Letter to Elon Musk, from Francis Fukuyama (Persuasion)

 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.)

Francis Fukuyama

Persuasion, November 2024