In 2012, the federal government employed about 2.2 million civilian workers, excluding Postal Service employees. About 45 percent worked in the Department of Defense or Department of Homeland Security, and roughly 15 percent were employed by the Department of Veterans Affairs. The rest of the civilian workforce worked in agencies providing a variety of public services—they regulated businesses; investigated crimes; collected taxes; and administered programs for the elderly, poor, and disabled, for example. The largest costs the federal government incurred for those employees were for salaries, health insurance, and pension benefits.

This option would reduce the number of federal civilian employees at certain agencies by 10 percent by allowing those agencies to hire no more than one employee for every three workers who left. The President would be allowed to exempt an agency from the requirement under certain conditions—because of a national security concern or an extraordinary emergency, for instance, or if the performance of a critical mission required doing so. About two-thirds of the federal civilian workforce would be exempt, the Congressional Budget Office estimates, thus limiting the workforce reduction to about 70,000 employees. (Agencies would not be allowed to hire contractors to offset the reduction in the federal workforce.) Provided that appropriations were reduced concomitantly, discretionary outlays would be reduced by $43 billion from 2015 through 2023.

An argument for this option is that some agencies could continue to provide crucial services with a smaller workforce by working more efficiently and by eliminating services that are not cost-effective. The number of management and supervisory positions has increased in many agencies as the workforce has aged, and research suggests that, in some cases, the additional layers of management hamper performance. This option could encourage agencies to reduce the number of managers and supervisors through attrition as people in those positions retired over the next few years. Research also suggests that federal workers earn more in occupations that do not require a college diploma than do their counterparts in the private sector. If private-sector compensation is indicative of the value of those positions, then the savings that agencies would generate by trimming that part of the workforce would exceed the value of the services that those jobs produce.

An argument against this option is that trends in federal employment suggest that the federal workforce may already be under strain from cost-cutting measures and that further reductions could impede the government’s ability to fulfill parts of its mission. The federal civilian workforce is about the same size it was 20 years ago, although both the number of people the government serves (as measured by the U.S. population) and federal spending per capita have grown substantially since that time. After declining during most of the 1990s, federal employment has increased moderately over the past dozen years. That growth largely reflects new responsibilities for the Department of Homeland Security and the increase in services the Department of Veterans Affairs is providing for soldiers returning from Iraq and Afghanistan. Workforce reductions at those or other agencies would probably reduce the quality and quantity of some of the services provided and could have other negative effects, such as increasing the amount of fraud and abuse in some government programs.