Decentralizing Federal Agencies

What Federal Leaders Can Do to Reconstruct Federalism

This is another commentary in Civic Way’s series on reconstructing American government. The author, Bob Melville, is the founder of Civic Way, a nonprofit dedicated to good government, and a management consultant with over 45 years of experience working with governmental agencies across the US.


  • Our federal government is massive, but it has not grown as much as the population it serves
  • The federal bureaucracy suffers from many flaws, including low public esteem, but many individual agencies are highly-regarded and public expectations remain high (if not unreasonable)
  • While public perceptions tend to emphasize federal government inefficiencies and waste, the most serious flaw of federal government is its avoidance of futures thinking
  • Decentralizing federal agencies offers a generational opportunity to not only improve the efficiency of the federal government, but strengthen the federal-state partnership and federalism
  • Establishing a mandatory national service program can help repair the social contract and support the phased transfer of federal resources to state and local entities


It is no secret that our faith in federal government is low. Public opinion surveys reveal a growing disenchantment with federal government. With few exceptions, the federal government’s favorability ratings have steadily declined since the 1960s. We tend to view the federal government as a bloated behemoth, unable or unwilling to solve society’s biggest problems.

What is less understood is how conflicted we are about the federal government. We distrust the federal government writ large, but we admire many individual agencies, such as the Post Office, National Park Service and FBI. Despite our skepticism about the federal government, we still expect it to solve our most intractable challenges.

Regrettably, since John Kennedy’s soaring call for public service in his inaugural address, we have come to expect far more from government than we do from ourselves.
Even as our frustration with the federal government has grown, our understanding of it—its strengths as well as its weaknesses—has plummeted. We perceive it as ineffective, inefficient and even wasteful without knowing why. We worry about its size and debt, but remain immobilized about how to make it work better. And, as the pandemic has brought federalism to its knees, we remain clueless about the federal government’s responsibility for saving it.

As we have written, we believe that federalism is broken. The bedrock of federalism—the federal-state government partnership—no longer works and the federal government is doing nothing to fix it. Much has been written about improving the efficiency of the federal government, but precious little about helping state and local governments repair federalism. A stronger federal-state partnership will improve governmental efficiency at all levels and improve our readiness for the next crisis.

Our Sprawling Federal Government

The federal government is many things, but above all, it is massive. It spends $4.4 trillion annually, about 21 percent of the nation’s entire gross domestic product (GDP), of which $3.5 trillion is financed by federal revenues and $984 billion by borrowing. While estimates vary, it employs a blended workforce of 9.1 million federal, contract and grant employees, about 6 percent of the total US workforce. By most metrics, it is the world’s largest organization.

Despite public perceptions to the contrary, the number of permanent federal employees has not grown. Per the US Office of Personnel Management (OPM), there are just over two million federal employees, down from 2.25 million in 1990 and 2.16 million in 1980. Per the Volcker Alliance, the total blended workforce (i.e., federal, contract and grant employees) has fluctuated, falling from 1995 to 1999, rising from 2000 to 2010 and then falling again from 2010 to 2015. Overall, the ratio of the blended federal workforce to the US population has decreased.

While the number of full-time federal civilian workers has held steady, the contract portion of the blended workforce is another matter. The ratio of contract/grant employees to federal employees rose from 2.4 in 1984 to 2.6 in 2016 (after a surge in 2009 and 2010 due to the Great Recession). From 2017 to 2018, federal contract spending grew by 9 percent. In 2018, we spent twice as much on federal contractors as we did on wages and benefits for full-time federal civilian workers.

Our views of the federal government are inconsistent. Public faith in the federal government has steadily declined. According to a 2019 Pew Research Center survey, only 17 percent of us trust the federal government “to do the right thing.” Yet, we give high marks to many federal agencies (e.g., the USPS, National Parks Service, CDC, NASA and FBI) and federal programs (e.g., food safety, workplace safety, natural disaster relief and anti-terrorism). And most of us still expect the federal government to help solve virtually every major problem affecting our nation.

Our Myopic Federal Government

The federal government has become an inefficient bureaucracy, with siloed business models, unwieldy spans of control and as many layers as an archeological dig. The number of cabinet departments has grown from 7 in 1961 to 15 today. The number of managerial layers has grown from 17 in the early 1960s to 71 today. With the Vice President and seven other cabinet-level officials, the President’s span of control is 23:1 (excluding other staff).

In addition to the executive agencies reporting directly to the President, there are 66 independent federal agencies. These agencies are typically led by an autonomous board or an official insulated from political interference (e.g., causal termination). These agencies, such as the Federal Reserve System, Federal Trade Commission, Securities and Exchange Commission and US Postal Service, also are known for limited coordination, with other federal agencies and state and local governments alike.

Even as we demand more of our federal government, we invest less in its ability to meet those demands. Political attacks on the so-called “deep state” have intensified. Our commitment to a professional federal workforce has frayed. The federal civil service system has eroded. The number of political loyalists has grown. Notoriously slow federal hiring processes have contributed to high vacancy rates, a rapidly aging workforce, a looming retirement tsunami and creeping contractor costs. In short, our federal workforce is becoming older, costlier and more partisan.

Politicians accuse the federal government of being bureaucratic, inefficient and even wasteful, but there has been no serious effort to improve efficiency and accountability since Vice President Gore’s Reinventing Government initiative. To illustrate, the federal performance appraisal system has become an absurd contrivance. In 2013, for example, 98 percent of federal employees were rated “outstanding,” “exceeds fully successful” or “fully successful.” Per a 2015 GAO analysis, the duration of the federal dismissal process ranges from 170 to 370 days.

Some believe that the federal government is too concentrated in metro DC. In reality, the federal government is quite decentralized, at least geographically. About 85 percent of federal personnel are located outside of the DC area. Many federal agencies (e.g., the USPS, Federal Reserve, National Park Service and Centers for Disease Control and Prevention) are geographically dispersed.

The real issue is the federal government’s centralized business model. Federal agencies—even those that have been geographically dispersed—remain organizationally centralized. Even as many large corporations have migrated from conventional centralized structures to flatter, more agile and egalitarian structures, most federal agencies still employ rigid, hierarchical chains of command with slow, top-down decision-making.

There are many reasons that so many of our largest corporations have moved away from heavily centralized business models. For starters, excessive centralization can stifle creativity and agility. It can hinder customer service. Ultimately, it can impede an organization’s ability to attain its most critical performance metrics (e.g., market share and profitability).

At the federal level, excessive centralization can slow responsiveness, alienate citizens and muddy the mission. The Department of Homeland Security (DHS), created after the 9-11 terrorist attacks, exemplifies this dilemma. With 22 agencies, it is our largest law enforcement entity and arguably the least accountable. Reports of abuse, wasteful spending and misconduct are widespread. Its bunker mentality, understandable at one time, appears to have calcified. This year, some of its agencies, such as Custom and Border Protection (CBP) and Immigration and Customs Enforcement (ICE), have been used for dubious purposes even as vital missions, like legal immigration, have been neglected.

Even more distressing, the federal government has become myopic and—too often—dysfunctional. Many causes have been identified—political polarization, legislative gridlock, gerrymandering, closed partisan primaries, dark money. Regardless of the causes, our two political parties have drained our civic life of electoral competition and constructive policy debates, seemingly more interested in power than progress. Bold legislation for solving our toughest problems rarely earns bipartisan support. Congress has become particularly adroit at creating pointless theater like shutdowns and avoiding the future consequences of its current behavior.

Our federal legislators can move swiftly to replace a federal judge, but can’t find the time to face (let alone solve) big problems, at least not without a crisis. And when Congress is forced to deal with a crisis, it usually finances its response with more debt. The federal deficit will total $3.7 trillion for the current fiscal year, thanks in no small part to the Social Security and Medicare programs. Financing such deficits will require the issuance of more and more debt, increasing the ratio of public debt to real GDP to over 100 percent by next year. The federal government’s ability to solve big problems is slipping away.

Federalism’s Silent, Yet Stunning Failure

There is no shortage of opinions on how the pandemic has exposed (laid bare) societal flaws, but few have echoed our views on the structural flaws of federalism. The federal-state partnership has largely disappeared. The federal government treats state governments as silent partners, state governments lack the fiscal capacity (and some the managerial capacity) to prevent or navigate big crises and local governments are continually preempted by states from bolstering their fiscal capacity or carrying out policies chosen by their voters.

When it works, federalism reveals the best of our federal, state and local governments—ingenuity, cooperation and resilience. When it fails, like during the budget shutdowns or the current global pandemic, it puts on full display far less admirable traits—confusion, redundancy and finger-pointing. One would think that the current threat of Covid-19 or the future threats of climate change or fiscal health would galvanize action, but few federal leaders seem to care about federalism.

The stark reality is that there is no mechanism for assessing or strengthening federalism. The US Advisory Commission on Intergovernmental Relations (ACIR), created in 1959 to debate federal-state partnership issues, has not existed since 1996. Led by a commission of 26 federal, state and local leaders, this small agency (e.g., a $2 million budget and 30 staff) was influential during the Johnson and Nixon administrations. During the 1980s and early 1990s, however, its board became more partisan and its influence waned. After it issued (and then rescinded) a one-sided report, it was discontinued.

The irony is that, just as the pandemic has reinforced the need for a stronger federal-state partnership, we find ourselves without a viable means for rebuilding that partnership. Just as Congress debates another relief package for state and local governments, we lack a forum for debating serious structural issues. How could a new federalism help reduce our vulnerability to future pandemics or disasters? How could federal resources be used to build a stronger partnership?

This failure of imagination merely assures another lost opportunity. Instead of using federal aid to galvanize new ideas, such as funding new governmental models or incentivizing federal, state and local initiatives, we will likely throw more money at the problem. Instead of linking aid to reform that could reinforce our future capacity, we will likely pass more debt onto our children. Instead of using the moment to find new ways to defeat future crises, we will continue to defer and distract.

The Deteriorating Social Contract

The pandemic also has taught us (or at least most of us) the limits of individualism. We may resent having to wear masks and comply with other public health guidelines, but most of us understand at some level our responsibilities to our fellow citizens. The reported progress on vaccine development is as breathtaking as the medical treatment has been inspiring. But individual action, no matter how ambitious or heroic, is no substitute for collective action—not in the face of a global pandemic.

The pandemic’s lessons could not be clearer. We are indeed in this crisis together and we will defeat it together. When one of us contracts the virus, we are all vulnerable. When we refuse to wear a mask, we risk the health of others, not just our own. Fighting this pandemic (or any crisis for that matter) requires the coordinated efforts of countless individuals. Since that coordination cannot be assured without effective governance, we must make government work better—at all levels.

When President Kennedy implored, “Ask not what your country can do for you, but what you can do for your country,” he was reminding us of our social contract. For our nation to succeed, we must balance what we receive from government with what we give it. We must recognize our responsibilities as individuals and as citizens—our obligation to others as well as ourselves.

Regrettably, the federal government does not ask enough of its citizens, especially given what we expect in return. Our national service programs (e.g., AmeriCorps, Volunteers in Service to America and Peace Corps) have been allowed to atrophy. Due to budget constraints, these programs must reject up to five applicants for each opening. Given the immediate need, such as election workers and contract tracers during the pandemic, such budget policies are deplorable. Given the long-term potential, such as fully developing human capital (e.g., youth, seniors and inmates), the neglect is immoral.

Building a Better Federal Government

There are many sound ideas for modernizing the federal government, far too many to mention here. Our focus is limited to what the executive branch can do to repair federalism and, at the same time, launch a process for improving the management of federal agencies.

The federal government needs a mechanism for rebuilding federalism. Whether it is an independent commission like the defunct ACIR or an existing entity like the Congressional Budget Office (CBO), it should have sufficient power to shape policy. For instance, it should have a role in planning and approving intergovernmental grants, incentives and partnerships. It should involve leaders from federal executive and legislative branches, state executive and legislative branches, cities, counties and special districts. In addition, the mechanism should require the involvement of experienced professionals (e.g., city managers, institute of government directors and financial advisors).

Using the structured mechanism, leaders should explore feasible options for organizationally decentralizing federal agencies. One option would be a franchise model embodying the best traits of centralization and decentralization. With this model, a federal agency would retain control over enterprise functions like planning and data management, distribute selected resources to state governments and delegate operational decision-making. Ultimately, the goal should be to transfer capacity to reconstituted states and shift suitable programs from federal to state agencies. In addition, leaders should continue efforts to geographically decentralize federal agencies.

In conjunction with the decentralization initiative, federal leaders should explore other organizational options for improving efficiency. They could, for example, reorganize cabinet agencies around similar programs (e.g., Agriculture, Commerce and Labor), merge or reduce independent federal agencies, eliminate excessive management layers and launch an initiative to strengthen the federal civil service system, revamp human resource processes and recruit younger, more diverse employees.

In addition, the federal government should shift more resources to planning, prevention and preparedness. It should reestablish crisis planning units for pandemics, climate change, terrorism and other future threats. It should restore its commitment to data management, science and research. And it should issue more grants to encourage state and local collaboration in targeted programs (e.g., community development, public health and law enforcement).

Finally, as it strengthens state capacity, the federal government should strengthen the federal brand and unify Americans. One way to attain this vital goal would be to establish a mandatory national service program. Upon turning 18, every American would be required to serve the country for two years. The new national service program would offer three service options: military service, civilian domestic service and civilian international service.

The military service option would approximate the options available today to young Americans who volunteer to serve in one of the nation’s armed forces (e.g., Army, Navy, Marines, Air Force and Coast Guard). The civilian domestic service would be a greatly expanded AmeriCorps offering service assignments in every region and for every programmatic need, including public safety, public health, student mentoring, election support, disaster aid, environmental and infrastructure. This program would be managed through contracts with state commissions and local nonprofits. The civilian international service option would be an expanded Peace Corps with the same structure as the current program. The entire program would be funded to ensure adequate training, housing and living stipends.

Restoring Our Faith in Democracy

As Lincoln wrote to Congress in 1861, one purpose of the federal government is “to give everyone an unfettered start and … fair chance in the race of life.” This purpose is a noble goal, but it should be attained not just through the federal government, but through state and local governments, the private sector and individual citizens working together. Federalism is the framework for that partnership.

Decentralizing the federal government in a thoughtful, deliberate way offers several benefits. It can help strengthen federalism and the federal-state partnership. It can improve the ability of federal, state and local agencies to coordinate services to citizens. It can boost the capacity of states, regions and localities to confront civic challenges. It can solidify ties between citizens and government and help restore public faith in government. And, much like the Department of Defense learned when it delegated decision-making to ground units, it can enhance the prospects of success—that is, forge a more nimble, responsive and resilient organization.

Establishing a robust national service program will reinforce the values that bind us as Americans. It will provide vital aid to communities (and other nations) at an affordable cost. It will enrich our young adults with a new understanding of other people and communities and with valuable skills and opportunities for future success. It will help restore the federal government’s reputation across American and the globe. And it will instill in the next generation the indispensable lesson that, despite our many differences, we are all Americans.

Together, strengthening American federalism and renewing our individual commitment to the public good will remind us of our exceptional opportunity. By learning to work together, we can help bridge the political and cultural divides that threaten our future. By improving government, we can improve our ability to solve big problems and better prepare our nation for future crises. By solving problems, we can restore public faith in government and democracy.