Washington’s blended workforce does not expand and contract by accident, but presidents may have less control over its size than they believe. As the following history strongly suggests, war and peace play a much more important role in shaping the true size of the federal government’s blended workforce than grand announcements of caps, cuts, and freezes on federal hiring. Presidents can and do affect the pace of growth and decline, however, and almost always take aim at big government even when they intend to expand it. The following pages discuss this history by administration over the past four decades.
The third year of Ronald Reagan’s administration provides the starting point for a contemporary history of Washington’s blended workforce. As Table 1 shows, the total number of federal contract, grant, military, and Postal Service employees reached almost 10 million in 1984, as Reagan approached the midpoint of his administration, and had barely changed by 1990.
Although the ranks of federal, Postal Service, and grant employees had risen, the number of active-duty military personnel and contract employees had fallen as the post–Cold War demobilization began.
As Table 2 shows, the ratio of federal employees to contract and grant employees was relatively steady from 1984 to 2002; surged from 2002 to 2005 as US troops, defense contract employees, and a small number of grant employees were sent to Iraq and Afghanistan; surged again after Obama launched his $830 billion grant-filled stimulus plan in 2009; and had dropped back to historic trends by 2015. Setting aside the 2005 and 2010 increases as the result of war and economic calamity, the ratios have been remarkably stable over time. Although there is a floor on the industrial side of Washington’s blended workforce, substantial numbers of contract and grant employees reside in a surge tank that rises and falls.
In a sense, there were two Reagans: the defense hawk and the budget cutter. Measured in constant dollars from 1981 to 1989, Reagan increased the defense budget by almost $200 billion between 1981 and 1985 but cut the budget by about $75 billion from 1985 to 1989. In doing so, Reagan proved that even a defense hawk can tame the defense budget without sacrificing readiness. According to the Center for American Progress, almost 90 percent of his cuts came from the defense procurement budget, which dropped from $170 billion in 1985 to $121 billion in 1989.9 Reagan approved a small reduction in the number of active-duty military personnel and began the downsizing that eventually reduced defense civilian employment by a third.
George H. W. Bush
President George H. W. Bush separated himself from his predecessor’s rhetoric during the 1988 Republican campaign by promising a “kinder, gentler nation,” “a thousand points of light,” and a positive role for government. “Does government have a place?” he asked. “Yes. Government is part of the nation of communities—not the whole, just a part. I do not hate government. A government that remembers that the people are its master is a good and needed thing.”
Bush also issued the audacious pledge that would eventually doom his reelection. “The Congress will push me to raise taxes, and I’ll say no,” he promised the party faithful. “And they’ll push, and I’ll say no, and they’ll push again, and I’ll say to them, ‘Read my lips: no new taxes.’”
However, Bush already knew that he could not honor his “no new taxes” pledge unless he balanced the federal budget. He also knew that spending cuts and government downsizing offered the only path to success. Yet, given his commitment to public service as “a noble calling and a public trust,” Bush seemed reluctant to impose new caps, cuts, and freezes. The post–Cold War peace dividend offered the only path to scaling back Washington’s blended workforce.
Bush decided to reap the dividend with a 25 percent drawdown in active-duty military personnel and an equal cut in defense spending. He put the cuts on the implementation track immediately after his inauguration in 1989.14 He placed a one-year freeze on military spending in 1989, began withdrawing forces from Europe to “more appropriate levels” in 1990, negotiated a nuclear weapons treaty with Russia in 1991, and put more cuts “in train” in 1992.
The peace dividend was ready for further harvesting when Bill Clinton took office on January 20, 1993, and he began the work immediately with a White House hiring freeze and a 100,000-person cut in the number of federal employees. Clinton expanded the effort by asking Congress to give him the authority to increase the cut to 273,000 under the Federal Workforce Restructuring Act of 1994. Clinton signed the bill only one year into his presidency but claimed victory in his battle against big government:
"After all the rhetoric about cutting the size and cost of government, our administration has done the hard work and made the tough choices. I believe the economy will be stronger, and the lives of middle-class people will be better, as we drive down the deficit with legislation like this. We can maintain and expand our recovery so long as we keep faith with deficit reduction and sensible, fair policies like this."
Clinton claimed credit for this harvest, but Vice President Al Gore did the hard work through his National Performance Review, commonly referred to as “reinventing government.” Gore and his reinventors used the employment ceilings embedded in the Workforce Restructuring Act to press for maximum cuts; accelerated the procurement process ordered by the Federal Acquisition Streamlining Act of 1994; targeted 200 military installations for closure under the Base Closure and Realignment Act; demanded performance plans from every department and agency under the Government Performance and Results Act of 1993; and eliminated the equivalent of 640,000 pages of agency rules under the regulatory planning process created by executive order.
George W. Bush
George W. Bush entered the White House a most fortunate president. He inherited not only a $128 billion surplus but a blended workforce headcount that was 600,000 smaller than George H. W. Bush’s had been at the end of his term. He had room to maneuver as he entered office after an economic boom under Clinton.
Bush showed little interest in further downsizing as he prepared for his inauguration. Clinton had already harvested most of the peace dividend, represented in the smallest blended workforce headcount in recent history. By the end of his presidency, the total number of federal, contract, and grant employees hovered near a twenty-year low, and Washington’s blended workforce seemed to be moving toward the proper meshing.
Bush did not enter office expecting to become a war president. He was as shocked as the nation by the terrorist attacks, and he could not have known that he would send US troops to war in Iraq or that defense spending would rise 30 percent over his first three budgets. Having started with Clinton’s defense cuts, Bush pushed defense spending to $450 billion in 2002, $492 billion in 2003, and $531 billion in 2004—almost all in response to 9/11. Nondefense spending would rise almost 18 percent during the same period as he pursued several relatively expensive domestic priorities, including the Transportation Security Administration, a new farm bill, education reforms, and Medicare prescription drug coverage.
As went the defense budget, so went the blended workforce headcount. The Bush administration added almost 1.4 million contract and grant employees to Washington’s blended workforce just between 2002 and 2005. With that large increase, the percentage of contract and grant employees as a share of the blended workforce also grew significantly as the wars expanded. Whereas there were 2.3 contract and grant employees for every federal employee in 2002, the ratio was 3 to 1 in 2005.
If George W. Bush had entered the White House a fortunate president, Barack Obama arrived at a most unfortunate time. The economy was reeling in the wake of the 2008 subprime mortgage crisis, the federal deficit was headed toward $1.5 trillion with the debt rising quickly, and credit markets were frozen. The wars in Iraq and Afghanistan still raged. And three of Obama’s cabinet nominees withdrew from consideration amid scandal or under political pressure. His honeymoon period seemed to be over before it began.
Obama showed no sign of worry on February 24, 2009, however, when he appeared before Congress to deliver his economic recovery plan. After all, he already knew that he would receive a peace dividend by ending the 2008 troop surge that Bush had launched six months before the election. Obama cast the coming cuts as an opportunity to reshape government. Speaking to the University of Michigan’s class of 2010, he rejected the traditional argument about big and small government: “The truth is, the debate we’ve had for decades now between more government and less government, it doesn’t really fit the times in which we live. We know that too much government can stifle competition and deprive us of choice and burden us with debt.”
Donald Trump did not mention the government-industrial complex in any form during the 2016 campaign or his transition into office, but he did discuss each side of the complex separately. On the industry side, he criticized Boeing for overpricing the new Air Force One: “Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel Order!” he tweeted on December 6, 2016.21 In another tweet on December 12, Trump targeted Lockheed Martin for overpricing the F-35 Joint Strike Fighter: “The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th.”22 Lockheed stock fell 2 percent later that day and fell 1 percent after Trump repeated his commitment to cost savings in early January.
On the government side, his Contract with the American Voter listed a federal hiring freeze as a solution to “corruption and special interest collusion.” As former Speaker of the House Newt Gingrich wrote at the time, the promise would reassure mainstream Republicans that Trump deserved their support:
"Trump’s Contract with the American Voter should also alleviate any concern among traditional Republicans that their party’s candidate is somehow not Republican enough. The provisions in the Trump Contract would reduce the size and scope of government as much as any president in our lifetimes, including Ronald Reagan. Its ethics reforms and bureaucracy-cutting measures would significantly reduce the power of the executive branch Trump seeks to lead."
Even as Trump accused contract firms of price gouging, he blamed the federal government for waste, fraud, and abuse. Asked in a February 2016 debate how he would balance the federal budget, he blamed agencies. “Waste, fraud, and abuse all over the place,” he answered, “Waste, fraud, and abuse. You look at what’s happening with every agency—waste, fraud, and abuse. We will cut so much, your head will spin.”
Asked two weeks later how he would pay for his tax cuts, Trump again put the burden on government. “We’re going to buy things for less money,” he answered. “We will save $300 billion a year if we properly negotiate. We don’t do that. We don’t negotiate. We don’t negotiate anything.”
The First 100 Days Trump followed through on his complaint on January 23, 2017, when he imposed a 90-day “across-the-board” freeze on civilian hiring. He signed the order without remarks, but the administration framed the memorandum as a broad attack on big government. “Look, I think you saw this with the hiring freeze,” the president’s press secretary, Sean Spicer, explained later in the day. “There’s been frankly, to some degree, a lack of respect for taxpayer dollars in this town for a long time, and I think what the president is showing through the hiring freeze, first and foremost today, is that we’ve got to respect the American taxpayer. They’re sending us a ton of money; they’re working real hard.”
Though perfectly legal, the freeze exempted thousands of national security and public safety positions, and it had little effect on nondefense employment. Relatively few federal employees leave their posts in winter, and most of the vacancies were filled by an unknown number of service contract employees.28 Brief though it was, the freeze created an atmosphere that one employee likened to the theme music in Jaws.
The uncertainty increased when Trump signed Executive Order 13781 in March. Designed to “improve the efficiency, effectiveness, and accountability of the executive branch,” the order gave the Office of Management and Budget (OMB ) authority to develop plans, as appropriate, to eliminate or merge whole agencies, pieces of agencies, or agency programs. The order also asked the OMB director to pose three broad questions about government performance:
- Whether some or all of the functions of an agency, a component, or a program are redundant, including with those of another agency, component, or program;
- Whether certain administrative capabilities necessary for operating an agency, a component, or a program are redundant with those of another agency, component, or program; and
- Whether the costs of continuing to operate an agency, a component, or a program are justified by the public benefits it provides.
The answers were not due for 180 days, but the future became clear when Trump released his 2018 “skinny budget” on March 16. Although best described as a wish list of future priorities, the budget outline contained a $54 billion increase in defense spending to honor the president’s promise to make the military “so strong ... nobody’s gonna mess with us,” and a parallel cut in nondefense programs and agencies that included the State Department.
Congress would have to approve the proposals, but all things being equal transaction by transaction, the defense increase would almost certainly raise the number of contract and grant employees on the industry side of the federal workforce, while the domestic cuts would almost certainly reduce the number of federal employees on the government side. Fortune estimated that the cuts could eliminate 100,000 to 200,000 jobs, which former Clinton administration budget director Alice Rivlin described as “drastic layoffs that would be very hard to do very quickly.” Stories about nervous, even terrified, federal employees hit the front pages again, but the effects on the total number of federal employees were ambiguous at best.
However, the administration made no secret about the depth of the cuts in what OMB Director Mike Mulvaney called the “America First Budget:”
"The president’s commitment to fiscal responsibility is historic. Not since early in President Reagan’s first term have more tax dollars been saved and more government inefficiency and waste been targeted. Every corner of the federal budget is scrutinized, every program tested, every penny of taxpayer money watched over."
Mulvaney stretched the history-making timeline all the way back to George Washington when he later said the “skinny budget” would stop 240 years of organic growth in government: “The president of the United States has asked all of us in the executive branch to start from scratch, a literal blank piece of paper, and say, ‘If you’re going to rebuild the executive branch, what would it look like?’”
Finally, Mulvaney explained the president’s decision to end his 90-day hiring freeze as a natural product of organizational learning:
"So we’re going from this sort of across-the-board hiring freeze. That’s not unusual for any new management team to come in—to put into place when they come into an organization, whether it’s the private sector or a government. Not unusual for a new management team to come in and say, look, stop hiring, let us figure out what’s going on, we’ll get acclimated and then we’ll put into place something that’s more practicable and smarter. And that’s what this is. So you’ll see this across-the-board ban tomorrow and replaced with a smarter approach."
Reinventing Government? If there was any comfort for anxious federal employees in the budget messaging, it came in the president’s statements in early March supporting a government that works better and costs less. “We are going to do more with less, and make the government lean and accountable to the people,” Trump wrote in his budget message to Congress. “Many other government agencies and departments will also experience cuts. These cuts are sensible and rational. Every agency and department will be driven to achieve greater efficiency and to eliminate wasteful spending in carrying out their honorable service to the American people.”
The president had not become a reinventor per se, but he did promise to do something “very, very special” to make government more efficient and “very, very productive.”37 In doing so, he even prompted some of Gore’s reinventors to endorse the effort. As Elaine Kamarck, chief staffer to the former vice president, told Politico in March, “To give them credit, it’s time to do it again. It is time to review the government again and ask the hard questions about what it’s doing and what it should be doing. And it is time to focus on obsolete functions and getting rid of them.”
Trump may have used reinventing’s “works-better-and-costs-less” cadence, but his definition of a government that works better and costs less was a government that cost less because it was no longer working.
On the government side of the complex, for example, his 2018 budget targeted nondefense federal employees for deep reductions in force. The administration did not set a specific downsizing target, but it ordered all departments to identify opportunities for attrition-based workforce cuts. The budget also scheduled wholesale cuts in nondefense programs such as environmental protection and Medicaid.
On the industry side, the budget gave contract and grant employees cause for joy. It offered 40 percent more for defense operations and maintenance, 20 percent for research and development, and 6 percent for procurement. Meanwhile, the budget promised the Army, Navy, and Air Force increases of 55 percent, 49 percent, and 46 percent, respectively, foroperations and maintenance; somewhat smaller increases for Air Force and Navy research and development; and 16 percent for Navy shipbuilding and conversion. These increases all promised large hikes in the contracting and grant workforce.
Deconstructing the Administrative State The number of nondefense federal employees could fall much further in subsequent years if Trump pursues his early plan to “deconstruct the administrative state.” Conservatives commonly use the term to describe the wholesale dismantling of the “deep state” that generates government growth and interference. The president endorsed dismantling when he appointed Stephen Bannon to the White House staff. Bannon used his close ties to Trump’s right-wing base to press for administrative and regulatory reform. Speaking at the Conservative Political Action Conference in late February 2017, he described deconstruction as the third “bucket” of the president’s America first agenda:
"The third, broadly, line of work is deconstruction of the administration. … If you look at these cabinet appointees, they were selected for a reason, and that is the deconstruction. The way the progressive left runs, is if they can’t get it passed, they’re just going to put in some sort of regulation in an agency. That’s all going to be deconstructed, and I think that that’s why this regulatory thing is so important."
Bannon had been forced out of the administration by August 2017, but his deconstruction agenda was widely shared by other senior officials, including Mulvaney and his team of budget cutters. Mulvaney did not use the term specifically, but he shared Bannon’s concern when he described executive orders as a poor substitute for legislative success:
"To the extent that we only do stuff within the executive branch—as with any executive orders—they can be overturned by the next administration if they see things differently. That’s the way the executive order system works. And that if we wanted real permanent change, the best way to go about that would be to do legislative change."
Trump had already started the deconstruction by using his pen to establish a travel ban on migrants from seven Muslim-majority countries; establish Regulatory Reform offices across the government; develop construction plans for a wall between Mexico and the US ; create an Office of American Innovation—led by his son-in-law and White House aide, Jared Kushner; and require every department and agency to develop reorganization plans.
The president also encouraged Congress to use the obscure Congressional Review Act to roll back Obama’s contracting orders.43 Trump’s first target was Executive Order 13673, which required contract bidders to disclose any labor law violations in the three-year period prior to the solicitation. Federal contract officers were ordered to use the information to assess the bidder’s record of integrity and business ethics; determine whether the violations were serious, willful, repeated and/or pervasive; and list the findings on the federal government’s Awardee Performance and Integrity Information System for other departments and agencies to use. Firms with violations could still bid for contracts, but the rule sent a clear warning that violations could matter in the final decision.
Trump had promised to revoke the so-called blacklisting rule during the campaign, and he welcomed business leaders to the Oval Office on March 27, 2017, when he sat down to sign the rollback:
"When I met with manufacturers earlier this year—and they were having a hard time, believe me—they said this blacklisting rule was one of the greatest threats to growing American business and hiring more American workers. It was a disaster, they said. This rule made it too easy for trial lawyers to get rich by going after American companies and American workers who contract with the federal government—making it very difficult."
Democrats and labor unions did not agree. With the revocation bill already on the president’s desk awaiting signature, Sen. Elizabeth Warren (D-MA) released a caustic report, Breach of Contract: How Federal Contractors Fail American Workers on the Taxpayer’s Dime. Drawing on federal databases, congressional investigations, and the Federal Contractor Misconduct Database of the nonprofit Project for Government Oversight (POGO), the report concluded that “the violation of labor laws and abuse of workers by federal contractors is common, repetitive, and dangerous.” While acknowledging that contract firms supported critical federal missions, Warren said they often did so by underpaying workers and putting health and safety at risk. She warned her colleagues that the risks would rise if contract firms took the rollback as permission to reduce employee protections even further.
Breach of Contract was too late to make a difference in Trump’s decision or media coverage. As the president indicated at his signing ceremony, Obama’s Fair Pay and Safe Workplaces rule was only the first of many rollbacks ahead: “I will keep working with Congress, with every agency, and most importantly, the American people, until we eliminate every unnecessary, harmful and job-killing regulation that we can find. We have a lot more coming.” He had inherited Obama’s pen and intended to use it toward a very different end.