SACRAMENTO, Calif. — Anyone who closely watches the federal government — or most state governments, for that matter — might understandably come away wondering how these enormously powerful and expensive agencies became so incompetent. They can raise money at will and, in the case of the federal government, float debt to pay for virtually any program or project they envision. The federal debt has surpassed $31 trillion and yet none of the problems the feds claim to address ever get fixed.
Part of the issue involves what California municipal finance expert Mark Moses noted in his recent book The Municipal Financial Crisis: the permanence of government agencies. “In private industry, the impact of bad decisions and unfinished business is transitory. Organizations that make poor decisions quietly disappear,” he wrote. “The average lifespan of modern corporations has been declining for decades. Meanwhile, municipalities are growing older.… Typically, local governments do not contemplate their demise.”
Because government agencies never go away and rarely are threatened with actual cutbacks (as opposed to reductions in the rate of spending growth), they never have the requisite incentive to improve their operations. That’s an enduring principle: the more permanent an organization, the more likely it is to be bureaucratic, incompetent, and immune from reform or change. Throw in a large size and you can forget about meaningful improvement.
Philip K. Howard’s new book, Not Accountable: Rethinking the Constitutionality of Public Employee Unions, also pins blame on public employee unions. Not only do those unions resist any form of employee accountability, but “public employee unions have taken a tight grip on the daily operations of government.” That’s another ironclad principle: The more unionized the government workforce, the more costly and incompetent the agency. In essence, with public employee unions, the employees are running the show.
Keep those realities in mind as we contemplate this column’s main question: How in the world did Julie Su get nominated to run the federal Department of Labor? Su is a former civil rights attorney, former head of the California Department of Labor under Gov. Gavin Newsom, and head of California’s Department of Labor Standards Enforcement under former Gov. Jerry Brown. She was deputy director of the federal DOL and now is acting director as she awaits a tough Senate confirmation in the next few months.
I had immediately thought that the Peter Principle might explain it. Coined by Canadian sociologist Laurence Peter in his 1968 book of the same name, it postulates that the tendency in all organizations is for “every employee to rise in the hierarchy through promotion until they reach a level of respective incompetence,” as Investopedia put it. But that surely can’t explain Su, who already reached that level in her previous employment. Investopedia also mentioned the Dilbert Principle, named after the comic strip: that big organizations promote people precisely because of their incompetence. In other words, they promote them to get them out of the way.
The Biden administration knows Su’s background in California — and the enormous failures she oversaw at the state labor agencies — but chose to place her in this position anyway. But unlike Dilbert, the president isn’t trying to get her out of the way — but put her directly in the way of the nation’s business community. She’s backed by labor unions, and due to the enduring nature of the DOL, no one seems particularly concerned about what she might do to that bureaucracy. Her selection is the perfect embodiment of why government is such a mess.
For a refresher course, Su was California’s top labor official and ultimately responsible for the Employment Development Department when a major scandal rocked that unemployment insurance–disbursing bureau. “California has given away at least $20 billion to criminals in the form of fraudulent unemployment benefits, state officials said Monday, confirming a number smaller than originally feared but one that still accounts for more than 11 percent of all benefits paid since the start of the pandemic,” according to a 2021 Los Angeles Times report.
Later reports put that number above $32 billion. “Of the $114 billion in unemployment paid by California since March, approximately 10 percent has been confirmed as fraudulent,” Su, then head of the California Labor and Workforce Development Agency, told reporters in 2021. “An additional 17 percent of the paid claims have been identified as potentially fraudulent.… There is no sugar-coating the reality, California did not have sufficient security measures in place to prevent this level of fraud.”
Her candidness is admirable, but overseeing a scandal that squandered as much as $32 billion — more than the entire general fund budgets of Missouri or South Carolina — is an odd qualification to run a federal agency with a budget of nearly $42 billion. It really is difficult to overstate a scandal that consumed that much money — and did so in many cases by sending money to prison inmates.
As the Sacramento Bee recently explained, “Republicans have said that Su continues to ‘fail up’ — first when Biden appointed her as Deputy Secretary of Labor in 2021, and again earlier this year when he appointed her to take over for outgoing Secretary Marty Walsh.” It’s like the Peter Principle on steroids. The article also noted the other major knock against Su: she advocated and enforced California’s controversial ban on independent contracting.
I’ve covered that issue several times for The American Spectator. At the behest of unions, California passed Assembly Bill 5, which codified a state Supreme Court ruling that made it nearly impossible for private companies to hire independent contractors. Instead of creating new benefited jobs for freelancers, the law threw many of them out of work and threatened the business model of ride-sharing and other tech-based companies. The state ultimately exempted more than 100 industries, but it was a disaster — and remains so for California’s beleaguered truck drivers.
In his statement announcing Su as his Labor pick, Biden noted that “she has led the largest state labor department in the nation [and] cracked down on wage theft.” She certainly did lead the California labor department. The latter is a reference to AB5-style efforts. The Biden administration continues to push similar rules at the federal level through Department of Labor rulemaking, so apparently his principle is that it’s OK to “fail up” as long as it’s in service to Big Labor’s agenda.
Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.
