Today, we are delighted to feature Francis Fukuyama in the pages of Persuasion once again. But some of you may not know that he writes a regular column, “Frankly Fukuyama,” which recently became part of the Persuasion family.
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Dear Elon,
Congratulations on the resounding victory of your candidate, Donald Trump, a result to which you contributed significantly. I understand that you are tapped to become an efficiency Czar in the new administration, a post that will be very critical since the federal bureaucracy does indeed need fixing. However, I have some suggestions for things to keep in mind when embarking on this post.
As I’m sure you know, you will find working in government very different from working in the private sector. The chief difference is that people in government are hugely constrained by rules. For example, you cannot begin firing people on day one as you did at Twitter. Federal employees are covered by a host of job protections created by Congress. Trump has a plan to eliminate those protections by restoring an executive order from his first administration to create a “Schedule F” category that would permit the president to fire any worker at will. But such a move will be heavily contested, and it will likely be months before the legal barriers to action are eliminated.
In any event, firing government bureaucrats is not necessarily a path to greater efficiency. It is a widely believed myth that the federal bureaucracy is bloated and overstaffed. This is not the case: there are basically the same number of full-time federal employees today as there were back in 1969, about 2.3 million. This is despite the fact that the government now disburses more than five times as many dollars as it did back then. In fact, you can argue that the government is understaffed, due to relentless pressure over the decades to keep headcounts down. The Center for Medicare and Medicaid Services, for example, oversees the spending of $1.4 trillion, or one fifth of the entire federal budget, with a staff of only 6,400 full-time employees. These workers have to check for Medicare fraud, evaluate and certify tens of thousands of health providers, and make sure that payments to tens of millions of Americans are made in a timely manner. If you cut this staff, the amount of fraud and waste in the Medicare system is likely to go up, not down. The Office of Refugee Resettlement, which looks after the millions of refugees entering the country, has a staff of 150. By increasing the staff at the Internal Revenue Service, the government is expected to take in an additional $561 billion over the next decade.
The government has compensated for this understaffing by hiring legions of contractors (among which is your company, SpaceX). It is easier to fire a contractor than a regular federal employee, but then who is going to perform the services the contractor provides? You may actually save money by taking these functions back into the government because federal workers are paid less, but then you will need to hire more people and will likely get lower quality.
Deregulation has to be part of any plan to make government more efficient. There are clear targets for deregulation, particularly in the construction industry—something you already know given your experience building plants in the United States. We have way too many permitting rules that slow down or altogether prevent infrastructure projects, like the National Environmental Protection Act (NEPA) that requires environmental impact statements that run to thousands of pages and take years to write. Moreover, federal and state laws invite private litigation to enforce environmental laws, which is both expensive and time-consuming. This is why it takes nearly a decade to get approvals for offshore wind farms, and years to construct transmission lines to send electricity from Texas to California. So anything you can do to streamline this process will be welcome. This will be one of the easiest wins for a new administration, one that will have positive effects in areas from affordable housing to climate adaptation. (You should, however, recognize that a lot of over-regulation occurs at a state level, over which you will have no control. That is, of course, why you moved Tesla from California to Texas.)
There is another type of deregulation that needs to occur, however, if the government is to be made more efficient. People blame the bureaucracy for over-regulating the private sector, but the bureaucracy itself is over-regulated. Americans have never trusted the government, and over the decades have piled up a mountain of rules that bureaucrats must follow. An example of this are the Federal Acquisition Regulations (FAR), which contains hundreds of pages of rules that government procurement officers must follow before they can acquire anything from an F-35 fighter to office furniture. Hiring new employees is also extremely difficult; my students often have to wait months before getting a job interview for an open position in the federal government. There are, moreover, a lot of DEI requirements that don’t necessarily reward merit, rules that I’m sure a Trump administration would be happy to torch.
Many conservatives believe that government bureaucrats have too much discretionary authority and use it to enact a liberal agenda, thereby eluding democratic control. This does occur in some instances. But the real truth is rather the opposite: bureaucrats spend way too much of their time complying with hundreds of rules mandated by Congress, rather than using their independent judgment to make decisions that lead to good results for citizens. They need to be liberated from these constraints, and have their performance judged by the outcomes they achieve rather than how risk-averse they are. This is, of course, how Silicon Valley and the private sector operate.
You obviously can’t think of delegating more authority to the bureaucracy if the bureaucrats don’t have the training and skills to use that authority wisely. And here we have another problem. Young people are not going into the federal bureaucracy. The average age of a bureaucrat is 47; only 7 percent of the workforce is under the age of 30 while 14 percent are over 60. In an age of artificial intelligence, younger workers are desperately needed to fill the ranks. But young people are reluctant to work in federal agencies. Complying with complex hiring rules makes it slow and difficult to land a job, and there is little social prestige to saying you work for the government.
Under these conditions, you cannot fire your way to excellence. Government work needs to be made attractive to younger, tech-savvy people; they need the flexibility to go in and out of federal employment and not be subject to a Government Service pay scale for job categories created 70 years ago, when most bureaucrats were clerks and typists.
So here’s the deal. You will never be able to run the government the way you run your companies. But you can do a lot to make it more efficient. The trick is to avoid simplistic moves like mass layoffs and the closing of entire agencies. Remember that Donald Trump’s appointee Rick Perry wanted to close the Department of Energy, not realizing that one of its most important functions was to run the system of national laboratories that were responsible for, among other things, research on nuclear weapons and energy. You will also run into the problem that Congress has a say in how the government operates. Even if that branch is controlled by Republicans, they will have equities in different parts of the American state, and may not allow you to violate statutes that they had earlier endorsed.
We need to cut back government regulation of many parts of the private sector. But we also need to deregulate the government itself, and allow those who work for it to actually do their jobs. If Donald Trump wants to help the American people, he needs to see the government not as an enemy to be dismantled, but as an effective and indeed necessary means of doing so.
Yours Sincerely,
Francis Fukuyama
Francis Fukuyama is the Olivier Nomellini Senior Fellow at Stanford University. His latest book is Liberalism and Its Discontents. He is also the author of the “Frankly Fukuyama” column, carried forward from American Purpose, at Persuasion.
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