Reducing Government Spending: Some Facts and a Common Half-Truth

The Trump Administration’s moves to reduce the number of federal workers are prompting a lot of debate. Some are saying the approach is haphazard and not based on objective analysis. Others say the bloat in the government is so great that aggressive moves are needed to start making a difference. Politicians are mostly reverting to their partisan positions and playing to their constituencies.

I believe government labor costs can be reduced significantly without harming vital services. We have a government that is not as efficient as it could be and many functions in agencies, particularly in mission support areas, are duplicative and inefficient. The government overuses contractors, leading to wasted time and money. On top of that, GAO reports that the government loses between $233 billion to $531 billion annually in improper payments.

Let’s Start With Some Facts, As Unpopular As That May Be

Because we are so politically polarized, it is difficult to have discussions regarding the size of the federal workforce because republicans and democrats do not appear to be able to agree on facts. It seems facts are irrelevant to many politicians. Republicans typically want to drastically cut the federal workforce (except in their districts, where federal workers are doing absolutely essential work). Democrats typically want to preserve every federal job and grow the workforce. Republicans who want to cut the workforce typically have no problem with contractors, even though they often cost far more than federal employees doing comparable work. Democrats who want to preserve jobs often have no problem cutting contractor jobs (unless they are in their districts, where contractors are doing absolutely essential work).

When I was Chief Human Capital Officer at the Department of Homeland Security (DHS), I had a discussion with one republican Senator’s staff regarding contractors at DHS. I explained that DHS was paying more than $400 thousand per year for contractors who were doing GS-13 and GS-14 level work. I was told in no uncertain terms that the Senator would not support adding federal workers so we could save money. I guess the deficit doesn’t matter when the money is going to a contractor. When I explained to a House democrat’s staff that it was in the best interests of the Transportation Security Administration mission that Transportation Security Officers retain their exclusion from the General Schedule, I was told in no uncertain terms that their boss wanted those employees moved to the General Schedule. Apparently the mission is not as important as the political benefit of moving employees to an outdated pay system designed in 1949 for a million clerks. In both cases, facts took a back seat to politics and knee-jerk partisan reactions to policy ideas.

In the interest of encouraging a discussion based on facts, here are two facts and a half-truth that should be considered when we talk about government spending and the government’s labor costs. I expect these to be rejected by many people on both sides of the aisle. God forbid we have fact-based discussions regarding how our tax dollars are spent.

Fact: GAO’s report makes it clear that the spending that is most ripe for savings is in improper payments. The federal employee workforce costs roughly $300 billion per year. Even if we reduce that number by 25 percent, it does not even begin to approach the savings we could achieve by focusing on improper payments. If we break the government and cut the federal workforce by 50 percent, it still doesn’t begin to approach the cost of improper payments. This is beyond a no-brainer – there is so much taxpayer money being pissed away in improper payments that any reasonable person would say it should be priority one for savings.

Fact: GAO reports that the federal government spends more than $750 billion on contracts for goods and services. The bulk of that ($456 billion) is in the Department of Defense. DoD is, for example, planning to spend $2 trillion on the F-35 aircraft. Regarding the F-35, GAO says “DOD’s planned use of the F-35 and its availability have decreased. The Air Force, Navy, and Marine Corps project they will fly the F-35 less than originally estimated on an annual basis. The F-35 fleet’s overall availability has trended downward considerably over the past 5 years, and none of the variants of the aircraft (i.e., the F-35A, F-35B, and F-35C) are meeting availability goals.” Weapons systems are not the only category where the government spends obscene amounts of money. Between 2017 and 2021, GAO reports the government spent $139 billion on time and materials contracts for engineering and consulting services. They found agencies sometimes used these contracts when they could have switched to other, lower-risk types. They did not address how little value some of these contracts provide.

Half Truth: Relative to the population, the federal workforce is smaller than it has been since 1950. Every time I read an article or see a report on television regarding the size of the federal workforce, someone trots out the statistic that the size of the federal workforce has remained relatively constant since the end of World War II, while the population has more than doubled. Thus the same number of workers are serving twice the number of Americans. That factoid is a great example of something that is true, but intellectually and practically dishonest. Let’s leave the incredible growth of federal contractors aside and focus solely on the number of federal employees.

Whether we believe the government needs more or fewer people, we should make the case based on the work that needs to be done, the benefits to the taxpayers, and the most efficient way to get it done. The workforce-to-population comparison does not do that. It takes two data points – population and Federal jobs – links them as top line numbers, then proceeds to argue that the number should be higher today because the ratio has changed. The problem with that is that our nation, our expectations of government, the world, the nature of work, technology, and virtually everything else has changed. Comparing the size of the 1950s or 1960s workforce with the 2025 workforce at a macro level does not tell us anything that we can use to determine if the number is too high, too low, or where it ought to be. When we look at the number of employees, the number of contractors or the number of grantees, we need to dig a lot deeper in the numbers before we make public policy.

The belief that government employment has failed to keep pace with the population is not new. A decade ago, OMB’s Analytical Perspectives addressed the issue directly –

“Fifty years ago, most white-collar Federal employees performed clerical tasks, such as posting Census figures in ledgers and retrieving taxpayer records from file rooms. Today their jobs are vastly different, requiring advanced skills to serve a knowledge-based economy. Professionals such as doctors, engineers, scientists, statisticians, and lawyers now make up a large portion of the Federal workforce. More than half (55 percent) of Federal workers work in the nine highest-paying occupation groups as judges, engineers, scientists, nuclear plant inspectors, etc., compared to about a third (33 percent) of private sector workers in those same nine highest paying occupation groups. In contrast, 45 percent of private sector workers work in the seven lowest-paying occupation groups as cooks, janitors, service workers, clerks, laborers, manufacturing workers, etc. About 26 percent of Federal workers work in those seven lowest-paying occupation groups. Between 1981 and 2011, the proportion of the Federal workforce in clerical occupations fell from 19.4 percent to 5.1 percent of the workforce, and the proportion of blue-collar workers fell from 22.0 percent to 9.7 percent.”

OMB rightly pointed out that the workforce of today is far different from what we had in the 1950s and 1960s. Most readers are probably too young to remember, but in 1965 the federal government had almost 1.1 million clerks. In fact, when the Classification Act was passed in 1949, the work force was mostly clerical. A Washington Post article from January 2014 put the number at three quarters of the workforce. (In the 1950s we had about 400,000 blue collar employees, so it is more likely that 3/4 of white collar employees were clerks.)

1950s and 1960s offices were full of clerks doing paperwork, typing, and filing paper records. The nature of work in the Federal government has changed so radically that comparing top line 1950s and 1960s employment ratios to today tells us absolutely nothing. The more accurate comparison of 1950s and 1960s government to 2025 is the white collar non-clerical workforce, because the role of government is defined far more by higher-skilled and higher-paying occupations than by clerical and blue collar jobs.  I say that because most clerical work is done to facilitate other, more substantive, work. Most blue collar work is either maintaining facilities (another example of facilitating other work) or repairing military equipment, ships and aircraft. If we correct for the number of blue collar and clerical positions in government in the 1950s and 1960s, we get an entirely different view of the ratio of employees to residents. 

In 1955 the United States had 503 residents per non-clerical white collar employee – today we have 172. The workforce performing substantive government work has grown a lot. As technology moved into government, it displaced clerical workers. The white collar workforce fluctuated over the years, but the number of non-clerical white collar workers has continued to grow. In just the last 10 years, the number of Federal employees started at 2,038,000, fluctuated for a few years, and is now up to 2,259,000. The size of the clerical workforce has dropped from 151,000 in 2009 to 99,000 today and the blue collar workforce has dropped from 207,000 to 182,000. The growth in the past five years is primarily in Defense, Homeland Security and the Department of Veterans Affairs.

Much of the historical growth of the substantive government workforce is driven by changes in life in 2025 vs life in 1950. We have far more air traffic controllers because air travel is accessible to virtually everyone. We have an Environmental Protection Agency (created during the Nixon Administration) because people prefer being able to breathe. The Department of Veterans Affairs has grown dramatically because we keep producing Veterans and they are living longer. Much of the growth of government is for things that people actually want. That fact, the political environment, our economic conditions, or any of countless other data points must go into any discussion of the right size of the workforce.

The Details on Federal Employment

The Truth

The truth is that the size of the workforce is not the proper starting point for the discussion. Nor is the number of contractors, or the ways the Department of Defense buys weapons systems. What people want from government is the proper starting point. That discussion should start on Capital Hill, where elected representatives of the people can debate the issues openly and in full, supported by data.

If that happened, and if (a big if) democrats and republicans decided to act as statesmen and stateswomen, rather than as politicians, perhaps we could reach agreement on the role of government and the resources it needs. If it did, and we get some agreement on the role of government, then we could have a discussion about the number of federal employees and contractors we need, Sadly, I think there is virtually no chance of that happening. The likely result is haphazard cuts in the smallest target (the federal workforce), rather than going after the massive dollars in improper payments and the billions going to contractors.