Merit and Accountability Make Bureaucracy Less Dumb.

In the USA, they once did; we can restore them today.

Construction of the State, War, and Navy Department Building, Washington, D.C., 1885

Throughout American history, the federal government has tended to expand dramatically during periods of war and crisis. About a generation after each crisis subsided, there tended to be a reset, an attempt to claw back the cronyism and dysfunction that results from large growth in budget, personnel, and authority. We’re in desperate need of such a clawback today.

President Lincoln used war powers to create new departments during the Civil War, and levied a small income tax in contravention of the norm that the federal government could not collect direct taxes (that tax was later ruled unconstitutional). For most of the 19th century, a “Spoils System” existed, in which the parties awarded professional government positions to friends. Incompetent “Spoils” appointees bloated the government, and created a mess. The Pendleton Act of 1883 ended the spoils system and created a robust system of merit-based tests for the civil service.

At the beginning of the 20th century, the Congress and States adopted the 16th Amendment, allowing a federal income tax. The rest is history: the crisis of the Great Depression led to the New Deal, the biggest expansion of federal power to that point. The Second World War and its aftermath was another period of major expansion, when bureaucratic authority began to meld with military and industrial power. The clawback attempt came again: President Eisenhower, who fought the war in Europe, warned of the “military-industrial complex” growing out of control. And in the 1970s, when the U.S. economy faltered significantly for the first time since the Great Depression, the country was so anxious and fed up that even President Jimmy Carter felt the political need to campaign on reducing and streamlining bureaucracy. 

It didn’t work. Today Carter’s legacy is inextricably tied to years of severe inflation and failed foreign policy that led to Reagan’s smashing electoral and economic success. The 1978 Civil Service Reform Act, which had the possibility of being the biggest reform to bureaucracy since the Pendleton Act, was crippled by special interests, judicial activism pushing a form of proto-DEI, and union influence. What could have been a Constitutional restoration ended up solidifying two extremely damaging trends that we are still facing: after a century we stopped using merit-based tests, and we gave near-ironclad employment protections to federal employees. We can’t hire the right people, and we can’t fire almost anyone.

Our bureaucracies have been getting steadily dumber, more bloated, and more broken for decades. And it’s breaking the country.

Without merit and accountability, we struggle to develop efficient energy infrastructure. $100 billion can’t build a train network, just a train to nowhere in California – maybe. $42 billion gets thrown away on a crony scheme for rural broadband that hasn’t connected a single rural American to broadband. Untold billions of dollars funneled to unaccountable NGOs. My editor has spared you from dozens of other examples.

This shouldn’t sound like a conservative rant: Merit wasn’t always right-coded! The lack of competence in our government prevents the accomplishment of political programs on both sides.

Citizens have become distrustful of so many government agencies — agencies that light money on fire by the billions of dollars, that harass innocent or politically unpopular targets while ignoring criminal abuse, or that fail to protect a former President. Many assumed the USSS had ulterior motives, but there is no need to attribute to corruption what can be explained by a culture of utter incompetence that prioritizes virtue signaling and abandons merit and accountability.

In May we wrote: “If a culture doesn’t aim for excellence and competence, it will tend to be not excellent and not competent.” A government policy that aims for competence won’t always work. But it will always be better than a government policy that outlaws screening for and demanding competence. Competence solves so many more problems than anyone understands. We should once again make it our lodestar. This should be a goal we all share, left or right or otherwise (though one suspects that for a while longer, the organized political left will still oppose this, even if center-left entrepreneurs agree with us!).

How “Disparate Impact” Theory Ended Merit

Immediately after the enactment of the CSRA in 1978, an affirmative action lawsuit began that ultimately led to the abolition of the Professional and Administrative Career Examination (PACE), the gateway test to federal jobs. When the 1883 Pendleton Act eliminated the spoils system, it replaced it with a competitive exam to assess the merit of entry level applicants. Over the course of almost a century, these exams eventually developed into the 1974 PACE. Just two months after CSRA was passed, the lawsuit Luévano v. Campbell was filed in federal court in Washington, D.C., claiming that the PACE exam discriminated against blacks and hispanics, creating disparate impact. Most government agencies preferred a “rating” of 90 for employment via the PACE, but a rating of 70 was considered “passing.” Results in the 1978 test were as follows.

• 46.9% of whites passed with 70, with 13.2% reaching a 90 rating

• 39.9% of Asians passed with 70, with 7.5% reaching a 90 rating

• 19.2% of Hispanics passed with 70, with 2.6% reaching a 90 rating

• 14.5% of Blacks passed with 70, with 0.6% reaching a 90 rating

• 41.2% of males passed with 70, with 12.0% reaching a 90 rating

• 43.8% of females passed with 70, with 10.8% reaching a 90 rating

These tests were difficult – and no racial or gender group had an easy shot at a government job through them (notice the lower male pass rate versus females, in 1978!) which is how it ought to be. And the Government Accountability Office found that the race-neutral PACE was highly-predictive of the types of skills needed in competitive federal jobs. 

But under pressure in the disparate impact lawsuit, Carter’s new Office of Personnel Management chose to settle and get rid of the test. Activist courts determined that the scores of black and hispanic applicants weren’t high enough, and that therefore the tests were automatically discriminatory. Reagan’s DOJ, seeing the judicial writing on the wall, finalized the consent decree. And thus died the century of merit in the federal government that had begun with the Pendleton Act, on the basis of proto-DEI judicial activism. For the last 43 years, our government has been hiring millions of people with no merit-based tests, and giving them broad protection against termination via unionization

The results are in. It’s time to end that experiment. 

Recently a number of elite colleges in the US made the same intellectual mistake that our government did by removing standardized tests from the admission process, telling themselves a story that they could keep accurately recruiting talented students without clear measures of aptitude. But after removing the SAT from college admissions, institutions like MIT, Harvard, and Yale have reinstated standardized tests, realizing how effective they are as a predictor of academic performance. Those were institutions that had the power to react to an obvious reality: that giving up merit wasn’t working for them, and was affecting the quality of their student body. They reversed course and restored merit.

We need the same realization in our civil service, and it starts with realizing that the very idea of disparate impact is misguided. As Thomas Sowell wittily put it, “Even with things whose outcomes are not in human hands, ‘disparate impact’ is common. Men are struck by lightning several times as often as women. Most of the tornadoes in the entire world occur in the middle of the United States.” Merit isn’t discriminatory, and the case law should reflect that common sense reality. You may or may not agree with recent court decisions that revisit rulings from 40+ years ago, but the disparate impact doctrine is more obviously mistaken — and it’s still causing harm to the country. Today, we have millions of people in government who have never passed any tests. A huge number are incompetent of all races and identities, and there's no way to fire them.

At the state level, a bold merit-based testing effort by any single state with clever leadership could prompt the legal challenges necessary to finally resolve this question.

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In the first quarter of 2024, government jobs at the federal, state, and local level made up over 25% of all jobs added in the United States. It’s an astounding figure. Today there are officially 2.9 million federal bureaucrats, and even more contractors — at least 4 million. And D.C. funds nearly 2 million state and local jobs. All together, the Federal Government spends well over $1 trillion a year on the wages of some 8.6 million people. And our government is on a hiring (and spending) spree at the same time that trust in its ability to get things done is at an all time low, and debt is at an all-time high.

We need accountability frameworks that make clear that the executive branch can fire employees for poor performance — and that separation of powers should ensure this right. With those frameworks, a spirited executive could test everyone in an administration, let the poor-performers go, and raise salaries for those left — making the cultures stronger and cutting waste. There are powerful special interests on the other side, demanding that we keep the status quo. Fighting against such interests requires bold leaders. But it’s worth the fight.

Toward the end of the Trump administration, a reform using a provision of law called Schedule F was a promising effort to reintroduce accountability in the federal administrative state. 

Under Schedule F reform, civil servants in roles that affect policy could be reclassified to make it possible to remove them for poor performance. Schedule F held out the greatest potential for bureaucracy reform since the 1970s. Months before Trump left office, the Director of the Office of Management and Budget found that 88% of that agency, or 425 employees, could be reclassified under Schedule F. On his first day in office, President Biden rescinded the Schedule F order promulgated by his predecessor. The priority was clear: protect a permanent state from any accountability. And last April, Biden’s Office of Personnel Management issued regulations to preempt another order like it, trying to ensure bureaucrats will keep their civil service protections even if they are reclassified under a future Schedule F reform.

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How did our government get to the moon? Merit was non-negotiable. How did we build atomic weapons? Merit was non-negotiable. How did we build the Pentagon in 16 months? You get the idea. Bureaucracy with merit and clear mechanisms for accountability is something we can deal with in our Republic. But massive bureaucracies and without merit or accountability (which is what we have now) are suffocating that Republic, and undermining all the goals we may have.

We may never get back to the scope of federal government we had a century ago, and that is something that practical-minded people have come to accept. But we can do so much better. Unfortunately, most people on the left (and some on the right, to be sure) don’t have “government incompetence” as a top-5 policy problem in America. They have resigned themselves to a growing government, and a less and less competent government. Competence should be at the top of our list. It solves all of the other issues that fall on one side or the other — in the left’s case, things like the state of the working class, regulations that cut pollution without crushing businesses, more effective welfare, affordable healthcare, even functional training programs and education opportunities.

But if we want back the type of government that gets to the Moon and beyond, we have to be honest about what’s gone wrong. And we have to accept that it will require some bold fights against entrenched interests!

Our civilization will decline rapidly from here if we continue lighting trillions of dollars on fire, adding illogical rules and regulations, and harassing our top innovators for the wrong reasons - all of which will happen if we cannot bring back competence. And on the positive side - there’s so much we could be doing to lift up the lives of millions of our citizens with just a fraction of the money our bureaucracies squander.

Our liberty, our families and our way of life is at stake. Whether we’re in or outside of Washington DC, it’s all of our jobs as leaders to engage in this battle, to restore competence by making merit-based tests and accountability legal and the norm in government once again. 

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Taking action: Innovation in government begins in our laboratories of democracy at the state-level in the USA. We hope to partner with a few bold governors and legislative leaders on ideas we are drawing up at the Cicero Institute around this topic.