we will now reconvene and welcome our second panel of witnesses we have doctor andrew biggs who is a resident scholar at the american enterprise institute for public policy research and mister bill dougan national president of the national federation of federal employees and chairman of the federal workers alliance welcome pursuant to committee rules all witnesses will be sworn in before they testify if you wouldn't mind please stand up and raise your right hand do you solemnly swear or affirm that the testimony you are about to give this committee will be the truth the whole truth and rightsize federal employment going into the future academic economists agree that federal employees receive higher salaries and benefits than private workers with similar education and skills much less is known however regarding the appropriate number of federal employees is the federal workforce larger than necessary to provide the services americans require there are no definitive answers but several points may be helpful in considering these issues first how does today's federal civilian workforce compare to that  and sixty nine there were sixty seven americans for each federal employee while in two thousand and nine there were one hundred and eleven americans per federal worker however this does not necessarily imply that today's federal workforce is too small if the productivity of the federal workforce followed that of the economy as a whole each federal employee today would be capable of serving around one hundred and thirty five americans just as each private sector employee today provides more goods and services than he did in  moreover there is a large shadow workforce of federal contractors who are not included in workforce statistics indeed there are few good estimates of the total number of federal contractors nor is it easy to say whether overall they offer better or worse value to the taxpayer th career civil service employees however the rise of the contracting workforce does imply that the total number of federal employees may be significantly higher than official statistics indicate second how do federal staffing levels compare to those in the private sector the answer is that we simply do not know principally because federal activities often do not have clear private sector analogs at the state and local level such comparisons are easier to make we know for instance that private schools often have less administrative overhead than public schools allowing them to focus more resources on teachers in the classroom if overstaffing is most likely to occur in places where it is most difficult to detect then it could occur at the federal level we cannot know for certain without further analysis third we can compare the u s to other countries although because countries differ in how they delegate responsibilities along levels of government only measures of the total public sector workforce are truly meaningful compared to other oecd countries the u s federal state and local workforce is slightly above the median however most oecd countries spend more than the u s making raw comparisons potentially misleading compared to governments that spend around the same as the u s government which is around thirty six percent of gross domestic product the u s does have an unusually large public sector workforce of the seven oecd countries of similar economic size to the u s public employment averaged eleven percent of the total workforce versus fourteen percent in the u s policymakers hoping to reduce the size of the federal workforce have focused on attrition which seems a fair and less disruptive way to reduce the labor force if desired ordinary federal turnover is very low compared to the private sector however the federal workforce is around five years older than the private sector average and is generally eligible to retire at younger ages thus there is the potential to reduce the size of the federal workforce without firings and layoffs through the gradual process of retirement when we think of rightsizing the federal workforce we need a clearer idea of what the right size will be a ten percent reduction in the federal workforce as recommended by the president's fiscal commission is not a hard number the appropriate number could be higher or lower on the other hand given the state of the federal budget there is also the danger of studying the issue to death without doing anything to address it gradually reducing the size of the federal workforce while commissioning further analysis of the best of total federal employment and the best allocation of employees between agencies has the potential to shift staffing levels in the right direction without the danger of dramatically overshooting in the short term along the way policymakers should monitor the effects of workforce reductions on the productivity of the federal government i am confident that we can do more with less but lawmakers should work together to find ways in which to do so thank you very much mister ross thank you mister biggs mister dougan you are recognized for five minutes for an opening thank you chairman ross and ranking member lynch for inviting me to testify today i am here on behalf of the national federation of federal employees and the one hundred and ten thousand federal workers we represent as well as nine member unions of the federal worker alliance on which i serv chairman if i can leave you with only one message today let it be this you do not measure the size of government by the number of federal workers you measure the size of government in dollars and cents  hearing is called rightsizing the federal workforce implicit in the hearing's title is the insinuation that the federal workforce is too big while it may seem logical that if you reduce the federal workforce you have also reduced the size of the federal government i can assure you that arbitrary reductions in federal agency staff do not truly reduce the size of government at all reducing an agency's workforce without a corresponding reduction in the agency's mandate actually tends to increase the size of government because arbitrary staffing limitations tend to cost federal agencies more than they save how is that possible federal workforce reductions without corresponding decreases in the work expected of agencies employees to meet their workforce needs however relying on contractors in this way generally costs taxpayers more than simply maintaining and properly staffing an inhouse agency workforce contracting though useful and economical in many cases has some characteristics that make it expensive for agencies contracting out requires the government to conduct contractor oversight which adds costs if done properly but is sure to be expensive if not done properly private firms have to pay executive salaries which make private firms more expensive than inhouse staff on top of that contractors have to make a profit all these factors make it difficult to deliver contractor services at the same value to the american taxpayers that the civilian federal workforce can this is particularly true for work that is has not already been contracted out the contractor workforce is currently about five times the size of the civilian federal workforce what is left in government is here for a reason that is precisely why during the bush administration's competitive sourcing initiative inhouse federal workers won the vast majority of  publicprivate competitions one hundred percent of them in some agencies in the end there are generally no savings derived from arbitrary staff reductions rather a cost shift moves resources away from the federal workforce t contractors this is a pointless exercise that reduces government efficiency hurts the services that federal agencies provide and sticks taxpayers with a bigger bill of course a bigger bill for taxpayers means bigger government regardless of the impact on the size of the federal workforce as i said before you do not measure the size of government by the number of federal employees you measure the size of government in dollars and cents this is precisely why we are opposed to proposals that take a nonstrategic broadbrushed approach to cutting federal jobs here are just a few we have seen recently the federal workforce reduction act h r six hundred and fifty seven aims to reduce the size of the federal workforce by allowing federal agencies to hire just one employee for every two that leave the federal service the federal hiring freeze act h r one thousand seven hundred and seventy nine would abruptly freeze practically all hiring in federal agencies with very few exceptions the bowlessimpson proposal included a provision to arbitrarily reduce the federal workforce by two hundred thousand ftes by two thousand and twenty through allowing agencies to hire two new employees for every three that leave federal service finally the u s house of representatives passed their fiscal year two thousand and twelve budget resolution which called for an attrition policy in the federal government that permits federal agencies to hire only one new employee for every three workers who leave federal service we strongly oppose all of these proposals to arbitrarily and nonstrategically reduce the federal workforce while showing little regard for the impact it will have on the services that the american people will lose as a result or the net budget impact when all costs are considered however wellintentioned these proposals may be they do not save taxpayers money and therefore they do not shrink the size of government that is not to say that we are opposed to all federal government downsizing the realities of our federal budget situation are such that downsizing in some federal agencies is appropriate we understand that however if congress is serious about truly reducing the size of government then lawmakers are going to have to make the tough choices about which programs to reshape scale back or discontinue altogether a nonstrategic broadbrushed approach to cost cutting that simply mandates significant personnel reductions in federal agencies will fail to achieve savings and will cause wastefulness and disarray in numerous agencies throughout the government again you do not measure the size of government by the number of federal employees you measure the size of government in dollars and cents i appreciate the subcommittee's decision to hold a hearing on this matter and i thank the subcommittee for the opportunity to provide testimony mister ross thank you mister dougan i will now recognize myself for five minutes for questions the national commission on fiscal responsibility's report states although the nation's federal outlays on things like unemployment benefits are countercyclical and there has also been an increase in employment due to the census at the same time though it is difficult on taxpayers and a burden on the economy if  federal government is growing in size and the federal workforce is growing in size at a time when the rest of the economy is least able to support that so the burden is difficult for the private economy when that economy is in recession and they have am not an economist but i can tell you for purposes of the federal works force about eighty five percent of the federal workforce lives and works outside of washington d c mister ross let me ask you this the quit rate for federal workforce mister dougan i think if your goal is strictly to downsize the workforce then certainly attrition is a good tool but again if you are downsizing the workforce without looking at the work that is going to be left or that you expect the the fact that we have spent four hundred dollars billion last year in interest payments alone we face difficult tradeoffs in trying to balance our budget can or let me ask you this should the federal government do more with less mister biggs sure i think the federal government has no choice but to do more with less because we are facing an increasing burden in the future and if you look at the federal budget today we are borrowing something like thirty five cents out of every dollar we spend so we have to fix that and deal with the challenges of entitlements and other issues going forward i think the size of the public sector workforce is something that needs to be addressed it will not by itself fix these problems i think we all recognize that mister ross and reducing the size of the federal workforce through attrition would it disrupt critical functions of government services mister biggs well obviously that depends on what your view of critical functions is i remember that when the president took office he said he was going to go through the federal budget line by line and eliminate wasteful or noncritical spending obviously in their point of view there wasn't very much there my opinion would differ on that i think we can maintain staffing and maintain effectiveness for the programs and the agencies that people clearly see as the most important we have to make difficult decisions going forward about certain activities  service support things like that activities where you have clear private sector analogs to what the federal government does i fully acknowledge that many federal workers have a skill set which is unique and which differs from  what private sector workers do those are hard to outsource at the same time though the federal government runs computer systems it has upkeep and maintenance just as private sector plans do and i strongly suspect from my work eleven budget negotiations in the letter you stated federal workers are in fact severely underpaid given the fact that as of december two thousand and ten the average federal compensation according to opm including benefits was one hundred and one thousand seven  the answer begs what data sets you are looking at when you look at the department of labor's bureau of labor statistics data they show a pay gap of approximately twenty four to twenty six percent i believe with also unemployment you can't get your pay and unemployment at the same time it is hospitalization benefit you can't get your pay and unemployment and hospitalization benefit at the same time and a death benefit  can't get your pay and your health benefits and unemployment and a death benefit obviously if you are dead at the same time so they have multiplied the costs now the employee does not get those all at one time but they have lumped those together to reflect what the cost would be for the federal employee i agree that is an expenditure for the federal government each one of those but that doesn't go to overpayment of the federal employee they don't get all that at once they  is the more aggressive one and it purports to save thirteen dollars billion over five years the president's proposal now that focuses just on quoteunquote federal employees the people that you represent the president's proposal looks at the other eighty percent of the workforce the contractor workforce and it proposes cutting contractors together multiply by ten or so and you are still not there the point is we have to look at both of these i would not be opposed at all to looking at contractors i think not enough is known about how the contract workforce functions whether we know about value on the contractor side i remember one of our earlier hearings when i was new to this committee asking the defense department audit agency how many auditors we had in iraq were spending ten dollars billion a month and they said actually zero and i said give me that again they said well we don't actually have auditors in iraq we have them in virginia and we are auditing iraq from virginia that  yes i mean i think both the contracting workforce and the federal workforce need to be on the table with respect to looking for places to save money there is no question about that but the biggest concern with that is if all we are interested in doing is saving money and we are not looking at the consequences of slashing budgets or doing away with a certain percentage of the workforce and not accounting for the work that is not going to be done or  the reduced delivery of services to the taxpayers i mean that doesn't ever seem to be a part of any discussion when we talk about you know either cutting the salaries or freezing wages  employees association have submitted comments in opposition to reducing the size of the federal workforce in a haphazard fashion and i would like those reports those comments to be entered into the record if you would third largest number of federal employees in the united states i also probably represent the largest number of federal contractors in the united states and i think they are both doing a wonderful job but i also believe as does chairman i a based on his statement today that this ought not to be a matter of theology the idea that somehow platonically there is some ideal size for federal employees the number of federal employees andor the number of federal contractors gets us into the realm of theology rather than analysis and i think congress needs to insist on rigorous analysis not arbitrary goal setting that has no basis in any kind of analysis that tells us what our needs are or what value we get for our dollars if i understood the testimony of our colleague misess lummis she would exempt civilian employees from her attrition plan in dod veterans administration and dhs if that is a correct understanding that ex sixty six percent of the entire civilian workforce meaning that the attrition she talks about to achieve the goals she wishes falls disproportionately on those remaining civilian agencies many of which by the way operate in her home state of wyoming answer would be you hire federal employees until the gain produced by the additional federal employee equals the cost of the federal employee the marginal benefit equals the marginal cost and when we think about the productivity effects of downsizing the federal government we think if we lose that employee are we losing services to the public sector for the cost of that employee mister connolly fair enough but would you not agree though frankly in the public sector in the private sector we have to do some differentiation for example how you measure productivity of border security guards is different than how you measure the productivity of some lab scientist in fda trying to protect public safety there is health foodborne illnesses and pharmaceuticals mister biggs you are exactly right it is far far easier to measure productivity and output in the private sector because you have dollars and cents attached if somebody is not willing to pay for a good and service you say it is not worth what is being charged i think that is one reason a contractor provides better value for money on a yeartoyear basis but also provides which i think is extremely valuable the ability to recast the federal workforce according to changing needs then it may make sense a contractor can be let go and you can hire new contractors in different areas we want fewer people in iraq and more people working in health care we can't do that with theh mister connolly well what percentage of the current workforce is eligible for retirement in the near future mister biggs i think over the next ten years or so a majority i  believe the number is around sixty percent mister connolly do you think it is reasonable to say that if sixty percent of the entire federal workforce is eligible for retirementh of course this congress seems to be doing everything in its power to want to incentivize and accelerate retirements where possible and we to have attrition at the rate of two to one do you think the federal workforce can actually do its job especially when we are exempting sixty six percent of it with that kind of attrition rate given the pending retirements we are looking at mister biggs i don't believe the proposals are to replace all retiring people forever at a onetotwo or onetothree ratio i believe the proposals are to do it until you reach some level say ten percent below the current workforce mister connolly would it surprise you to learn that one of the major employers in am trying to be as rational as i can i remember my mother used to tell us that right is right if nobody is right and wrong is wrong if everybody is wrong and so trying to figure out what would be the right size of government it seems to me begs the question because the first question that has to be answered is what do you view as the role and function of government what is the purpose what is the mission what are you trying to accomplish and i guess if we can answer those questions then it gets easier to decide what the right size would be it seems to me that the purpose of living quite frankly is to try and improve the quality of life and to make living more qualitative than what it is and it has always been my opinion that if we are not doing that then we are just kind of taking up space and perpetuat world that we accept but let me ask you mister biggs you state in your testimony that the united states public sector workforce is around the of the packh and i am quoting when compared to other developed countries that fourteen point one percent of total employment in making these comparisons you include state and local government course we here in congress cannot control what goes on in state and local government size many other comparisons when you talk about other countries are not necessarily including state and local government though if one was to exclude state and local governments and make it a straight comparison with other developed countries where all countries differ in the activities and responsibilities they allocate to the central government versus state versus local governments so because of those difference in how we allocate different activities looking at one sector of government between countries could give you a very very misleading point of view we could look very big we could look very large it doesn't stand up analytically so the point i made is a limited point where i can look only at combined state federal and local workforce relative to other countries and compared to countries that spend around the same share of their economies as us our total public sector workforce is somewhere around thirty percent larger some of that is accounted for by the military but see any utility in talking about the numbers of federal employees because we have to decide what work it is that they are going to do and what the cost of that work is and then ask ourselves can we afford that and if we can't then we are going to have to decide what work it is we are not doing and that is the conversation that hasn't been taking place in this country and from my perspective if we are going to get serious about reforming our financial house that is the first