Slash The Fat: Nine US Government Agencies To Cut By 50%

As we have indicated, the 16 agencies slated for elimination do comprise a kind of Litmus Test of fiscal resolve. If these Federal bureaucrats and agencies can’t be eliminated, the prospect for reining in America’s unfolding fiscal calamity is dim indeed.

Yet the 71,000 headcount reductions and $11 billion of savings constitute hardly a nick out of the Federal payroll. In fact, on a government-wide basis including the uniformed forces, the total payroll numbers nearly 3.83 million civilian and military employees and costs nearly $600 billion per year. So the agency reductions outlined so far amount to just 1.8% of the total.

For this reason, we have identified a second layer of nine agencies where we believe the headcount could be cut by 50% and existing missions sharply curtailed. This would result in a further Federal staff reduction of 93,000 jobs and nearly $15 billion in direct compensation cost savings.

Agencies DOGE Should Target For 50% Staff Reductions:

• SEC: 2,250 staff and savings of $360 million.

• FCC: 750 staff and savings of $120 million.

• Federal Aviation Administration: 22,500 staff and savings of $3.6 billion.

• IRS: 41,500 staff and savings of $6.64 billion.

• National Labor Relations Board: 800 staff and savings of $130 million.

• Office of Personnel Management: 1,340 staff and savings of $214 million.

• Environmental Protection Agency: 8,500 staff and savings of $1.36 billion.

• NASA: 9,000 staff and savings of $1.44 billion.

• General Services Administration: 6,360 staff and savings of $1.02 billion.

• Total, nine agencies cut by 50%: 93,000 staff and savings of $14.9 billion.

Securities and Exchange Commission (SEC):

The SEC is an exceedingly top-heavy agency with staff of 4,500 absorbing upwards of $1.1 billion per year in compensation expense, which figure computes to an average cost of $255,000 per head. It is also an egregious Nanny State meddler in an industry---the stock, bond and related markets of Wall Street---that hardly needs the helping hand of the state to function.

In fact, the basic SEC function---mandated financial disclosure---generates an endless tsunami of filings that are basically superficial, proforma, mechanical, ritualistic, minimally informative and lawyered ten-ways-to-Sunday. Consequently, real investors in today's $100 trillion+ Wall Street casino spend lavishly from their own pockets to dig for supplemental business and financial information that can actually make a difference with respect to the prospects and performance of registered companies.

Stated differently, the Wall Street casino is not some kind of latter-day nursery school where the boys and girls operating there need SEC nannies to proof their readers and workbooks. With tens of trillions at stake, investors and traders would get the financial and operational information they need. Failing that, uncooperative or crooked issuers would readily find a torrent of (short) sell orders at the posts were their securities are traded.

SEC efforts to specify and enforce accounting standards are even more of a joke. Virtually all Wall Street stock analysts construct elaborate non-GAAP accounting statements (Generally Accepted Accounting Principles) for the companies they cover and recommend, even as the SEC nannies and gumshoes require companies which mention or discuss these analyst-based non-GAAP versions of their financial results to provide elaborate bridges back to GAAP. So what's the point of spending hundreds of millions per year enforcing GAAP accounting standards when the daily financial vocabulary of Wall Street traders and analysts amounts to a systematic GAAP work-around?

Then comes the foolishness of the SEC's massive market monitoring and enforcement efforts with respect to essentially undefinable and mostly pointless insider trading cases. The very predicate of insider trading laws---that each and every investor should have access to exactly the same information at the same moment in time---is an inherent insult to the basic nature of financial trading markets, where the opposite principle actually pertains. To wit, investors who develop an "edge" are rewarded with superior returns, which is how the market incentivizes and compensates for the search for information and insights that make trading more efficient and productive.

The truth is, insider trading laws amount to a version of flat-earth economics. Besides, the trading moves of a big hedge fund are far more impactful to stock prices than some undisclosed financial tidbit from a company CFO. Yet the latter is per se illegal while your "insider" knowledge of trading activity by the big swinging hedge fund operating next door to your own trading floor is completely legal so long as it was not obtained through "a breach of duty or trust".  Whatever that means.

The argument that without SEC nannies the trading markets would be corrupted by illicitly obtained "inside" information is a relic of what politicians in the early 1930s didn't understand about the real reasons for the 1929 crash (the Fed caused it). But in today's world of instantly and infinitely available information and massive financial incentives to scour the landscape for market moving data, "inside information" amounts to a Snapchat equivalent. Its half-life is too short to make a difference to investors over any measurable investment horizon.

The same goes for the SEC's prosecution of "market manipulation".  The fact is, there are currently more than 8,000 hedge funds, which collectively manage $2.8 trillion of assets---with much of the latter coursing through the trading desks of a tiny number of "prime brokers" (Goldman, Morgan Stanley, JP Morgan etc.) on a 24/7 basis. These arrangements are fully legal but inherently result in market moving surges or plunges whenever the big boys all lean in a common direction. By happenstance, of course!

The inherent irregular and sometimes herky-jerky movement of trading markets in response to information and investment flows generated by the hedge fund mob, in fact, is just economics 101. By comparison, the SEC's market manipulation targets amount to chasing the ghosts of what sharp-edged traders did in a more primitive time way back in the 1920s. In today's technology-enabled trading world none of these alleged marketplace sins would actually have more than a momentary impact and, in any event, would breed countermanding schemes similar to the manner in which some traders today buy excessively shorted stocks to trigger a covering rally. That is to say, today's markets root out cheaters and short-cutters far faster than could any passel of overpaid GS-16s at the SEC.

In short, the Trading Nannies at the SEC are not needed to prevent any of the five types of "market manipulation" pursued by the agency. Today's information, communications and technology rich Wall Street markets, where trillions are at stake every minute and hour, are always and everywhere on the alert for so-called abuses of these types. They don't need the SEC to tell them when marketplace miscreants are pumping, dumping, spoofing, wash trading, churning or lying. It quickly becomes obvious to other traders who are paid to stay alert.

1. Pump and Dump Schemes: Inflating the price of a stock through false or misleading information, then selling it at the inflated price.

2. Spoofing: Placing fake orders to create a false impression of supply or demand, influencing other market participants.

3. Wash Trading: Simultaneously buying and selling the same security to create the illusion of increased trading volume.

4. Churning: Excessive trading by a broker in a client's account to generate commissions without regard for the client's investment objectives.

5. False Statements and Rumors: Spreading false information to manipulate stock prices.

At the end of the day, the SEC should be retired to the museum of 1930s mythologies. Yet it is probably so deeply embedded in the warp and woof of the financial markets---especially with respect to routine reporting in 10Qs, 10Ks, offering prospectuses etc.---as to make its complete abolition impractical. Still, it is involved in so much unadulterated Nanny State nonsense and tom foolery that its massive staff and payroll could be easily cut in half.

That would reduce the Federal headcount by 2,250 bureaucrats and upwards of $575 million of annual expense. The fact is, the SEC modus operandi itself is an exercise in government-conducted fraud, waste and abuse because its Nanny State regime doesn't make investing on Wall Street any safer--- just more expensive and cumbersome. So if 50% of that kind of "fat" can't be cut, there is not much hope of achieving the much more difficult savings from downsizing the muscle or cutting the bone in the rest of the Federal budget.

Federal Communications Commission (FCC)

The FCC is another relic of 1934. Even a brief perusal of the manner in which it allocates its $411 million annual budget tells you that much. In an internet-based streaming, satellite-TV and Starlink enabled world there is no longer any such thing as oppressive communications monopolies. Competition is exceedingly fierce, innovative and far-reaching---as perhaps crystalized by the "cable-cutting" crisis now sweeping the traditional cable TV business.

As it happens, traditional cable TV has seen a cumulative loss of over 10 million subscribers just since 2018, and the loss has been accelerating, with major providers like Comcast and Charter reporting relentless declines. So why in the world are the busy-bodies at the FCC in the business of consumer protection, competition promotion or broadband extension to so-called underserved areas, at all? Technological advance and competitive innovation have all these matters covered in spades without any help from the FCC nannies seeking to justify their jobs.

Indeed, the FCC nannies are mostly a hindrance to pro-consumer innovation, as is evident in the rigid blunderbuss of the "net neutrality" rules. Again, this is just regulatory socialism which prohibits internet service providers (ISPs) from blocking, throttling, or engaging in paid prioritization of any lawful content, such as providing premium priced "fast lanes" for streaming services.

That is to say, these bureaucratic power-grabbers through a new order as of April 2024 are attempting to shoe-horn today's world of internet and technology-based dynamism into the placid one-size-fits all Ma Bell modality of 1970.

At the end of the day, the only arguably useful thing the FCC does is public spectrum management, but even that should be limited to auctioning licenses for different categories of media---such as television, radio, mobile communications, and public safety. And that would require only a tiny fraction of today's staff and budget.

In short, the FCC would be getting off easy with a 50% staff cut. That would reduce its headcount by 750 jobs, save direct compensation costs of at least $120 million per year, and would also enable much of the remainder of its budget (@$300 million) to be eliminated, as well.

Breakdown of the FCC's $411 million budget for fiscal year 2024:

Federal Aviation Administration (FAA)

The FAA gives the notion of a padded-payroll bureaucracy an altogether new definition. Its 45,000 staff positions exceed by orders of magnitude the levels that should be needed to efficiently accomplish the air safety and traffic control functions it has been assigned by the Congress.

For want of doubt, just consider the enormous bloat in the 20,000 staff level at the Air Traffic Control Organization (ATO). A few years back the DOT inspector general (IG) performed a detailed comparison of costs and staffing levels as between---

• the 254 airport control towers that are operated and staffed by outside contractors, with 1,400 controllers who manage 28 percent of the National Airspace System.

• The 266 airport towers that are operated directly by the FAA, with 15,000 controllers who manage the other 72 percent of the system.

The IG found that contract towers were roughly three times more cost effective per aircraft movement handled than FAA towers. Yet the contract tower safety records for comparably sized facilities were also on par with those of FAA towers.

On average, the report said, contract towers use 48% fewer resources per aircraft handled per year. That's the case even though economies of scale should favor the larger FAA-run towers which handle significantly more flights.

Moreover, the IG found that the contract towers deliver lower costs because they typically staff their facilities with fewer controllers whom they pay much less than the FAA pays its staff. The report said a year’s worth of labor and benefit costs at the busiest FAA towers runs about $15.7 million compared to just $2.7 million for a contract facility.

Moreover, standardizing these figures on a per aircraft movement basis showed that the FAA facilities cost $22.34