employees are underpaid relative to the private sector by 20 percent or more, a 2016 Heritage Foundation study found that federal employees received wages that were 22 percent higher than wages for similar private-sector workers; if the value of employee benefits was included, the total compensation premium for federal employees over their private-sector equivalents increased to between 30 percent and 40 percent.18 The American Enterprise Institute found a 14 percent pay premium and a 61 percent total compensation premium.19 Base salary is only one component of a federal employee’s total compensation. In addition to high starting wages, federal employees normally receive an annual cost-of-living adjustment (available to all employees) and generous scheduled raises known as step increases. Moreover, a large proportion of federal employ- ees are stationed in the Washington, D.C., area and other large cities and are entitled to steep locality pay enhancement to account for the high cost of living in these areas. A federal employee with five years’ experience receives 20 vacation days, 13 paid sick days, and all 10 federal holidays compared to an employee at a large private company who receives 13 days of vacation and eight paid sick days. Federal health benefits are more comparable to those provided by Fortune 500 employers with the government paying 72 percent of the weighted average premiums, but this is much higher than for most private plans. Almost half of private firms do not offer any employer contributions at all. — 77 — Central Personnel Agencies: Managing the Bureaucracy The obvious solution to these discrepancies is to move closer to a market model for federal pay and benefits. One need is for a neutral agency to oversee pay hiring decisions, especially for high-demand occupations. The OPM is independent of agency operations, so it can assess requirements more neutrally. For many years, with its Special Pay Rates program, the OPM evaluated claims that federal rates in an area were too low to attract competent employees and allowed agencies to offer higher pay when needed rather than increased rates for all. Ideally, the OPM should establish an initial pay schedule for every occupation and region, monitor turnover rates and applicant-to-position ratios, and adjust pay and recruitment on that basis. Most of this requires legislation, but the OPM should be an advocate for a true equality of benefits between the public and private sectors. Reforming Federal Retirement Benefits. Career civil servants enjoy retire- ment benefits that are nearly unheard of in the private sector. Federal employees retire earlier (normally at age 55 after 30 years), enjoy richer pension annuities, and receive automatic cost-of-living adjustments based on the areas in which they retire. Defined-benefit federal pensions are fully indexed for inflation—a practice that is extremely rare in the private sector. A federal employee with a preretire- ment income of $25,000 under the older of the two federal retirement plans will receive at least $200,000 more over a 20-year period than will private-sector work- ers with the same preretirement salary under historic inflation levels. During the early Reagan years, the OPM reformed many specific provisions of the federal pension program to save billions administratively. Under OPM pres- sure, Reagan and Congress ultimately ended the old Civil Service Retirement System (CSRS) entirely for new employees, which (counting disbursements for the unfunded liability) accounted for 51.3 percent of the federal government's total payroll. The retirement system that replaced it—the Federal Employees Retirement System (FERS)—reduced the cost of federal employee retirement dis- bursements to 28.5 percent of payroll (including contributions to Social Security and the employer match to the Thrift Savings Plan). More of the pension cost was shifted to the employee, but the new system was much more equitable for the 40 percent who received few or no benefits under the old system. By 1999, more than half of the federal workforce was covered by the new system, and the government’s per capita share of the cost (as the employer) was less than half the cost of the old system: 20.2 percent of FERS payroll vs. 44.3 percent of CSRS payroll, representing one of the largest examples of government savings anywhere. Although the government pension system has become more like private pension systems, it still remains much more generous, and other means might be considered in the future to move it even closer to private plans. GSA: Landlord and Contractor Management. The General Services Administration is best known as the federal government’s landlord—designing, constructing, managing, and preserving government buildings and leasing and

— 83 — Central Personnel Agencies: Managing the Bureaucracy and PPO’s chosen White House Liaisons and their staff at each agency, is essential to the management of this large, multilevel, resistant, and bureaucratic challenge. If “personnel is policy” is to be our general guide, it would make sense to give the President direct supervision of the bureaucracy with the OPM Director available in his Cabinet. A REFORMED BUREAUCRACY Today, the federal government’s bureaucracy cannot even meet its own civil service ideals. The merit criteria of ability, knowledge, and skills are no longer the basis for recruitment, selection, or advancement, while pay and benefits for com- parable work are substantially above those in the private sector. Retention is not based primarily on performance, and for the most part, inadequate performance is not appraised, corrected, or punished. The authors have made many suggestions here that, if implemented, could bring that bureaucracy more under control and enable it to work more efficiently and responsibly, which is especially required for the half of civilian government that administers its undeniable responsibilities for defense and foreign affairs. While a better administered central bureaucracy is crucial for both those and domestic responsibilities, the problem of properly running the government goes beyond simple bureaucratic administration. The specific deficiencies of the fed- eral bureaucracy—size, levels of organization, inefficiency, expense, and lack of responsiveness to political leadership—are rooted in the progressive ideology that unelected experts can and should be trusted to promote the general welfare in just about every area of social life. The Constitution, however, reserved a few enumerated powers to the federal government while leaving the great majority of domestic activities to state, local, and private governance. As James Madison explained: “The powers reserved to the several States will extend to all the objects, which, in the ordinary course of affairs, concern the lives, liberties and properties of the people; and the internal order, improvement and prosperity of the state.”31 Modern progressive politics has simply given the national government more to do than the complex separa- tion-of-powers Constitution allows. That progressive system has broken down in our time, and the only real solution is for the national government to do less: to decentralize and privatize as much as possible and then ensure that the remaining bureaucracy is managed effectively along the lines of the enduring principles set out in detail here. AUTHORS’ NOTE: The authors are grateful for the collaborative work of the individuals listed as contributors to this chapter for the 2025 Presidential Transition Project. The authors alone assume responsibility for the content of this chapter, and no views expressed herein should be attributed to any other individual. — 84 — Mandate for Leadership: The Conservative Promise ENDNOTES 1. U.S. Constitution, Article II, Section 2, https://www.law.cornell.edu/constitution/articleii#section1 (accessed February 1, 2023). 2. 5 U.S. Code §§ 1101 et seq. and 1103(a)(5), https://www.law.cornell.edu/uscode/text/5/part-II/chapter-11 (accessed February 1, 2023). 3. 5 U.S. Code § 1201, https://www.law.cornell.edu/uscode/text/5/1201 (accessed February 1, 2023). 4. 5 U.S. Code § 7101, https://www.law.cornell.edu/uscode/text/5/7101 (accessed February 1, 2023), and § 7117, https://www.law.cornell.edu/uscode/text/5/7117 (accessed February 1, 2023). 5. S. 1871, An Act to Prevent Pernicious Political Activities, Public Law No. 76-252, August 2, 1939, https:// govtrackus.s3.amazonaws.com/legislink/pdf/stat/53/STATUTE-53-Pg1147.pdf (accessed February 1, 2023). 6. H.R. 995, Uniformed Services Employment and Reemployment Rights Act of 1994, Public Law No. 103-353, 101st Congress, October 13, 1994, https://www.congress.gov/103/statute/STATUTE-108/STATUTE-108-Pg3149. pdf (accessed February 1, 2023). 7. 5 U.S. Code § 1206, https://www.law.cornell.edu/uscode/text/5/1206 (accessed February 1, 2023). 8. 42 U.S. Code § 2000e, https://www.law.cornell.edu/uscode/text/42/2000e (accessed February 1, 2023). 9. 40 U.S. Code § 581, https://www.law.cornell.edu/uscode/text/40/581 (accessed February 1, 2023). 10. U.S. National Archives, “Milestone Documents: Pendleton Act (1883),” last reviewed February 8, 2022, https:// www.archives.gov/milestone-documents/pendleton-act (accessed February 2, 2023). 11. S. 2640, Civil Service Reform Act of 1978, Public Law No. 95-454, 95th Congress, October 13, 1978, https:// www.congress.gov/95/statute/STATUTE-92/STATUTE-92-Pg1111.pdf (accessed February 2, 2023). 12. Donovan Sack and Bill Theobald, “Veterans Affairs Pays $140 Million in Bonuses Amid Scandals,” USA Today, November 11, 2015, https://www.usatoday.com/story/news/politics/2015/11/11/veterans-affairs-pays-142- million-bonuses-amid-scandals/75537586/ (accessed March 15, 2023). 13. U.S. Government Accountability Office, “Federal Workforce: Distribution of Performance Ratings Across the Federal Government, 2013,” GAO-16-520R, May 9, 2016, https://www.gao.gov/assets/gao-16-520r.pdf (accessed March 15, 2023); U.S. Government Accountability Office, Results-Oriented Management: OPM Needs to Do More to Ensure Meaningful Distinctions Are Made in SES Ratings and Performance Awards, GAO-15- 189, January 2015, https://www.gao.gov/assets/gao-15-189.pdf (accessed March 15, 2023); U.S. Government Accountability Office, “Measuring Federal Employee Performance,” WatchBlog, posted October 18, 2016, https://www.gao.gov/blog/2016/10/18/measuring-federal-employee-performance (accessed March 15, 2023); Lisa Rein, “The Federal Workforce, Where Everyone’s Performance Gets Rave Reviews,” The Washington Post, June 13, 2016, https://www.washingtonpost.com/news/powerpost/wp/2016/06/13/heres-the-news-from-the- federal-government-where-everyone-is-above-average-way-above/ (accessed March 15, 2023). 14. Ludwig von Mises, Bureaucracy (New Haven, CT: Yale University Press, 1944), https://ia902300.us.archive. org/17/items/mises-pdfs/1944-01-01_LudwigVonMises_Bureaucracy.pdf (accessed February 2, 2023). 15. Figure 1, “Permanent, Non-Senior Executive Service Employee Performance Rating Outcomes (All Rating Systems, Calendar Year 2013),” in U.S. Government Accountability Office, “Federal Workforce: Distribution of Performance Ratings Across the Federal Government, 2013,” p. 6. 16. President Donald J. Trump, Executive Order 13839, “Promoting Accountability and Streamlining Removal Procedures Consistent with Merit System Principles,” May 25, 2018, in Federal Register, Vol. 83, No. 106 (June 1, 2018), pp. 25343–25347, https://www.govinfo.gov/content/pkg/FR-2018-06-01/pdf/2018-11939.pdf (accessed February 2, 2023). 17. President Joseph R. Biden Jr., Executive Order 14003, “Protecting the Federal Workforce,” January 22, 2021, in Federal Register, Vol. 86, No. 16 (January 27, 2021), pp. 7231–7233, https://www.govinfo.gov/content/pkg/FR- 2021-01-27/pdf/2021-01924.pdf (accessed February 2, 2023). 18. Rachel Greszler and James Sherk, “Why It Is Time to Reform Compensation for Federal Employees,” The Heritage Foundation, July 27, 2016, https://www.heritage.org/jobs-and-labor/report/why-it-time-reform- compensation-federal-employees. 19. Andrew G. Biggs and Jason Richwine, “Comparing Federal and Private Sector Compensation,” American Enterprise Institute Working Paper No. 2011-02, revised June 2011, https://www.aei.org/wp-content/ uploads/2011/10/AEI-Working-Paper-on-Federal-Pay-May-2011.pdf?x91208 (accessed February 2, 2023).