I’m joined by Nadia Schadlow, the former Deputy National Security Advisor for Strategy in the first Trump administration and lead architect of the 2017 National Security Strategy. Currently, Nadia is a senior fellow at the Hudson Institute where she focuses on strategy, national security, and industrial policy.

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We discuss:

• The process of drafting the National Security Strategy

• The differences between the 2017 and 2025 strategies

• Why time is an underappreciated element of strategy

• What to read to understand Russia better

Thanks to Harry Fletcher-Wood, Shadrach Strehle, Rita Sokolova, and Jasper Placio for their support in producing this episode.

For a printable PDF of this interview, click here:

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You were the primary author of the 2017 National Security Strategy. That document is a multi-party creation — how does that work?

Strategies should be a multi-party creation in a democracy, because they are about coalition building. But let me step back. What’s the purpose of strategy? Strategists and academics like to use phrases like “ways, ends, means,” answering questions like:

• What do you want to achieve?

• How will you go about doing that?

• What resources are you going to apply?

But a strategy explains the goals of a new president and their importance to a broader audience — in this case, the American people. It generally begins with a set of assumptions — a description of, “Here’s how the world looks today, and here’s why it’s advantageous, or not, to American interests.” Fundamentally, strategy is about explaining to the American people the direction that a country is going in.

If it’s to have any bearing on reality, you need to build coalitions around it. Implementation and outcomes depend upon bringing people together to get things done. No one person can implement very much in this country. We can talk about the ongoing debate about autocracy and democracy — many people think President Trump can and is doing exactly what he wants. But longer-term problems require sustained implementation, which requires coalitions.

You flag the multi-party nature of these documents as a good thing, but it’s often criticized. One critic of the 2025 National Security Strategy called it, “a consensus document produced through least-common-denominator bargaining between its authors.” Would you accept that frame?

I accept that as a criticism of many of these documents. It’s a balance. Strategy-making and articulation is not a science and there isn’t one way or established formula for doing it. When I first got to the White House in 2017, I didn’t get a “how-to” of how you create a strategy. You read different assessments and past strategies, and you develop an idea of how you might construct one.

In a government with competing power centers and viewpoints — whether it’s a Republican or a Democratic administration — you’re going to have a sense of those competing ideas in the document’s contents. Chief drafters can do a better or worse job of cohering them by taking out real inconsistencies or editing certain types of language. But if you’re articulating one point of view that’s not representative of other power nodes in government, you won’t see progress on those issues. People won’t do anything.

Will you talk to me about that set of power nodes? I’m not asking you to gossip, but as you’re producing a document like this, what are the forces you’re trying to mediate between?

Departments see things in different ways. When I was last in government, the Treasury Department was less hawkish on China than other parts of the government. Treasury traditionally represents Wall Street and financial interests that don’t necessarily want to be constrained in their investments into China. The China hawks, probably including me, were more prevalent on the National Security Council (NSC) as well as in the Defense Department. They were concerned that US investments were going toward Chinese firms contributing to the People’s Liberation Army. That’s a good example of interagency debate.

Another example might be within the defense establishment. When I was there, debates went on about how much more of the defense budget should go toward legacy systems or platforms, aircraft carriers or drones. These debates continue today, and they’re important because they get to:

• What does future war look like?

• Is it going to be dominated by smaller precision drones?

• Do we still need aircraft carriers?

• Do we need these big legacy systems?

• Do we need tanks?

• Do we need what’s called “capacity”?

• Do we need a lot of stuff, or a few big exquisite systems?

These are the kinds of considerations that are reflected in a strategy.

Where would something like the balance of funding for drones versus aircraft carriers be reflected in the National Security Strategy? Because after that strategy, the executive branch has to produce a National Defense Strategy and a National Military Strategy. These other documents are downstream, and I assume they get more into the nuts and bolts.

You’re exactly right. The debate I described would come out more in a National Defense Strategy, or in subsequent implementation documents. But for the National Security Strategy, we discussed it in terms of how to frame the language to say “more capacity.” I’m not a big user of adjectives, you have to be very careful with them. But in this case, “more capacity” would send a signal about needing a quantitatively bigger military. The specifics would come out later. Sometimes there are signaling words — you might say something about the need to produce more at scale, more quickly, because of the environment we’re facing. Then you might describe that environment. But you don’t want it to be too specific, otherwise you’d have a very long document.

Let’s imagine I’m on one side of that fight. I want to produce way more drones rather than spend money on massive naval systems, and the adjectives in the National Security Strategy lend themselves to my way of thinking. How would I use that to get what I want?

You’d go with the language. One of the lessons I learned when I worked at the Defense Department many years ago was how important the initial talking points are; what’s called in “the paper drop” in government-speak. If you can be the first one to put the piece of paper down with the language, you have a competitive advantage in the interagency process. It’s probably the same in business. There is a power to that, because then everyone else has to respond. You’re creating the template.

Second, it comes down to your principal — the Secretary of Defense, or Commerce, or Treasury — being willing to fight it out at the table, or send their delegates to fight it out. You find some compromise language — or not. Not everyone was happy with every element of the 2017 strategy. I learned the art of how to be polite, get inputs, and consider and balance ideas, but to ultimately take a decision that’s not always popular. Climate change was not mentioned in the 2017 document. That was shocking to people, but it wasn’t a priority for President Trump and still isn’t. It didn’t come up as a major security interest for the United States, which was a departure from the previous administration.

Who else was unhappy about language in the 2017 strategy?

I think there was less disagreement than people wanted there to be. I was always asked, “What were the massive knock-out fights?” There weren’t that many. There was a sense that the document needed to articulate a worldview that was consistent with the President’s — what he had said on the campaign trail and during the first year of his first administration. It did that.

There was pushback by some who focus on Europe. They were concerned that there wasn’t enough mention of the European Union (EU), for instance. These issues seem small and tactical, but they tie to President Trump’s overall view of the EU — an entity that he’s frustrated with, which he sees as not pro-free trade and disadvantageous to the United States in terms of its trade policies. Those are his views, so that emerged in the strategy.

If those critics were frustrated by how the EU was talked about in the 2017 strategy, you should have told them, “Wait till the 2025 one. You’ll get a kick out of that.”

There was a sense that it wouldn’t be seen as a center point of power, so we shouldn’t talk about it as such or mention it much. I learned from that experience that country-mentions are important. Countries wanted to be noted as an American priority.

Almost all National Security Strategy documents — going back to the first of Reagan‘s second term, when it was first congressionally mandated — have a list of regions. Each section — Europe and Africa, and the Western Hemisphere or Latin America, depending on how you slice it — lists priorities and partners. Is the principal motivation there to broadcast our approach to partners, allies, and potential rivals?

Those regions that are mentioned are of strategic importance to the United States. What’s required is a sense of our role in those regions, how we manage them, and what outcomes we want. There’s a traditional way of thinking about regional balances of power, which is articulated in the 2025 National Security Strategy. Generally, we don’t want to see a region dominated by a bad actor — we don’t want the Middle East to be dominated by Iran, Eurasia by China or Russia, and the Indo-Pacific by China.

Countries in the region play a role in balancing power. That concept is very compatible with burden-sharing and getting partners to do more. It also indicates that the US has an interest in keeping those regions stable and balanced.

I want to go back to that list of power centers that play a role in the drafting of this document. We talked about the Treasury and China hawks. What were some of the other power centers you were mediating between as you created this document?

Border security was elevated in the 2017 strategy in a way that it hadn’t been for maybe decades. There wasn’t disagreement about it, but articulating the importance of a non-porous American border was very important. Missile defense played a key role. The idea of protecting the security of the American homeland became what was called the first “pillar” of the strategy.

We had four pillars — core strategic objectives that we described in the document: (1) protect the American homeland; (2) grow economic prosperity; (3) preserve peace through strength — meaning a strong military, but one you hopefully don’t have to use; and (4) advance American influence.

It’s not that other administrations don’t agree with those objectives. But politics comes in, and how you go about doing that differs across, or even within, administrations — maybe even from Trump I to Trump II. The “how” is where the politics get hashed out.

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Talk to me about the role of the Department of State. We’ve had several folks on from State (including Dan Spokojny and Judd Devermont) and the Central Intelligence Agency (such as Laura Thomas and Rob Johnston). They’ve often talked about the particular cultures they come out of, and the lenses they bring to bear. How did those cultures show up for you?

The State Department culture manifests through a focus on how the document will be received by respective countries or impact US relationships with a particular country. Whereas the White House culture, and my culture, was, “This is a document that we’re writing for the American people, to articulate a view of what the world looks like from here and what we’re going to do to improve America’s position.” We had this so-called “interagency” process, which is one of the many overused words in Washington.

Why is it overused?

It’s such a blobby word — what does it actually mean? [Statecraft had Dean Ball explain the interagency process, and how he navigated it, in a recent interview.] You can have these talks and talks that are interminable, because you’re trying to include everyone around the table — versus making a decision and finding that balance. There isn’t a formula for that — a lot of it comes down to personality. Clearly the President is not super-interested in the interagency process. It’s not his personality. At the lower levels, it may or may not be going on to varying degrees.

I ran one for the 2017 strategy — I had the autonomy to do that — and I found it to be useful. We literally had the State Department in the room: we would host meetings in the Eisenhower Executive Office Building and invite the State Department, meaning representatives of key offices. I didn’t decide who came — the State Department decided who to send. Same thing for the Department of Defense, Treasury, and Commerce. You sit around the table and work through a particular agenda. But I didn’t host meetings all the time. We had about 12 significant meetings.

As principal author, did you set that agenda?

That was my job, to set an agenda to drive the production of the document. I had the autonomy to do that. In the Trump White House, both in I and II, everyone has autonomy, which can be good and bad.

What would a typical agenda look like for one of those meetings?

There wasn’t a typical one. I asked attendees what they thought about the core structure of the document and there was debate focusing on the four core pillars. At the time, it was, “How do we treat the concept of sovereignty and the nation-state?” That was, and continues to be, a clear theme of both Trump administrations.

Previous documents had been highly focused on the multilateral order that the US helped to shape, which was an effective one. Trump came in saying, “What’s working and what isn’t?” How do you create a set of meetings to address that without it becoming an irrelevant academic process? There’s lots I like about academia, but you have to run a process that has an end point. It’s not just a course you’re taking.

People have strong feelings about that topic and could go off in all kinds of directions. How do you run a meeting with these important stakeholders to get something useful to go write a document?

You ask for inputs and have people come to the table with their views on paper. Two or three pages, not more. “How should we articulate the concept of sovereignty? How should we articulate the problem of jihadist terrorism and its underpinnings?” Ask others around the table — ideally people that you know might have different viewpoints — to present the papers for discussion. That’s the art of running a good meeting: have a clear agenda, stay on time, don’t let one person dominate. That’s useful for readers to have in their toolkits. You want everyone to feel that their views have been taken into account and they’ve had a chance to speak. You always have someone at the table who’s sputtering because they haven’t been listened to. It’s happened to me — I’ve been on the other end.

Did you run these meetings Amazon-style where everyone sits in silence and reads in the meeting, or did you expect everyone to come having read?

Ideally they should have come having read the paper, because it’s not reading time. But a lot of times individuals won’t have the time, so they end up glancing down at it. That’s why you keep the papers short. Most meetings have what we call “the book” — the agenda and the relevant papers. My meetings weren’t with the secretaries or deputy secretaries of the departments. These were working-level meetings of assistant secretaries or deputy assistant secretaries. But it’s the same thing all the way up to the president. You have the book, you have who’s preparing the briefing book. The agenda generally starts with, “The purpose of the meeting is…” We tried to run our meetings that way. General H.R. McMaster, who was the National Security Advisor during that period, ran NSC meetings that way.

At that level, there are two types of meetings. One could be informational — you need to get information out there. The second is to make a decision on a topic. You shouldn’t have meetings that have a lot of other purposes at that level.

Were there parties or agencies that were consistently better or worse prepared to play an active role in these meetings?

There’s a lot of gamesmanship. Speaking out of turn — some of the post-Trump I books talk about it — there’d be these paper drops by the State Department. That meant ignoring everything in the briefing book and coming in with your own agenda, saying, “Here are the PowerPoint slides that we should be looking at now.”

It’s pretty aggressive — you’re the one setting the agenda and they’re imposing their own.

Secretary Rex Tillerson might’ve done a bit of that, as has been written in some of the books. That would make everyone mad — “You can’t do that.” But he thought,“I can do it. I’m Secretary of State. This is a topic that is of big interest to the State Department.” I always see it both ways — it’s part of how to navigate Washington. I assume this happens in other domains. But the stakes are high sometimes. You’re not giving people enough time to prepare their argument, though you could also argue they should be well-versed enough on the issue to make a counterpoint.

In a podcast taped shortly after the publication of the 2017 strategy, you mention how, on occasion, you would circulate drafts as PDFs to make it a bit harder for other people to give you detailed line edits. Are there any other tricks of the interagency trade that you’d suggest?

You have to be careful with that one. But I feel secure about my writing skills — I’m a picky editor — and I didn’t want it to get all gobbledygooked up, where everyone’s throwing in random words and crazy adjectives, like “robust” or “leverage.” Leverage is the favorite verb of the Washington policy community. Things can go nutty — they don’t actually mean anything. You’re like, “What’s a ‘robust defense’ as opposed to a ‘defense’?” I always like asking that. “What’s ‘leverage’?” Leverage was like “seesaw” — it’s an engineering term. Now it’s gone crazy. It’s everywhere. Washington likes to include three verbs whenever it can, as opposed to one.

I encounter this in my editorial work. I like triplets sometimes, but they get beaten to death.

Are all three necessary? Or is it just the last one — because you implicitly need to do one and two, to get to three?

That was why I did it as a PDF. It still allows you to come in and say, “Nadia, you’ve gotten these three things wrong,” or, “You need to say this more clearly.” That’s what I wanted to hear. I didn’t want to have words randomly changed.

What does the national security strategy do for somebody who wants to get things done inside the federal government?

Let’s take pillar one, ensuring that we have a strong border. Page nine says, “Strengthening control over our borders and immigration system is central to national security, economic prosperity, and the rule of law.” The strategy spoke clearly about the need to build a border wall. If you’re the Secretary of the Department of Homeland Security, it gives you the White House political imprimatur to say, “The president said, ‘We need to do this.’”

It’s not that everyone listens. It’s not, “Do this or else you’re off to the gulag.” We live in a democracy. It becomes a way for you to negotiate and gives you the cover you need. It tells people, and Congress, “This is a priority.” Then you get into rolling up your sleeves and figuring out how to do it and how to appropriate the money. That’s not something I did, or that the NSC does. That’s what the departments do. The Department of Homeland Security, Congress, the Office of Management and Budget — they’re the money people. They sit in a room and argue.

To play devil’s advocate, the President said many times in the 2016 campaign, “We’re going to build the wall.” It’s maybe the thing people remember most about the campaign. What does the document do that the principal’s message doesn’t?

There’s a difference between campaigning and putting it on paper. There is a value to capturing ideas in one place, so you have an integrated strategy. It also allows people to say, “You said you want to do all this for border security, but later on, you want to do these other things. How are you going to make the trade-offs, or fund one over the other?” Having a consolidated statement of interests and goals is what strategy is. It allows you to have the arguments about trade-offs, and see if there are inconsistencies. But a candidate’s power is different from the president’s.

Does Congress play a role, informally even, in the creation of this document? Obviously Congress is not formally privy to the interagency process — it’s outside the executive branch completely. But are there ways in which you, or people in your shoes, would get information or have touchpoints with congressional leadership?

The White House has a congressional liaison team [the Office of Legislative Affairs]. You could formally work through them and ask where Congress is on particular issues, or for a sense of how Congress is likely to respond to the language. You play a role, but you have to make sure it’s an informal role, because there are rules about how executive branch officials can speak to Congress. With the permission of the Office of Legislative Affairs, you can go up to the Hill and brief the staffers on the Senate Armed Services Committee on the general lines of argument. Especially after [the strategy is published], you can say, “Here’s the strategy, here’s what we meant, here’s what we said.” So there is a back and forth. But you’re right, Congress does not have any formal role in shaping the strategy — although in the end, they’re a key part of implementation, because they control the purse.

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I imagine that informal back and forth with Congress is a bit easier today now that everybody in Washington uses Signal.

Exactly. Or I guess they just use X too.

This administration’s National Security Strategy has key similarities to the one that you principally authored almost a decade ago, and some striking differences in content and in tone. Let’s talk about the tone first.

The tone is definitely different. Every drafter has a style of writing. You know that, because you’re an editor. This document was stylistically different. The 2017 strategy had a more measured tone — maybe not as emotional.

Would you call this one more emotional, more confrontational?

It’s probably more confrontational, more angry — there’s more frustration expressed in this document. It’s organized differently, but many elements are the same in both documents:

• Protection of the American homeland,

• A concept about how to grow the American economy,

• A lot on trade,

• How America has been disadvantaged by globalization,

• A description of the rationale for tariffs, and the role they would play,

• The “peace through strength” element — a strong military to deter; and,

• Concepts of balance of power and power mattering.

I was glad to see recognition of allies and partners being quite important in this one, especially in the Indo-Pacific. I know the Europeans were not that happy with this 2025 document.

That’s one way of putting it.

These strategies often introduce strategic concepts, or new language for a concept. The second Obama strategy talked about “strategic patience.” The Bush doctrine was a feature of the first George W. Bush administration’s strategy. Did you lean on any specific language or concepts in the 2017 strategy that you don’t notice in the second Trump strategy, or vice versa?

I think there’s consistency, even though this one used different words. For example:

• In 2025, “flexible realism” was used. We used a different version of that in 2017. But realism definitely comes through in both, maybe with adjectives before it.

• The idea of the nation-state as a primary actor, and sovereignty being important and elevated, is in both.

• Deterrence becomes important. To go back to our discussion about language, in this case the two words matter. “Deter,” and if necessary, “defend” or “fight.” That’s where it’s okay to use a couple of different verbs, because you want to deter — that’s the primary purpose. If deterrence fails, you want to have the capability to defend yourself, or punish your adversary. So having a strong modern nuclear deterrent comes out in both documents — the importance of reinvigorating our nuclear enterprise.

I did not go and do the ChatGPT comparison. To our earlier point about how you can end up in these very esoteric analytical discussions — I’ve avoided it.

I have asked a couple of LLMs for their perspectives on the comparison. You noted many of the similarities. I agree there’s consistency — after all, it’s the same president. I think there is an argument that this NSS is closer to the perspective of President Trump than the 2017 one, at least tonally. It feels more like a Trumpian document. Am I crazy for thinking that?

I don’t think so. The President has a certain way of communicating and a voice — both literally and figuratively — that probably is more evident in this 2025 strategy. There has been criticism of the 2025 document for not being as China-hawkish as the first one. My response has been, “Yes, China is not called a strategic competitor.” The 2017 document used that term “strategic competitor.” That was important at the time, because it was a phrase that people initially were like, “Oh no, we should rephrase.”

Readers younger than me might not have a sense of how striking that was when it came out — that you were choosing China as the single biggest threat facing America.

That was President Trump — that’s how he was articulating the China problem at the time. The second document reflects that he wants to leave opportunities for negotiation open — not to poke, poke, poke. I think the second White House chose to use different language. Strategies don’t stay the same — nor do people. Their thinking evolves. But if you look at what the document says — when it speaks about predatory state-directed subsidies and industrial strategies, when it discusses unfair trading practices, job destruction, and de-industrialization threats against our supply chain — those are pretty strong statements, and they’re not geared toward Spain or Italy. It’s obviously China.

That’s without even getting into the South China Sea and our commitments to Taiwan. I did notice that criticism of this year’s strategy, which I thought was a bit strong after reading the document. It seemed more like a matter of emphasis or tone than a major shift in the approach to China.

That’s a good point, because the language on Taiwan is very strong. It might even be stronger than it was in 2017. It definitely articulates a status quo and that we don’t want to see a change, which means we don’t want to see China invade or try to change the status quo. It presents the importance of Taiwan more broadly beyond being a center of the most important economic drivers, meaning semiconductors and ships. It also discusses the importance of growing and keeping our military strong. We’re doing that because we see China as being the main peer competitor in that domain.

Iran is briefly mentioned in this most recent one. Operation Midnight Hammer had already happened at the time of publication, so that’s mentioned briefly. North Korea is not mentioned at all. What’s up with that?

I don’t know. Is it an omission due to process and not going to someone who might have asked “Oh, where’s North Korea?” Or is it deliberate? Then there’s a reason behind it, which might be about keeping open the opportunity to communicate — not knowing the direction that things are going to go. It’s a super-complicated problem set that we’ve had limited success in dealing with, even though the first Trump administration was the most forceful in decades, with a maximum pressure strategy. I’ve moved toward thinking it’s more about keeping options open. Maybe there’s not a settlement internally on how to address it. It could also be that things are still being debated.

Is there anything else that’s not totally intelligible to you, whether or not you’re critical of it?

It’s pretty clear. The North Atlantic Treaty Organization (NATO) is a critically important alliance. It’s one of the most successful features of the post-World War II order, and one that should continue to exist. It would be very difficult to recreate it. Why would you not want to keep it strong? Now we’re debating how to keep it strong. Trump’s would probably argue that toughness on NATO made the alliance stronger. But we do want to remember that these are our allies too.

I’m not going to make you talk much about Greenland — by the time we publish this, the facts on the ground may have changed — but it seems very stupid to me, and counterproductive.

It’s counterproductive. Everyone likes to take one episode and say, “Maduro means we’re going to do this in Iran, and Iran means we’re going to do this…” But if you can achieve your outcomes — improving the US and NATO security posture in that region, access to critical minerals, all of the things that the President wants to do — without the use of military force, why wouldn’t you take that course of action?

You could argue that in the case of Venezuela — this is what he argued, and I’m sympathetic to it — we were being infiltrated by drugs and cartels. You can make an argument for use of force. [Statecraft recently published a detailed discussion of US action in Venezuela]. You can definitely make an argument for use of force vis-à-vis Iran. The strikes there — you’re not going to achieve that with negotiations, diplomacy, and changed posture. I understand the impetus to say, “Get serious about Greenland.” But you can achieve your outcomes without the use of military force. So I don’t completely understand it.

In the past year, you’ve written about a cluster of related ideas: strategic depth — having the time and flexibility to choose your response to circumstances — and time, as an underrated dimension of strategy. Talk to me about your intellectual interest in this cluster of ideas, then help us understand why “strategic depth” matters.

I’ll start with time, because that is something that animates me. It’s both obvious and amazing how long it takes to get things done. By not considering how long something takes from start to finish, we’re undermining confidence in our democracy. We’re creating cynicism. I think it’s a huge part of the dynamic domestically too. We’ve been saying the same thing about the reform of America’s public schools for 30 years, and things aren’t getting done. We’ve been saying that we need to rebuild our infrastructure. We’re rebuilding part of it — whether it’s the highway to get to John F. Kennedy Airport or some other — but it’s taking years and years. We conveniently avoid this question of time.

I think it’s hurting us domestically. It’s letting our politicians and leaders off the hook. It’s definitely hurting us internationally, because organizations like the United Nations have spent 30 years talking about the same sets of problems. This article in The Atlantic was inspired by “The Forgotten Dimensions of Strategy”, an article written many years ago by a great military historian named Michael Howard.

Which is also a very clear read, like the 2025 National Security Strategy.

It just says, “We like to talk about strategy at the big level” — in some ways, the way you and I have had this conversation — “and it’s fun. But there are also these concrete inputs: logistics, you have to be able to get from here to there; what people think about the unfolding of a war — the forgotten dimensions.” In rereading it, I thought, “Time is a forgotten dimension.” Or it’s not put front and center.

Today there’s an opportunity, with all of the data we have, to do that. We no longer have the excuse of saying, “We don’t know how long it takes to build a new mine from start to finish.” We do know — it takes something like 16 years, at least. We can also say, “We know how many regulations are involved in that.” We can use AI to do that. We can do things differently today if we want to.

I’m very sympathetic to this view, because much of our work at IFP is trying to reduce the amount of time it takes to build things in America. We’re pretty fixated on the amount of time it takes to run a clinical trial and test a new drug. But why is this a forgotten dimension in the Blob of national security strategy? I would naively assume this would be an obvious question — the American military is famously focused on logistics. Why do people in your world need to hear about the importance of time and strategy?

Because it shouldn’t take decades to develop a weapon system, or integrate something into our Defense Department, or negotiate a deal.

How do you solve that? You evaluate time as a key input. You do a Gantt chart. I did an essay about the electrical vehicle debates during the Biden administration. The title was, “We Gantt do this” — a bit hokey, but it works. Gantt was an engineer in the early 1900s. Many readers in the private sector will know the Gantt chart. It’s a great concept: “How do you get from A to Z? And what’s the timeline?” We need to do that more systematically in the national security and foreign policy space. Then you understand what the obstacles are, what regulations are impeding you, and where you need to focus your action. The more you input this as a core component, the more you focus on it, and are held accountable to it. There’s room for an organization like yours to help answer that question. I don’t know the complete answer of, “What are the approaches to improve this?” but there are probably five or six specific ways that you could do this in the Food and Drug Administration process. I bet people would have an answer.

You’ve given me a wonderful excuse to link some of our work in the show notes without feeling like I’m abusing the reader.

But it’s true. What’s the right combination of things where you could make a difference here? There’s probably not one answer, but the point of that article was to say, “We talk about ways, ends, and means. Where does time fit in? How do you evaluate one project over another if you put time into it?” We like to use this term in Washington, “The perfect is the enemy of the good.” You develop this perfect weapon system — versus one that is pretty darn good and can be produced quickly at scale. Time matters there. You’re making a choice, maybe taking a risk, but saying, “In this case, the speed of acquisition and deployment is more important than the perfect precision of another system.” That’s a good example. It helps you make trade-offs.

I want to change gears one more time, and ask you about your background in Soviet studies. Almost by happenstance, a big pile of the reading I did last year was Russian, or about Russia. If I want to understand Russia, historically and today, what would you recommend I read?

You’re dating me, because as soon as you say “Soviet studies,” you’re like, “Wow, she’s old.” That major doesn’t even exist anymore.

Understanding a country requires a combination of the culture, the history, and the political science. With Russia especially, it’s always important to read Russian literature — the classics. Even in today’s discussion about Ukraine, people will point to key Russian nationalist thinkers and how they think about Ukraine as being very important for the way Putin thinks about Ukraine. As much as it is wrong, it provides them with a rationale that we should understand.

When I was studying the Soviet Union, the two key authors were Adam Ulam and Richard Pipes.

Pipes is very high on the list for this year.

Now I read Stephen Kotkin. He’s wonderful. He has done some great podcasts.

The third volume of Kotkin’s Stalin biography is coming out this year.

I’ve been rereading a bit about Tukhachevsky — a famous Soviet General who was killed by Stalin after articulating some important and interesting concepts.

The worst thing that can happen to somebody like you in the national security space is that you come up with some important new concepts…

And you’re hauled off. I realized how many of the Soviet General Staff were killed. Depending on who you read, it made a material difference in the war. But I’ve been reading about him because, to go back to the strategic depth point, that is a concept about time and space — having enough territory to keep an adversary busy until you have time to counter-attack. The best example is what happened with Napoleon’s invasion, and then the Nazi invasion. There’s this great chart which depicts Napoleon’s invasion. It’s called the Minard graph. It’s one of the most famous graphic depictions of a whole bunch of things.

There’s that Edward Tufte book, The Visual Display of Quantitative Information. It’s a touchstone for one of my colleagues and for the way we think about our work here at IFP. I’m glad you’re bringing this up.

The Minard graph depicts Napoleon’s army going into Russia. It’s a big thick line going in, depicting 400,000 troops — and a very thin black line coming back out, showing that something like 10,000 troops survived.

They were able to draw in the troops, use the territory to regroup, and have the time to counter-attack.

People who want to understand China often read the science fiction book, The Three-Body Problem. I think it’s useful to read some contemporary Russian authors to get a sense of what society is like today. But I’ll stop there — let me know what you’re reading.

The three books I have on my list for this year are Richard Pipes’s book, The Russian Revolution, which you mentioned; Dostoevsky’s Demons, which is one of those classics; and Secondhand Time — I hear Svetlana Alexievich is an excellent interviewer, tracing the fall of the Soviet Union. I could use advice on how to interview better, but anything else that you’d put on my list from the modern era, I would happily throw on.

You need to have a sidebar book club here.

I need one more project, is what you’re telling me.

Exactly.

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In October 2024, I was trying to understand how international students enter the US workforce: where they move for work, how many of them use programs like Optional Practical Training, and whether they stay in the US after graduating. So, I opened up a dataset from the Department of Homeland Security’s Student and Exchange Visitor Information System (SEVIS). Today this data is available on the OPT Observatory; it’s the most granular public resource available to answer these questions. But it took me over a year to produce. The process of getting there taught me as much about government data as it did anything else.

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Thanks to Shadrach Strehle, and Jasper Placio for their support in producing this episode.

For a printable PDF of this interview, click here:

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Below are 10 lessons I’ve learned about handling government data:

1. Administrative data has major gaps. It’s not just that we don’t collect things we should; it’s also that information a system like SEVIS should collect just isn’t in that system.1 While some data gaps result from human error, others are the product of data collection systems that are leaky, or that just don’t exist. We simply cannot know things one might assume we do, like which visa-holders are currently in the country, or the employer of every working international student, because the departure dates and employer addresses of working international students are only present a fraction of the time in SEVIS. The federal government doesn’t know these things either. Failing to adequately maintain records and non-mandatory both result in inconsistent record-keeping. These gaps occur on every level as we decline to write down valuable information, neglect to write down everything we’re supposed to, and fail to hold on to everything we once wrote down.

2. When something seems off, it often is. Government datasets often have a small number of users; often a handful of civil servants in this or that agency. This means that inaccuracies can persist unnoticed for a surprisingly long time. If you encounter what seems like a major error in government data, it’s less likely to be a failure of your understanding than you might expect. In 2024, the US undercounted the number of international students by 200,000. The error went unnoticed for months until one diligent user contacted the agency responsible.2 The frequency of and methodology for data collection also change periodically, which leads to results that are technically correct, but also unintuitive and potentially misleading. Most quantitative disciplines rightly train students not to assume that the data is wrong until they’ve scrutinized their own work or their understanding of the data first. But if you’re working with certain kinds of government data, you should probably leap more quickly to suspect underlying data issues.

3. If it’s a question on a form, you can find data on it. Government administrative data is commonly just collated responses to the same questionnaire. Reading the forms which feed into it can tell you what it might contain, and where to find it.3 Since information isn’t always collected where you might expect, learning an agency’s paperwork can save you time, too. While investigating how many H-1B visas go to former international students, and how much they earn, my colleague Jeremy happened to realize that US Citizenship and Immigration Services collects information on someone’s wages and current immigration status when they file an I-129 Petition for a Nonimmigrant Worker. He learned this by talking to someone who knows USCIS paperwork like the back of their hand: an experienced immigration lawyer. Without realizing it, his analysis wouldn’t have been nearly as rich.

4. We’re not actually counting. Lots of government data is based on representative samples, and uses statistical methods to reach conclusions about the population at large. But that data is not produced by literally counting the population at large. This introduces various assumptions that can easily invalidate your findings if you forget to include them. The “irreversible demographic fact” claimed by politicians last year, that two million more Americans were employed than in the year prior, was the result of using data in ways the statistical agencies explicitly tell users not to. Jed Kolko describes how this statistic was actually a zero-sum accounting artifact, resulting in part from the fact that the population totals are pre-determined by the census, while nativity is not. Since the Current Population Survey measures variable immigrant and non-immigrant populations but is always scaled to match Census totals, any reduction in the reported foreign-born population will necessarily appear as an increase in the native-born population, even if it’s driven by changes in response rates rather than real departures.

5. Nobody understands statistics. Trying to elucidate statistical subtleties in a policy context is usually a losing battle, and it’s best to avoid trying. If you absolutely must, assume you’re talking to an audience of 5th graders. Never, ever assume the numbers speak for themselves. Be extremely clear about what you intend to show with the graphs you share, how they could be misinterpreted, and why those misinterpretations are incorrect. Policymakers may take numerical claims and their accompanying interpretation at face value, so choose your words wisely — they could get reiterated verbatim. If you want to make a point based on data, stick to publishing graphs with a single red line going up (or down) and to the right. If you want to be honest, include detailed footnotes.

6. Nobody knows how the whole thing works. Most users of large, complicated government datasets become experts only in narrow parts of them, and there’s rarely a single person who can explain the whole thing. University officials know how to update individual student records in SEVIS, and government officials understand backend processes, like how certain fields are autogenerated, but neither sees the full picture. As a result, hardly anyone ends up drawing connections between the different parts of the system. This means that those who do can provide unique insights. My team at IFP was able to create the OPT Observatory only because of our unusual combination of expertise in immigration law and policy alongside software development, design, and data engineering, allowing each of us to understand different parts of the dataset and draw novel connections. But it took deep collaboration, for months, for us to figure out what was happening in the dataset.

7. Government data systems were built for administration, not analysis. These systems are designed to help bureaucrats track the processes required to administer a program, which mainly involves answering specific, often rote, questions. They were not made for policymakers who want to synthesize information, or generally understand how a program works. The point of querying SEVIS for someone who works at Immigration and Customs Enforcement is closer to “verify that a given student is in active status and is authorized to work” than it is to “count the number of students working.” These systems can act more like audit trails than flexible databases, accreting answers to a staid list of possible queries. Answering anything outside that list requires creativity, and restructuring the data in ways the system never anticipated.

8. The trustworthiness of survey data is under threat, making administrative data comparatively more useful than before. In the past, government surveys were often the cleanest, most reliable source of information about the population at large. However, declining survey response rates and AI-enabled spam may affect the statistical power and quality of such data, both government and otherwise. The risk of non-response bias in the American Community Survey increases with declining response rates, and the proliferation of AI chatbots (which make it easier than ever to produce spam) requires agencies to be on watch for disingenuous responses, while also training the public to generally ignore unsolicited contact, including for legitimate government surveys. In a future where survey data is heavily polluted, administrative records which avoid these issues could become increasingly valuable, despite their gaps.

9. Organizational incentives can make government data messy. Government data systems are infamously brittle. Often, they were last updated decades ago. This forces their government users to develop workarounds that bend them in unintuitive ways to achieve their goals. In government especially, a system’s goals can be influenced by complex political incentives which don’t get written down. Understanding underlying incentives and resulting decisions about how to store information is invaluable for deciphering that information.

10. Which means that being useful requires practitioner knowledge. For any given trend or perceived abnormality in a dataset, someone deep in the bureaucracy likely knows exactly what caused it. Typically, it’s the result of some conscious action within the bureaucracy — a new regulation, a memo, a digitization project, and so on — and someone dedicated a significant part of their career to enabling it. If you want to discover anything new about such a dataset, you have to find out what others already understand by engaging with their expertise. This means learning from practitioners, who experience how changes to law, regulation, and habit might generate lasting data quirks, and who inherit knowledge of previous data quirks from colleagues. The accumulated knowledge of both policy changes and their implementation makes it readily apparent which data “mysteries” are actually the legacy of changes in user behavior. In SEVIS, changes to the reliability of employer data over time can be explained by a 2008 programmatic change, which resulted in additional documentation of employer information for a subset of records. Exploring such a trend can be helpful for your own understanding of a dataset, but it won’t result in genuinely novel insights unless you can distinguish between what you yourself know about the data and what is collectively known among those who know it best.

Many of these have been previously written about by Jennifer Pahlka, or better articulated by IFP’s Distinguished Senior Immigration Counsel Amy Nice, and I’m sure the list could still be longer. “Government data” is an enormous catchall, and nascent efforts to make it accessible, like data.gov, are a promising start to a challenging problem. In the meantime, I’m excited to continue witnessing how today’s extraordinary access to data can help us understand, better than ever, unintuitive truths about the world’s oldest democratic society. Tweet at me to fill in what I missed.

Thanks to Peter Bowman-Davis, Connor Sandagata, and Jeremy Neufeld for their early comments, and Thomas Hochman for inspiring the format of this post.

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Why is Jeremy on Statecraft today? After the failed redesign of FAFSA in 2023, he spent six months at the Department of Education helping to ensure the 2024 launch was successful. The revised application form meant 1.7 million more students were eligible for maximum Pell Grants in the 2025-26 application cycle.

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We discuss:

• Why attempts to simplify FAFSA went so badly wrong

• The problems caused by precise drafting in Congress

• How Singer got FAFSA back on track

• What politicians and GAO don’t understand about developing software

Thanks to Harry Fletcher-Wood, Shadrach Strehle, and Jasper Placio for their support in producing this episode.

For a printable PDF of this interview, click here:

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Our story of the day is the salvage operation you did a couple years ago on FAFSA, the Free Application for Federal Student Aid.

But first, my most urgent question. I’m sure that in your role as president of College Board, you saw my SAT scores. What did you make of them — room for improvement?

Excellent scores — well-equipped for the modern world. No, that is a very common question, but we do not have access to scores.

You don’t dig around?

Even very important people, we cannot access.

You’ve been president of College Board for a while.

It’ll be 13 years — the longest I’ve ever been in any one place.

That period was punctuated by a six-month stint in the federal government, and that’s what I want to talk to you about today.

Around 2020, there was a big bipartisan bill to simplify FAFSA, the main system for financial aid for college applicants — to go from about 100 questions to 36. When the new system was finally rolled out, at the very end of 2023, it was totally botched. Tons of applicants couldn’t access the site or fill out their forms. Colleges had to wait months to get initial financial aid information from students.

For a number of your readers, it will bring back PTSD. My six months — I call it the world’s worst sabbatical. It was good to have a bit apart from College Board, but it was jumping into a fire.

Let me start at an even higher level. There’s a ton of research — Raj Chetty out of Harvard is one of the best — that shows a college degree is the surest pathway to a better life. For a huge number of students, FAFSA is the tool that unlocks financial aid allowing them to fulfill that — go to college, get a degree, and improve their pathway.

How many American students fill out FAFSA in a year?

There are roughly 40 million people accessing the system on an annual basis. But that’s both students and families. I think it’s at least 17 million. If you’re familiar with federal Pell Grants — FAFSA unlocks Pell. There are federal loans you can get; there is Work-Study, where the feds pay you to work in college. But FAFSA is used by many states, and some colleges, to open up their aid to students. It is the linchpin of financial aid. [Editor’s note: the transcript originally said 17 million people access the system on an annual basis — it’s actually 17 million students, and 40 million people (both students and their families).]

So I fill out FAFSA as an applicant, that’s a federal program, but then a state like Louisiana needs that information to prime its own financial aid system.

Exactly. Students could either be an independent student — they’re no longer dependent on their family for financial aid — or they’re dependent, like many younger students are. A prospective college or higher-ed student and their family will complete the FAFSA form. It will be analyzed to determine what level of need they have, based on their income, family income, and all these other factors.

FAFSA generates something called an Institutional Student Information Record, generally known as an ISIR [pronounced “icer”]. The federal government sends it to states and colleges. Based on that, they will know what kind of federal aid the student is going to be eligible for. But in addition, if Louisiana is giving state aid to students, they could use the ISIR to determine how much to give that student if they go to Louisiana State. And many institutions that give aid to students in need use FAFSA as the best proxy for that need. It’s all contingent on the information originally filled out by the student and their family.

Which millions of kids are filling out every year.

Before FAFSA was redesigned in the last couple years, there was good research that there were literally millions of students who would be eligible for federal and potentially state and institutional aid, but never completed the FAFSA. It was too complex, they didn’t know about it — there’s a lot of reasons.

This had been an issue for a long time. [Former senator] Lamar Alexander deserves a lot of credit. He had a lot of desire to simplify this process so it’d be easier and more accessible — many more families would be able to complete it, and it would open up college to more low-income students. When he was on his way to retire, in 2019, there were two congressional bills about FAFSA simplification. The question was, “Can we take this cumbersome, 100-plus question form process” — a lot of it was taking data from your tax returns and figuring out field 38 needs to go here, and a family inputting it and potentially making mistakes — “and make it easier?”

There would be logic built into it. Think of TurboTax — when they find some information on you, they say, “These six questions are no longer relevant, so you no longer need to ask them.” The single biggest breakthrough was this was going to pull data from the Internal Revenue Service (IRS). Santi, you did a tax return hopefully?

You’re making me second guess. Did I leave the oven on?

I’m trusting you here. Let’s say you filed. You have a child. Now, instead of you trying to figure out what parts of your tax return you need to physically enter into the form, it would ingest that from the IRS. That dramatically reduces the time and amount of input — families literally go from hours to complete the form and find all the information, to tens of minutes — some under 10 minutes, depending on the complexity of the individual.

The instinct behind that bipartisan congressional push was, “The federal government has my tax information. There’s no reason we should make citizens go dig that information up again. It’s just a matter of linking up these massive internal federal systems.”

That’s right. All well-intentioned, all made sense. But it became the biggest software project that the Department of Education (DOE) had ever done, and it was not initially successful. It was supposed to launch in October of 2023. It launched much later, and it launched in pieces.

You were brought in in June 2024 — six months after the botched rollout. You were responsible for running the cleanup job.

In 2019 and 2020, Congress told the Department of Education, “You’ve got the better part of three years to set up this new system. We want it ready for kids in the fall of 2023 to apply, so that in the fall of 2024, they go to college with however much in federal aid.”

What happened between those bipartisan bills passing to great fanfare, Lamar Alexander retiring, and this nightmare rollout?

I’ve spent a lot of time trying to uncover that. I got a call from the White House in May 2024. They were modeling it after the Affordable Care Act. They launched the exchange, they weren’t working, they kept trying to fix it — eventually President Obama had the foresight to bring in a team from the private sector with software experience. They fixed it.

This was the same. They needed people with large-scale software experience, and my name got floated. The students that couldn’t complete FAFSA are the students we were trying to serve at College Board. Also, we’re a membership organization, every higher ed institution is a member, and it made their job next to impossible that year. We decided the best thing I could do — more than anything I could do at College Board — was to try to right FAFSA.

I called every brilliant person I worked with in my career: friends, colleagues, former colleagues. I had a great team of eight people. Jeff Olson, who’s the Chief Technology Officer (CTO) for College Board, came; he said, “You’re way over your head. You need me.” But other brilliant people — including Aaron Lemon-Strauss — came on board. When I left, he stayed, and he’s now the GM of FAFSA, which is essentially what I was, with Jeff being the CTO, which they’d never had.

They’d never had a CTO?

There’s the Department of Education, then within that, there’s Federal Student Aid (FSA). There are a couple of organizations set up by the government to be performance-based. They want it to run more efficiently — the idea is to run it more like a private sector. Why is that? There’s trillions of dollars of loans — it’s one of the world’s largest lenders. It’s in the DOE, but it’s really a huge financial loan organization.

Within the FSA, there was a Chief Operating Officer (COO), which in government they pronounce “Coo” — I’d never heard it referred to as that before. The COO was supposed to be the person to run all of FSA. FAFSA’s a big piece of it, but there’s a lot of other pieces, like how you manage outstanding loans. The COO should have been the GM of FAFSA, but they had a lot of other responsibilities — there was no one running FAFSA. There was a CTO of FSA, then there’s someone at the Department of Education, but not specific to FAFSA. That becomes a big issue.

What went wrong? I’ll bucket into three large areas. One, the two bipartisan bills that passed in 2019 were incredibly well-intentioned, but were overly prescriptive on how the system had to work. They hard-coded product requirements. 40 years ago, everything was what‘s called “waterfall”:

• There’s a team that defines exactly what the output has to look like,

• They hand it over to developers to code it,

• They hand it over to quality assurance who check it.

That process, while very large in the ‘80s, was replaced, in most cases, by some version of agile.

Agile — the idea is, your future self is almost always going to be smarter than your current self. If you try to define everything upfront, you’re going to learn in the process and you’re going to miss out if everything’s hard-coded. Instead of trying to define everything, you start iteratively producing code, getting feedback, learning, and that loop keeps going. For some projects, where there’s a very specific deliverable, on a date, to a budget, it’s hard to do agile. Agile — it’s harder to predict those dates. People will use waterfall occasionally. If you’re going to build a skyscraper — we both live in New York, there’s the big skyscraper in Manhattan that is waving. That was a waterfall. They tried to define everything. You have to. You can’t say…

“We’ll figure it out 50 floors up.”

Exactly. Where the ducts are — that all has to be defined. What you do with the foundations depends on what’s going to be constructed. Buildings are waterfall, but many other things don’t need to be.

It’s been interesting talking to my colleagues at IFP on the infrastructure team about what better planning looks like. In some domains, what you’d like to see to build products more efficiently is more upfront planning. But that’s in places where you get one chance to dig. The budget bloat in things like the Boston Big Dig is a result of not understanding that you won’t get to go back and iterate, because of the physical constraints of the process. Whereas in software you can write new code — you are allowed to learn from your mistakes.

100%. What Governor Shapiro did in Pennsylvania, remember the I-95 and how fast they fixed that. We’re stretching it, because it’s not software — but it wasn’t agile. “How do we get it fixed correctly, quickly?” Maybe there is some application in certain instances.

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It’s more complicated than my simple gloss. But even with high-speed rail in California, there was not a lot of planning inside the California Department of Transportation. They didn’t have the technical capacity internally [as Zach Liscow discussed on Statecraft]. As a result, as you realize things you didn’t know about the project, you have to go back after you’ve started.

I’ll give a very specific example. There was a very well-intentioned Democratic senator who cares a lot about the unhoused population, particularly unhoused applicants for FAFSA — “unhoused” being the term of art for “homeless.” In the bill, they said, “You have to give unhoused people more scaffolding to complete FAFSA, because they don’t have a home address to list.” 100% makes sense.

But the way it got defined, the team that was executing had to put this interstitial direction that was specific to a percent of a percent of FAFSA applicants were unhoused. I’m not saying they’re not important, but everybody had to see that language. If you weren’t unhoused, it was — “What are they trying to say? Do I not list my address?” It was well-intentioned, but we quickly saw so many students got confused by these pages. But because of the way the statute was written, FAFSA couldn’t take it out.

Similarly, we had a Republican senator who was very active in writing the bills. I was with her in front of a student filling FAFSA out when we were doing beta testing. She was… not a fan of us. When we’d first come, she’d told the press, “There are people from College Board that are going to further torpedo the FAFSA to help College Board somehow” — that we were there to be saboteurs. But in the beta testing, there was some confusion in the software and she turned to me and — credit to her — she said, “Oh my God, this is something I put in, not knowing that this would be confusing to the user.”

You could have got that information in a much less confusing way. She immediately saw it because she saw the student struggling with it and she’s — “I didn’t think it could be interpreted like that.” So that’s [problem] one. The legislators — their view is, “We can’t leave it up to career staffers to define all these terms.” But then they’ve handcuffed them.

The second big issue is, who’s producing the software? This was the biggest software project in the history of the Department of Education. They had limited deep technical experience in the department or in FSA.

When you say limited technical expertise, put some numbers on that for me. How many engineers were there at FSA?

There’s probably a decent number. But they had four primary software vendors. General Dynamics Information Technology (GDIT) was the biggest. They had a very large contract with Accenture, and then two smaller tech firms. My father worked at IBM back in the day. The idea — “You never get fired for hiring IBM” — probably in government you rarely get fired for hiring Accenture or GDIT, because they’re big monoliths that the government uses a lot.

“Beltway bandits” is the critical term people use to describe these big consultant firms.

I don’t know how good these firms are technically, but — GDIT had built the old FAFSA software. It was built in archaic software languages that were no longer being used — COBOL — and on mainframes. A lot of the people we were getting were the same people that had built the system and didn’t know Python, or modern software techniques. They were ill-equipped for the job. What was clearly needed, and I think what Aaron Lemon-Strauss has successfully built, is 15-20 senior technical people who understand the architecture, and can effectively keep the vendors accountable.

There was no ability to check the veracity of what the vendor said as far as status, quality of code — all the things you’d want to do. They had four large vendors. The vendors did not work well together. There’s no perfect solution. Sometimes government [chooses] one big contractor, but then you’re hostage to that contractor. They know everything, they control, and you really can’t do much.

The argument for giving it to one contractor is, “You have one neck to squeeze when things go wrong.” You say, to Accenture or whoever, “we’re holding you to account.”

That is the argument. Otherwise you get five people pointing in twelve different directions of who to blame.

A ton of people were our guides. We all had software and education experience, but none of us had government experience. Jen Pahlka [who Statecraft interviewed in 2024] was our guru; her book was our Bible. Danny Werfel from the IRS was willing to meet with us and advise. He was fantastic. His take on this is, “It’s costly, but if you’re going to pick a single vendor, keep a second company on the side, and make it known.” Pay to keep the second vendor up to speed so that you have a credible threat to the first vendor: “If you don’t do this better, I’m going to switch vendors.”

There’s a cost to that: you’re constantly paying a backup to be ready to come in. You have a backup quarterback who’s always doing reps. But then you can say, “If you don’t do better, I can fire you.” If I was going to do one, I would do that.

The other model is where you have four or five vendors and they’re all involved. If one’s not performing, you move it over. Procurement has all of its own issues: there’s archaic rules, it becomes political, it’s a mess. But the other issue is, if you’re going to have four or five vendors, you need systems that allow them to work together.

When you release software, it’s an evolved process to make sure it’s going to perform the way you want. When they wanted to release code, each of the four vendors had to do something, but they had to do it independently. They weren’t on the same systems. They were emailing or texting things that should be in a system.

One of the vendors builds the security verification, one of them builds the plugin to get the IRS data, and one of them builds the front end that I see as a 17-year-old applicant?

[Another does] the analysis to determine what the score is so they can generate an ISIR, another to generate the ISIRs. It’s all those things.

None of this is visible to the user, but it’s essential for it to work well. You try to get a common interface so that the ability of systems to talk to each other is easy. Everyone talks about that — easier said than done, but you use APIs, so you know what to expect if you’re one end of software ingesting information from another. Equally importantly is something as simple as communication. That was terrible. After I left, we got a very happy note from Aaron Lemon-Strauss to the group that had worked on this, that they had finally all gone on Slack, which was hard. We were trying to get everyone on the same system.

All the vendors?

All the vendors and the FSA. That was a huge breakthrough. It sounds so freaking obvious. If you’re in the private sector, obviously everybody working on a software project would be on the same system so you could communicate. Imagine — “I got this in Slack, I’ve got to copy it to Teams so this person can hear.” It’s absurd.

The third [issue] was organizational within the FSA. Some of the classic — unclear decision rights, escalation took a long time, very risk-averse culture. On both parties a lot of politics gets into it. All this compounds the problem.

What was interesting — there was a train wreck happening. FSA, Department of Education, the White House — I don’t think anyone there realized. Remember, October 1st, 2023 is when they’re supposed to launch. My guess is spring of 2023, the vendors were — “We’re doing well.” It was completely non-transparent to the department how screwed they were. If I was doing a release on October 1st of that scale at College Board — or when I used to be at Kaplan or McGraw Hill — we would’ve been code complete probably in May 2023. Then we would’ve been just testing — load testing, user testing, improving on the edges. October 1st when you open to 17 million people, it works.

They were still building core functionality very late — even past October it turns out. I don’t think the department knew how screwed they were. They were somewhat surprised as it got closer how bad it was. Even then, they didn’t know how bad it was. The well-intentioned people in the department and the White House — if you don’t have the information, you’re reactive. They pissed off the community, higher ed, the Community-Based Organizations involved, the high schools, the general public. Because they couldn’t adequately communicate the situation, and they kept putting stuff out that ended up being wrong.

I don’t want to make this a blame exercise — I’m more interested in your perspective on the cleanup. But for my own personal education, I’m curious to understand how something like this happens. The healthcare.gov debacle and then that successful cleanup happened two administrations prior, in the Obama years. I’ve always understood that as the beginning of a sea change in American policy around how you build tools and service delivery.

What meant that those painful political lessons weren’t learned by the next Democratic administration?

I don’t think they were absorbed by either party fully. Developing good software — particularly that has the complexity of FAFSA or other software that the government does — is not easy, even in the private sector. There’s a lot of private, well-run companies that botch software launching. I’ve had a few in my career — not to excuse it, but it’s a hard thing.

If you’re going to build software, what do you do? The alternative is don’t use vendors, build it yourself. Some have tried that in government. That’s really hard. Can you attract the best software talent? You’re competing with Google, Facebook, and private enterprise. There are brilliant people who could do better in the private sector, but want to have impact. But, by and large, you’re going to get a lower quality of person who’s going to see this more as going through the motions. So it’s very hard to build it internally and support it long term. The hope is you can find that smaller slice of people with very strong technical [knowledge], which they didn’t have.

Part of what came out of the healthcare.gov story was this idea of trying to use multiple vendors. But it’s not that simple. They’d say, “Use multiple vendors, but you need clear, expert leadership.” If you don’t have the technical expertise and you want a single breakable neck, there is a world where you say, “Accenture, you’re going to be over all these vendors, and it’s your job to make sure it delivers.” Then you could have gone to one org and said “You screwed it up. You’re accountable.” But they didn’t have either of those.

It’s my understanding that there were no product professionals at FAFSA in the fall of 2023. But you’re slowly shaking your head.

There were people that were product experts in the old FAFSA system. They understood workarounds and the minutiae — because there were some things that the old software had issues with and they knew that stuff inside out. Are those the people I would put on rethinking the software and developing something modern? No. Like the GDIT engineers that were COBOL engineers and knew how to code something in 1980 — these people were not the people I’d want to develop an innovative product in 2023. No question they didn’t have the right people on staff, either in FSA, or the department.

Then it became a crisis. A lot of well-intentioned people — smarter than us in policy and many other things — jumped in to try to fix it. But they also were not software or operational people. They didn’t know what they didn’t know. They made some improvements, but they couldn’t figure out how to hold the vendors accountable. A big part of my job was trying to keep some of these well-intentioned people, who didn’t understand software, away from the software — to give the rest of the team the opportunity to do work.

We were lucky. There were United States Digital Service people — this is like a civic Peace Corps. They are very successful technically — engineers, product designers, data scientists. They come to government from the private sector and do two or three-year stints — helping veterans get benefits [as Marina Nitze has described for Statecraft], you name it. Very effective. Jen Pahlka, again, one of the origins of that. There were about 200 of them in the government before this current administration. We had about 15 working on FAFSA. But they were frustrated because they didn’t have room to do their work.

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You had politicals, the White House, suddenly hyper-engaged on this front-page news story. How did you give your team cover?

It was a lot of selling. I was lucky because it was an Intergovernmental Personnel Act (IPA) agreement. College Board was still paying me and let me work for the government. I was of the mindset — “You brought me in to fix this, and if you don’t like it, fire me. I’m happy to go back to my College Board job. I’m not enjoying this work.” It was a brutal amount of hours and stress.

You had your own other vendor lurking in the background — “I can walk at any time.”

I was a bit of an asshole. But I brought a lot of credibility with higher ed, with K-12, with Community-Based Organizations (CBOs), that are essential to FAFSA.

Will you define CBOs for me?

Community-Based Organizations — these are nonprofits that are part of the ecosystem that helps families and students complete the FAFSA. They ride shotgun, they go to schools and communities to help them complete it — and are so essential to how it works. The National College Attainment Network is the probably biggest. Part of the success we had was thanks to all those organizations. When I got there, there was such a fractured relationship.

To your question about what I was doing — we ended up meeting weekly, a call with staffers for the top four Democrats and top four Republicans who work on education in the House and Senate. It was a group of 20. They’re very frustrated, because they wrote the bills and now the software wasn’t working. I was the face of that. They were unpleasant calls. Similarly, we were in a weekly White House call, and we met with the Secretary.

Here’s a great example. We got there in June, and realized there was no way we could launch the next year’s form on October 1st. If I was at any of my old software jobs that significant, I’d probably be code complete in May to launch something to this size population. They were not only not code complete, they were still fixing bugs from the prior year. There’s no way we can hit October. But the system was all going toward an October 1st launch. In fact, while the department knew that was a Hail Mary, there was pressure not to acknowledge this.

Within the department?

Within the department, the White House, the community. We had these well-intentioned associations of college presidents, high school associations, and community-based organizations — they wrote a letter to the Secretary and Congress to say, “You have to launch on October 1st.” I get there and — there’s a phrase in software: “Two moms can’t produce a baby in four and a half months.” There are times where you can throw the kitchen sink — as much money, whatever, and you still can’t produce quality software in a certain time.

I said, “This is a suicide mission.” The last thing I wanted to do is work my ass off and then all these constituents that College Board serves, that I know — I’ve built credibility over my whole career — disaster.

All the constituents wanted October 1st, but October 1st is not a magic date. It used to be January 1st, and they moved the deadline forward maybe 10 years ago. Earlier is better, but it’s not like November 18th, when we launched, was a disaster.

So many colleges, high schools, and CBOs do stuff to help students complete the form. They told me, “If it’s not October 1st, we’d much rather know a firm date that you’re going to hit, and it’s going to be quality software, so we can plan around that. If there’s a 70% chance you’re not going to open October 1st, but you don’t tell us first, that’s a disaster.”

I couldn’t convince the White House or the Secretary. The Secretary had gone in front of Congress in May, and apparently he’d been told, “Do not commit to October 1st, no matter what they ask you.” They knew there was a real risk.

Of course, in the moment, he says, “We’re going to make October 1st.”

This is Secretary Cardona?

Yeah, Miguel Cardona.

The bright lights of the oversight hearing are just too hot…

It’s hard not to. You want to do good.

I get in there, I’m trying to convince the White House, and they’re worried they’re going to get crushed, because they have this letter from all these constituents. I start calling all the people I know and say, “We’re not going to be able to do this. We can pretend, try, and miss, but it’s going to be very similar to last year.” The first year — they claim it was December. It was a bit December, but it was into January. But that was only the part of the software where the student and family could enter their information. The production of these ISIRs, which go to colleges — that functionality didn’t open until many months after January 2024.

When they produced the ISIRs, they were “Oh s***. There’s an error in the submission process that is generating faulty ISIRs.” Millions of students had to go back in and redo this — now we’re talking spring ‘24. We knew that if we tried to go for October 1st, at best, we could only do that front end again, where people could submit — and there was a chance they’d have to redo what they submitted. That would be a disaster. But it took so much gamesmanship, political capital, and triangulating to get everybody to accept that. We eventually did. My role was — not just in the government, but with the community, the whole ecosystem — trying to help them be realistic. Because all these people were aligned. Everybody wants FAFSA to work. Republicans, Democrats, higher ed, CBOs, high schools.

I’ll give you another example. There was a situation where we ended up doing beta. Whenever you’re doing software, before you open something to 17 million people, you’d want to test it with as many people as possible, so that you can find and fix bugs — so that it works.

There’s a rule of thumb that if there’s an issue, if one user in every ten hits that bug, you usually will be able to diagnose and fix it if you have 100 users. You want 10 people to experience that bug, then you can probably figure out what it is. A 1 in 10 bug is a disaster. But we started our first beta with a few hundred students, so that we could say, “If there’s that frequent a bug” — luckily there wasn’t, “we would find and fix it.” We found little things that we did fix — usability issues. Then the second beta, two weeks later, was thousands of students. Now we’re finding 1 in 100 issues. Our last beta was tens of thousands of students. We would find 1 in a 1000. We weren’t going to find 1 in 1 million — when you have 17 million people, there’s still going to be bugs.

That six weeks of beta testing was essential. We went out to schools, we watched them complete the form, and we discovered so much. I took one of the FSA product people that had been there 20 years. It was her first time she was watching a user interface with software, which was very upsetting.

It’s a week before we release. Whenever you do anything to the code, there’s a risk that you create some other issue. There’s something called regression testing, which is supposed to help reduce that risk, because you test the software in a million ways, but it’s not foolproof. I err conservatively. If I have a system that’s working, I don’t want to mess around with the code a week before it’s going to launch. We introduce too much risk.

There was a small population, less than a percent of users — they could complete the form, but it was not a great user experience. It may have been incarcerated students. We were like, “We’re going to defer [fixing it for them] — because we’re about to launch 17 million people.” The last thing we want to do is accidentally introduce something that affects all 17 million.

I got a call from someone very senior in the government who said, “You have to fix it.” I said, “No, it’s too risky. No one in their right mind who knows software would ever play this game. We’ll fix it later.” We went back and forth, and finally I said, “My CTO and I say this is a disaster. But if you want us to do it, all you have to do is send me an email saying that despite our recommendation, you know more about software, you’re telling us that we should do this, and if something goes wrong because of this…” Of course finally they back down. But there’s a lot more of that s*** I had to do than I wish I had.

If I ask you for the name of that very senior political official, I don’t think you’ll tell me. But what’s the larger lesson there? Politicals don’t want to put things in writing?

Both parties face such pressure now that it’s not very conducive. One [lesson] is, you’re bringing your experts for a reason, and you’ve got to listen to them. This person did incredible things, but in this one area, they were out of their depth.

The thing that’s depressing is just how political all this is. Let me give another anecdote. We had to pitch House and Senate staffers on why beta makes sense. There was a lot of pushback at first: “It doesn’t make sense, you should just launch.” Finally we laid it out in such a convincing way. The staffer I mentioned earlier, for a prominent Republican senator who’s still there — that staffer loved beta when she finally understood. She said, “Can you help us figure out a way to put a requirement in any government software that they do a beta launch before they launch fully.” This is the same person who’d told us we should quit, because we’re from College Board and we’re trying to undermine the government.

You won her over.

We were so happy. I’d rented an apartment in DC for the six months. We went to the apartment, and we were having dinner before we did more work. Her boss, the senator, tweets out, “Failure of the Biden administration. This beta thing is just an attempt to confuse the public.” Totally had weaponized this in a bad way, despite his main staffer loving it so much that she wanted help. It’s stuff like that — your head just explodes.

When it came to student loans, the Biden admin had a big other political priority, which was loan forgiveness. Over the course of 2023, and especially ‘24 when this rollout got botched, there were a lot of allegations from Republicans that the Department of Education politicals had taken their eye off the ball, and that focusing too much on loan forgiveness led them to be poor stewards of FAFSA. How much credence do you give to that claim?

It goes deeper, to what you think the role of government is. If your maxim is, you want government to help citizens of the United States succeed, including experience quality education, get a degree, end with an affordable amount of debt that they can repay, and have a system that makes sense in how they repay it — Democrats are more ambitious on the things they think government can do. I’m not breaking any news here. If you’re in the Republican party, and you’re specifically very minimalistic on what government should do, you have a lot less ambition.

When you talk to the lifers at the Department of Education, they are more inspired, on average, by what the Democrats want to do. But they sometimes have more success in Republican administrations, because Republicans have many fewer priorities.

To that extent, there’s some veracity that the Biden administration tried to do too many things at once in education. They were living through COVID, so we could debate, “Were most of those things required?”

My intuition is that it’s very easy to take your eye off the core functions. This was a bipartisan, statutorily-required thing that FAFSA had to do. It was an incredibly big, ambitious modernization — but it’s also something that needed to get done.

I don’t think people understood the complexity and magnitude of it — which happens all the time. It’s easy to look back and say, “It was such a big project, it should have been the priority.” But it’s also hard to know — they were dealing with a million curveballs that COVID created. Easy for us to sit back and say, “I would’ve just focused.” In the moment, it would’ve been a very hard thing.

I want to change gears and hear your perspective on the Government Accountability Office (GAO), which issued a very critical report in 2025.

The report criticized the botched rollout, as well as your cleanup operation. Your colleague Aaron Lemon-Strauss, who is still there, wrote a response to GAO saying, basically, “No, you’ve got it wrong. You don’t know anything about building software. If you did, you wouldn’t say this stuff.” [Good piece from Jen Pahlka on the GAO response here.]

Everyone should read that response, because it’s genius, and it’s 100% right. I was never involved in government, so this was wide-eyed Jeremy going to DC thinking about how things work, then seeing the reality, and being — “Oh s***, this is how the sausage is made.” The biggest hit was GAO. I have always viewed them as smart — the place that keeps everybody accountable.

Who doesn’t like accountability?

Exactly. Then I see it. I’m like “Holy s***.” If we had followed what they suggested, it would’ve been a much larger disaster. It was almost as if they programmed Claude, or whatever they used, in 1990 practices — “This is how you make software” — to give a recommendation. Because it was such a mess. Oversight’s a critical function, but the GAO team that did this was so bad. It was very compliance-oriented. Compliance does not lead to successful software.

What did they ding you for on the process and compliance stuff?

There was stuff like, “If people had taken certain trainings, we would’ve avoided this.” They were critical that in these moments of crises — prior to me — people didn’t go through the right steps to document everything. But if you’re dealing with a house on fire, you’re not going to go, “I’m going to first go to the second floor” — it’s detached from any reality. They were requiring key people that I needed to launch the software in the fall of ‘24, and they were having us produce old documents and review stuff and I’m like — “Guys, we need to do this.” To the credit of the department, they tried to help make sure that the critical staff we needed didn’t get too distracted by these exercises. But when I talked to them, it seemed they didn’t get it. It’s not people I would want to give a recommendation on how to produce good software.

These are not unique criticisms of GAO. I’ve heard similar complaints from people in different domains (notably the CHIPS Program Office).

I think their framework is broken. I also wonder whether they have the quality of mind, of people, that can understand there’s a framework, but also understand nuance and say, “You do want good documentation. But when you’re in an instance like this, that’s not possible. I’m not going to ding them for that. But what I would’ve wanted to see is X.” Or understand waterfall versus agile and say, “I get it, there’s less documentation because of this. But if you’re doing agile, you should be doing these six things that are essential for agile success.”

You guys had Congress breathing down your necks after the failed rollout. What would a good version of that look like? One that did all the things you want out of oversight, stopped you guys from wasting money or fraud, and kept you on mission?

I don’t think there’s a lot of fraud involved.

No, but that’s a big reason we have this whole oversight system.

I don’t know how we do it, but if we could depoliticize things, that would help. It’s not normal that, on a project like this, the team reports to 20 congressional staffers once a week. That was a reaction to the early issues. It wasn’t a bad thing for Congress to want to be closer to something that had issues. But I wish it was less political. There were moments where they could appreciate the good thing and ask questions. It didn’t have to be as staged or theatrical as it was.

Jeff and I benefited because we didn’t want careers in politics. In fact the opposite. So we could be honest. We didn’t care about our brand to some of these people. If we did, we would have to be even more political in what we said and how, and maybe we don’t share as much.

We had this whole concept of working in public. Aaron Lemon-Strauss started this — we wanted to put up a blog — because the ecosystem’s so large and we wanted to galvanize them. We said, “We’re going to work in public, we’ll talk about what bugs there are, so people can help their students, or work around them.” We got such resistance to that openness, because there’s a danger: the more information you give out, the more stuff that can be weaponized politically. I wish that wasn’t there. There would be a tendency for more openness.

What could Congress have done, in writing the statute, to avoid some of these failures?

In software, you develop use cases, but you don’t specify how it works. A use case could have been, “I want an unhoused applicant to easily understand what they should do in this section that is complex if you don’t have a house.” You could’ve defined it like that, as opposed to, “You have to give this language to people.” There are a million examples where you could say what you want the software to do, then let the team figure out how to do it most effectively — test and iterate, put it in front of users, and see how well they understand it — but not hard-code how the software’s going to present.

You can’t change how Congress or other oversight bodies behave, but let’s imagine you have to start another modernization project elsewhere in the federal government. What’s your laundry list of steps to take to avoid somebody else having to clean up your mess later?

If a department is doing a software project, they need a cadre of people who are technical experts, know how to manage vendors, and understand architecture. That isn’t always the case. That may be figuring out a way to attract more of these people. It may be the ability to pay them more. USDS had been a really useful version of this. But unfortunately their presence has been significantly reduced.

Although you’ve got a different version of USDS, in Tech Force. I’m not going to say it’s a rebrand, but in a lot of ways it looks an awful lot like the old USDS.

USDS had a great track record — we’ll see. One thing is, when do you make public commitments? Could there have been some process about what a timeframe that would’ve made sense was? Again, they didn’t have the technical people. A lot is around vendor management and choosing vendors. That whole process has to be reinvented.

You were the epitome of one model of going into the federal government: in and out very quickly. You came in on an IPA, you were there six months, your salary was paid by your private-sector employer, and you were out. What are the strengths and weaknesses of that model, versus trying to build long-term technical capacity in the federal government?

I definitely think this model is only [to be] used in an emergency. It is much better to have the talent in the government. There are a ton of people in government with these skills, and even USDS, or this new effort — they’re brought in for a limited period. It’s really valuable. But I wouldn’t want those people running things. The nice thing with USDS is they intentionally didn’t try to run stuff, because they knew they were temporary. You need those skills in the government. You need those people driving it.

This is a measure of last resort. There’s so much stuff we didn’t know that would’ve been useful. To Aaron’s credit, and Chris Cummings — there’s a lot of people that we were working with that stayed. They know so much more now than we knew. They’re getting so much done, thanks to that knowledge. I much prefer figuring out enough talent that can lead, then utilizing consultants as needed, but not to drive it.

This has been a pleasure. If there’s anything I can do to improve my almost-three-year-old’s chance of acing the SAT in almost fifteen years, shoot me a line.

I’ll send you the test.

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She worked on Capitol Hill for 10 years, for Congressman Scott Peters from San Diego. She began as scheduler, moved to the legislative team, and was most recently his chief of staff in the DC office.

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Thanks to Harry Fletcher-Wood, Shadrach Strehle, and Jasper Placio for their support in producing this episode.

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Baillee, hi. The reason I wanted you to come on Statecraft is a summer internship I did in the office of a representative from Nebraska. I spent two months sorting mail and responding to constituent calls in DC — very rewarding stuff, but it’s grunt work.

In that office, the scheduler called all the shots, deciding what the boss did hour by hour. The chief of staff — a more senior role on paper — often followed the scheduler’s lead. Since that experience, I’ve been struck by the fact that somebody else manages the time of representatives and senators: some of the most important people in the world. A scheduler has an enormous amount of responsibility.

So today, I want you to explain how a Hill office works.

It’s interesting, the way you frame it. When I was an intern, I decided I wanted to stay and work in Congress, and I was cautioned away from being a scheduler because it’s administrative. It can be seen as a more junior position.

I don’t think all scheduling positions are like that. What was most compelling to me is the relationship you can have with the members themselves. You get to know someone very well. Being a scheduler taught me more about being a chief of staff than even my legislative work did — in terms of taking the member’s perspective.

The most valuable thing in a congressional office is your boss’s time. You’re trying to think about how they’re using their scarce free time. Each person in your office — the legislative team, the communications team, the district team, even family — has their own priorities and obligations.

A congressman has an office back home in their district, and an office in DC, where you’ve spent most of your career. I walk in the front door of Representative Scott Peters’s office. Walk me through the space.

I’m speaking from a House perspective — Senate offices are different. Typically, when you walk into an office, you’re greeted by either a staff assistant or an intern, whose job is to receive visitors. You get so many people who come into a congressional office day to day:

• Constituents coming in from home,

• Lobbyists and people coming in for meetings,

• Advocacy groups,

• Sometimes other staff,

• Sometimes strangers off the street ask for a meeting that same day.

While there’s security at the front of Longworth House Office building, anyone can come in. You don’t need an appointment.

You just need to not carry a knife.

That’s right. Sometimes people forget not to take their knives or guns out of their pockets, even staff. They have had consequences for that. There’s security everywhere on the Hill.

When you walk into a congressional office, what you’ll see is usually some congressional district pride decor — awards that the member has received, pictures of the district if it’s particularly pretty. In the office that I worked in, it was San Diego — that’s a lovely place to advertise, and people got jealous of the nice photos. But it’s a pretty small entry room. In the receiving room of some offices, there’s a side table that you can meet at. If you’re the staff assistant, you may have one other front desk person to assist you, but it can be challenging: you’re in charge of people coming in for meetings, then also managing staff-level meetings at the side table that the member isn’t taking.

In the Rayburn House Office Building, there are smaller offices that the chief and the scheduler sat in. It was helpful to have them be in the same room because, going back to the tight relationship, those are the two folks who are most regularly thinking about, “What is the member doing? What are their priorities? What’s the next thing on their to-do list?”

Is it fair to say those two people are staffing the principal most closely, and the legislative and comms team are not necessarily as focused on the person of the representative?

Actually, no. The chief and the scheduler are staffing the boss in a sense of anticipating what the full day is looking like, but they’re quarterbacking. The legislative and communications teams are with the boss most frequently. A legislative staffer who covers energy will be staffing the boss at the Energy and Commerce Committee. The communications director may take them to go to an interview. The chief and the scheduler aren’t necessarily doing the day-to-day staffing. The chief usually staffs for unofficial business — fundraisers and that kind of thing. And they may join certain meetings, depending on the attendance.

So legislative staff is who?

The legislative staff is composed of a legislative director, legislative assistants, and a legislative correspondent.

The legislative director is the person who oversees the legislative team and the legislative agenda. The team is in charge of anything that a member needs in order to introduce bills, write letters to agencies, and staff committee hearings — it provides vote recommendations for the member.

The legislative director has to manage the legislative staffers. The legislative assistants and the director have different portfolios. When I was a legislative assistant, I managed eight issue areas, including housing, transportation, infrastructure, budget, tax, immigration, and labor — it’s a broad swath. You can only be an expert in so many things, but you needed a certain proficiency for each of your issue areas. Housing took up a lot of my time, but that may not be the case in another district where housing may not be as prominent an issue.

So that’s four or five people out of maybe a dozen in the office?

There’s about ten people, and maybe four or five on the legislative team.

Then we’ve got the chief, scheduler, staff assistant, maybe a handful of interns, who don’t count necessarily towards your quota. What’s the remainder - comms?

The communications team is extremely important. They are almost part of the legislative team, because if you are working hard to produce, introduce, and get a bill passed, you need a communications team to be able to explain what it does. We’re often writing very wonky-weedsy legislation. The communications team makes it clear to constituents, “This is why this matters to you.” They are also focused on bigger brand issues: “What do you want to be known for? Who are the folks that you should be talking to, the people that you want to get in front of?” That team can vary in size. You could have one communications person who is stretched too thin.

Because they’re doing tweets, press releases, video, booking them on Fox News or MSNBC?

It’s bookings, it’s writing or reviewing any talking-points, speeches. If the legislative team is the folks who take the first pass at remarks during a hearing, the communications team typically has to review that to make sure that it’s relevant:

• Why are we questioning a witness in this way?

• How is this going to come across to constituents?

• Is there a way that we can pitch this to a reporter?

• Are you going to say something interesting at this press conference that you want to give a heads-up to reporters?

So there’s a lot of strategic planning that the communications team has to do. Both the leg team and the comms team are strengthened if they see themselves as partners and amplifiers of the work that they do — rather than leg vs. comms, which is often what it comes down to.

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You’re describing the modal member of the House of Representatives, and that layout of talent is pretty common. But you get different kinds of members: members who care a lot about legislative work, and are not interested in making a public name for themselves. And you get members who are not there to pass legislation — they’re there to get on TV as much as possible.

Tell me about that variation. Does that change how members staff their offices?

There’s no office I’ve known which had seven comm staffers and one legislative staffer. I don’t think that’s a realistic layout. But you could have a substantial comms team with three people — a communications director and a press secretary in the DC office, say, and then a district press secretary. Or a communications director, a digital director, and that’s it.

There are certainly members who demand or prioritize press. But because the House already has such small legislative teams, I don’t think you can make too much of a dent slimming that down. When I first started in my office, our legislative team had only two legislative assistants. As the MRA — the Members’ Representational Allowance — increased, and the budget got bigger to pay staff, we ended up expanding and having three legislative assistants. I would say it typically sits around there.

The Members’ Representational Allowance is what every member receives each year to pay for everything that they need. This includes salaries — which takes up the vast majority of the MRA — office expenses, including rent for your district office, printers, computers, telephones, and paper.

Salesforce subscription?

Or whatever your constituent resource management system is. And then travel — if a member needs to fly or take the train to and from the district, it has to include that. The MRA is typically around $2 million, but it varies depending on how big your district is, and how far away it is from DC.

The budget allocation is interesting. The budget increased by 20% in 2022, which was the first huge increase in a long time. That was explicitly for staff salaries to go up — a concerted effort to try to increase congressional staff retention.

Within that bucket of money, do Congressmen and women have wide discretion on how they want to break it down? Obviously every office has some distribution of these titles. But is that simply because it’s evolved? Could you say, “Screw this, I’m going to run my office completely differently”?

You could. But there are core functions — as a member of Congress, you need to fulfill your constitutional duties, know how you’re voting, and be prepared when you go to committee hearings. I don’t think it would work if you decided, “I don’t want a legislative team. I’m going to do it all on my own.”

But each office runs as its own small business. Each budget is totally at their discretion. There are obviously things that you can’t spend money on — there are ethics rules against spending money on campaign things. At the same time, there’s a lot of wiggle room in terms of salaries — some offices don’t pay much. Others say, “I’m going to pay at the higher end of the salary band in order to get talented staff.” They may spend up to 90% of their budget on salaries.

Then where are they cutting corners, elsewhere in the budget? The boss is traveling less, or the furniture is dinky?

The main place of discretion in the MRA is on communications and franking. Franking is a weird privilege that members of Congress and government officials have where they can send mail with their signature — it’s taxpayer-funded communications. Different offices have a variety of franking budgets. Members who are in tighter seats, in competitive reelections, typically put more money toward franking, because they want to be communicating with their constituents. So, while that is not a campaign-related expense, you often see a correlation with members who want to get their name out there.

It’s an interesting dynamic, where there is a clear firewall legally between campaigning for reelection and governing. For instance, congressmen have to step off the Capitol grounds to take fundraising calls. You see them across the street, then they finish their call, and come back inside. But there’s a lot of overlap between talking to your constituents about the good work you’re doing and campaigning — even if they’re formally separate activities.

Members of Congress, especially House members, always have reelection in the back of their mind. They are reelected every two years. They’re basically always campaigning. The separation is distinct there — there are a lot of rules, and the vast majority of offices strive to be very ethical and spend their money in appropriate ways.

There’s this perception that members of Congress are wheeling and dealing in their congressional offices when they meet with lobbyists — that’s really not true. There are very regimented ways that members of Congress can set up meetings off the Hill, not in their congressional office. There’s a firewall.

The two people in a congressional office who experience both the official and unofficial side are the scheduler and the chief. The scheduler has latitude to see the member’s entire calendar, and needs to schedule both official and unofficial business. The chief of staff often has to be the person staffing those unofficial meetings.

I like how people on the Hill almost always refer to their boss as “the boss.”

When I called Derek my “boss” in front of people, he was like, “Please don’t call me that.” And I was like, “It’s a habit. I can’t help it. I’m so sorry.”

The last core function of an office is “constituent services.” Say a bit about what that is and who does it. Because a question a lot of folks have about this is, “Should I call my congressman? Does it matter?”

I love that question. Yes, it does matter. The way you do it matters too. Constituent services is such a big category. The job of every single person in the office is constituent services. That’s why people come to work on the Hill — to serve the 750,000-plus people who elected your boss. You’re always trying to make their experience special. The legislative correspondent is the point person who manages all of the constituent incoming to a member’s office — whether you call in to the office, you mail, or email, that person will be reading your message, and trying to figure out the best way to respond to it.

The way an office manages that is by batching. If you are writing about a particular topic, typically it will get marked as, “It’s a housing issue.” Or if there are a lot of letters coming in about a particular housing bill, then there may be a new batch that’s made to say “HR 677,” or whatever the bill is. “It seems enough constituents care about this particular bill. We should figure out if we have a response to address this specific concern.” So it matters if a lot of people are calling in about something.

What happens to those batches? People call about this housing bill. Those calls get batched. Then what?

The batching helps organizationally. It gives you a clear understanding of what has been responded to, and what types of letters you need. Do you already have a letter? Have people written in on this before and do we already have a position for the member to describe? Sometimes it’s a novel issue — something will pop up, maybe in foreign affairs, and the office needs to have a position on it. So the legislative correspondent may talk with the legislative assistant who handles that issue and say, “How is the boss thinking about this issue? What’s our position here?” The other way that your calls and emails make a difference is by making the office think about the issue — which is an underrated thing — even if they may not necessarily be taking a position or an action.

Why does an office have to think about every issue? I can imagine a boss from a very rural district or one that’s relatively untouched by — pick some topic — saying, “I don’t want to make a name for myself on foreign policy. I’m not going to engage on that.” Or more cynically, “I don’t have time for responding to constituents. I’ll just do TikTok, and we’re going to seal reelection that way.”

What is forcing an office to respond to people?

You raise an interesting point, which is that offices vary in their constituent mail program. I have never met anyone who’s worked for an office who simply says, “None of this is worth responding to.” But there are some members — particularly older members who have been in office for 30 years and never got around to setting up a constituent resource management system — that have never set up a way to receive digital notes.

These are all representatives in safe seats?

They don’t need to worry about responding to constituents in the same way, or providing thorough responses. There can be diminishing rates of return: you don’t necessarily want to respond individually to every single message that comes in. You could spend all of your time doing that, and it won’t make a big difference.

I’m familiar with representatives who I’m told spent a huge amount of time reviewing legislative correspondence and making sure it sounded like them. I know people who thought that was a very poor use of the boss’s time and talents.

That’s a fair opinion. It totally depends on the member. Some see their job as being responsive to constituents, and literally responding to their incoming is the best way to be responsive to their concerns. I have friends who have worked for bosses who read every single word that goes out that has their name on it. If they have signed it, they will have read it. I had a friend who worked for a member who wrote handwritten thank you notes to every single constituent they met that week — that would be their task on the plane. It depends on the member’s priorities. That’s not the case for every office.

The overarching point here is that calls generally do matter. The way that it gets presented to members of Congress varies. Typically members of Congress will get a report of, “Here’s what constituents are writing in about this week.” If we are voting on a big issue, there may be a tally of how many people wrote in for or against a side, and a bit of color on what the vibe is in the district.

A week in the life

When you’re scheduling a member’s week, what do you have to balance? In your case, it’s been Scott Peters, but I know we’re not going to stick to that office.

I can talk about it generally, because when you are a scheduler, you have lots of scheduler friends. You trade notes, and you really want to have scheduler friends who can get information or do favors for you when you need it.

Your goal is to use your member’s time most efficiently and effectively. Say you’re coming in to work for someone who has been a member of Congress for a while, and they know what their priorities are. The first thing you think about when things come in is, “Is this meeting even practical?” Many people request meetings when Congress is out of session and the member is back home in their district. If that’s the case, you know immediately you’ve got to “staff that out,” the member can’t meet with them.

The reason members of Congress come to DC is the vote schedule. In November of each year, the majority sends out a calendar that’s usually pre-negotiated with the minority and says, “Here are the days that Congress is in session. You can plan your lives now.” Members of Congress and staff depend on that calendar. You can’t take vacation when there are votes, because you need to be in town doing your constitutional duty. So when members are in DC you have to schedule around votes, committee hearings, and markups.

Generally members fly into town on Mondays, they’re called fly-in days. Votes are always at 6.30pm, reliably for about half an hour. Members like my old boss who fly in from California — they only have a couple of hours before votes. We would typically do a scheduling meeting and a staff meeting before votes, then maybe have an evening event afterwards. The committee hearings are typically in the morning, and votes are in the afternoon. So you get a sense of what the cadence of scheduling looks like around that, and what time you have.

Then you have to layer on caucus meetings. Both the Republican Conference and the Democratic Caucus have their meetings, typically the morning after fly-in. They bring in different guests to talk to members, or committee ranking members or chairmen present on what bills will be on the floor that week. The members who are more focused on the communications aspect will talk about what the message is. It’s trying to get everyone on the same page.

If a representative is a member of other caucuses — those squeeze in weekly, biweekly?

It depends on the caucus. Some meet frequently, some are less active. The most active ones are typically the ideological caucuses. Speaking for my background as a House Democratic staffer, the primary ideological caucuses are the Progressive Caucus, the New Democrat Coalition, and the Blue Dog Coalition. Those typically have standing meetings, typically a lunch, and they always bring in guests to speak. Other caucuses are scheduled ad hoc. Depending on your boss’s priorities, they will want to make time for that. If they have a caucus leadership position, they’ll often have to ask other members to come and whip attendance.

What we’ve talked about — votes, committee meetings, caucus meetings — is a ton of time. That could be your whole week. But you also have a ton of meeting requests. Constituents come all the way across the country to talk with a boss about an issue they care about. Industry comes in to talk about a business issue. You can have press and speaking events, maybe TV. Time gets scarce very quickly. We didn’t even talk about fundraisers or campaign events, which typically consume anywhere from 2 to 15 hours of a member’s time a week.

Even in the first year? Because in the second year, obviously it’s election season.

Members are always fundraising. I see it more in terms of quarters — maybe you would have more fundraisers at the end of a quarter, because you report fundraising quarterly. But for House members, the fundraising doesn’t slow down. If you’re in a competitive district — which not too many members of Congress are these days, most get reelected fairly easily — but those who are in tight seats are obligated to do a lot of “call time,” which is getting handed a list of people you need to call and ask for money. People in competitive seats may spend up to 15 hours a week on call time alone, which is pretty miserable.

That’s literally going down the list and saying, “Joe, how you doing?”

It can be that, or it’s, “We’re hosting this lunch event. We’d love for you to join. Please come to my lunch and you can pay $1000 to be there.”

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As we were talking, I realized I don’t know the etymology of the word “caucus.” I would’ve guessed it’s Latin, right? It apparently has an Algonquin root — it means “advisor” and pops up in the mid-1700s.

That is fascinating.

Let’s say I am a constituent, and I’m going to DC. It’s a family trip, but we want to stop in and meet the boss. I have to make sure Congress is in session; not a Monday morning. What else do I have to do to maximize my chances?

I love this question, because these were the types of meeting requests we were most excited about scheduling. People don’t think that they can visit their member of Congress when they go to DC. It was always fun when constituents would drop in and say, “We’re visiting, you guys helped us get a Capitol tour, but we wanted to stop by and say ‘Hi.’” What separates a good scheduler from a great one is noticing that as an opportunity. “It’s so great that these constituents are in town. What can we do to make their visit even more special?” Sometimes a drop-by works. If the member happens to be around, our scheduler would typically say, “Congressman, the constituent family is here to visit. Would you want to say ‘Hi’ and get a photo?” Members of Congress are more than willing to do that.

My old boss loved to take kids on the floor. You can take kids under 12 years old on the House floor, which is a cool experience. So there were some times — and this is rare — if folks are in town, votes are about to happen, and you stop by the office, we could facilitate meetings like that, or some of those more special engagements.

If folks want to meet their member, they can also do it in the district. They are there a third to a fourth of the time. There is less time in the district, and there are a lot of demands on their schedule, but they live there and they have a whole team there. So dropping by the district office and trying to meet your member that way is also great.

You’ve mentioned a bunch of things that are fixed: floor votes, committee markups, caucuses. Fundraising is not fixed, but necessary if you want to keep your job. What else are you trying to slot into your boss’s week?

Lunch. I remember, probably my first week of scheduling, I don’t think I made sure that my boss had lunch. It’s very apparent when you start that you’re scheduling for a human. So “lunch” is my shorthand for saying that each member has their own human priorities. If their family’s in town, setting aside time for that. Making sure that they have time to go to the gym and the things that you need to do in order to be a healthy, happy human.

What percentage of congressmen would you say go to the gym on a semi-regular cadence?

I have no idea, but I would say more than 50%.

Huh. Good for them.

DC is a walkable city. Maybe they walk, maybe they take the metro.

When lobbyists, business interests, or issue advocates are trying to get on the boss’s schedule, what are your heuristics for deciding who gets face time?

The trickiest part of scheduling is trying to figure out, in the limited discretionary time that you have, who is going to be able to meet with a member of Congress? A lot of it comes down to — practically speaking, when can the requesting person meet and when does the member have time? Sometimes someone will ask, “We can only meet between 9:00am and noon on Tuesday.” At that time, he’s already got a committee hearing, or an interview, or a speaking event. Those are the easier ones where it’s, “Sorry, we can’t make it work.” If it is a CEO, they probably don’t want a staff meeting. If it’s someone who is open to being staffed out, we’ll say, “Our legislative director would love to meet with you. We can pass that message along and hope that the member can meet you next time.”

You always have to think about the priorities of the member. Is this an issue within their purview, within their committee jurisdiction, or one of their priorities? Are they going to be interested in hearing about it? Sometimes you get folks who want to meet every other month. We don’t have time for that. So it’s also a matter of, “How recently have you talked with this person? Do you need to catch up? Can it be a staff meeting, or skip for now?”

As a scheduler, you can track all that information? You can pull up that person’s name and be, “Oh, you were in here last month. Sorry”?

You can look at the calendar and say, “When was the last time we met with this person?”

The number one screen is, “What is the district nexus?” Is there a constituent in the meeting? Sometimes you would get requests from big fly-ins, where it’s a conference that’s being organized for some advocacy issue, say for breast cancer. There’s someone from Los Angeles who’s requesting a meeting and it’s, “We don’t have time to meet with someone from Los Angeles, because we represent San Diego.” Of course any member from California has an interest in other parts of the state, but they can’t care about the whole state. That’s the reason why there are 52 of them. They each have their own neighborhoods that they have to look out for. If you met with every Californian — that wouldn’t work. I sympathize with the senators who get requests from every Californian.

What external resources do offices get? For instance, Statecraft alum Matt Weiner advised the California Democratic Caucus on wildfires and forest management. Those 40-odd California representatives didn’t have to staff their own fire expert in each office. What else exists — with caucuses, the party leadership, or the Architect of the Capitol — to support up your team?

The Chief Administrative Officer (CAO) is an enormous resource. There’s a whole staff support team. They have done a lot in the past several years to professionalize congressional staff in a way that it previously had not been. Each congressional office is run as a small business. We talked about budget, but it’s much more than that. There are not the same standards for promotions, titles, or salaries. The CAO has done such a good job at training staff and saying, “This is how you become a legislative correspondent. If you’re a staff assistant, this is how you can stand out in your office. This is what you can do to volunteer, write letters, and have a relationship with your senior staff in order to progress in your career.” Prior to the CAO providing some of those resources, it was one-to-one mentorship. If you’re in an office that strives to support junior staff in getting ahead, that’s great, but not all offices are like that.

The Congressional Research Service (CRS) is the best. [Statecraft on the CRS here.] They are a team of impartial experts. If you ever have any question about the legislative history of a particular issue, or there’s this problem in the district, “What are some potential solutions to this? What existing programs already tackle this issue?” It’s a remarkable service, because you can submit a request, and they’ll call you back and say, “What do you need?” Sometimes they’ll write reports for you. The value of the CRS cannot be understated. There are so many issues that pop up — you’re like, “I never knew I had to learn about this very obscure grant program that affects my district. I don’t know what the acronym stands for.” You’re able to call someone and say, “Help me understand this.”

Your boss moved offices three times over the 10 years that you were there. How much does moving affect the day-to-day operations of an office? Is there a lot of serendipity in who you get placed next to and the bills you go on to co-sponsor?

I wish I could say that, but not necessarily. You mentioned earlier the Architect of the Capitol. They’re an entire resource to serve the House and Senate office buildings and make sure that anything your office needs gets taken care of.

Members move from office to office as their seniority increases. At the end of each Congress, there’s essentially a room draw. As members retire, or lose their seats, their offices are vacated. Given that a lot of retiring members are more senior, they typically have the biggest offices, or an excellent view of the Capitol. It’s a nice perk.

The room draw gives members the option to move. Some choose to stay in their offices — that makes sense if you have a good office setup and location. Others want to mix it up. Rayburn is where a lot of the House committees are. Sometimes members want to be closer to their committee. If you’re all the way in Cannon and you have to go to Rayburn for your committee, it’s a long walk. But different members prioritize different things. Some want to be close to the entrance so their constituents can find them more easily.

Rayburn, Cannon, Longworth — am I missing one?

Those are the three primary house office buildings that members of Congress are in. There are also Ford and O’Neill, which mostly have committee staff.

You said Rayburn has more committees. Do the offices have different stereotypes?

A bit. Cannon has been under construction for the past eight years. They’ve gone wing by wing — there are four wings; they’re on their last one now. They’re the fancier offices — they have tall ceilings, lots of natural light, many offices have built-in standing desks. That is not the case for Longworth and Rayburn. Longworth typically has more junior members of Congress, and some of the offices are a bit smaller. Rayburn is seen as the more senior building. It’s very sterile. It feels like a hospital. But a lot of members like the offices because the room the member gets is pretty big.

Part of my motivation behind wanting to hear about this is — and this is a treat for readers who’ve gotten this far — my dad proposed to my mom in Cannon.

Oh my God, that’s so exciting.

Two more questions for you on the scheduling. Are you scheduling in five-minute increments? Mechanically, how closely do you measure the boss’s time?

The sophisticated schedulers will see timing as more of an art than a science. Different members prefer different things. Some require travel time explicitly on the calendar: “You need to leave this meeting by this time. I’ve mapped it because it takes this amount of time to get to your next meeting.”

Some friends worked for members who were perpetually late. That was just the way they lived. You’d schedule a 15-minute meeting and it would become a 25-minute meeting. If you’re a perceptive scheduler, you’re trying to account for that. Instead of scheduling meetings back to back, you give a bit of extra time so that the next meeting isn’t waiting for longer than you need.

The schedule at the beginning of the week looks very different than at the end of the week. At the beginning of the week, you get a general sense of when votes are going to happen, but you never know exactly when, or how long they will be. There’s a certain amount of debate on the floor — an hour for Democrats and an hour for Republicans. If members don’t have as much to say on a certain bill, the debate runs short. Maybe the floor decides to recess, and give members the votes at the time they were predicted. Or maybe they decide to call votes now and there goes your hour.

The boss is jogging down one of those tunnels to get to a vote on time.

There’s wiggle room. When they first call votes, members get around 15 minutes — in reality, it’s more like 25 — but you get some notice. The vote series may be short or long, depending on how many votes you have. If it’s an appropriations bill, and you have a lot of amendments to vote on, that may take a two-hour vote series.

During COVID, voting increments were blocked by last names, so people had a much longer time period to vote. Voting took a long time. There was also proxy voting, so if you needed to stay home because you or someone in your family had COVID, you could delegate to another member your proxy. Then a member of Congress — potentially a DMV-area member — held a lot of proxies for people and would have to say, “I’m voting yea for this person, nay for this person.” It’s run as a much tighter ship now that there’s no proxy voting. Floor staff try to make it as predictable for members as they can, but they can’t control everything. A trait that you need to have as a scheduler is zen flexibility. Things will change and you need to be able to adjust to make things work.

What lessons from being a professional scheduler should us normal schedulers take away? Any tips and tricks that you bear in mind when you’re scheduling your own week?

Professional scheduling and personal scheduling are two different beasts.

That’s so dispiriting. That can’t be true.

I learned how to be a much better flight booker after being a professional scheduler. I was able to scout flight rates better. I also developed the trait that if you really want to make something happen, you can. It’s about will. There are times when it’s difficult. But if it’s a priority of yours, you can get it done. So that’s a nice motivational thing. The other thing I learned is not to over-schedule yourself. Try to be kind.

I’m still working on that one.

After a period as scheduler, you ended up as Representative Peters’s chief of staff. You and I got into a deep conversation a couple of months ago about the different kinds of chiefs of staff — that there are as many archetypes as there are bosses. What does every chief of staff need to have, and what are some of the different ways you can approach that job?

To be a chief, first and foremost, you need to know your principal well. What are their priorities? Stick to those priorities. We talked about how different members of Congress see themselves in different ways.

• For some, their primary goal is, “How do I be the best legislator? I want to pass bills.”

• Some are messaging-focused. They want to help shape the narrative, or be known for taking stances on certain things.

• Some members, whether they want to or are obligated to, need to prioritize their campaign. They need a chief who is focused on fundraising and making sure that they come back to office. This is often the case in freshmen offices — if you’ve been reelected once, you’re much more likely to come back. If you’re a freshman, you have to be scrappier to try to keep your seat.

The chief of staff role is also all about managing staff, and general relationship management. There are so many different stakeholders and opinions, within and outside your team, on what the boss should be spending their time on — whether in a legislative sense or just events that they’re going to. The chief can be a great extension of the member and say to stakeholder groups, “I’m trying to receive everything that you’re explaining to me and delegate it in the best way to make sure that we can manage your request.”

My impression of your old office — this is other people’s perspective as well — is that it was and is well run. That’s not the case for many Hill offices. Gossip on the Hill can be extremely active: who’s a great boss, who’s a terrible boss, and which offices have different pathologies.

What kinds of pathologies can an office display?

That’s a tough one. We all have heard stories about members of Congress who scream at their staff. There’s so many. Those are well covered, so I don’t need to get into them. But some of the dysfunction in offices can arise through not having direction. I was lucky to have a boss who had a vision for getting things done, and a relentless focus on accomplishments. That was motivating as a team.

Where it can go wrong is if you have offices that are competitive amongst each other and don’t necessarily see themselves as a full team. That can result in communication silos. It’s important to always encourage people in an office to say, “We can share intel amongst each other safely.”

It’s pretty rare to have to work for a member of Congress who isn’t in it for the right reasons. Those exist, but it’s more the lack of focus or priorities — or if you’re a staff member who doesn’t align with their priorities. If you work for a boss, there’s got to be some issue that you personally disagree with them on. That’s totally okay, and encouraged in a lot of offices. But if you work for a member who you’re really not aligned with, that’s always going to cause friction.

What about places that are not necessarily nightmares to be in as an employee, but that don’t function well?

Sometimes it depends on what position you’re in. Is it that you are a legislative assistant, you have a portfolio, your boss isn’t on any relevant committees, and you don’t get a lot of attention? There’s responsive work you need to do, but you aren’t growing because your boss isn’t willing to lead on any of the issues in your portfolio. I may have had this perspective when I was more junior — that you’re not able to grow in a certain way because you don’t have that priority. But maybe a better office would be better suited for you. If you’re in an office that doesn’t function very well, that’s a problem for management. If there’s a team member that’s slacking, it’s very obvious. If you have a team of ten people, you’re going to notice pretty quickly if someone is not pulling their weight.

Let’s say early 2027 rolls around, and you’ve been convinced to go back to the Hill, as chief of staff to a freshman representative you think is fantastic. They are asking you, “Help me get started.” How are you allocating your budget?

The first question to this new member is, “What do you want to accomplish and be known for? What is it that, two years from now, you want to have done? Let’s think about that in a realistic way.” If you’re a freshman, it’s going to be hard to do a lot of the things you’re dreaming about. But the best way to get set up for success is to hire and manage a well-run team.

Let’s imagine this representative is a rock star — she wants to do it all. “I want to put my name on some signature legislation, I want huge earned media, I want TikTok to blow up, and I want to pin people to the wall in committee hearings. I’ve got the energy to do it all. Help me get there.”

I assume most freshmen come in that way. The first thing I would say is, “You can’t do it all. We have to choose. There will be trade-offs, because you can’t do everything, and you can’t be everything to everyone.” Trying to encourage some discipline. By choosing priorities, you are letting some things go, but you’re going to be much clearer to your team and your constituents about what you’re here to do.

The best members I have seen and worked with are the ones who know why they’re in Congress. There are so many members who want to do everything, and end up not getting a lot done, because they are trying to have their hand in every single issue. At the federal level, there’s certainly the opportunity to do that. But carving out and using your personal experience as expertise — each member of Congress has their own background, interests, and skills. Pulling on that, and going back to why they ran in the first place, and what are the things they’re good at? — trying to match that Venn diagram.

The hardest thing is that it takes over your life. You have a scheduler who controls your entire schedule. You have a team that writes words you’re going to speak. You need a team that you trust. You need to be able to empower them to be a multiplier of you, rather than feeling you’re being held back by them.

Let’s say your new boss gets that and says, “I want to invest as much as we can in talent. I want to make sure despite being a freshman, we get the best people. We’re going to go to the top of the pay range, and we’re going to have to find savings elsewhere.” You mentioned one area you could do that, which is franking — you send fewer letters back to your district. What else do you cut in order to get the absolute best people in an office?

There are not too many more changes — especially if you’re a freshman and you need to buy everything from scratch. You may get some equipment and materials that the old district had, but you may need to upgrade a lot of things — if your predecessor was an older member of Congress, maybe they don’t have the latest technology. Freshman budgets are hard, because you need a lot of stuff and you need to set it up.

It’s important to prioritize and hire good staff. You could do that by saying, “We’re not going to get our committee assignments until March or April. Usually freshmen are put onto committees that are a little less demanding. You’re not going to get onto an exclusive committee like Energy and Commerce until a couple of terms in. So let’s hire a really good legislative director who can be great at managing the committees that you do have, and maybe a legislative assistant in the issue area that you want to be a leader on.” You pay those folks well, but maybe you don’t hire three legislative assistants. So maybe it’s less about cutting, and more about how you prioritize and structure the team.

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He was Mayor Bloomberg’s communications director, leading on the design of NYC Service and on public engagement for a number of Bloomberg reforms.

James has paid more attention than almost anyone to how cities work, and how they learn from each other. But is the Bloomberg model for making cities better “technocratic”? What can it do, and what can’t it do? And should mayors be “innovative”? Or are the best practices, at the end of the day, pretty straightforward? We get into these questions and more.

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Harry Fletcher-Wood, Shadrach Strehle, and Jasper Placio helped produce this episode. This transcript is lightly edited for clarity.

For a printable PDF of this interview, click here:

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How do you describe the work you do?

I run a portfolio of capacity-building programs called the Government Innovation Programs. They equip mayors and their teams with the capabilities they need to solve problems better.

• We run leadership programs that train everyone — the mayor, the chief of staff, the budget directors.

• We focus on great organizations, equipping cities with better data practices, innovation practices, and teams.

• We help cities generate and test more ambitious urban solutions. If they work, we help them spread to cities around the world.

• We’re building a better field of organizations that focus on strengthening the capacity of local government, and building a tremendous amount of research on what works in cities.

Across all of that, we focus on making sure that mayors are constantly learning from each other and building on one another’s successes.

Our program started in 2010, with the first five grants. Mayor Emanuel in Chicago and Mayor Landrieu in New Orleans got innovation teams. Today, more than 900 cities are getting deep technical assistance grants and leadership development from us. Thousands more cities are benefiting from our education programming.

Almost every issue that affects people in their daily lives — housing, safety, climate resilience, economic mobility — is experienced locally; it’s implemented through municipalities. City halls are the first line of response and the last mile of delivery.

But municipalities are stuck using operating models that were developed in a very different era and have been underinvested in. If we want national policy to land in the real world, we have to think about the capacity of municipalities to solve problems in a very different way. That’s what we are focused on at Bloomberg Philanthropies.

In the American system, mayors are the elected leaders with the most power over the domains they’re elected to govern. A representative in the House has about 1/400th the decision-making power over a given bill, whereas a mayor often has a broad range of tools.

What do individual mayors have the power to do?

When you’re working in local government, state capacity variability is your best friend. Oftentimes two cities sitting across county lines have a different authorising and operating environment, because there are different labor regimes, tax bases, powers and authorities. There’s extraordinary variability.

You mentioned the old operating model that many municipalities have. Can you explain that model?

I’ll answer it on two levels, and one level will be super familiar to your audience. Local governments tend to be highly siloed. They operate vertically and not horizontally. This is a leftover of the Fordist organizational model that defined our public services in the last century.

Perhaps a more useful way to think about it is that local governments in the US are still construed, both by federal funders and in public discussion, as organizations that are responsible for delivering an on-time, on-budget service — not as problem-solving entities being asked by their constituents to solve emerging issues that often take them away from service delivery.

The vast majority of mayors’ budgets are fixed — pensions, labor costs, fixed services. The smallest parts of their budget fund governance improvement, strategic thinking, innovation, IT upgrades. Those are the first areas cut in a downturn.

When you say the Fordist model was adopted in the public sector, can you give me more colour? Everyone fulfills a specific role in a manufacturing process? How did we set up cities to be like the Model T production line?

We’re talking about standardized services for a mass public, clear division of labor, and rules-driven bureaucracy. Success is measured by throughput, not necessarily by outcomes. We live in a world where mayors are dealing with transformation — pandemics, mass migration, the affordability crisis — and they’re being asked by their residents to respond in real time. That requires people to work across sectors, across silos, and be more iterative. We have to test, learn, and adapt. This is not the curriculum for the standard Master’s of Public Policy (MPP) or Master’s of Public Administration (MPA) class.

Much of what the public sector has to do today is help communities navigate change, and thrive in spite of that change. You can’t look to a single federal funding stream to enable you to do that. If your budgets are tied to those vertical funding streams — 50-75% of all municipal budgets are fixed or near-fixed costs — the amount you have to develop internal capacity to respond to change is out of that smaller slice.

We recognized that there was a distinct role philanthropy could play to help show what’s possible, set standards, and create a different North Star around what it means to run an organization that is iterative and adaptive. It has to deliver services effectively. We all know a lot of cities don’t get that right. But it also has to be able to shift resources and change direction in response to the change that a community is experiencing. What does it mean for me as a mayor? What do I need to have on my team in order to navigate that change? That’s the through-line of our programming.

As mayor, your old boss Michael Bloomberg was most often described as “technocratic.” It’s funny that the same word is used to describe the old Fordist model, which he rather disdained.

It’s a bit of a lazy description of Mike. He was deeply values-driven. Sometimes “technocratic” was applied because people didn’t know what to do with a mayor who was not an ideological purist. He was deeply interested in finding the best solution to each problem on its own terms. [Statecraft spoke about Bloomberg’s mayoralty recently with another former member of his team, Maria Torres-Springer.] That gets reduced to the word “technocratic,” but to me, there was always a very clear sense of values driving the work that the Bloomberg administration got behind.

That makes sense to me. I don’t share Mayor Bloomberg’s politics, but in our work at IFP, we also get labeled technocratic. I’d have a similar answer to you: we have a specific set of things we care about. We’re very public: “These are our values.” Then we try to be very focused on what success would look like in each of those issue areas and how we can do it. I’m open to being convinced that we should use a different tool for each of those projects. If that’s technocratic, so be it.

One of the key lessons I learned from Bloomberg was, “Understand the problem deeply. Circle that problem with data, and with different perspectives, before you generate a solution.” I was recently speaking with Tim Kelly, the Mayor of Chattanooga. He came to the Bloomberg Harvard City Leadership Initiative. This is one of our flagship programs: it trains 40 mayors every single year, emphasizing the role of managing well: how do you squeeze more efficiency and effectiveness out of the limited resources that you’ve got?

Kelly majored in innovation in the Bloomberg Harvard program. He sent a team; they got coached on evidence-based strategies to understand a problem. He told me, “I’m a results mayor, I’m beating my chest, asking for solutions. That process taught me to use data — the perspectives and experiences of other cities — to understand a problem in a way that I never would’ve understood it before.” Once they did that, they realized that youth crime in their city was overwhelmingly about mental health. That unlocked a whole set of interventions they otherwise wouldn’t have zeroed in on. A while ago, they celebrated a year of zero murders in one of the highest-crime neighbourhoods in their city as a result of those interventions.

When people talk about “evidence-based policy-making,” it’s hard for me to find anyone who will stand up and say, “We’re against it.” So what are you teaching people to do that wouldn’t happen without you?

I didn’t mention evidence-based policymaking. I mentioned evidence-based practices.

Let me answer your question in a couple of different ways. Number one, we’re training mayors to be great managers and training their organizations to be learning organizations. A decade back, that was not in the DNA, was not the way that we thought about mayors, and there was a pressure on city leaders to know all the answers.

Number two, we’ve made huge gains in helping US cities move up the ladder of sophistication in their use of data. One of our programs is called What Works Cities. It’s a certification program. When we started this work 15 years ago, cities around the country said to us, “I don’t know what good data looks like.” Over the last decade, we’ve moved hundreds of cities up that ladder of sophisticated data use. Cities around the US are probably in the best position of many public institutions to embrace the AI era, because they know their data is clean, well-structured, and timely.

Third, when we started there were only a handful of chief innovation officers in the world’s public sector. Everyone you talked to had a different definition of innovation. They were throwing spaghetti at the wall. Fifteen years later, a field has emerged where people are using the same language. They understand what tools help them understand problems better and produce more creative ideas, test those ideas, and scale up the things that work. Those are the evidence-based practices that we promote, because they work in the private and public sector.

Making those practices the norm has taken innovation offices out of the periphery and brought them into the center of city halls. Mayors are using them to advance their big priorities. I’ll give you a really good example. Brandon Scott, the Mayor of Baltimore, inherited an Innovation Team we were funding under the previous mayor. He was in the heat of the pandemic when he took office. Cities around the country were hiring large management consultancies to stand up contact-tracing firms.

Mayor Scott had a deep belief that because Baltimore had just experienced a crisis — the prior mayor had been indicted and left office — locals wouldn’t trust outsiders. They wouldn’t open their doors and provide that information. He took that innovation team and said, “Let’s create a home-grown version of a contact-tracing firm.” They were the only major municipality in the country that did it, and he outperformed his peers on every single indicator that mattered: vaccination rates and more.

Now he’s using his Innovation Team to address another top political priority, which is police recruitment and retention. [The Innovation Team’s focus on this began under the previous mayor.] This year, Baltimore has brought on more than they’ve lost — they have a net increase in police officers for the first year in a decade. That comes back to this mayor using these evidence-based tools around, “How do we understand what’s causing our attrition and retention problem, and where do we find the points of leverage to fix them?”

I still have this lingering question about data. Let’s say I’m the mayor of Baltimore, 30 years ago. I assume the city gathers all kinds of fine-grained data. Can you explain the weakness of those data systems originally?

Cities are incredible generators of administrative data. That data is stored and structured in highly variable ways. Sometimes it takes the form of handwritten forms put into a filing cabinet. Other times it’s an Excel spreadsheet or in a CRM. We’ve tried to help cities structure that data in optimal ways, make sure the governance is excellent, then being able to use that data in ways that inform executive decision making. I hate to say it, but I still hear so many new mayors say, “I’m coming into office and I’m flying blind — not seeing the data I need to feel comfortable with the decisions I’m being asked to make.”

What kinds of decisions are they thinking about?

All types of policy and programmatic decisions. “Mayor, we want to shift our sanitation service from Monday, Wednesday, and Thursday to Tuesday, Friday, and Sunday, and the reason for that is this.” The mayor says, “Show me the data.” They say, “This is what we’re hearing from the ground.” Those types of issues.

Part of our management training for the mayors is focused on:

• What are your expectations for how you want the organization to use data?

• What are the kinds of questions you can ask that get the organization to bring forward more data?

• How do you have some patience with the fact that the data at the beginning is not going to be the best, but it’ll improve over time and with ongoing use?

• What kind of people do you need to have in place to make sure that yours is an organization that’s well positioned to use data in an impactful way?

It’s everything: people, practices, routines, performance management, governance, how data is being used with things like procurement — to issues like public engagement and communication.

Let’s say I am that mayor and I feel I’m flying blind on when the sanitation services should run. The only data I’m getting is my Sanitation Department saying, “This is what we’re hearing we need to do.” What should I start implementing?

A long-standing and extremely impactful program is our What Works Cities certification. Any US city of 30,000 or more is eligible to participate. First, we help the cities do an assessment: “Let us understand your existing data practices.” We then work closely with the mayor and the team on a set of priority interventions to improve those practices one step at a time.

I’ll never forget — the first mayor that we worked with was Tony Yarber, then-mayor of Jackson, Mississippi. He came into the What Works Cities program and said, “I don’t have a data person, but my comms guy is going to be our data point person.” We taught that guy the basics around how to help this mayor structure data so that he could ask it questions, and get answers that helped to inform his decision making. Today, the data practices are way advanced. 54% of US cities of 100,000 or more are moving up that ladder of sophistication towards certification in the What Works Cities program. There’s a real movement of data people in cities around the country. People understand today that data is important — you cannot do good AI if you don’t have good data governance in place. There’s extreme interest in getting better.

How do you develop better sources of data without driving the people who are sourcing it crazy? Police officers complain about how much paperwork they have to fill out, but you’d like to get more data from officers.

In some ways it’s about structuring and organising data that these institutions already have, but typically aren’t using well. Almost all of the programs that we operate or fund are focused on priority problems for the mayor. In Baltimore it might be public safety; in San Diego it might be housing. The data work follows a basic rhythm, which is:

• What’s the problem you’re trying to solve?

• Do you have the data that you need to understand that problem?

• If not, what are the gaps?

• What is that data telling you?

• How often do you need to look at that data to understand where you’re standing?

• What are your data flows?

• How can you make that predictable?

Let’s go back to Baltimore and the violence-prevention work that this mayor has done. Baltimore has seen a fantastic drop in violence post-COVID. Tell me about the work you did with the mayor.

All credit goes to Mayor Scott and his incredible team. This week they announced homicide levels at 50-year lows, and the data point beneath that is probably even more interesting. Violent crime and murders are coming down in cities across the country, but Baltimore’s driving it down fastest.

Mayor Scott has done a couple of things that are textbook examples of how a mayor solves complex problems effectively. The first is, he made very clear that this is his number-one priority. He put himself at the center of decision making and public communication. He set an ambitious goal. His team was nervous when he came out and said, “We’re going to have a 15% year-on-year reduction in murder.” But he knew that if he didn’t challenge the ambition of the system, the system would do less than it might otherwise.

Then he’s put data-driven decision making at the center of everything he’s done. We helped him stand up a world-class data capability and hire a great chief data officer. Mayor Scott can wake up, pull up his dashboard, and understand where things stand. Then he calls his police chief and they talk about real facts in real time and what the next strategies are going to be. Declaring a clear goal, making it his organizational priority and leaving no room for doubt on that, and continuously using data to inform the strategies that he’s delivering has been the path to great progress.

How innovative do you think that story is? The counter-argument would be: Yes, Baltimore has been a fantastic success story for the reasons you mentioned, including a careful data approach and a mayor who is willing to stake political credibility on it. But isn’t that just like other successful attempts to drive down violence in major cities? The Boston success story from the 90s had many of the same elements. CompStat in New York, which we discussed with Peter Moskos on Statecraft, was this model: we’re going to organize the data, be held politically accountable, and hold people down the chain accountable for knowing exactly what’s going on, and having a plan.

I don’t mean this to denigrate Baltimore’s achievements. But is this an example of applying a best practices playbook, or is there something new here?

He’s absolutely embraced evidence-based strategies; group violence reduction has been at the center of all of the success. Baltimore’s starting point was a tough spot. They were suffering from one of the worst homicide rates in the country. This is a mayor that has figured out how to produce the fastest-declining murder rate in the country. It is a come-from-behind success story, and that speaks to the mayor’s management approach and how he has personally thought very strategically about how he shows up as manager-in-chief of a system.

You’re absolutely right, he’d be foolish not to avail himself of strategies that have worked in other places. His starting context was very different than most of those places, and his level of execution success has been top-notch. He’s now taking those capabilities and applying it to housing vacancy, which is the second-biggest problem in Baltimore.

What I’m after here is not so much, “How much credit can we give the mayor for this work?” But at a more philosophical level, how important is innovation? There’s a huge amount of evidence on how to drive crime down, and several American cities have successfully done that. My impression is that that’s often true for other key things we expect cities to do — there is a playbook.

I tend to define government innovation pretty broadly. It’s about making one plus one equal three or more. Sometimes that takes the form of radical, system-shocking ideas. The work we’re seeing around the care economy — cities are deploying a full-throated municipal response to care, which has been the under-attended-to underbelly of our economy forever — is a great example. But a lot of it is also process and partnership reimagination.

In Baltimore, there was a persistent challenge: the squeegee boys — young men who didn’t have income and were out on the streets offering to squeegee windows for pay. This was something that the mayor was hearing a lot about from the business community. He shook the pockets of everyone at the table: “What assets do you have to put towards this solution? How can we coordinate those interventions so that they feel meaningful to these young men, and we can create an inducement to get them off the streets?” That challenge is no more in Baltimore. That’s a process innovation. It’s not a radical paradigm shift, but we think of government innovation in that very broad way.

There’s room for both of your points in that definition. Sometimes it’s stuff no city has ever done before. We have the Mayors Challenge: we’re about to name the 25 best breakthrough ideas that cities from around the globe surfaced. There’s some thrilling stuff there. But most of the day-to-day innovation we see in city halls is business-model, customer-service, and efficiency innovation. Those are critically important, and they too require capacity. People need to understand how to squeeze more out of these systems. There’s a science to it, and that’s the science that we help cities connect to.

Let me ask you about the role of external consultants in how cities are governed. I talked recently with the head of the federal Office of Personnel Management, Scott Kupor. He had good things to say about similar contracts at the federal level, but he feels much of that work could be done better and cheaper internally.

Compare the state of play at the municipal level. Is there a management consultant bloat?

There’s certainly an over-dependency. Municipalities are less able to afford expensive management consultants than their state and federal counterparts. But I am in total agreement. Innovation used to be contracted out to the McKinseys and the IDEOs; data work used to be externalized. Municipalities need to have internal capacity. They have to own their own data, and the freedom of technical expertise on the inside, so that they can be adaptive and iterative as new needs emerge.

The big consultants benefit from these contracts. But are there also forces in city halls that are opposed to trying to bring that capacity in-house?

The major pushback is fiscal. The vast majority of city budgets are dedicated to relatively fixed costs. The amount of discretionary capacity that most mayors have is small. This is the funding that goes to IT modernisation and beefing up your data — your in-house capabilities. These are difficult fiscal choices. That’s where the reluctance is. We try to make the case that these investments pay dividends over time, and there’s growing evidence that they do.

Are there cases where you have helped city halls stand up these internal capacities, and then a fiscal crunch comes and the capacities are on the chopping block? How do you try and stop those things from being zeroed out in crunch time?

We’ve been doing this work long enough that a number of fiscal cycles have occurred. There are times when cities are reducing any and every cost. What’s amazing is that 95% of the innovation grants that we’ve made, once they have stopped, city halls have maintained those lines on city dollars. A growing number of them — a majority now — are lasting across administrative turnover. When people see what this data capacity can do — what it means to have a dedicated problem-solving team that helps a mayor put points on the board that their residents recognize — they work hard to keep it going. Not all the time, but certainly more and more of the time.

When Mayor Bloomberg came into office in New York City, he set up City Hall on an open floor-plan model — that was a big deal at the time. That’s been retained through multiple mayors.

Besides building better data streams and being more evidence-based in their practice, what other things do you think of as best practice — things you’d encourage any mayor to pursue?

Allowing people to work across silos is central to our capacity-building programs. We just exported our mayoral leadership program, which has been operating at Harvard, and created a sibling program over in Europe. I just got a note from the mayor of Izmir, Turkey, who set up a bullpen, as he was so inspired by the way that worked in Bloomberg’s City Hall.

I think public engagement — we are in a moment where city halls feel that the lack of institutional trust is a real problem. How do you show the work? What does operational transparency look like? How do you let your residents understand where things are and what the black hole of local government is doing? That is an important strategy to rebuild trust in government.

You run a New Mayors Program at Harvard, with the US Conference of Mayors. What are the most common mistakes that you see new mayors making?

If Mike Bloomberg were here, he would tell you that the thing that matters more than anything is getting the team right at the outset. Do you have people who are not sycophantish and are willing to tell you hard truths?” If you don’t have that, you’re in real trouble, because pretty soon the waters get deep and you’re swimming for your life.

Are mayors too often inclined to pull together yes-men and women around them because it’s the natural inclination?

Human beings are. We’ve learned that lesson very well in today’s social media world.

I know there’s a lot of collaboration between mayors. There are best practices that a mayor doesn’t have to reinvent — the town a few miles away may be doing an excellent job. But I’m curious about competition among mayors. A few months ago I had a conversation with the former mayor of New Orleans, Mitch Landrieu. As a mayor, he was motivated by the idea of competition: “What are they doing, and can we beat them?”

Do you see inter-mayoral competition often?

This is an amazing force for public improvement. Mayors uniquely, amongst elected officials, reject the Not Invented Here syndrome. Mayor Landrieu is a great example, but that’s pretty common. Mayors have a lot of FOMO. When they hear that one of their contemporaries is achieving impact, they want to learn and, if appropriate, import those lessons back home.

Idea transfer between public sector organizations is a fraught enterprise.We have a whole suite of programs — global convenings, peer networks, an ideas exchange — where mayors get technical assistance to adapt ideas from other places, so we make it easier for them to get a running start.

If you go back 5-10 years, before LLMs, people talked about “smart cities.” There was an Internet of Things instinct that we should wire up as many sensors as possible in the home or the municipality, get a lot more data, then use it to drive evidence-based practices.

What were the failure modes of that model?

The smart cities movement — the meaningful critique is that it was focused on solutions, not problems. Our programming is focused on problems first: making sure that people in local government have the tools to go find the right answer and bring it to life. We avoid so many of the traps of those earlier movements if we keep ourselves laser-focused on the problems our elected officials are trying to solve for the people that put them in office — and make sure they have access to the capabilities inside their institutions that allow them to do that, repeatedly, strategically, and in a way that produces impact that people can see.

When you say that maybe some of the smart cities movement was more focused on solutions than problems, was that people getting excited about the new tools before they thought about what they were using them for?

We still hear some of that, but less. It’s natural — mayors can be the perpetrators. They see a shiny technology that another city has deployed, hear that it’s producing an impact, and say, “We’ve got to get one of those things back home.” Hopefully, we’re building up the capacity of their staff to say, “Let’s first understand what our problem looks like and whether that’s the right solution,” because different cities’ problems manifest in different ways. Giving mayors that protective layer of a staff that has the analytical skill-set before they jump in and replicate a smart city solution is more than half the battle.

Local governments today are challenged to procure emerging technology. There’s a huge information asymmetry between them and tech providers in terms of what the externalities, negative or positive, of these software services might be. There’s still a whole host of issues that government procurers need to wade through. But that problem of problem-solution fit, more and more public organizations have outgrown or moved past it. Not enough, not all, but more.

Over Christmas I was using Claude Code, coding in my terminal for the first time, making a little personal website, and I was blown away. If you were giving advice to mayors who were looking at that shiny object of AI and thinking about how to integrate it, are there specific things you’d warn them against jumping on too quickly, or places that you’d try to direct their attention to — to identify the right problems and solutions?

One of our programs is called the City Data Alliance. It’s taking some of the cities that have the best data capacity and helping them take a big step into the AI era, to create lighthouse examples of human-centered AI deployment. A lot of great stuff is coming out of that. We’ve been advising mayors on generative AI ever since ChatGPT got onto their cell phones. Our approach has been: number one, get yourself fluent with these technologies. Promote fluency and understanding on your staff. Encourage them to learn; bring in local assets from research universities and have them talk with your teams about the potential and the pitfalls. Don’t lead with regulation; lead with low-risk experimentation so that you can begin developing some competency and confidence in deploying these technologies.

The first wave was around administrative use cases. Cities are now trying to bring generative AI more into service delivery to produce better outcomes for residents, and we’re seeing more risk aversion. “Get your data house in order,” has to be step number one. Think carefully about your use cases and the amount of risk you’re looking to take, and then step into this new era, understanding that bandwidth constraints are one of the major impediments to local government progress, and these technologies can help square the circle. You’ve got to build up your capacity and confidence, and walk carefully but clearly into that future.

Last question for you, about people “voting with their feet”: leaving California for Texas or the Sunbelt; people moving to Florida. Blue states are having a challenge retaining people.

I want you to make a prediction for me: What cities are you especially bullish on because of the quality of their governance? Where do you expect to see boom in the coming year or two?

I could give you many examples of mayors that are making the right moves. You can’t look past Daniel Lurie and the team in San Francisco. If you go back a year, that doom-loop narrative was so dominant, and the press and social media were so insistent on it. This guy closes out his first year in office with a 70-some-percent approval rating. He hasn’t fixed the street homelessness crisis or the fentanyl issue. But he’s out on the streets every single day, speaking into his cell phone and showing people the steps they’re taking toward a better quality of life.

We’ll have to have you back on, because I’m also pretty bullish on San Francisco’s mayor. We’ll have to check in a couple years and see if our expectations came true.

Greg was part of the founding team responsible for creating the Center for Justice Innovation, serving as Director from 2002 to 2020, and helping to guide it from a start-up to an org with an annual budget of more than $80 million. Alongside that, he:

• Has written multiple books, mostly on reducing mass incarceration, including Trial and Error in Criminal Justice Reform and Good Courts: The Case for Problem-Solving Justice.

• Has been at the center of left-liberal attempts to do criminal justice reform, especially in New York City, over the past two decades.

• Was on the Board of Correction for Mayor Michael Bloomberg, and the public safety transition team for Mayor Bill de Blasio and Manhattan District Attorney Cy Vance.

• Is the co-editor of a publication called Vital City, which I enjoy — it’s one part New York journalism, one part policy journal.

• Is the Distinguished Fellow of Practice at the Harry Frank Guggenheim Foundation, investigating various topics related to violence.

Thanks to Charles Lehman, Sean Sullivan, Oliver Traldi, Park MacDougald, Rafa Mangual, Ari Schulman, and many others for their contributions to the thinking behind this piece. Additional thanks to Jasper Placio, Harry Fletcher-Wood, and Shadrach Strehle for their editorial and production support.

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We discuss:

• Why nonprofits matter to government service delivery

• Critiques of nonprofits from the left, the right, and both sides

• How the Center for Justice Innovation reduced incarceration, and why funding that work got harder

• What nonprofits should do to regain public trust

For a printable PDF of this interview, click here:

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It may not be obvious to readers why we’re talking about non-governmental organizations (NGOs) on a podcast about state capacity. Why should people who care about governance care how NGOs operate?

In places like New York City, and arguably the entire United States, the government relies on nonprofits to do service delivery in a host of domains. You can’t talk about education, childcare, housing, and economic development without talking about the nonprofit sector. Coming out of the ‘60s and ‘70s, there was a lot of public discontent with government — a feeling that it had overreached in the War on Poverty. It can be debated whether it failed, but there was a public perception in many quarters that it had.

In places like New York, government over the past 50 years has increasingly turned to the nonprofit sector to deliver services that could be delivered by the state. Viewed in the most positive light, nonprofits are responsible for extending state capacity and improving service delivery. Increasingly that assertion is debated. People worry that nonprofit service delivery organizations are not accountable in the same way as government agencies. A podcast devoted to the work of government should think about NGOs because American governments can’t function without us.

There’s an interesting dynamic here. There was a big backlash across the country to the government running many of these programs in the ‘70s. In New York especially, nonprofits backfilled some of this work, in partnership with the state and the city.

The flip side of that dynamic is that NGOs are increasingly dependent on the federal, state, and local governments. A third of the money that goes into nonprofits is from the government in some form. There’s a more symbiotic relationship than in the past.

[Correction needed on my end: a third of nonprofits receive money from the government. About a third of those grantees rely on the government for more than 50% of their revenue.]

I should back up and say: “nonprofit” is an enormous category. It includes everything from your local block association — that has no paid staff, and a budget that maybe can be counted in the thousands of dollars — all the way up to Harvard University, which has an annual budget that dwarfs many nations. It’s hard to talk with a broad brush about nonprofits because they vary so much in scale, size, and what they do. In general, we’re talking about human service delivery organizations connected to the government.

There’s a lot of misconceptions about nonprofits. One is that they’re all charities, the people that work there are doing it out of the goodness of their hearts — volunteering, or making subsistence wages — and they depend upon getting a few nickels from the Salvation Army bucket. In point of fact, at least in New York, there are incredibly sophisticated nonprofits, the management of which rivals the complexity of any business or government agency. Many — including the one that I used to lead, the Center for Justice Innovation — rely primarily on government grants and contributions, rather than individual donations. We should underline the class of nonprofits that we’re talking about.

We’re going to spend most of our time talking about these service delivery organizations.

I’ll put some of my cards on the table, you and I have overlapping takes on the nonprofit sector, but we diverge in places. The think tank Institute for Progress, which I work for, is a nonprofit. We don’t take money from the government or corporations — it’s all private donations — but we’re an NGO, as are the Sierra Club, the Heritage Foundation, the Black Lives Matter organization, charter schools, and local community orgs.

I’ve spent much of my career in the nonprofit sector: a summer interning at Airwars, which tracks civilian casualties from airstrikes. It had a narrow remit when I was there — just tracking deaths in Syria and Libya — but it was funded, among others, by George Soros‘s Open Society. A little later, I worked at a news outlet called the Washington Free Beacon, which is very much on the right politically — that was technically a nonprofit as well. I think I’m one of the few people who have been funded by George Soros as well as by right-wing hedge fund manager Paul Singer. At the Free Beacon, and in the right-wing media background I come from, a lot of us were critical of the role NGOs played in American life. I say that as somebody who’s now working at a nonprofit think tank, and I’m on the board of a nonprofit, the Recoding America Fund. I ran a fellowship program for young folks in tech called Interact, which is a 501(c)(3) organization.

So: you and I are both creatures of the nonprofit sector. We have a lot of affection for it, and a lot of critiques. Let me start with the title of the book, “The Nonprofit Crisis.” I’m sure you’ve answered this on several podcasts, but what is the crisis you’re describing?

I don’t know when it started, but it first crossed my radar screen about a decade ago. I’ve spent all of my professional life within the nonprofit sector. I always worked for the kinds of organizations that no one has ever heard of, and that are hard to describe. When I would go out to cocktail parties with people I didn’t know, as a shorthand, I would say, “I’m Greg Berman. I work for a nonprofit.” There would be a smile across people’s faces and a loosening in the atmosphere. There was this general sense of, “I may not understand anything that you do, but you must be trying to make the world a better place.”

That started to erode around 2015. All of a sudden, the response was not warmth, but people looking at me side-eyed, or with overt hostility. I perceive there to be a significant decline in public trust and confidence in nonprofits. That’s happened over the course of my almost 40-year career. It never has come to a head in a way that the sector has had to try to address it — because there’s always 1,000,001 problems to deal with, many of which have taken greater urgency than this crisis of ebbing public trust.

I wrote the book to try to focus the attention of nonprofit executives, and those who love or work in nonprofits, on this problem. You can see this erosion in public trust, not just anecdotally in how people react to Greg Berman, but in the public opinion polling. Places like Independent Sector do polling. The house isn’t on fire. People express more trust in NGOs than they do in Congress or the media.

But that’s a low bar.

Just north of 50% of Americans express support for the nonprofit sector. I would argue that is — if not a red flag, certainly a yellow flag that nonprofits should be concerned about. When you pair that with the fact that we see volunteerism down among the American public — nonprofits are the primary vehicle for volunteerism. And while the dollar figure of donations going to NGOs remains high, the number of Americans that are contributing to nonprofits is going down.

This is a problem because nonprofits are one of the things that is uniquely great about the United States. If you travel abroad, you’ll quickly see that the strength and breadth of our nonprofit sector distinguishes the United States from other countries. In many places, there’s the private sector, the public sector, and nothing in between. When nonprofits are functioning well, they are part of the interstitial glue that ties together this diverse, ginormous, heterogeneous society. I get very worried when I see these yellow flags going up and public confidence in the sector going down.

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Before we get into the specific critiques, say a little bit more about how the sector has changed. One of the dynamics you point out is fewer normal people donating, and therefore more large philanthropists. Another is this long thread in American life of civil society being important. Tocqueville talks about this — Americans love to organize themselves outside of business organizations. They like to do other things together. As far back as the founding, that’s a theme of American life.

But a more contemporary dynamic is what one political scientist has called “associations without members.” Another, my friend Steven Teles, has called it “‘advocacy’ rather than representation.” What’s that change in the nonprofit sector?

I think that is a profound and generally unremarked change in American life over the past century or so. This is consistent with the argument that Robert Putnam makes in Bowling Alone — Americans used to be great joiners. That was true for tons of civic associations — the Lions, Kiwanis, the Daughters of the American Revolution. These groups were massive organizations — some of them had hundreds of thousands of members, and that was their strength.

Over time — I don’t think this was anyone’s malign plot; some things just happen — we’ve seen an erosion of those kinds of organizations. One of the things that distinguishes the nonprofit sector has been increased professionalization. Some of that has been positive. Organizations that are not massive membership organizations are lighter on their feet. My sense is that there are more creative, innovative, cutting-edge nonprofits today than 100 years ago. Certainly there’s been professionalization of the management. They’ve become increasingly sophisticated.

But something has been lost in the transition to associations without members. The nonprofits are incredibly prominent, incredibly effective, and have a high degree of access in DC, and to politicians across the country. But I don’t think they are as connected to the general public as they used to be. Even the organizations that still have lots of members — it’s different now. They are small donors who give a couple bucks on the internet. They are not going to community meetings in the same way. They don’t feel that they are equity stakeholders in those organizations, the way that local businessmen did in their Kiwanis club in 1955.

How has public perception shaped the critiques of NGOS that you talk about in the book?

I feel like this is an example of the horseshoe theory of political action — nonprofits are increasingly under attack from both the right and the left. Both critiques are multifaceted, but the specific elements are different. I’m just going to give a quick sketch of them.

In recent years, left-wing critics have looked at nonprofits and asked hard questions about racial disparities — particularly at the executive and board level. Some very hard questions, understandably, were asked about a bunch of nonprofits in the wake of the MeToo movement. There were a bunch of executives, mostly male, that were engaged in sexually harassing behavior. For too long that went unexposed and unpunished. Left-wing critics have also focused on substandard wages paid at the lower levels of nonprofits. Those are all fair critiques — things that the nonprofit sector should take, and I would argue has taken, seriously.

On the right, I see the critique mostly being focused on viewpoint diversity and “wokeness,” for lack of a better word — a feeling that in many nonprofits it has become difficult to voice opinions outside of a very narrow progressive orthodoxy. Frankly, there’s some truth to that critique as well. The nonprofit sector may have over-corrected to the left critique and under-corrected to the right critique.

Both left- and right-wing critics use this phrase — which I hate, but I’m going to repeat it here — “the nonprofit industrial complex,” which is of course such an insult. You have critics saying, “Nonprofits are motivated by elite opinion, funded by out-of-touch elites, and are about perpetuating their own self-interest rather than solving social problems.” That’s not exactly a new critique. You could go back at least 50 years, probably longer, and find echoes. It feels louder now. It’s hard to judge — we live in the social media era, and sometimes it’s hard to separate the signal from the noise. But it feels like those kinds of critiques have a sharper edge, and are gaining more purchase, now, than when I started in this field in the late ‘80s.

Let me add a couple of critiques that you talk about in the book. One, that is also a horseshoe criticism, is the lack of transparency in the sector. We can talk about opaque funders using different vehicles — it’s hard to see where nonprofit money is coming from, including nonprofits that do service delivery. That’s a critique I’ve seen a lot on the right, but as you flag, it’s also a perennial critique from the left.

Another, that I had not fully grasped, is the critique from the left of this historical move — nonprofits now do a lot of service delivery, and many people on the left would prefer the government to do that. The Marxists especially would say, “That’s an erosion of the government’s proper role in civic life.”

Another term of derision that is sometimes thrown at nonprofits, particularly in a place like New York where they’re strong, is that they amount to an unelected “permanent government.” There’s elements of truth to this. Mayors come and go, but if you look at the Mamdani transition committees, some of those are the same people that were on the transition committee for Adams, de Blasio, and Bloomberg. A lot of that continuity comes from large nonprofit service providers that are there no matter who the boss in charge is.

Another critique has been that, particularly up to and through 2020, the NGO class was not just turning woke, swinging to the left, and not open to viewpoint diversity — it was one of the main drivers of the woke turn in American life.

Then another critique is the one Elon Musk and others make: they’re opposed to anything that’s not a for-profit. People like Elon think the structure of the nonprofit is wrong to do social change — that incentives will inevitably be misaligned, because they’re not in touch with a market signal. The Department of Government Efficiency tried to embed someone in the Vera Institute — it’s a nonprofit, but it took money from the government. They said, “No, we don’t have to take you on board.” But it was a remarkable moment for flagging how strong the antipathy towards NGOs was.

I don’t want to blame the victim. Some of the things the Trump administration has done feel motivated by revenge, animus, and bad policy. I’m not a supporter of the attacks on universities, or their threats to go after Open Society and Soros, that they deem to be enemies of the state. There’s been a lot of bad ideas, bad policy and overreach on the part of the administration, and those who support it.

But I would say that they’re responding to something real. If nonprofits don’t take the critique seriously — that they have sometimes been drivers of polarization, been out of touch with mainstream American opinion, and can appear opaque and unaccountable; all real issues that the sector has not wrestled with adequately — that helps to fuel the overreaction that we’re seeing on the right.

I might be a bit more inclined to blame the victim than you are, but broadly I agree: there’s a lot of foolish overreaction in this administration to the sector — and there’s something real that the backlash is about.

But let’s table the partisan critiques for a second. I want to hear about your experience over two decades running the Center for Justice Innovation (CJI). I’d like to just get a couple of basic facts on the board about how an organization like CJI works: who works for it? Who funds it? What does it do? From there, maybe we can start to get a better picture of which of these critiques hold water.

I’ve had the good fortune of living through a golden era of nonprofits in New York. Coming out of the ‘60s and ‘70s, there was a turn to using nonprofits more, because of a backlash to perceived government failures, but also a shrinking public sector. There was a shrinking tax base as New York flirted with the brink of bankruptcy. Nonprofits — I’m thinking here of places like the Central Park Conservancy, the Times Square Business Improvement District (BID), and the other BIDs — were innovative responses to shoring up important city services and civic life at a moment of real crisis. [On Statecraft, Peter Moskos described the role BIDs played in turning around policing in New York City.]

The Center for Justice Innovation has been in similar work over close to 30 years. It’s an organization dedicated to reforming the justice system, predicated on a critique: that the justice system is neither as fair, nor as effective, as it could be. In particular, the birthplace of the CIJ was in Midtown Manhattan, with a project called the Midtown Community Justice Center. It was dedicated to forging a new response to individuals that had committed misdemeanor offenses — like prostitution, drug possession, shoplifting, and fare-beating — in and around Times Square. The idea was that too often the justice system was either doing nothing — letting people go with no penalty for their offense — or over-indexing on sending people to Rikers Island for a few days or weeks.

We created the Midtown Community Justice Center to forge a range of penalties that judges could use, in between nothing and jail. That looks like drug treatment, community service, job training — a whole bunch of alternatives to incarceration. We embedded them in the courthouse apparatus to ensure that they would be used and be high quality.

That project, which was launched in 1993, turned out to be enormously successful in helping to reduce crime and improve local attitudes towards criminal justice. From that base, we went on to create other experimental justice projects that were similar, in all five boroughs, working with different kinds of defendants, including some that had committed very serious offenses — felony defendants for whom we were providing long-term care in lieu of incarceration. We were the first organization that brought the violence interrupter to New York. It has become very widespread in New York City, trying to hire credible messengers — who have been engaged in gangs, drug dealing, or other criminal activity, but have gone straight — and train them in intervening in conflicts, so you didn’t get this cycle of retaliatory violence.

An organization like CJI cannot function without the trust and support of the government. That includes financial support. I don’t know what the ratios are today. I stepped down from running it in 2020. But back when I was in charge, we got roughly equal amounts of money from city, state, and federal government sources. That comprised 75-80% of our budget. 20% would come from private sources. As a nonprofit executive — there are exceptions to this rule — you want to have diverse funding sources so you’re not too dependent on any single funder who can just decide one day that they’re not interested in funding you. It felt to me like we were in a relatively strong position. We certainly would’ve suffered greatly if the state or the city had withdrawn their resources — but we weren’t solely dependent on any one branch of government to support 90% of our operations.

I’m curious which basic challenges came up for you as a nonprofit executive over those 20 years.

It’s always been a hard job. Running an organization like the Center for Justice Innovation, there’s multiple lines of accountability. If you’re a service delivery organization, you should be accountable to the recipients of your services. You’re accountable to staff at some level, to the board, to donors, and to government. You could argue that nonprofits are some of the most accountable institutions that we have.

Why is that?

Multiple levels of stakeholders that you have to worry about all the time. When it feels good, they’re all pointed in the same direction. But of course, that’s not always the case. Increasingly it’s not the case.

I guess I’ll just be crass with you. The hardest thing about running a nonprofit is raising money. People that rise to leadership levels in the nonprofit sector are those that can raise money. Some of that is a positive thing. To raise money, you have to be able to articulate a vision in a way that makes people — government, individual donors, or private foundations — want to write a check to you and like you. So some of that pressure is healthy for an organization and selects for people who are visionaries — highly articulate and persuasive. But there are some pernicious consequences of selecting leaders based on whether they can raise money. It’s not necessarily the best managers, or the most knowledgeable people about the subject.

Any organization has complicated interpersonal dynamics, and you have to manage that. I was a thoughtful and responsive manager; I was tending to the internal dynamics as carefully as I was tending to the external pressures of raising money. I haven’t polled my peers, but I would be surprised if most nonprofit executives didn’t say something similar — that they felt this tension between needing to spend a lot of the time out of the office, but also spending time inside the office on day-to-day operations. Those things often felt in conflict.

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When I talked to people in prep for this episode, I heard different stories about why this nonprofit crisis occurred. One story is about a generational shift: the rank-and-file of these organizations became much more doctrinaire about certain ideas. They pulled their organizations left, which generated tensions between staff and leadership.

But there’s another narrative: rather than a bottom-up pull to the left, there was a top-down pull from philanthropists. The composition of the class of people giving money to these organizations changed. More large philanthropists are giving a larger percentage of the donations. Those elites were driving this shift in behavior.

Which of those narratives do you give more credence to?

Both those things are true. I don’t think they’re in tension. I might be tempted to weigh it 55-45 in one direction, but you could convince me it was the reverse. A lot of the problems I diagnose are downstream of problems in philanthropy. Many foundations are guilty of, over the past 10-20 years, funding what’s known in the business as “intense policy demanders” that fueled polarization, without thinking about the long-term effects on American politics.

Then there’s no doubt — if you take out half a dozen nonprofit executive directors and buy them a round of beers, you’ll hear a range of complaints about young staffers and how doctrinaire they are. Particularly on social media, there’s a lot of anti-woke people who castigate people like me, NGO heads — “They work for you, just tell them to shut up.” Maybe somebody could get away with that, but I don’t feel like I could. It’s a hard way to run an organization. You govern with the consent of the governed, even when you’re paying them. So it’s not so easy to just hand-wave away the priorities and predilections of this younger generation. You have to deal with them. They’re not going away.

I want to take that opposing view here and press you on the relationship to the staff. When you entered a leadership role at CJI in 2002, you instituted a lot of hierarchy. You felt you had to drive the train. But in the book you say, I’m paraphrasing, “I couldn’t do that today. The landscape has changed and it wouldn’t be the right advice for me to give.”

What changed between then and now?

Social media has driven democratization: everyone has a communicator in their pocket where they can communicate to the entire world instantly. That has profoundly destabilized, not just nonprofits, but government and media.

We also went through a moment that felt close to full employment in the nonprofit sector. If you quit your job today, you’d have another job tomorrow. The combination of social media driving democratization, the fear of finding yourself on the wrong end of a social media beatdown, the reality that it’s a highly competitive marketplace for talent — at least for a little while, the balance of power shifted towards labor.

That was profoundly different than when I entered the field. I started working in the nonprofit sector in 1989, on the heels of a recession. I looked for work for six months, I would’ve bitten your arm off for a job, and I wasn’t going to ruffle feathers once I got there. I hope this came across in writing the book — I tried to be very careful. I do have a critique of this younger generation, and I don’t share their values in large part, but I want to be sympathetic to it. I don’t want to be just an old man complaining about the young people.

I’ll be the younger man complaining about the young people on this episode, don’t worry.

I’m the father of 20-something children. They can, at the touch of a button, choose who they want to date, organize their Netflix queue, and personalize the stuff they see on Instagram. That backdrop does create a set of expectations that, “When I go to the workplace, why can’t I personalize that in the way that I personalize everything else?”

I’m also curious about the talent pool that you were drawing from, if you were a nonprofit with an orientation towards criminal justice, say — it’s not like you could fire half the team and find new people who wouldn’t have those instincts about where the organization should go. The people who want those jobs have similar politics.

I don’t think that’s universally true, but the more elite the institution was, the more that was the case. The more that you’re drawing from a college- or elite-educated population — because your employees are lawyers or what have you — I think that critique is fair. Some of the problems in the nonprofit sector are downstream of problems in philanthropy. Some are downstream of how kids have been educated in universities, high school, and other institutions.

You think some of the pressures from below were salutary: fights over sexual harassment in the workplace; fights about wages.

Then there’s another set of pressures that were more about, “What’s the mission of this organization?” We could go down a list of NGOs that had these tumultuous fights in public over what they were about [The Poetry Foundation, Fridays For Future, Planned Parenthood, the ACLU, to name a few]. The Sierra Club had this big New York Times piece about how it tore itself apart — largely over nonenvironmental issues. There’s a great line where one staff member gets criticized for focusing on Colorado’s protections for wolves because, “What do wolves have to do with equity, justice, and inclusion?”

There was a tight labor market, and therefore more standing to lobby for your own interest internally. But that sat alongside a different instinct from staff: “We should be able to change what this organization does.” [Readers may enjoy reading the response to the NYT coverage from the Progressive Workers Union, which represents Sierra Club staff.]

I think that’s true and unfortunate. That’s where one would like to see more pushback from leaders than there sometimes has been. I don’t think this is exclusively a problem on the left. What’s happening at Heritage is a very similar story. The terms of the fight are different, but it’s a generational schism.

I’ve got a groupchat with some family members called the Heritage Crisis Comms Channel, where we’re following the latest in that schism. I totally agree. It is not a uniquely partisan dynamic.

But I do think that something has shifted. I don’t know if you read Yuval Levin, who I think is very strong on this point.

I used to work for him!

I just know him from reading him. But he’s made this point that we used to go to institutions and expect that they would shape us in our behavior. Increasingly, people are going to institutions — whether it be Congress, nonprofits, or the New York Times — and viewing them as platforms for doing their own thing. That’s a profound shift. I’m not quite sure what’s at the root of that, but I do think that’s a problem. It’s important that nonprofit leadership push back on that — the staff’s job is not to reshape the mission of the organization.

I’m so glad you mentioned Yuval, because I got to work on the promotion for his book A Time to Build, in which he talks about “institutions as molds” versus “institutions as platforms.” It’s been a very helpful frame for me. I’m at a nonprofit where some of this work is a platform. Because of the institution, I host a podcast, I get to talk to you, and I get to claim some of that credibility for myself. But there’s a real risk in any of these forums that you cannibalize the credibility of the institution to get a little bit more clout for yourself. A danger for me would be seeing IFP as just a way to publicly position myself.

I’ve hired maybe thousands of people over 20 years. It used to be, “We say what the mission of the organization is, and if you come to work here, it means that you bought into it.” But increasingly, towards the tail end of my time, it didn’t feel that way. People were coming to the organization because they were roughly interested in criminal justice, but really, “I’m going to come here and change this place.” Some of that energy can be healthy, if channeled in the right direction. But some of it has proven to be incredibly destructive for these organizations.

You used the phrase “intense policy demanders” to describe what philanthropists were drawn towards funding. I haven’t heard that phrase before. Will you describe what you meant?

I’ll speak to the field that I know best, which is criminal justice reform. Philanthropy has driven polarization because there’s been a desire to fund advocacy over service delivery. One of the pernicious effects of the past 20 years is that we’ve seen a bunch of service delivery organizations feel like they have to open policy shops. A bunch of organizations that were devoted to policy have opened 501(c)(4)s and gotten into direct political funding. It’s hard to say that you’re a nonpartisan, above-the-fray organization when you’re funding politicians.

A lot of that has been driven by philanthropy wanting to have wins they could claim responsibility for. When people complain about “the groups” that have so much power, in the Democratic Party in particular, a lot of those are single-issue organizations. Whether it be education, criminal justice, housing, homelessness, LGBQT — they think their issue is the only one that matters. They just want to drive extreme policy on it. That’s been to the great detriment of the Democratic Party. You may have more window into whether a similar dynamic pertains in the Republican Party.

I think less so, in part because the demographic base of the parties has been different, although that may be changing.

Where does that demand from funders comes from? If I was a philanthropist, and I had a lot of money to deploy on service delivery, what would make me think, “I’d like to fund an advocacy group instead”?

I’m not 100% sure what drives it, whether it’s guilt — I haven’t been on the philanthropic side. I’ve been a professional supplicant most of my life, trying to curry favor with philanthropists. I try to get into their heads, but I can’t speak to the dynamics of how things have shifted.

When I was at the Center for Justice Innovation, towards the end, if I went to a foundation and said, “We run this program, the Brooklyn Mental Health Court. We’re working with 200 felony offenders every year. We can show you hard research by independent evaluators that we’re improving outcomes for this population: reducing incarceration, and improving their mental health outcomes and job prospects.” I always slept very easily at night, because I could show you 200 people per year whose lives were measurably better based on the work we were doing. At a certain point, foundations ceased being as interested in that story. It felt like, “That’s cute, but that’s 200 people. What we want is transformational change.” It became very hard to raise money for discrete service delivery programs like the Brooklyn Mental Health Court, and much easier to raise money for, “Help us do this campaign to close Rikers Island.” That’s where the heat was.

Philanthropy is faddish. Things wax and wane. When I was coming up in the nonprofit sector, there was a whole critique that it was touchy-feely. People like me could come tell you a story about one person they helped, but — “We need some hard-minded business thinking here. Let’s focus on statistics and evaluation.” That was the dominant trend for the first 20 years of my career. At a certain point it shifted. What became hot was issues of racial justice and transformational structural change. I think that may have crested and we’re onto something else now.

A lot of the way you describe the culture of philanthropy — the faddishness, the boredom with small or medium-sized effects — mirrors what I’ve seen in my time around the venture capital space. I wonder if there is some crossover in ideas between VCs and philanthropists — some of whom are the same people — where there’s more interest in catalytic change. They favor funding new organizations over existing ones, or funding a new special project at an existing organization, instead of the core work.

Am I making up that parallel?

You’re connecting some dots for me that I don’t think I have properly connected on my own. That’s a plausible explanation. You can see it in the vocabulary of many of these foundations over the past 10-20 years. Increasingly, people talk about, “We’re in the business of placing big bets.” That’s not so different from venture capital saying, “We’re going to fail with 100 things, but we’re hoping to find one unicorn.”

I imagine some of the appeal of a big campaign to close Rikers Island, is if it hits, it feels like you’re returning the fund in venture capital, even though many of those messaging efforts will fail.

One thing I’ve seen a lot is philanthropists who want to give restricted funding — for just the specific project — instead of funding an organization and trusting it to do what it does best. When I talk to professional supplicants, this is a big complaint: philanthropists want to have their name on a pet project. Maybe it’s not as exciting to say, “I supported the ongoing operations of organization X.”

How did you run into that dynamic?

That was certainly a dynamic that I ran into all the time. Fun is too strong a word, but part of that was the delightful challenge of fundraising. My organization wants to do X. A philanthropist wants to fund Y. The challenge of being a successful fundraiser is to either convince them that what you’re doing is actually Y, or to find the overlap in the Venn diagram where their interests oversect with yours.

There’s been a big push over the past five to seven years to do more general operating support. People have listened to the critique of professional supplicants and are trying to get better at that. I do think that philanthropy is trying to reform itself on that dynamic.

I want to talk about some of the critiques that people make of service delivery organizations — the subdomain of nonprofits that you’ve spent most of your career in — because the Heritage Foundation or the Black Lives Matter organization are slightly different beasts, even though they’re all 501(c)(3)s.

There’s been a lot of conversation, especially around the city of San Francisco, although I think you’ve seen it in New York as well, about inefficiencies in the nonprofit sector, graft, skimming off the top, and structural disincentives to solve the problem that your nonprofit is formally about.

There’s a piece that you and I both read about an affordable housing org in San Francisco [TODCO, also covered here]. The money that nonprofit made was directly correlated to the rents in that neighborhood. The way the incentives lined up, it benefited from there being no other building of affordable housing.

One critique would be that that case maps to a structural pattern lots of nonprofits have, maybe subconsciously — a disincentive to actually solve the problem they work on, because then the funding stream would dry up. A business would not have that challenge.

What do you think of that structural critique?

Let me give you an emotional response that’s perhaps inappropriate: it infuriates me. It feels incredibly disrespectful. I do think it’s one sign of just how far nonprofits have fallen — that people actually think there are affordable housing nonprofits and homeless service providers that would prefer people to be unhoused, just so that they can continue to exist and draw huge salaries.

I don’t doubt that there are some examples of perverse incentives out there. Let me not deny that there are cases of graft, corruption, and malfeasance. I would like to tell you that nonprofits are immune to these things, but they are staffed by fallible humans, who make mistakes — sometimes criminal mistakes. For sure, we should root that out where we see it.

But at a meta-level, this notion that nonprofits want to perpetuate social problems couldn’t be further from the truth. The stereotype — that the people attracted to work in nonprofits want to do good in the world, solve social problems, and make San Francisco, New York, name the place, better — my experience has been that is almost 100% the case. I know people that run large nonprofits that provide homeless services. They’re passionate about solving the homelessness problem. It saddens me that we’ve reached a stage where they can somehow be construed as the villains in the story rather than part of the solution.

Let me go slightly further. This gets to the critique, “Why do we need nonprofits? Government could just do this work.” In my experience, government is worse than nonprofits, mostly. Generally nonprofits are less bureaucratic, lighter on their feet, and more mission-oriented, creative, and idealistic.

Look at whatever domain you want. If my child had to be arrested and receive services, I’d much rather they receive them from a nonprofit than the Department of Probation. So when I run up against people who seem to think that nonprofits are not just not a force for good, but a force for evil; that they’re engaged in perpetuating social problems — the thought experiment I would turn to you is, if we could get rid of all the nonprofits tomorrow and have that work performed by business or government, would the world be a better place? I think the world would be massively worse.

You couldn’t convince business to do most of this work, because there’s no profit to be gleaned from it. We have all had horrible service experiences with government. There’s nothing to say that government is going to supply these services better than NGOs. I think the preponderance of evidence suggests that they provide these services worse.

I agree with you in part: I think the number of people working in the nonprofit sector who are explicitly motivated by graft, or who don’t have ideological commitments to the work that they’re doing, is very slim. That is not my experience in either the policy and research world, or in my limited experience with service delivery.

But there is still a question here about the structural incentives, and the narratives we tell ourselves. You had a great survey piece a couple of years ago with current and former nonprofit executives. You quote one of them admitting, “there is corruption, waste, and pocket-lining in the nonprofit sector,” and that “highly motivated and savvy nonprofit executive grifters can go for years without getting caught.” Somebody else you spoke to pointed out there’s little incentive for nonprofits to be efficient, which can lead to “bloated organizations and overpaid chief executives.”

I don’t think many people are becoming billionaires in the nonprofit sector. But there can be a nice overlap between doing the work in a particular way and making a lot of money doing it. If you’re not effective, you may have structural incentives not to pay close attention to that outcome.

I just went on a passionate rant defending nonprofits. Now I’m going to talk out of the other side of my mouth. I’m not going to deny what you say. You can survive in the nonprofit sector, because it isn’t subject to the same market pressures as businesses. A lot of nonprofits continue to exist, year after year, regardless of whether they’re having a good impact. At a high level, I would defend the nonprofit sector against incursions from government or business trying to provide the same services. But in any specific case, you can find plenty of nonprofits that are not good — where executives are overpaid and they’re not delivering services as effectively as they could.

The maximalist view of this critique would be something like Elon Musk’s perspective: these institutions are disincentivized from paying close attention to impact, because they are not tethered to a profit motive. For all the flaws of business, if a business isn’t selling products, they know immediately, and everyone’s livelihood is on the line.

What do you make of that high-level critique of the form of the nonprofit?

I guess I feel like nonprofits are being held to a very high standard. Have they succeeded in solving the problems of poverty, racism, and social inequality? No. But the reasons that they haven’t solved those problems — despite plenty of them being devoted to solving them — number one, the limits of the human imagination. I don’t think we actually know how to solve a bunch of the social problems that nonprofits are chartered to solve. Number two, the political will doesn’t exist in the country to solve these problems. To beat up nonprofits because they haven’t magically made homelessness go away feels like moving the goalposts in a way that’s very difficult for any organization to meet.

The book I wrote previously was called Gradual. I tried to make the case for incremental change, against those who argue for radical change. It’s not that the argument that you’re ventriloquizing is totally stupid and should be shot down. There’s a germ of truth to it. Part of the motivation for writing this book is to get nonprofits to wrestle with these questions of public accountability, and lining up their interests with the public good — so that they don’t get subject to the kind of radical, bad change Elon Musk tried to bring.

One common thread from critiques on the right and the left is this demand for more transparency. You could take the graft view: “We need more transparency to make sure these people aren’t skimming off the top.” Or you could take a less cynical view and say, “It’s often very opaque who is funding a given nonprofit, because of some neat financial architecture in the American system, that means often you don’t have to disclose, if you’re a funder, what you’re funding.”

I would push back a little on that. They’re not perfectly transparent, but most nonprofits have to file an IRS 990 every year. Those are all publicly available. You have to list where the money came from. I think part of the problem for nonprofits is the opposite. They’re pretty transparent about some things, including where the money is coming from. So if you’re a muckraking ideologue, and you’re unhappy with George Soros or the Koch brothers, you can immediately figure out who they’re funding, and turn your arsenal on those NGOs that have received money.

Well, the recent salaries of people at my institution and yours are public, yes, anyone can look up the 990 forms. But the names of individual donors are not disclosed to the public.

It’s not perfect, but I would argue that it’s much more transparent than the average non-publicly traded business.

Sure, but we’re talking about critiques of the nonprofit sector. I’m drawing this from the first couple of chapters of your book, where you say transparency is a continual ask from critics.

Maybe I’m pushing back too hard. I do think that nonprofits can and should be more transparent. One of the things I’m most passionate about — which is a slightly different point, but related — I find that many NGOs have essentially given up on persuasion; on speaking to the bulk of the American public. When I look at newsletters, websites, or annual reports, I often see ideologically-freighted language, some of which is unintelligible if you are not already in the elite left club. I think that’s a profound problem. When they’re communicating with the world, NGOs should be aiming to convince people, speaking plain language in a way that is intelligible to the bulk of the American public. A lot of organizations over the last decade are guilty of not doing that.

I’d agree, although I’d argue that your critique doesn’t go far enough. There was a lot of messaging from these institutions that was not aimed at persuasion at all. If you look at the nonprofits that advance journalism, for instance, there was a turn away from persuasion, towards an idea that they existed to protect the American people from themselves, and from believing false things — rather than trying to convince them of things the nonprofits believed were true.

But that’s more about political tactics: maybe it’s unwise to make certain arguments, or use freighted language. The broader critique from the right is that using the phrase “BIPOC,” or capitalizing “black,” is a symptom. The underlying beliefs were the problem.

I think both are true. But it speaks to, “Who are the nonprofits for? Who are they accountable to? How do they perceive their mission?” Nonprofits are organizations that have been granted an incredible privilege by the federal government. They’re exempt from tax under 501(c)(3). That is a gift given under the assumption that they are operating in the public good. A lot of organizations — again, it feels maybe too harsh to say — have lost track of the fact that they’re supposed to serve the broader public.

I don’t mean to suggest that just tidying up some language is going to solve the problem, because it’s more than a linguistic problem. It’s about an orientation towards the world. The public includes, not just Democrats, but independents, moderates, and Republicans. Nonprofits should seek to serve them too.

Transparency is always the first thing that critics can complain about, even when the institution is fairly transparent. When I was covering DOGE and USAID, I criticized what I thought was a reckless attack on these foreign aid programs (something we discussed with Dean Karlan, USAID’s former Chief Economist). Someone tried to draw a little red-string-on-a-pegboard connection between me and USAID to imply that I was being paid by the federal government to defend graft in USAID programs. Which was pretty deranged, but you see that a lot: that conspiratorial instinct is very normal in American life today.

All that to say, I take your point, transparency is not the be-all and end-all of good governance of nonprofits.

We were talking about places where you think nonprofits do a lot better in providing a service than the government. I’d be curious to hear what domains that’s true in and why. As we’ve talked about, some big, public failures in the ‘60s and ‘70s mobilized this trend for nonprofits to do more of this work. But I assume it’s historically contingent, and dependent on the nature of the government institutions.

In what places would it be appropriate for a nonprofit to say, “We’re wrapping up, because we think we can help the feds or the state do it better”?

I don’t have an easy answer to your question, like, “Let’s rely on nonprofit service providers in housing, but not in education.” To riff on your question a little bit, when nonprofits outperform government, there’s a number of reasons for it. It’s not magic. One is that they tend to be less bureaucratic — they’re not encumbered by civil service rules. Another reason is that they tend to be cheaper. Their employees often make less than comparable workers in government.

It’s certainly true in New York City, broadly about 20% less.

Another reason is that there are plenty of mission-driven people in government, but there is a higher preponderance in nonprofits. One concern I have is that as nonprofits turn towards unionization, become more bureaucratic, and invest more in HR and other bureaucratic staffers, they begin to erode their advantages over government. If these trends continue in the nonprofit sector, you can make a strong case that 10 years from now there will be no difference. Why outsource these things when government can perform at the same level?

We did an episode with Professor David Schleicher about this looming pension crisis in some cities — Chicago specifically. Since nonprofits have lower labor costs, typically, than the comparable government department, it can make fiscal sense for a mayor to encourage outsourcing to nonprofits — it’s a lot cheaper. But that’s not only because nonprofits are more mission-aligned and less bureaucratic: if civil service laws were relaxed, the government could achieve that goal more cheaply.

I think that’s fair. That terrain may shift in the future.

I want to come back to this question about the tactics and language think tanks use, and the way they think about their relationship to their work and to the American people. Whatever happened in 2020, there was a change in how nonprofits saw themselves and what they did. That has driven a lot of the backlash — which up till then had not coalesced, even if there was mounting frustration.

It’s hard to know how you convince people to trust the nonprofit sector again without some shift in how they govern and see themselves. Their rhetorical approach alienated a lot of people, and led to circular firing squads internally about what words to use and how. But if they just change their tactics, because of the realization that it didn’t work in 2020, why should Americans trust that they will perform differently?

Changing communication style is an important step, but if that’s all it is, it will not be sufficient. Nonprofits should take pains to articulate that they are welcoming to staffers across a broad political spectrum — in a way that they have not been explicitly saying on their websites and in their public utterances in recent years.

In terms of, “How do they regain trust?” — mission creep, and getting embroiled in political controversies beyond the scope of your organization, has clearly ensnared many organizations. The Sierra Club is Exhibit 1A. I recommend everyone reads that article from the New York Times. There’s no reason I can perceive for the Sierra Club to opine on the war in Gaza. I don’t think you’ll ever convince me that it’s essential for an American environmental organization to take a political position on that. Much greater mission discipline is part of the answer. It’s going to be a long road back.

The most important thing they can do is just do a killer job of whatever their mission is. The more that you can show that you’re reducing homelessness, educating people — that’s going to be the best bastion against the erosion of public support.

The big challenge right now, as I talk about this book and say, “Here’s the nonprofit crisis, it’s this erosion in public trust.” People sometimes look at me and say, “What are you talking about? The nonprofit crisis is Trump and the federal government.” That is a crisis too. Trump is engaged in some very dangerous behaviors. But in figuring out how to confront the challenges that the federal government presents right now, nonprofits have to be very careful. The more that opposition to the Trump administration looks like just another battle between the right and the left — it’s a bunch of progressive NGOs and philanthropists who don’t like Trump — the worse the nonprofit sector will come out of it.

Maybe you’ll deride this as just a tactical move, but I do think it’s important for nonprofits, and the foundations that fund them, to be doing cross-partisan work, engaging people in the center and the right of the political spectrum in standing up for the sector, and values of civil society. That’s the only way they’re going to be effective. One of the concerns I have is that the more that NGOs look like politicized institutions that just exist to resist Trump — they do long-term damage to themselves.

In Statecraft-y language, we’re interested in principal-agent problems — where the organization formally wants to do one thing, but in practice you have to work with a bunch of other people to execute, and those people have other goals. Some of these nonprofit organizations have been around for a very long time and there’s been mission creep over the course of their lifetimes. The Sierra Club and the American Civil Liberties Union might be examples. You could name any number of organizations where this is a natural drift — you talk about O’Sullivan’s Law, that organizations that are not explicitly right-wing tend to become left-wing over time.

Let’s say a nonprofit executive really wants to take your advice, to try and build those cross-partisan alliances and refocus on the mission. What are they supposed to do tomorrow?

There’s a lot of forces above and below, and on social media, driving nonprofit executives into confrontation mode, and driving nonprofits to carve out public positions on a host of controversies. My instinct — I’m not sure this is right; some of this is just my personality — points in the opposite direction. Which isn’t to say that it’s always wrong to take public positions — there’s lots of NGOs where that’s intrinsic to the work. This is maybe what I’m trying to argue in the book — nonprofits should keep their heads down and stick to their knitting.

I would tell any friend who’s just ascending to nonprofit leadership, “The most important thing you can do is focus on achieving the goals of your organization.” We have a real signal-and-noise problem in our culture right now. There’s so much noise, so much to distract attention, and so many forces tugging at you — whether it be donors, clients, staff, or government. But to have as a touchstone, on your desk, the mission of the organization — and that you are a servant to that mission, rather than the organization being a servant to your ambition — I think that’s where the road back to the full trust, faith, and confidence of the public starts.

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Then, in a totally novel example of economic statecraft, we grabbed Maduro and seized Venezuelan oil, so we had to discuss that too.

As a result, we’re doing a lot in this episode, and we leave some important questions out: the legal challenges to the current tariff regime, for example. But I think readers will come away from this episode with a clear view of the old and new tools of US policy in the realm of economic statecraft.

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Our guests

Daleep Singh is an economist who served in two separate periods in the Biden Administration as Deputy National Security Advisor for International Economics.

Peter Harrell served as Senior Director for International Economics at the White House, jointly appointed to the National Security Council and the National Economic Council.

My colleague, Arnab Datta is Director of Policy Implementation at IFP. He’s also the Managing Director of Policy Implementation at Employ America.

Table of contents

• What is economic statecraft?

• Venezuela

• China and tariffs

• Trade deals

• Industrial policy

• Lessons learned

Thanks to Harry Fletcher-Wood, Shadrach Strehle, and Jasper Placio for their support in producing this episode.

For a printable PDF of this interview, click here:

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What is economic statecraft?

Daleep, let me start with you. In your post-administration life over the past year, you’ve been working in public using the term “economic statecraft.” What is economic statecraft?

Daleep Singh: It is the use of economic tools, both punitive and positive, to achieve a geopolitical objective. Most people are familiar with the punitive tools: sanctions, tariffs, export controls, investment restrictions. They try to coerce a foreign country or actor to behave differently, because of the prospect of being penalized or excluded from the US financial system — or US technology, if we’re talking about export controls, or trade, if we’re talking about tariffs.

The positive tools are less appreciated, but they’re more potent, because they derive their strength from who we are as a country — our power to inspire, attract, and create. These are tools like investment subsidies, infrastructure financing, price floors, offtake agreements — the tools that you hear about when industrial policy is the conversation. I think we’re out of balance in terms of the frequency and potency of punitive tools, relative to positive. That’s partly why I’ve been pushing for a doctrine of economic statecraft that gives us a chance of more strategic coherence.

You’ve pointed out that there’s been a remarkably quick shift in how the world’s leading powers, especially the US, have gone from using economic pressure relatively sparingly to making it “a default feature of foreign policy.” The number of sanctioned individuals and entities worldwide has increased tenfold since 2000. Whatever the other differences between Biden and Trump, they’ve taken a similar approach to economic statecraft, relative to the approach of the late 20th century.

Say more about that shift and why it’s happened.

Daleep Singh: Starting with the late 20th century — this was the post-Cold War unipolar moment. The notion that many people held was that this was the “end of history,” and we were undergoing a process of ideological convergence. We’ve left that world, and we now are back to the “old normal” of intense geopolitical competition.

Because today’s great powers are mostly nuclear powers, conflict is channeling away from the battlefield and into the arena of economics — including technology and energy — because confrontation in those domains is not existential. I think you’re starting to see all across the world, not just in the US, much more frequent, potent use of economic statecraft, particularly punitive statecraft, to achieve geopolitical goals.

What we’re seeing in Year One of the second Trump term is a maximalist approach to using many of these tools. What we’ve seen in Venezuela is a form of economic statecraft that I’ve never even thought of prior to the last couple of weeks.

• We’ve removed and captured a head of state.

• We’ve declared that we’re running the country.

• We’ve issued an Executive Order that freezes the oil revenue in US accounts.

• It seems as though we’re shielding the assets from creditor claims, and we’re now giving the Secretary of State a debit card to decide how to spend the money.

That is an entirely different category of economic statecraft than we practiced in the previous administration. I can give you 10 other examples.

Venezuela

We’re recording on January 14th. Peter, you’ve spent time thinking over the last two weeks about Venezuela. There will be new developments before we publish, but give me your read on the economic tools that we’re using.

Peter Harrell: Venezuela is an interesting case study in what did and didn’t work on economic statecraft. President Trump and the people around him have wanted to dislodge Maduro going back to Trump’s first term. They had this maximum-pressure sanctions campaign on Maduro. They started trying to reduce Venezuela’s oil exports. They had some success in that, and in putting economic pressure on the government in Caracas, but were unsuccessful at achieving their stated outcome, via economic pressure, of seeing Maduro go.

Last year, Trump tried to negotiate with the regime, then seemed to get back to trying to use sanctions to put more economic pressure on Venezuela. They’d done some more designations of tankers, were threatening more sanctions, but it was not working. In the couple of months before Trump started militarily seizing Venezuelan oil tankers, despite the economic pressure, you saw Venezuelan oil exports rising, almost back to where they’d been a year before.

Similarly, last year you saw Iran exporting the same volume of oil it had exported during the Obama nuclear deal — almost 2 million barrels a day — despite Trump saying, “We’re going to maximum pressure on Iran.” What’s going on is that essentially all of the oil from Venezuela and Iran — about 80% from Venezuela, 90% from Iran — is going to China. China, over the intervening years, had built enough of a fleet — we call it the “ghost fleet” or the “dark fleet” — operating outside of US jurisdiction, that the sanctions on ships were no longer preventing the volumes of oil from going there.

Trump had a choice. He could either get tough with China, using economic pressure — we do have a lot of economic leverage still on China — to get them to buy less Venezuelan oil. Or he could start taking the ships militarily. Looking at the failure of sanctions to stop these flows, and his unwillingness to blow up the trade deal with China — because if he got tough with China over Venezuela and Iran, it would probably blow up his trade deal — he chose, late last year, to go back to this 19th-century version: “We’re going to seize the ships, and disrupt trade that way.” I think he gave that a couple of weeks, thinking that maybe literally embargoing the oil in a military sense would force Maduro to go. Maduro didn’t go, he went in and seized Maduro. Now he seems to be asserting that he’s going to have a client local government down in Caracas.

The economics of this are going to be quite interesting. The idea seems to be that the US will broker Venezuela’s oil exports, the proceeds will go into an account in the United States, and Marco Rubio will get to decide what to spend the money on: presumably American agricultural products, medicine, and oil-field equipment.

I think, in a weird way, there is a precedent for this. After George W. Bush took over Iraq in 2003, they did something similar for a couple of years — more internationally monitored, but a similar mechanism. Obviously going in and seizing a leader is unprecedented in modern history. Let’s put that aside. It’s like what went on in Iraq, except it’s unclear what the exit strategy is. Trump may want to do this long-term, and there seems to be much less pretense about normative goals other than controlling the resources down there. That is strikingly different to anything we’ve seen in the United States since at least prior to World War II.

I want to focus on the plan the administration has laid out for what’s going to happen to the oil. Arnab, you’ve educated me quite a bit over the years about the structure of the oil market. Describe the vision for where that oil’s going to go, and how that will affect American producers and consumers.

Arnab Datta: As Daleep and Peter alluded to, this isn’t a new effort of the administration — this was something they were trying in the previous administration as well. But I start with President Trump’s singular focus, which is to get this oil to the market to bring prices lower. That impulse is understandable. Americans regularly cite cost of living as their number one concern. But prices in the oil market are low now. They’re averaging around $2.81 a gallon, which is as low as it’s been since March 2021.

So is this the place to be bringing prices down? There’s a hidden cost to adding more foreign product to the global market and bringing prices down, and that’s our energy security. Since President Trump came into office, his strategy for more oil has been foreign oil production. His first week in office, he pleaded with Saudi Arabia and the Organization of the Petroleum Exporting Countries (OPEC) to produce more. They’ve been producing more. As you go lower, the price becomes too low for our domestic producers to get to break-even points.

For the shale sector particularly — following the shale revolution, which made us the number one oil producer in the world — you get to a level below $60 a barrel where they start to cut back production. The cost of that to American consumers — whether you’re refilling your tank or you’re an industrial producer — is you’re now at the whim of these foreign governments. OPEC, in a year, could decide to cut production. With our domestic shale sector weakened, they’ll be much less responsive to fill that gap. You’ll see prices go through the roof. Pursuing the lowest price at all costs has energy security implications. That’s where I’d fault this strategy.

An alternative approach would be to capitalize on the fact that we have become the world’s number one oil producer and try to build that resilience here at home. To the extent that we are trying to secure more resilience with oil abroad, maybe we should look to countries like Canada — which we already have an integrated oil market with— as a stable country. As Peter mentioned, there’s no exit strategy for us in Venezuela. In a year, if the government falls, we’re not going to have the same level of access.

Daleep Singh: These oil assets in Venezuela are not “turnkey” assets, they’re distressed assets. The estimates are that at least $100 billion of capital expenditure is going to be needed to rehabilitate productive capacity back to where it was a decade ago.

Put a little color on that for us: why is it that you need more than $100 billion to rehabilitate capacity?

Daleep Singh: During the post-Chavez era, investment in the productive capacity of these oil fields has been extraordinarily low. They’ve fallen into disrepair. What we’re talking about in Venezuela is some of the heaviest oil on earth. It requires upgrading of the physical infrastructure to produce oil we can refine in the US. This is going to take years, and probably over $100 billion of capital expenditure (capex). Even if the US government induces Chevron and Exxon to pay for some of this, they’re not going to do so without some form of insurance. A first-loss guarantee, development finance corporation, political risk insurance — these are all examples of positive economic statecraft, but they incur costs to the US taxpayer.

The costs of an occupation — logistics, troops, aid — are immediate, but revenues are years away. There’s a massive mismatch. Then, as Arnab says, there’s the price of success. If the US does manage to resurrect oil production back to pre-Chavez levels, what does that do to the production incentive of shale producers in the Permian with break-even production between $40-60 a barrel? We’re already about to breach below that threshold.

Will you say more about the delta between current Venezuelan production and what that $100 billion in capex would theoretically get us?

Daleep Singh: The best estimates are that Venezuela is producing about 900,000 barrels per day, some outsized share of which is going to China. Only about 200,000 barrels per day is hitting the global market. The ambition is to return production levels — the peak was 2-3 million barrels per day pre-Chavez. That’s what has a $100 billion-plus price tag.

Arnab Datta: To give you one piece about how degraded the Venezuelan oil infrastructure is, it was reported a couple of years ago that their pipelines leak oil every single day: every day there is a separate leak. The idea that US taxpayers would subsidize that production, rather than any number of efforts we could take to boost the resilience of our domestic sector, is pretty absurd.

Peter Harrell: It’s also been interesting to see the news around some of the energy companies being reluctant to go back into Venezuela. Unsurprisingly, it looks like some of the trading houses that are brokering oil have been involved in some of the trades, and refiners will buy the oil.

But if you’re an energy major that’s going to go in and expend capital to try to bring that production up, you’re looking at a time horizon that is far longer than Donald Trump’s presidential term. They’ll need to understand what the long-term political situation in Venezuela is going to be. The last thing they want to do is start putting money in the ground, Trump is out of office, and the assets get nationalized again.

Daleep Singh: Peter, it seems to me the message coming out of Washington to the oil majors is, “If you want to satisfy your claims as a creditor, you need to fund the occupation and reconstruction now. If you don’t pay up, we’re not going to help you recover your seized property.” In other words, this is an ask of publicly-traded companies to act as the financing arm of the US military. That’s a pretty tough sell for corporate boards that have fiduciary duties to shareholders, not to the State Department.

Peter Harrell: That is very much the messaging we’re seeing out of the administration. They are suggesting that if the companies with claims want to get paid, they had better start putting new capital down there. I have no idea exactly how individual energy majors marked these losses, but probably most of these companies — even though they have very large headline claims against Venezuela — marked them down to pennies on the dollar. If you’d asked them a year ago, they didn’t think they were ever going to be paid on this. They are focused more on, “Do we want to put real dollars in Venezuela?” than on the paper value of these claims.

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China and tariffs

Daleep, you were talking about the administration’s calculus being this long-running attempt to squeeze Chinese access to oil. You can, in some sense, read the Venezuela operation and the pressure on Iran as ways to try and constrain Chinese options.

How do you think the administration is thinking about this?

Daleep Singh: It’s a little dangerous to describe the actions in Venezuela as purely about resource denial to China — the migration flow and supposed drug flows were a big part of what this administration defined as our strategic objectives. But you can draw a through-line between what the administration’s talking about with the oil in Venezuela — and controlling 30% of the world’s proven oil reserves as a consequence, if we’re “running” the country — and what the administration is talking about, for example, in Greenland, which is the only plausible stand-alone alternative in terms of rare earths and critical minerals that could challenge China’s scale.

If you put those two together, you begin to see more of the contours of this Trump corollary to the Monroe Doctrine: in our hemisphere, we are going to control all of the resources needed to secure our national security and economic growth potential. That may be overstretching the rationale, but when you listen to administration officials, including the president, that’s the impression I get.

Arnab Datta: China has, over the past half-decade, been making attempts to insulate itself from this type of oil market disruption. They have built capacity for up to 2 billion barrels of crude oil in their reserves. They’ve been building up the stored product in that reserve over the past five years, to 1.4-1.5 billion barrels of oil. Recent estimates have claimed 500,000-1 million barrels per day would be added over the next year or two to those reserves. They are stockpiling. This is a globalized market, so it’s not like you cut them off from Venezuela and they’re not going to be able to access crude any more. They’ve built a sizable buffer stock to weather disruptions, and then they can respond in their own way to secure it with other countries. It’s important to view it in that context — China has been building domestic resilience to this type of effort.

[Arnab and Skanda Amarnath came on a year and a half ago to discuss the American Strategic Petroleum Reserve, a set of massive caves, mostly along the Gulf Coast, where the US stores its own oil reserves.]

Peter Harrell: In the short term, China is one of the world’s largest net energy importers, and as a large manufacturing power, is a massive beneficiary of global low energy prices. I hear this meme, “Maybe long-term, this is about building leverage over China.” I not only think there isn’t a ton of leverage to be gained over the long term, but, in the short run, it’s quite good for China to see more production.

Daleep Singh: One caveat is that China is a massive creditor to Venezuela. To the extent that the executive order wipes out China’s ability to collect oil in exchange for debt service, that is a de facto default. It does give negotiating leverage to the administration.

With China this year, we’ve had tariffs, export controls on high-end technology (which we discussed with Dean Ball), and this back and forth on rare earths. How is this administration picking which tools to use on China?

Peter Harrell: What they’re doing on the economic front is derivative of their overall approach to China. Many of us who watched Trump during his first term thought he would come in quite hawkish on trade policy, with tariffs, on export control, and with other tools, like restrictions on the use of Chinese technology here in the United States. In some sense, that is what he did. China, along with Canada and Mexico, was the first country that he increased tariffs on early last year. Then there was a very brief trade war where we went up to 145% tariffs on many imports, back in April.

But one of the big macro stories of the second half of last year was that Trump decided he wanted a détente with China, something that more resembles a managed trading relationship than a high-pressure campaign.

We’ve seen Trump back off on tariffs. They are still higher than they are on most other countries — although the differential on tariffs between China and countries like Vietnam has gotten small enough that it’s not clear how disadvantageous it is to China anymore. Then just yesterday, on January 13th, they put in the rule finally authorizing Nvidia to sell high-end AI chips to China. We see an administration that has tools that it did deploy earlier this year. But the story more recently has been a much more moderated approach, and a desire to see some, at least temporary, détente with China.

Daleep Singh: I was smiling when you asked the question, Santi, because I don’t have a clear idea of the strategy vis-à-vis China. I could give you a flippant answer and say, “We’re talking about one man’s reaction function,” to use a central banking term. “I want to get on Mount Rushmore, I want to win the Nobel Prize, and I want a dynasty.” The symbolism of a Nixon-to-China — a Trump-goes-to-China moment, might give him objective number two.

China’s had a very good trade war. Growth has held up close to 5%. That exceeds all of the expectations at the start of last year. Net exports are about a third [of that growth]. That’s a share we haven’t seen since the China shock of the 2000s. China is literally exporting their way out of a real estate morass. The way they’re doing that is reorienting exports away from the US — to countries that are transshipping them to the US, the Association of Southeast Asian Nations (ASEAN), Europe, or the Global South.

In the process, China continues to gain global market share in the sectors that they deem most strategic. If you look at ships, cars, drones, machinery, pharmaceuticals, chemicals, lagging-edge chips, or minerals processing, China’s gaining market share, from a baseline of one third of global manufacturing production — more than the US, Japan and Germany combined. To me, that’s a pretty good year for China, in the midst of the largest tariff increase since 1934.

According to The Wall Street Journal, the Chinese goal has been to apply “maximum pressure,” in order to get as close to a full rollback of tariffs and export controls as possible. Doesn’t the fact that they would like to be free from these tariffs say something good about the policy? Should the Biden admin have been more aggressive in its own tariffs? Should I think, “They don’t like it, that means it’s better”?

Daleep Singh: I don’t think it’s especially controversial that the tariffs and export controls hurt China, particularly at a moment when its domestic economy is struggling. The structural weaknesses from the demographic trajectory, de-leveraging going back to the property boom after 2008, and the de-risking that’s taking place — those are all drags on growth. [Statecraft took a deep dive into the Chinese economy with Dan Wang.] External frictions, particularly export controls — the crown technological jewels of the US no longer flowing to China in the way that they used to — harm China’s ability to grow, raise its productivity trend, and escape this demographic trap.

But I wouldn’t go so far as to say that it means it’s all working — because they believe they still have a strong hand, as evidenced by the fact that they were able to get at least some partial licensing of H200 chips in exchange for not very much in return — some soybean purchases, the resumption of rare earth supply, and a trip to Beijing for the president in Q1.

I take your point on the soybeans, but isn’t the resumption of rare earth exports a pretty big deal for us at this point in time?

Daleep Singh: Definitely. But we’re trading chips for rare earths. We’re playing tit-for-tat. The question is, who has escalation dominance? Beijing’s self-perception is that they have greater tolerance for pain, and perhaps that they have more policy space to cushion the downside risks. I don’t think they flinched very much in the past year, and I don’t think the fact that they don’t want tariffs and export controls contradicts that.

I’ve talked to people who would argue the tariffs have done deflationary damage to the Chinese economy. Earlier this year, Goldman Sachs estimated that 16 million jobs in China are at risk due to the tariff increases. We’re China’s number one trading partner. Even if there’s a diversification for transshipping, they still pay some cost here.

What’s your perspective on the medium-term impact of these tariffs on the Chinese economy?

Daleep Singh: The Chinese State Council is much more focused on market share in strategic sectors than they are on monthly Consumer Price Index numbers. Look at China’s trade surplus. Never before in economic history have we seen a manufactured goods trade surplus of $1.2 trillion, which is what China registered last year. If you look at specific sectors, China continues to grow its share [of global manufacturing] in:

• Solar panels, it’s 80%,

• Electric Vehicle (EV) batteries, about 70%,

• EVs, about 70%,

• Electrolyzers, 50%,

• Shipbuilding, 60%; and

• Drones, over 70%.

I don’t know what people are referencing when they say that the more hawkish levels of tariffs have caused lasting harm to China’s own strategic objectives. It may have dented China’s export growth temporarily. But China is still successfully transshipping quite a few of its exports to the US through Vietnam, Malaysia, and many ASEAN countries. It’s dumping its excess supply to Europe and the Global South. The year-over-year growth in Chinese exports to Africa and the Global South is nearing 30%; to Europe, it’s up double digits.

I don’t see any evidence of a domestic manufacturing renaissance in the US such that we can substitute domestic production for foreign imports. I don’t see much evidence that exporters to the US, outside of Japanese automakers, have absorbed the cost of tariffs into their profit margins. I don’t even see any evidence that US importers in tradable goods categories are absorbing the higher tariffs into their own margins. In most cases — think about an industry like apparel or food — margins are very thin. These are highly competitive categories. They can’t afford to absorb higher tariffs into margins, therefore they’re passing it on to consumers. We see that in both the inflation and the growth data.

Arnab Datta: [On the administration’s choice of tools,] the Trump administration certainly believes that they’ve got a toolkit and they’re going to use it in an aggressive way. When you look at some of the deals, for example, the MP Materials deal that they cut back in August, that Peter and I did a deep-dive into, there are different tools as part of that transaction. It’s a multi-billion-dollar deal that includes:

• A loan,

• An equity investment,

• A price floor for mined neodymium and praseodymium,

• A guaranteed offtake agreement for finished rare earth magnets; and

• A guaranteed EBITDA.

The authorities that they’re relying on for that — the Defense Production Act (DPA) — has never been used in this way, to take an equity stake in a company, for example.

But to pick up on Daleep’s point, what is the purpose of this in the context of critical minerals markets? They’re making big bets in individual companies, but these companies are still operating in a Chinese-dominated market. There doesn’t seem to be as much of a policy effort to reorient that market away from China towards something that is more functioning, free, and competitive.

Where’s the allied partnership? It’s very difficult to go to China’s level of scale. But if you take the critical minerals market, you have:

• Everything that we’re trying to do,

• The European Union, which is pushing for $300 billion in public-private mobilization to counter the Belt and Road Initiative,

• Canada committing $2-4 billion,

• Korea and Japan.

There’s hundreds of billions of dollars in commitments to counter China. The US should be serving a coordinating function to build this market infrastructure. But you’re not seeing that. What is the purpose? Outside of cutting a deal here and there, it’s not totally clear to me.

You hear people in the administration sometimes allude to “technological advantage.” They managed to convince the president not to export the Blackwell chip, but they gave this license for the Hoppers. Our colleagues at IFP have written great reports: this could eliminate our compute advantage — the one advantage we have in the AI race. What is driving these two decisions, which are very different?

It looks like the number of Hoppers we’re going to be sending is not nearly enough to substantially erode the compute advantage that we have. That’s probably a win, compared to sending the high-level Blackwells in mass quantities, which was discussed ahead of Trump’s meeting with Xi in Korea.

Daleep Singh: On export control policy, we’re shifting from a strategy of — you can call it “containment” — small yard, high fence around technologies that are foundational for our national security.

That was the Biden administration’s language.

Daleep Singh: That was the term that we used in the Biden years. That’s now evolving to a strategy of monetization. If you want a metaphor, it’s something like a tolled drawbridge. That’s a seismic error. The logic of the H200 deal may sound clever: let’s tax China’s AI growth to fund American R&D, extracting rent from our key strategic rival, while locking them into the Nvidia ecosystem.

But when you look at the political mandate and the engineering realities in China, that logic collapses. First, because lock-in is a myth. Beijing issued a document, Document 79, back in 2022, that legally mandated state-owned enterprises to purge US silicon by 2027. We were debating in the Biden years, “Where should we land on the continuum between de-risking and decoupling?” Beijing was already setting the date for a divorce as it relates to US chips. China doesn’t want H200s to get in bed with Nvidia. They want to bridge the gap until Huawei‘s comparable version comes online. Let’s say that’s late 2027. We’re not capturing a customer. We’re bridging a competitor.

Let me ask about inflation data. So far the tariffs have not been as inflationary as was widely expected in the weeks post-Liberation Day, when every economist I talked to flagged inflation as the core concern.

Peter Harrell: I’m a lawyer — I would defer to Daleep on the economic numbers. But part of the story is that Trump, starting over the summer, began to back off some of his initially maximalist tariffs. We had 145% tariffs in China for a couple of weeks, and then those came back down and steadily ratcheted lower. They’re maybe 45%.

There’ve also been lots of quiet exclusions of products. Trump has talked about tariffs on semiconductors and cell phones. But if you look at what he has done, semiconductors, cell phones, laptops, and consumer electronics are, by and large, fully exempt from the tariffs. Some of the recent data suggests that only about half of the products the US imports have been subject to any new tariffs under Trump’s second term.

There’s a lot of headline noise. It is still the largest increase in tariffs probably since the ‘30s — I don’t want to minimize the impact. But it is not nearly as dramatic as it was looking like it could shape up to be at the beginning of the year, in terms of the value of the product subject to the tariffs. When I look at some of the Goldman estimates, we are seeing some pretty quick tariff pass-through on low-margin products, highly susceptible to the tariffs — furniture and apparel.

Sectors where the margins are tiny, and there’s no slack to eat.

Peter Harrell: The margins are tiny and the tariffs are quite high. Trump has 25% tariffs on upholstered furniture, vanities, and cabinets. You are seeing the pass-through there. But in some other industries, you are seeing companies dragging out the pass-through over time. They didn’t want to get in trouble with the White House by suddenly hiking prices. In some of the higher-margin products, they are willing to eat into margins for maybe a couple of months. But we’re going to see the price increase on those products. 60%-70% will get passed through — but over the course of a year from last summer, rather than two months.

Daleep Singh: Back in January 2025, the effective US tariff rate — taking into account the fact that consumers will substitute lower- or non-tariff goods for higher-tariff goods — was about 2.5%. That had been pretty steady for many years. Just after April 2nd, that rate spiked to 28%. That was the shock-and-awe phase. Then as Peter mentioned, as of late 2025, that effective rate declined towards 18% or so. That was the highest effective tariff rate since 1934, just after Smoot-Hawley was passed.

My conclusion, looking at the economic data over the past year, is this has not been a free lunch:

• The vast majority of exporters to the US have not absorbed these tariffs into their profit margins.

• We have not seen a domestic manufacturing renaissance in the US that substitutes for foreign imports — manufacturing output has been flat, or has contracted, for 10 consecutive months. We’ve lost about 72,000 jobs in the manufacturing sector.

• If the dollar had strengthened, that could have offset the impact of higher tariffs by making it cheaper to buy foreign goods. In the first half of last year, the dollar depreciated by about 10%, which is, on an inflation-adjusted basis, one of the largest declines in the past 50 years.

US importers by and large absorbed the tariff increase. Because these are price-competitive categories, about 80% of those costs — about $300 billion in tariff revenues — have been passed on to consumers. It hit the bottom 20% harder than the rest of the country, because they spend a larger-than-average share of their consumption on tradable goods, food in particular, but also many other imported items. That translates into a 6-8% decline in their inflation-adjusted after-tax income, or about four times more than what you see for the top 10% — they tend to spend more on services which have not been tariffed. For a struggling family living paycheck to paycheck, that has been part of this cost-of-living crisis.

On inflation, I do think we’ve seen a less acute effect, as Peter suggested, but it’s going to be more protracted. Businesses are smart. They saw the April 2nd announcements coming and accumulated inventories to a historic degree — two to three [quarters’ stock] above the pre-pandemic trend. I don’t think we’ve fully exhausted those inventories. In the first half of this year, and afterwards, we will start to see higher levels of pass-through that will impact our inflation numbers and the cost of living. It’s going to have a long tail.

I always appreciate a concrete prediction on this podcast.

Arnab Datta: From a broader investment perspective, our domestic industries are struggling. Every quarter, the Dallas Fed does a survey of oil executives, and they produce rich insights. There’s been consistent consternation about the tariffs over the last three to four quarters. In a recent survey, about half of executives said that at least a quarter of their oil field equipment was sourced from China. The necessity to find domestic suppliers was running into quality-assurance issues. This was affecting their ability to get projects delivered on time. We haven’t experienced the full impacts these tariffs will have.

As Peter mentioned, the tariffs have changed — there’s these exclusions. The general environment is of uncertainty. That is something that’s very difficult for businesses to react to. As these sustain, you’ll start to see more behaviour change as well.

Daleep Singh: To be fair, I can imagine people reading saying, “Didn’t the Biden folks also support tariffs?”

That was my next question.

Daleep Singh: I’m mind-melding with you. Tariffs are a tool that belongs in the toolkit. They are one of the three prongs of a domestic revitalization strategy:

• The first and most important one is investment. Make public investments where we want to strengthen and scale up productive capacity in strategic sectors to crowd in the private sector.

• Step two: we’re not going to build all the productive capacity we need at home, so let’s work with our allies who are playing by the same rules, invest in each other’s productive capacity, and lower barriers in those strategic sectors.

• Three, where necessary to level the playing field, you use targeted tariffs so that our investments pay off. So it was not a tariff-centric strategy in the Biden years — it was an investment-centric strategy.

It’s all a question of balance. I applaud the MP Materials deal. But I don’t want us to create national champions. I would like there to be a portfolio of MP Materials investments. That would have the makings of a more sustainable competitive environment where we can win.

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Trade deals

You guys are obviously keen observers. Has the last year changed your views on the use of tariffs as a tool? Have you learned anything that you would want to leverage if you were in the White House again?

Daleep Singh: I have been surprised by how much leverage a maximalist tariff policy gave us in the short term. When I look at which tools in our toolkit for economic statecraft are most potent, I would not have said tariffs. If you look at the US as a share of global imports, we’re about 15%. But China’s share of global imports is about 10%. The EU share — even if you exclude trade within the EU — is about 14%. That’s not my definition of asymmetric strength. We have a marginal advantage in terms of the US consumer’s power, relative to that of other trading nations. It’s less potent as a tool of statecraft than our dominance in finance and tech.

The fact that we’ve been able to use tariffs against our main trading partners, and we’ve not seen any retaliation, I find surprising. Part of this has to do with the fact that the US has been growing faster than the rest of the world — at least most of the advanced economies. Leaders in the EU accepted an asymmetric deal — we put 15% tariffs on them, and they have no retaliation against us — because their growth remains relatively weaker, and they have a relatively higher dependence on external demand from the US. They had a weak hand. But while we do appear to have significant leverage in the short term, we’re seeing the rest of the world hedging to reduce its vulnerabilities to the US over the longer term. That’s my takeaway from what the EU is doing with Mercosur. There are new trading blocks emerging in the Asian supply chain. That’s going to continue.

Peter Harrell: I was quite struck by how readily most of our major trading partners just caved to Trumpian trade demands made by tariffs. The countries that resisted US pressure are all Global South, emerging markets countries.

• The European Union — despite a bunch of noise — caved pretty quickly.

• Japan, and South Korea, despite a little bit of noise, caved.

• Southeast Asia made a very rational calculus. A 20% tariff on something we import from Thailand — there’s not going to be any US onshoring. A lot of these countries concluded, “Fine. The Americans will just pay this tariff for the stuff we’re exporting. It doesn’t affect us much, as long as our tariff rate is the same as our competitor countries’ tariff rate.”

• The countries that stood up to Trump have been China, which retaliated hard, Brazil, and India — which have eaten exceptionally high tariff rates and refused, so far to cave, though there is talk about deals.

I would not have necessarily expected that it would be the large emerging market countries that would’ve stood up to this, rather than the close allied countries. Maybe our allies feel dependent on the US for security in the short term, and felt they had to cave.

I have been surprised at how effective China has been, in a short period of time, at finding other export markets. It is striking that China’s overall exports are up substantially last year. As Daleep walked through earlier, major increases — double digits to Europe and 25-30% to a bunch of other countries. I would not have thought that the rest of the world would’ve absorbed that industrial output from China to the extent that they have.

It has been interesting to me to see how little onshoring tariffs at this level have caused. Manufacturing employment is down. Best-case scenario, manufacturing is flat. There’s a lot of talk about US manufacturing — we’re not seeing it in the numbers.

What do you ascribe that to? Is it business uncertainty about the current tariff model?

Peter Harrell: Part of it is the uncertainty. No one wants to invest when they don’t know where tariffs are headed. Part of it is the indiscriminate nature of the tariffs, which have hit a number of industrial inputs pretty hard. Steel in particular, and aluminium to a significant degree, are needed to build manufacturing capacity and are in lots of manufactured goods. We now have by far the world’s highest steel and aluminium prices. That doesn’t, on a cost-competitive basis, help US manufacturing.

One thing we have seen Trump back off on; the Biden administration’s big bet on industrial policy was, we were going to put a ton of federal government money, through grants and tax credits, into clean energy manufacturing. That was beginning to work. Trump has pulled a ton of that back. What we’re seeing is, if you want manufacturing, it can’t just be tariffs. You probably need to lead with the investment, which we are simply seeing fewer dollars of this year, though we are seeing some of those dollars deployed in interesting ways.

I do want to talk about some of the specific country deals. There’s a US-Japan tariff deal, where we established a 15% baseline tariff on most Japanese imports, and they committed to big investments in US strategic sectors. There’s a Korea deal potentially upcoming.

Last summer, when I talked to people around the US Trade Representative Office, the model of what was going to happen seemed to be, “We don’t need to land deals with everybody. We need deals with a couple of the big trading partners — Japan, Korea, one of the big Europeans, India, or China. All these other deals don’t matter. Everyone else will fall in line once they see the model. What matters is landing these deals with Japan and Korea early.”

How would you evaluate that strategy? And what’s the reality on the ground now with these big country-to-country tariff deals?

Peter Harrell: We now have a number of deals out there. There are only two countries where we have what I would consider a fully-developed deal text — Malaysia and Cambodia. With the big trading partners — the EU, Japan, Korea, a couple of others — we have what I might call MOUs (Memoranda of Understanding). We have high-level parameters. Importantly, the MOUs have adjusted and frozen the US tariff rate. They have begun to provide some degree of certainty. In many cases, they did bring the tariff rates down from where they were prior to the deal.

A very large share of our trade does come from our top 10-12 trading partners. If you get deals with those countries, you have covered most of our trade. The other important thing is that, although we don’t have new deals with Canada and Mexico, our two largest trading partners, Trump has exempted 80% or so of our imports from both from his new tariffs, because he said the stuff complies with his United States-Mexico-Canada Agreement deal. It’s not tariffed while he negotiates. That’s also provided a lot of certainty.

So they’re not wrong that you cover most of our trade by nailing down a couple of the big deals. But they are finding it hard to finalize the deals with the big countries. This is going to be the big story of the next couple of months — there’s going to be a lot of friction in America’s trading relationships as they try to finalize the deals.

Which deals are next on the conveyor belt?

Peter Harrell: The EU deal, in which we have an MOU they’re trying to negotiate, but seems very tense now. We’re going to hear a lot of friction about that. I think that Japan and probably the Korea deal will hold. But we’re going to see a lot of friction over the next couple of months with the EU, Mexico, and Canada, which are three of our top six trading partners. The reason is that the preliminary deals, or Trump’s exemption for many Canadian and Mexican products, in some sense gave the other country what they wanted, which was certainty and a lower rate.

But the other parts of these deals beyond the US tariffs are a bunch of things that Trump thinks he got these governments to agree to, or with Canada and Mexico, he wants them to agree to. He thinks he got, as part of the deal last summer, Europe to stop regulating big American tech companies. It turns out that Europe doesn’t want to stop, and does not think it agreed to it. That’s a source of tension that we’re going to see escalate over the next couple of months.

Daleep Singh: There’s a huge opportunity to use this money that’s been committed by Japan and Korea as part of the truce with the US administration on trade, not just for the US, but as a pool of allied capital to compete with the Belt and Road Initiative across the Global South, and in geopolitical swing states that have productive capacity in strategic sectors. Think about nickel extraction and processing in Indonesia, or Active Pharmaceutical Ingredients in India. If you keep it all domestic, it’s going to be perceived as tribute. But if you deploy it globally, that’s a strategic counterweight that more countries could get behind and maybe sustain beyond this administration. There’s upside there.

Arnab Datta: I’m a bit more pessimistic. I’m originally from Calgary, in Canada. We’ve been trying to build export capacity to East Asia for many years. It is the first time I’ve seen this, both amongst the local population and political leaders, described explicitly in terms of “decoupling” from the US. Prime Minister Carney is leaving for China momentarily. On his agenda potentially is testing the waters for increasing imports of Canadian oil and gas to China. [Shortly after this conversation, the countries agreed to explore cooperative oil and gas development and to lift tariffs on Chinese electric vehicles and Canadian canola oil. Carney described the progress and partnership as setting both countries up for the “new world order.”]

Our allies need certainty as well. That’s one of the challenges with this approach. Even if you can get some of these deals with Korea and Japan where they commit to putting up capital, I worry about long-term credibility.

Industrial policy

I want to turn to interesting moves the administration has made in domestic industrial policy. My read is that you guys may have more interest in equity stakes, or some of the other domestic tools being used by the administration, than in the tariff approach?

Daleep Singh: I absolutely agree. We’re back in a period of intense geopolitical competition. If that competition is primarily playing out in the arena of economics, does the private sector by itself have the incentives to invest at pace and scale to compete? I think the answer is no, therefore I am very much a proponent of the US government taking more risk to achieve strategic objectives. Not just loans, but also equity, offtake agreements, price floors, there are a whole suite of tools sitting on the shelf in various agencies. If they’re put to more creative use, it can make a very big difference. My biggest quibble is that none of this should be improvisational. We should have a playbook, and take it as seriously as a doctrine of economic statecraft for punitive tools. We need that same type of rigour for industrial policy.

Let’s take one of these recent deals, the MP Materials deal, which I’m guessing 25% of Statecraft readers are going to be super familiar with and the remainder are going to be, “What are they talking about?” Can I have you guys lay out what MP Materials is, what the deal is, and why has it been so buzzy, at least for the four of us?

Arnab Datta: MP Materials is a company that owns a mine called the Mountain Pass Mine out in California. It’s been in operation since the 1950s — they have made up a lot of our rare earths over that period. It’s also a mine that tells the story of the Chinese era of dominance, both in access to the materials, but particularly in processing — they process over 90% of the world’s rare earths.

In the ‘70s, China set up a Rare Earths Office. They started to accelerate in the ‘90s. They put more effort into dominating the market infrastructure — the means by which a lot of this is priced.

In the late ‘90s, [mining was suspended due to weak prices for rare earths]. Over the course of the next decades, it’s gone through these cycles of someone taking ownership of the asset, putting some investment in, then — when China decides to put more product into the market to bring down the price — bankruptcy. In 2017, MP Materials took over. It had been shipping almost all of its product to China. As the trade war heated up, China instituted a number of export restrictions and [MP Materials] had no customers for their product.

In the midst of that, the Defense Department undertook this extraordinary intervention: they’re providing loan capital and taking a 15% equity stake in the company. They’re putting in a price floor for Neodymium and Praseodymium (NdPr), which is one of the things out of that mine that goes into finished rare earth magnets. They’re also putting in a bunch of capital, in the form of a guaranteed offtake agreement for a new facility for MP that would produce finished rare earth magnets. They’re putting a multi-billion-dollar investment into MP to create a vertically integrated — from the mine all the way to the finished rare earth magnets — national champion. It’s a very big deal. It deploys all of the tools.

Peter Harrell: The US government has, over the last seven months, taken equity or equity-like stakes in more than 15 companies. By equity-like, they have options or warrants that will give them a share if certain metrics are made.

MP Materials, Intel, what are the other ones?

Peter Harrell: You have Intel, where they have a 9.9% stake. The Trump administration has put equity into a number of other mining and minerals companies. One company is called Lithium Americas, but there are maybe eight or nine now.

They’re also doing them in ways people aren’t as closely focused on. Last fall, the administration announced a new, up-to-$80-billion nuclear deal involving Westinghouse Electric and a property manager out of Canada named Brookfield. If you read the Securities and Exchange Commission filings, if certain performance and valuation metrics are met, the government will be entitled to a 20% equity stake in the project. They’re also embedding contingent equity stakes in other deals where equity isn’t granted on day one.

The MP deal is the one where you see the government thinking through how a number of tools can be used together to achieve a desired outcome. It’s not just the Defense Department taking a 15% stake. They have lending for MP to scale up its facilities, and offtake and price floor agreements, to make sure there’s demand for the products.

So far, that has not been the case with most of these other deals. The Intel deal was the government telling Intel, “You had these grants to build fabs. Instead, we’re going to give you a grant to take a stake in your company.” But they haven’t shown any other tools to help Intel build better chips in the United States. Similarly, in some of these other minerals deals, all the government seems to have done is put in capital. Capital needs to be a part, but they haven’t brought to bear the tools that you’ll need to see more lithium refining in the US, for example.

There’s a big philosophical debate about whether the government should be doing equity investments in general. The arguments against are pretty well known. The argument for is that it’s patient capital for technologically-risky, long-term investments. You may get a return for taxpayers; you get ownership in the event that there’s a bailout.

Arnab, talk to me about what might be wrong with taking this company-based approach to these one-off deals. You are generally open to the use of the tool. What’s the risk?

Arnab Datta: It’s important that we’ve ripped off the Band-Aid here and shown, “The world doesn’t fall apart when the government takes an equity stake.” It is worth mentioning one risk that gets less attention. If the government has an incentive in the value of an equity stake going up, does it create cross-policy pressure to maintain the value of that stake? Let’s say a competitor arises — America’s great at technological innovation. If an innovation would wipe out the value of that equity stake, does it mean we’re not going to support it?

The approach I would like to take would be oriented towards building a robust market excluding China. You need to repair one mechanism by which China dominates the critical minerals market: the market infrastructure — the benchmark contracts, the exchanges — which determine how these minerals are priced. If you don’t address that, you’re not creating an opportunity for US competitors to compete with each other, succeed, and get better. When you’re just making a single equity investment in a company, you’re not addressing that other part of the problem.

The market infrastructure you’re talking about that the US should be interested in — what does that mean, for something like rare earths or critical minerals?

Arnab Datta: We should start with, “What are markets and what problems do they solve?” Modern commodity markets, many of which were pioneered by the US and the West, solve problems of coordination and risk intermediation. Metals and commodities can spoil; they’re difficult to transport. If you are trying to get your product refined and transported to General Motors somewhere across the country, a ton of challenges arise. Markets solve a lot of them. They make it easier to coordinate, and to transfer risk to different entities within that chain. Ultimately, the value of that is more investment.

If you look at critical minerals, that market hasn’t developed in the same way. China dominates it, both in production and processing, but many of the means by which those metals are priced are indexed to the Chinese market — Chinese supply and demand. That’s what creates the price pressure on US and Western producers. They can’t get investment because the price is so low in the Chinese market that they can’t compete.

Building market infrastructure, where you took demand from the US and our allies — there’s hundreds of billions of dollars being deployed to decouple from China’s dominance here. If you organize that in a market — where you have transparent mechanisms for prices, and more opportunities for intermediaries to enter and reduce some of that risk in transportation and spoilage, it would make our effort more robust. That’s where I’d like to see more interventions.

The Trump administration does get this. If you look at the deals the President signed with Japan and Australia, the third clause mentions that they want to support the development of liquid competitive markets. That’s a real opportunity. I want to see the execution. I might kick it to Daleep, because we’ve written about this.

Daleep Singh: You laid it out perfectly. What we want is a place where buyers and sellers can predictably meet each other and exchange their goods, or hedge their risks, in a way that’s transparent, fair, and dependable. That’s market infrastructure, and it’s lacking in critical minerals markets and rare earths, in large part because China can dominate supply and push down the price so much so that producers outside of China are no longer solvent.

In your model of good economic statecraft, how do you think about when to use equity stakes, and when to try to build market infrastructure? If we’re trying to build a better market, should we then be picking a national champion?

Daleep Singh: There is a class of investments in projects or companies that require a lot of upfront capital investment, a very long time to generate a commercially attractive return — let’s say 10 years-plus — and that have a lot of risk that investors feel uncomfortable modelling. It could be geopolitical or regulatory — some type of risk that the government knows more about than they do. A lot of these are deep tech or physical hardware investments. The venture capital community tends not to fund these projects at pace and scale. But these companies require equity because they don’t yet have cash flows to service debt. That is the sweet spot of where equity stakes make sense.

You have to start with the why. This gets to my proposed playbook for industrial policy. The sector has to pass what I would say is a two-part test:

1. Is it critical? Does it power the military? Does it secure public health? Does it sustain a technological edge?

2. Is there a dangerous dependency? Is the production concentrated in a geopolitical rival, or is it reliant upon a single company at home?

Then you get to the question you just asked: “Why hasn’t the private sector solved this problem?” Usually it’s because there’s some type of market failure. It could be a capital constraint, a demand shortfall, an energy shortage, or the absence of a market where buyers can meet sellers and exchange their goods at a transparent price.

You design the appropriate intervention around the failure you’re trying to correct. There’s a vast toolkit. You have tax credits, loans, demand guarantees, deregulation, skilled labor, and equity. In certain areas of the economy, particularly deep tech, physical hardware, and supply chains that are strategic, equity’s appropriate. But if you invest in equity, you have to also insist on a competitive market and you’ve got to protect the taxpayer. If the public sector is absorbing the risk of a private company, the public should be rewarded with upside if it succeeds.

But you also need strict conditionality to protect the taxpayer’s downside. You should tie the equity injections to milestones that are agreed upfront — construction targets, production yields — and you should have sunsets, because you want the government intervention to be a temporary bridge to self-sufficiency, not a permanent lifeline.

Peter Harrell: One tool we are not talking enough about in the industrial policy debate is concessional lending capital. If you look at countries that have done effective industrial policy — at the post-World War II reindustrialization in Japan and industrialization in Korea — you saw an aggressive use of concessional capital to help companies scale up their manufacturing capacity.

Even in the US, if you look at some of the very first uses of the Defense Production Act, Title III — which is an authority to expand industrial-based production in the US in the early 1950s — the government made 0% loans to aluminium and titanium projects to try to make the numbers pencil. Just as the US has not done equity in recent decades, until last year, we largely got out of the business of concessional lending. Even where you saw, for example, loans in the CHIPS Act implementation [which we discussed on Statecraft recently], they tended not to be particularly concessional.

Not so much for breakthrough technologies, but for critical-base manufacturing capability — whether it’s in the mineral space or the shipbuilding industrial base — we’re going to have to use concessional lending as one of the tools, alongside equity, which serves a different purpose in the corporate lifecycle.

Daleep Singh: You could have hybrid capital where you initially lend, and that can be converted to equity if certain targets are hit — that’s the kind of creative tool we could potentially design in future administrations.

Lessons learned

So far, we’ve been more diagnostic than prescriptive, but I want to open it up. All three of you are influential figures on the Democratic side of the DC aisle. What would you like the next Democrat president to do, based on what you’ve seen of economic statecraft from the Biden admin, and in this first year of the Trump admin?

What will you be championing the next time it comes around?

Arnab Datta: Two lessons I would take from where things have evolved over the last four to five years: one, It’s important for these industrial policy tools to be grounded in an institutional structure that gives the private market confidence and credibility that it’ll be sustained over time. In different domains — energy, and beyond industrial policy, it includes permitting — it’s important that the private sector feels confidence that policy and the use of these tools can sustain over time, and that the discretion that is utilized is something that can withstand changes in administrations.

It’s been harmful for the business community that many subsidies, discretionary grants, and permits have been pulled back over the past year. I also criticized, at the time, the Biden administration for the LNG pause. I would like to see more of these tools grounded in an institutional structure that has some genuine independence — that decisions are being made in a technocratic way —

I can’t believe you said the T word.

Arnab Datta: In a rigorous way that gives the market confidence. The Fed is a unique institution because of how important the bond market is. James Carville said that if he ever died, he’d love to come back as the bond market, because you can intimidate everybody. But that type of a model where, whatever the institutional structure, it’s communicating consistently what its policy goals are and why decisions are being made, so people in the business community can feel that they are being heard and that they have a chance at competition, is important.

My second lesson: It does strike me that the MP Materials deal, which was this robust use of the DPA Title III, it was lauded in a bipartisan fashion. They pushed the boundary of the authority — but you’ve heard three people here talk positively about it. At the time, there was a Heatmap article that said Biden officials are jealous of the deal. That kind of stuff can withstand over a longer period of time if you have that type of buy-in. These interventions should have some level of across-the-spectrum support when they’re being deployed.

One takeaway for me is how much continuity there seems to be between administrations. There are places — like the LNG pause under Biden and many of these different energy pauses under Trump — where there’s not continuity. But there’s also this thematic continuity, from Trump I to Biden, of this new awareness of China as the geopolitical threat. Then, from Biden into Trump II, you’re seeing this awareness that this set of industrial policy tools exists and can be combined in interesting ways.

There are ways in which you see each administration in the shadow of the lessons that have been learned by the previous one.

Peter Harrell: I think of it in two ways. There is a bipartisan consensus now that China is our leading geopolitical challenger — though it’s not a 100% consensus — and that in order to compete effectively, we need to have a fully developed economic statecraft toolkit.

I also think there’s a consensus that is related to, but distinct from, the views of China — that the US should have more manufacturing base in its economy. We got a little too services- and tech-oriented, and financialized. I don’t know if that is the right call from an economic perspective, but it’s certainly a legitimate call that a democratic society can make. If that is the call our country is going to make, just as we need a fully developed economic statecraft toolkit to compete with China, we need an economic statecraft toolkit to have a better manufacturing base here in the United States.

One lesson I would draw from the last year, that I would encourage a future president of whatever party to take — you’ve got to integrate these tools. The lesson of the tariff-heavy approach last year, on most aspects of the economy is, you’re not, by using one of these tools, getting the industrial policy outcome you want.

Second lesson, and I say this having served a Biden administration that was legally risk-averse — you probably should be more prepared to take some legal risks in order to do creative things. The Biden administration tied its hands on some of these issues with an excessively cautious approach to interpretation of authorities — they should be more aggressive.

The third thing, that is not really a lesson for the executive branch, is there is value to being legally creative. Over the long term, if we want to maintain bipartisan support for this toolkit, if we want to have the toolkit be as effective as it can be, and to get ahead of the inevitable governance problems that we’re going to have with all of this, we need Congress to get more active in this space. It’s good for the executive to be creative and go out and lead, but ultimately we are going to want to see some congressional oversight. We’re going to want to see some of this put on a regular footing that will deal with some of the governance issues and force a more strategic approach.

Daleep, you’ve thought about how you would operationalize more robust — I hate using the word “technocratic” — but a system for deciding when to use some of these tools.

Daleep Singh: It doesn’t have to be the next Democratic administration. Most of these ideas have bipartisan appeal for anybody interested in economic security. But for me, the three big ones are, number one, we need a doctrine that lays down limiting principles for the use of punitive economic tools. The frequency and potency of economic weaponry — sanctions, tariffs, export controls — has grown almost exponentially over the past few decades. We need guiding principles to govern, at the highest levels of the US, why, when, to what extent, and for what purpose, we’re using these punitive tools. I don’t think doctrine should stop at our border. Ultimately, and this will take place over the course of decades, we should get on with trying to create a more global framework. It’s the economic analog to a Geneva Convention — not out of altruism, but out of self-interest, because as the anchor country in the global economy, we have the most to lose from an uncontrolled escalatory tit-for-tat using economic weaponry.

The second is, I think we have to institutionalize industrial policy. It’s here to stay, because the private sector doesn’t have the incentives to invest to compete with China at pace and scale. Part of institutionalizing is having a playbook that lays out the strategic objective of each intervention, the market failure, why the intervention addresses a failure, how it sustains competition, and what our exit strategy is. Organizationally, we need a strategic investment fund — with an executive director nominated by the president and approved by the Senate, democratic accountability to Congress, and a technocratic staff — that tries to look at where our strategic opportunities intersect with a private sector deficiency. It’s been done before. The Reconstruction Finance Corporation in the ‘30s and ‘40s led to the “Arsenal of Democracy,” and we can do it again.

The last thing is we need a Department of Economic Security. The National Security Council was created at the dawn of the Cold War. We’re at the dawn of a new era of economic competition. It’s time for an organizational revamp to give us strategic coherence in our use of tools. They’re dispersed — tariffs are at the Office of the US Trade Representative, sanctions are at the Treasury and State Department, export controls are at the Commerce Department. The positive tools are spread across an alphabet soup. If we have a single department, we can strike the right balance between punitive and positive. We can create more connective tissue with allies. We can develop the analytical infrastructure we need to make judicious use of this taxpayer money. That, to me, is how you take economic statecraft seriously.

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I’ve added a pdf to each post with tidy print formatting, for those of you who like to read in analog formats.

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Governance and state capacity

• What’s Wrong with Nonprofits? | PDF

• 99.8% of Federal Employees Get Good Performance Reviews. Why? | PDF

• Why We Don’t Build Apartments for Families | PDF

• How to Bring Down Healthcare Costs | PDF

• Trump’s H-1B Changes Will Backfire | PDF

• How to Write the AI Action Plan | PDF

• Leninist Technocracy with Grand Opera Characteristics | PDF

• Four Ways to Fix Government HR | PDF

• How to Be a Good Intelligence Analyst | PDF

• Governance Lessons from the Constitutional Convention | PDF

• What Can We Learn from Estonia? | PDF

• How to Run a $5 Trillion Payment System | PDF

• How to Fix a Department’s Funding Tools | PDF

• There Are Too Many Judicial Injunctions | PDF

• Three Principles for Running a White House Office | PDF

• How to Beat Megafires | PDF

• Why the Two Parties Operate Differently | PDF

• How to Budget for the SEC | PDF

• How to Win an Election Against the Communists | PDF

• Did the Courts Just Nuke Environmental Review? | PDF

• How Bureaucracy Is Breaking Government | PDF

• How OIRA Works | PDF

• How to Build State Capacity | PDF

• How to Invest Federal Funds Like a VC | PDF

• How to Actually Implement a Policy | PDF

• How to Hide the Manhattan Project | PDF

• How to Stop Losing 17,500 Kidneys | PDF

• How to Find Your Mate | PDF

• How to Make Government Less like the DMV | PDF

• How to Make Immigration Regulations | PDF

• How to Reform High-Skilled Immigration | PDF

• How to Procure Advanced Military Tech | PDF

• How to Salvage the VA | PDF

Congress

• How a Congressional Office Actually Works | PDF

• Is the Senate Fixing Housing Policy? | PDF

• How to Modernize Congress | PDF

• How to Investigate the Federal Government | PDF

• How to Assess the Future’s Technologies | PDF

• How to Forecast the American Budget | PDF

• How to Teach Congress to Do Its Job | PDF

• How to Pass the CHIPS and Science Act | PDF

Presidential power

• What President Trump Should Do | PDF

• How to Defend Presidential Authority | PDF

• How to Hide the President’s Condition | PDF

• How to Present Decisions to POTUS | PDF

State and local governance

• How to Rewire City Hall | PDF

• Should the Feds Bail Out Chicago? | PDF

• How to Run New York City | PDF

• How to Fix Risk Assessment in Child Welfare | PDF

• How to Beat Crime in New York City | PDF

Economics and industrial policy

• One Year of Trump’s Economic Statecraft | PDF

• Did the CHIPS “Everything Bagel”...Work? | PDF

• What Is America’s Infrastructure Cost Problem? | PDF

• How to Run the Treasury Department | PDF

• Launching the Techno-Industrial Policy Playbook | PDF

• Does Anyone in Government Care About Productivity Growth? | PDF

• How to Report Inflation to the President | PDF

• How to Calm Oil Markets | PDF

• How to Shape a Market | PDF

• How to Wrangle the President’s Economists | PDF

• How to Allocate $52 Billion in CHIPS Funding | PDF

Transit

• How Cheaply Could We Build High-Speed Rail? | PDF

• How to Save DC’s Metro | PDF

• How the Federal Transit Administration Works | PDF

• How to Salvage a Transit Project | PDF

DOGE

• How to Build the ‘90s DOGE | PDF

• Highlights from the Comments on “50 Thoughts on DOGE” | PDF

• 50 Thoughts on DOGE | PDF

• What to Expect From DOGE | PDF

• More (Brief) Thoughts on DOGE | PDF

Science and research policy

• What’s Wrong with NIH Grants? | PDF

• How to Save Science Funding | PDF

• How to Predict the Future | PDF

• How to Salvage a Nuclear Waste Facility | PDF

• How to Speedrun a New Drug Application | PDF

• How to Buy Stuff Like DARPA Does | PDF

• How to Replicate Operation Warp Speed | PDF

• How to Use Challenge Prizes | PDF

• How to Run Good DARPA Programs | PDF

• How to Treat Schizophrenia | PDF

Foreign affairs

Diplomacy

• How to Track Santa | PDF

• How Diplomacy Works in Africa | PDF

• How to Fix Foreign Aid | PDF

• How to Ban Biological Weapons | PDF

• How to Reverse a Coup | PDF

• How to Save Twenty Million Lives | PDF

Defense

• How to Build a Flying Ebola Hospital | PDF

• How to Produce a Kamikaze Drone | PDF

• How to Rebuild the Arsenal of Democracy | PDF

• How to Prep Hospitals for a Shooting War | PDF

• How to Fix Defense Procurement | PDF

Russia

• Order of Operations in a Regime Change | PDF

• How to Run a Private Military Company | PDF

• How to Stage a Coup | PDF

• How to Catch a Lab Leak | PDF

• How To Secure Weapons-Grade Uranium | PDF

Iraq & Afghanistan

• Lessons from Iraq and Afghanistan | PDF

• How to Fix the State Department | PDF

• How to Recruit Iraqi Weapons Scientists | PDF

• How to Run a CIA Base in Afghanistan | PDF

• How the Government Loses a Road | PDF

Britain

• How UK Biobank Was Built | PDF

• What Can the Brits Teach Us About State Capacity? | PDF

• How to Make a World Cup Bid | PDF

• How to Build the British ARPA | PDF

Other

Roundups

• A Statecraft Fall Roundup | PDF

• Statecraft February Roundup | PDF

• Statecraft January Roundup | PDF

• Statecraft December Roundup | PDF

• Statecraft’s November Roundup | PDF

• Statecraft Fall Roundup | PDF

About

• Statecraft in 2026 | PDF

• How Statecraft Works | PDF

• Introducing Statecraft | PDF

Below are a couple notes about Statecraft in 2026: What we’ve done so far, and what I’m hoping to tackle.

I’m hiring!

Specifically, I’m looking for an editor to join my editorial team at IFP (the tremendously effective and exciting think tank at which I work). You can find more details in the job description here and in a short Twitter thread I created about the role here. The TL;DR is that we need someone who loves the written word. This person needs to be able to inhabit a role that is sometimes adversarial (authors and editors disagree sometimes!) and still be not just pleasant but a joy to work with. And this person needs sharp instincts about how to reach a wide range of audiences, from the general public to issue-area experts to a specific person in the Eisenhower Executive Office Building. Note that this role will not primarily touch Statecraft; it’s mainly about supporting the core IFP team.

The deadline is EOD Monday, January 19th. That’s next Monday — act fast. We’re offering a $3,000 referral bounty if we hire the person you refer (if you’re encouraging someone to apply, just have them mention your name in the application).2

The Statecraft state of play

The last time I did one of these yearly roundups, we’d just crossed the 10k subscriber mark.

A bit more than a year later, we’ve more than doubled that number: we’re currently a few hundred subscribers shy of 30k. We’ve managed to put out 109 episodes, more or less keeping our one-a-week cadence. Also, without giving away details, Statecraft was read at a pretty high level this year. Our readership in Congress grew substantially, as well as our readership in the executive branch.

And this newsletter’s real-world impact was substantial this year.

Some goals for this year

We’re going to keep doing individual interviews: that’s the bread and butter. I have a list of ~400 people I’d like to talk to at some point, and it keeps growing. There are just so many people who have expertise to provide, who have a valuable lens on how the state actually works mechanically, who can tell interesting stories, and who have not told them yet. There’d be enough there for 10 Statecrafts, and that’s leaving aside the household names or guests who have had more media exposure. But we’re also planning to experiment with a few things.

One is to trial some episodes that take a little longer to put together, and require a little more investigative and production work to create. Individual interviews can be valuable reporting, and they can reveal new facts about the world, but they’re not the ideal mode for digging up a full story. For that, we need multiple voices and longer lead times. Some of these episodes are going to be about stories that have perhaps not been as carefully or as intensely covered as I think they should be.

Another experiment is video, which we’re going to take a stab at this year. More to come on that front in the summer.

Last thing for now: If you’re reading this, thank you for your support over the past two and a half years. It is so much fun to produce this project, I feel very lucky for the opportunity, and I have that opportunity because you read and listen to this series and are constantly pushing me to get better.

So please, if you’re not already telling your friends about Statecraft, let me know what to improve about Statecraft to make it worth telling your friends about.

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We discuss

• Why the NIH used to fund 60% of grant applications, and now funds just 10%

• How “soft money” forces researchers to fund their own salaries

• How distributing lots of small grants wastes everyone’s time

• How block grants could fund more breakthrough science

• Why researchers don’t get their first independent award until their mid-40s

Thanks to Harry Fletcher-Wood, Shadrach Strehle, and Jasper Placio for their support in producing this episode.

For a printable PDF of this interview, click here:

Print this interview

My colleague Caleb Watney told me you’re one of the deepest thinkers on public science funding.

That’s very sweet of him.

Today we’re going to find out if he’s telling the truth.

You were the Deputy Director for Extramural Research at the NIH. Extramural is the fancy word for grants that go out the door: 80–90% of NIH’s total budget. If one thinks of the NIH as a big investment fund for biomedical R&D, extramural is almost the entire portfolio.

As deputy director, did you get to decide who got funding?

No. It’s obviously a very high-volume system. When you’re dealing with tens of billions of dollars and tens of thousands of grants, the system by definition has to be decentralized, so there’s no one person making the decisions about all those grants. We had a very elaborate system that involved tens of thousands of reviewers, as well as thousands of program staff who together would make the decisions about what grants would get funded.

What was your role?

We had an office within the Director’s office that served as the main coordinating body for the NIH. We were responsible for what you could call the corporate framework of extramural funding. It included some very down-to-earth practical things, such as our IT system, electronic Research Administration (eRA), which handled more than 50% of all the grants in the federal government. Anybody who interacts with the NIH in any way — sending in applications or serving as a reviewer — would interact with eRA.

We were also responsible for grant rules and policy. One thing that took up an awful lot of my time was dealing with non-compliance and integrity cases. We also played a major role in outreach and communications about NIH grant rules and policies.

I’m going to read you some things you said in our first call, and I want you to explain them. You said:

“The system of funding science is fundamentally broken. In some respects, it’s been an unmitigated disaster. It was a house of cards, and it’s not surprising that it’s now falling apart.”

What do you mean?

The system suffers from systemic flaws that go back way before the second and even the first Trump administration. The fundamental problem is that the system, which was originally designed to be competitive, has become hyper-competitive — so much so that it is dangerous and corrosive.

Back in the late 1940s and 1950s, when the NIH grant system started, it was relatively small, and about 60% of all applications got funded. Getting funding would not be a source of a great deal of stress. Scientists essentially had to fill out the forms — they were four pages long. Today, a typical grant application is 100-150 pages long. I’ve seen grant applications that are over 1,000 pages. It’s a different world.

Over time, more and more money was fed into the NIH system. This was a two-edged sword. On the one hand, it was great getting more money. On the other, the scientific community responded by expanding dramatically — more buildings, scientists, graduate students, PhDs — many more than the monies could accommodate.

As time went on, the likelihood of getting funding went down, and the system became excessively competitive. We went from a 60% success rate in the 1950s down to 10% in 2025. The many problems that the grant system has — incremental research, the loss of innovation — are symptoms of the fact that too many scientists are chasing after too few grant dollars. This has rendered the system quite vulnerable.

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What do you mean there’s too many scientists? Your job was to encourage and support science happening out in the world. How can somebody in your role say there’s a bubble in science?

I would imagine that most readers have a job: you gain an income from your employer. Your assumption would be that as long as you did high-quality work, your employer would continue to pay you.

That is not what it’s like in science. Let’s say you’re a scientist and you work at a university. There’s a high likelihood that your university doesn’t have the money to pay your salary. Instead, it says to you, “It is up to you to get your salary. You’re going to have to apply for grant money from the federal government.” That means you have to participate in a competition in which the likelihood of success every time you ask for funding is on the order of 10–20%.

As you might imagine, this is a highly stressful state. Instead of thinking about great ideas and experiments you could be designing, you’re worried about whether or not you’re going to have enough money to pay your own salary, as well as the salaries of your staff, six months or two years from now.

The term that we use for this system is “soft money.” When a university hires you, they don’t have the money to pay you, or maybe they only have the money to pay you for a few years. They make it very clear to you that after that you’re on your own. It’ll be your responsibility to bring in your salary, or a big chunk of it. If you fail to do that — because you’re not lucky in this extremely hyper-competitive system — your lab will be closed down and you may very well lose your job.

This is obviously a very high-stress situation. It’s not one that is conducive to great science. What’s conducive to great science is where people can engage in long-term thinking and don’t have to worry about their funding.

This is a succinct and punchy critique of the current system. Did your colleagues at the NIH agree with it?

I think for the most part, yes. Certainly some of my colleagues in the top echelon did recognize that the system was fundamentally broken. There were papers that came out, say 10-15 years ago, with titles like, “Rescuing biomedical funding from its systemic flaws” and “Saving biomedical research.” I don’t think that very many of my colleagues were questioning the premise that the system was in serious trouble.

What counts as extramural? My understanding is that most of these are grants to specific researchers for specific projects.

That’s exactly right. The word “extramural” literally means outside of the walls [Latin: extra muros]. There are a couple of ways a government could support science. One is that the government has its own scientists as salaried employees. That certainly does happen. In fact, the NIH has a rich intramural program — inside the walls — that has produced great scientific discoveries and Nobel Prize winners.

The extramural approach is to fund grants that go mostly to universities and medical schools — research institutions that hire scientists to conduct specific projects. Even there, there are different approaches that can be taken. One approach might be to give universities large sums of money and rely on them to figure out what projects to conduct and which scientists to support. For the most part, that is not the system that we have. We fund lots of relatively small individual projects — something that came out of various events around World War II.

When you say “very small,” will you give me a sense of the scale of the R grants — these classic investigator-driven grants?

The most common type of grant that the NIH funds is what’s called an RPG: a Research Project Grant, not a rocket-propelled grenade. In 2024, the agency issued a little more than 40,000 research project grants, each for about $600,000. To put that in perspective, the overall NIH budget — everything extramural, intramural, and various other expenses — adds up to $48 billion. Each individual grant is a very small part of the overall whole.

I’m trying to do the math in my head — these are something like half of the NIH’s grant-making?

The R grants make up most of the grant-making. The other major component is training. Roughly $1 billion got spent in 2024 to pay for fellowships and training grants; more like $30 billion for research grants. [Here is a long list of all the different NIH activity codes.]

Some folks will not be familiar with how the federal science funding apparatus developed in this particular way. Will you give us the two-minute version?

It’s fascinating. Before World War II, government did not fund very much science. Scientists wanted government to be as far away as possible. They did not want it to be controlling their lives. World War II changes things, because suddenly the government has a need for science and needs it very fast. The government puts a huge amount of money into supporting science. Most famously the atomic bomb — the Manhattan Project. But another big project was the development of methods to mass-produce penicillin.

When the war came to an end, science had been so successful that the government decided that there was a need to continue and perhaps increase its support. The question was how to do that. The NIH started almost by accident. The agency existed, but it was a small laboratory. They found themselves with some extra money because the price of penicillin had suddenly gone down. The person who had my job way back then sent out a letter to university deans saying, “If you have any need for some extra money, please let me know.”

He got an overwhelming response. That was the beginning of the NIH grant program. It did not start with an act of Congress. It started because of a series of accidents. By 1946-47, the program was de facto running. Congress liked it so much that they did make it legal.

You can imagine a lot of systems where the federal government gives money to researchers. But the model we have is one where researchers say, “Here’s the project I’d like to do over the next few years, and I need this much money for it.” Why is it that way?

The model is based on what happened to the Rockefeller Foundation. [For much more on the Rockefeller Foundation’s role in building the modern scientific ecosystem, I recommend Eric Gilliam’s writing.] In the pre-war years, it was the main nonprofit supporter of biomedical science in the United States. Initially, they gave large institutional grants to universities. Then in the late 1920s and early ‘30s, two things happened. One is that they underwent a reorganization, and the second was the Great Depression. Their investments shrank and their financial situation became more problematic.

Lots of readers won’t be aware that the Rockefeller Foundation was the biggest funder of science in the US at this point. It’s funny to think of a private foundation being not just a plurality, but I believe the outright majority of science funding.

Today, if people think about foundations that support science, you might think about the Gates Foundation, which supports a lot of science. But compared to the NIH, even Gates is relatively small.

Facing this reorganization and financial pressures, the Rockefeller Foundation was concerned that if they gave out large institutional grants, they could put themselves at risk. They figured it would be a lot safer to give out small project grants. If a project fails, it’s no big deal. The other thing is that these would be short-term grants — for a few years. They were not obligating themselves to a lot of money down the line.

The person who headed the medical science division at Rockefeller was Alan Gregg — he later won the Lasker Prize. He was vehemently opposed to this. He said that it was going to gum up the works: there was going to be a huge amount of administrative work, and essentially the Rockefeller Foundation would turn into “a dispensary of chicken feed.”

He vehemently pushed — once the NIH became the main funder — not to follow the Rockefeller model, and to go back to the way things were before. But the reason the NIH did follow that model is because universities were now used to it — this was the accepted approach for nonprofit sponsors to support science. Nobody ever sat down and had a thoughtful policy discussion about what might be best. It evolved this way, and this is the system we have now.

In your read, ruthless competition for these grants drives a lot of the paperwork requirements and unpleasantness associated with being a scientist today. Will you say a little more about that?

Again, there’s no way to understand this without some history. During the first 15 years that the NIH ran, the paperwork was kept to an absolute minimum. Essentially scientists were given money — theoretically for a project, but the reality was they could use it however they felt fit. There was remarkably little oversight from government staff.

When this came to the attention of a particular congressman, Lawrence Fountain — a Democrat from North Carolina in the late ‘50s and early ‘60s — he was appalled. He said, “This is no way to run a government program.” To trust people, give them money, and not carefully oversee what they’re doing, made absolutely no sense. He called on the NIH to change their system.

The NIH actually resisted this. Initially, they said, “Thank you very much for your wonderful advice,” and moved on. But Fountain was insistent. There were a series of contentious hearings held in 1962 when then-NIH Director James Shannon said, point-blank, that Congress had it all wrong. “The whole idea, the reason why our system works well, is that we give scientists money and let them loose. For you to ask us to run this like we would run a weapons program makes absolutely no sense.”

Congress would not have it. They said it was totally unacceptable for the agency to run things this way. That was the beginning of the extreme bureaucratization that we have, with hundreds, if not thousands, of laws and regulations, and the insistence that scientists must propose a project and must do the project they said they were going to do.

That was a major series of events in the 1960s. There were three reports put out by the [House] Committee [on Government Operations]. Each was more caustic than the one before it. We often talk now about the poor relationship between politicians and the NIH. Unfortunately I lived through a good part of this and it was very sad to see, but we’ve been through this before. The consequences were quite serious.

I’d love you to explain that explosion in paperwork — what’s in these 150 to 200-page grant applications?

The research plan — the science itself — is relatively short. That’s about 12 pages. The rest consists of a lot of information about:

• The administrative structure of the institution;

• The facilities;

• Performance sites;

• Budget, and

• Detailed biographical sketches.

Then, depending upon the specifics:

• Information about the protection of human subjects;

• Vertebrate animals and how they’re going to be used;

• Data management and data sharing, how that’s going to happen, and

• Biosafety; select agents.

I could go on and on. There’s a long list of requirements, and some people have questioned why all of this has to appear in applications when there’s only a 10–20% chance that they’re going to get funded anyway. “Wouldn’t it make much more sense to not worry about that until later?”

Another way of thinking about this is, how much time do scientists spend on administrative issues as opposed to doing science? This is something that has been carefully studied by the Federal Demonstration Partnership. They have conducted well-designed surveys, starting in 2005, then every six or seven years. They showed the same thing: scientists are spending about 45% of their time related to federally-funded research addressing administrative requirements, not doing science.

There’s no way that you’re going to be able to completely eliminate administrative requirements. The administration is important and it has to be done properly. But when people are spending 45% of their time handling paperwork and only 55% doing science, you’ve got a big problem.

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How much control does the NIH have over the content of that paperwork? Some of it is required in statute, like the parts about biological agents and national security. How much leverage did you have internally to make other parts of the grant application shorter?

There is some leverage, but not much. We can think of this in two ways. On one level, there are explicit statutes regarding the protection of animals and people, export controls, agents, biosafety and so forth.

But it’s also an understanding of congressional expectations. In many respects, these have not changed since the 1960s. The expectations are that the agency will run a very tight ship. That may sound like a good thing, but it means that you err on the side of more administration, more oversight, and more data to be collected. There is some discretion, and a number of my colleagues — I give them great credit for it — have attempted to make the system simpler and remove some of the administrative steps.

Another problem is that we have dozens of federal agencies that support research, and every single one has their own culture, laws, and regulations. Sometimes they contradict each other. One agency may say, “Thou must do A.” Another agency says, “Thou must never do A.” Then if you’re the poor grants administrator at the university and you’re sending out grants to both agencies, somehow you have to manage to keep it straight. The agencies also use different computer systems. That creates all kinds of problems. It’s something where the agencies do have some control if they want. But I would say for the most part, the degree of leverage is relatively small because it’s congressionally-directed.

What are the most onerous paperwork requirements for scientists? If you could go to Congress and say, “Get rid of these two or three requirements,” what will give scientists the most time back?

One would be to figure out ways to streamline the requirements related to human subjects protections and animal welfare. These are very important, but they’re way too complicated.

Another is filling out all the information on the initial grant applications. One suggestion has been that the initial grant application should be maybe 15 pages — 12 pages of the research plan, 1 page that has a high-level look at the budget, and 1 page with additional stuff. That would take a lot less time to put together. Then — only for those 10–20% who are lucky enough to get funded — you ask for all the additional information. That could potentially save a lot of time, and it would not decrease the amount of information that the government gets on the grants that it funds.

One of the classic streams of economic evidence that we think about a lot at IFP is a set of papers that say, “You could double or triple the tax dollars that go to R&D, and the payoff for society in cancer drugs, geothermal energy, and whatever else you want to put in there would still be positive.”

How would you go about doubling the amount of money the NIH spends and limit this horrible rat-race dynamic?

One big question is whether we should be focusing on individual projects — as opposed to scientists, programs, departments, or even universities. You asked me earlier, “What’s wrong with asking scientists to stick to the projects that they proposed?” One of the problems with this project-based approach is that it’s based on a false premise. Science is fundamentally different than, say, remodeling a kitchen. I hire a contractor. I know exactly what I want. I work it out with the contractor that he’s going to remodel the kitchen in this particular way. I hold him to it. If he doesn’t do it, then there’s a potential breach of contract.

With scientific grants, it’s incompletely specified by definition. We don’t know what exactly is going to happen:

• The hypothesis may turn out to be wrong.

• The experiments may yield surprising results.

• New technologies may come on the scene which completely change the way that one thinks.

• There may be new public-health threats — nobody predicted COVID-19 until it happened.

All of a sudden the needs change.

The very nature of science is that you don’t know what you’re going to be doing over the next year — for sure not five years. I saw this interesting commentary by Peter Lawrence, a zoologist at Cambridge University, who said that we’re asking scientists to become bureaucrats and astrologers. They’re supposed to write an astrology about what they’re going to be doing over the next five years, and then stick to this particular fiction.

One of the other reasons we have a surplus of scientists is that the incentives are all wrong. The grants that we fund support salaries. If you’re a university, you like getting grants, because then you don’t have to pay your faculty’s salaries. In fact, as I mentioned before, you go so far as to say, “We’re not going to pay your salaries. You’re responsible for getting your salaries.” But it’s even worse than that, because the way grants are structured, we not only pay for the cost of the research, we also pay for the overhead. It’s called indirect costs.

We did a whole episode on this topic, going far deeper than any of our readers wanted us to.

I listened to that and I thought it was very well done. The problem here — I’m not going to talk about the wonkiness of overhead costs — I’m talking about the incentives. Not only will the grant pay for the professor’s salary, it will also pay a bonus on top of that, in the form of indirects. That means universities are incentivized to hire people that they do not have the resources to support.

It gets worse than that, because the same thing applies to graduate students and postdocs. Grants will pay for their stipends, their tuition, as well as overhead on top of their compensation. That means universities are incentivized to bring in more graduate students and postdocs — irrespective of whether they have any hope of getting an academic job when they’re finished. We have this whole layer of perverse incentives, which is creating this bloated system.

This all makes perfect sense in terms of the incentives for the institutions. But let’s say I was considering grad school in a hard science, and I’d seen this insane rat race for grants. There are way fewer opportunities at the postdoc level, or to have one’s own lab, than there are people chasing those opportunities.

If I were a talented young scientist, couldn’t I go into industry, or to some big pharmaceutical company, and avoid this whole rigmarole entirely?

That’s absolutely correct. From an economic point of view, it would be absolutely irrational to go down the academic route. We do see that fewer American students are going to graduate school and getting postdocs in the biomedical sciences. We’ve become increasingly reliant on foreign students and postdocs to fill those spots. They are willing to come in and accept a situation that an American person would not accept, because they think they’ll get outstanding training — which they could potentially take back to their home country — or that they might be able to stay and be successful here in the United States.

You mentioned a lot of your colleagues shared this general critique of the way that the NIH doles out money. So why have we been in this regime for 75 years?

There are some fundamental questions that have not been answered. One is, why should the government fund science in the first place? Is it because it’s the right thing to do — if the government doesn’t fund basic science, nobody else will? Or should it produce a direct benefit to the public? If so, what exactly does that mean? Does that mean a direct benefit next year or five years from now? Or would we accept a direct benefit that may be ill-defined, and happen 20-25 years later?

I’m going to put some meat on this, or some fat on this. Back in the ‘70s and ‘80s, NIH and the Veterans Administration (VA) funded some scientists — both on the intramural and extramural side — to conduct work on sugar metabolism. That included work on a hormone called glucagon. We can think of it as the anti-insulin: insulin reduces blood sugar; glucagon increases blood sugar. There was a group of scientists in various parts of the country who were doing very basic research on how sugar metabolism works, on how glucagon is made. It’s something that at the time seemed extremely esoteric.

“Basic research” in this context means there’s no immediate commercial application.

Yes, this is curiosity-based research. It is, “I want to better understand how nature works. I’m not thinking about a drug that I’m going to be able to produce within the next few years and get approval from the FDA, or a device I’m going to be able to sell. I’m just interested in how the world functions — pure science.” Some people might call it science for science’s sake.

Should the government be supporting this? Back in the ‘60s, ‘70s and ‘80s, when this work was being done, nobody could say where this was going, including whether it was going to go anywhere. It eventually led to the blockbuster GLP-1 weight-loss drugs, like Wegovy, Ozempic and Zepbound. They’re now the top-selling drugs and have dramatically changed the way we think about obesity — that’s why I brought up fat. These drugs were not developed to help people lose weight. They were developed as a potential treatment for diabetes. Then it turned out that they also induced a great deal of weight loss. They also prevent heart disease. It’s an amazing story.

This is a success story where the government supported basic science that a company would not support, because there was no clear benefit in the short term. Also, companies could not be guaranteed to keep all the benefits. There’s nothing to stop other companies from taking advantage of that knowledge and making money themselves.

So this is a fundamental question and it has not been answered. Back in the ‘60s — and we’re talking now about the very top of the executive branch of government — President Johnson said, point blank, “We’re spending too much money on basic research.” [For more on this episode, see here.] As you can imagine, this sent the scientific community into panic. Eventually things settled down and stayed the same. But one reason why we are where we are is that fundamental questions like this — “Should the government be spending a big chunk of its money on basic research? Should we be paying for salaries for university faculty? Should we be paying for more graduate students and postdocs?” — were never answered.

I don’t know if that answers my question.

These debates about the role of government in funding science — whether to fund basic or applied research — they’ll always be with us. That’s a question for a democratic society. Politicians and citizens can have all kinds of perspectives about what the goal of federal science funding should be. That’s totally normal and expected.

But that’s a separate question from “Which science funding mechanisms should we use?” The grants we use to fund science at the NIH are almost exclusively these time-bound, project-bound individual grants. But it’s not obvious to me that politicians firmly believe that this is the most efficient way to fund science, or to get the most high-value science.

I feel like, whether you want more basic research or more applied research, everyone should want to experiment more aggressively with the way that we fund science.

I completely agree with that. Part of the issue here is, who should be making these decisions about how the system runs? Politicians and their proxies, or technocrats — scientists, either out in the field or in the government? This question also has never been satisfactorily answered. There’s been a continuing tension, going back to the very beginning.

When the post-World War II science apparatus was being set up, there was a big debate going on. On the one hand were the Democrats, primarily led by Harley Kilgore from West Virginia, who said, “The politicians should control this. Yes, the government should be supporting science in universities. But it should be the politicians who decide how the system works — they should be all over it.”

On the other hand, you have Vannevar Bush and Cassius Van Slyke, the initial head of the NIH grants program. They were taking the exact opposite stance, saying, “No, the only role of the government is to write a check. The scientists should have complete control — not only over the science that they do, but also the policies that govern how the science should be conducted.” This tension’s been going on for a long time.

Part of the reason we’ve got the system that we have is that nobody’s ever done a careful assessment of, “What’s the way we can get the best of both worlds?” The best of the world in which the politicians are calling the shots is that there’s accountability, transparency, and responsiveness to public needs. The best of having the scientists run the show is that they have the expertise, and arguably a higher degree of competence, to make sure that a program runs well.

The other point you’ve emphasized is you don’t know in advance what you’re going to find. So pre-specifying the outcomes or gating the funding until you produce the product you promise is harder. You want to leave some room for scientists to find things out and change course as they learn.

You can almost think of this as an investment. You put together a diverse portfolio with a range of assets. Some of them are going to be extremely successful, but since you don’t know what they’re going to be, you invest in a wide range. That’s what venture capitalists do. They try to get their money into many different places. Most of their investments will not do very well, but a few are going to do so well that it more than justifies everything else. That’s very similar to what we have in science.

It’s an interesting metaphor, and one that we’ve been talking about a lot here at IFP. In terms of the number of investments, the system does very well at “diversifying” — 40,000 RPGs in a given year. But each of those grants is relatively small. You can’t fund a lot of the breakthrough science with huge upside on just $600,000 over three years.

My colleague Caleb Watney likes to say, it’s like our science portfolio is 90% bonds with a 3% expected return. We’re massively underdiversified in terms of the expected returns of the scientific portfolio.

That’s a very interesting way of thinking about it. Also what that does is fix your commitments. Yes, each individual project is very small, and so the potential loss from each project is quite small. But you’re giving up a huge amount of flexibility, which is inherent in the value of science. Overall there’s going to be a net loss. The other thing is, if 45% of your most important people’s time is being spent on administrative work, and much of that is because they’re attending to a large number of relatively small projects, that is going to be inherently wasteful.

One way I sometimes think about this is, “bureaucratic units.” I don’t know whether that’s a formal term, but say a grant application or an annual award is a bureaucratic unit. Each of those units come with a whole set of administrative tasks. NIH will issue 60–70,000 awards every year — competing awards, new awards, as well as renewals. We also get up to 80,000 applications a year. When you put all that together, that’s well over 100,000 bureaucratic units. Every single one entails work, and opportunities for mistakes. They drain the system.

An alternative way we’ve argued you could go about federal funding for science is something we’ve called “X-Labs.” The idea is a new kind of grant — a big block grant to an outside institution. Maybe it’s a university — maybe it’s a different research entity that has lower overhead or is more incentivized to pursue these breakthrough innovations.

The National Science Foundation has just announced a very similar program, Tech Labs. Generally, and for the NIH in particular, it sounds like you’d be supportive of something like this. What form do you think it should take?

I would be extremely supportive. The key to having something be successful is that it’s got to be big enough.

Let’s do a thought experiment: say you have a university that’s getting $100 million a year, and that comes in a very large number of small grants. To make it easy, assume that all of that money is going into basic science, in laboratories working on a wide variety of things.

We’ll tell that university, “We’re going to give you $90 million — one grant.” Now we only have one bureaucratic unit, not thousands. “With this one grant, you’re going to run a basic science program.” We can define — and Congress could help do this — what work would be allowed — what can be paid for and not. For example, “We can pay for salaries for faculty and staff, but not graduate students and postdocs. That should be handled someplace else.”

Then we leave it up to the university to figure out how to spend that money most wisely. They know who their scientists and team players are. They know who’s collaborative. They know what their strengths are. They would be in a position to make an appropriate judgment.

The system has to be accountable. I could imagine various ways that could be done. One is regular financial audits to make sure that the monies are being handled properly. The other would be retrospective scientific audits: we would tell the university, “We expect you to produce some great science. We are not expecting that every single scientist in your staff will produce great science, because we know that’s not possible. But we expect you to set up an environment that will ensure that somebody somewhere — actually somebodies somewhere — within your system will produce great science. We’re going to use that retrospective review, conducted by experts, to determine whether you will continue to get funding.”

In order for this to work, it has to be big enough that scientists are not going to be incentivized, implicitly or explicitly, to spend their time writing grant applications. Their incentive should be to do great science — that’s what they should be spending their time on. The administrative work should be solely that which is necessary to get the science done, not to deal with government administrative issues. If the system is too small, then the scientists are going to still be writing grant applications on the side.

If I’m filling out another application for $150,000 and I’m doing it on company time.

That completely defeats the purpose.

The other argument I’ve heard for big block grants is that they let you do a specific kind of science you can’t do on smaller budgets. You can’t pay for team-based, leading-edge science unless you’ve got capital to spend. Nickel-and-dime grants here and there will never add up to enough to buy the piece of equipment that will let you do the breakthrough experiment.

That’s absolutely true. A block grant system enables a wide diversity of work to be funded. For example, it would be very reasonable for universities to devote some of the money to what you might call “skunkworks” — relatively small exploratory projects. You give people six months to see whether there’s anything there. If it works, great. If it doesn’t work, no worries, we move on to something else. But it also gives them the resources to buy expensive equipment and put together large teams of scientists to do more ambitious projects.

I think, ironically, something where there’s only one grant would allow for a greater degree of diversity than what we have now, where the university is saddled with a whole bunch of individual small projects.

The system incentivizes research institutions not to go for big swings. There’s no upside to trying to chase down a huge grant for something that has a high likelihood of failure.

One of the upsides of what you’re recommending is you get some political guardrails, but you also say, “You’re going to be judged on your portfolio. If you can get some big hits — the next crazy weight-loss drug — we’re going to forgive shots on goal that were creative and didn’t pan out.”

Not only forgive; I would be stronger than that. We fully expect that failures will happen. In fact, we would be very worried if you come back to us and say, “I have 500 scientists in my institution and all 500 produced great work.” Then I’m worried that you’re being too conservative. I certainly expect all 500 of them to have managed their money responsibly. I expect them to run their labs in a civil and safe way. But I expect a large proportion of them won’t have much to show scientifically, because that’s the nature of the beast.

While we’re on the topic of institutional reorganizations, I want to ask you about the different Institutes and Centers in the NIH, the ICs. There’s a few handfuls. That’s why it’s the National Institutes — plural — of Health. Some are more commonly known — big disease-focused ones like the National Cancer Institute (NCI), the National Institute of Allergy and Infectious Diseases (NIAID), and the National Institute on Aging. They get the vast majority of NIH dollars. But then there’s a whole bunch of them that don’t often get public attention.

There have been arguments that the institutes should be consolidated. Project 2025, for instance, said there should be fewer. [NB: I was thinking of OMB here, not Project 2025.] It’s not just a right-wing view — there have been all kinds of perspectives on this over the years. What’s your take?

I used to say, “I work for the National Institutes of Health. The key word is the second word — institutes — and the key letter is the ‘s’ that comes at the end.” There are 27 institutes and centres. That means that at any given time, there are 54 different opinions. So it was a difficult place to work.

Why double the number of opinions?

I’m being a little sarcastic, but it’s a remarkably fragmented agency with each unit doing their own thing. They have their own culture and set of rules. There are certain rules that are common to the entire agency, but the degree of variation is remarkable.

On the one hand, that was a good thing because it enabled some innovation. But the downsides were much worse. It’s also problematic for scientists because if you submit a grant to the National Cancer Institute, your likelihood of getting funding — even before 2025 — was maybe 10-12%. If you submitted a grant to the Basic Science Institute [the National Institute of General Medical Sciences], it was 30%.

Why should there be such a big difference? It has to do with the fact that the agency is split up into these administrative units. If it were entirely up to me, there should be one institute, the National Institute of Health. That’s actually what it was. The discussion that we had about giving one block grant to a university — the same could be applied to the NIH. What Vannevar Bush proposed back in 1945, with his Endless Frontier report, was one agency to cover all civilian research for the government: physics, chemistry, computer science, and biomedicine. The more bureaucratic units you have, the messier things are, the more difficult they are to manage.

How different are the individual institutes? Does each director have their own fiefdom?

There’s an enormous amount of variation. For example, the National Cancer Institute and NIAID devote a larger proportion of their funds to intramural research. The NCI devotes a fair amount of money to research centres. That means there’s less money available for the relatively small grants.

Some institutes decide what grants they’re going to fund by scores from peer review committees — the numbers alone. There’s very little thinking that goes into it. I’m being a little glib, but not by much. Then there are other institutes, like the Basic Science Institute, where the peer review scores play a major role, but are only one component of a more holistic decision. Those cultures are quite different.

When you look at the size of the different institutes, you see a pretty consistent pattern: institutes that have an associated patient advocacy group are much bigger. The National Cancer Institute gets 20% of the budget of NIH — there are a lot of people with a direct stake in that. Whereas the Basic Biomedical Science Institute does not have the same massive advocacy group.

How do advocacy groups shape how the institutes work?

They play a major role. The reason why the National Cancer Institute is as big and powerful as it is, is because Mary Lasker was a strong proponent for research — essentially a lobbyist; an extremely effective one. She, along with a number of her colleagues, successfully lobbied the government, including President Nixon, to pass the National Cancer Act of 1971, which led to the National Cancer Institute becoming much bigger and more powerful. In 1948, the National Heart Institute was formed. That was also a result of a lobbying effort. The advocacy groups have played a major role in how the agency is organized.

The institute directors pay very close attention to the advocacy groups, because they want their support. It translates into lobbying on Capitol Hill. I was reminded a gazillion times that, as a federal employee, I was not allowed to lobby. But the advocacy groups could lobby — and they did, very effectively. It’s not a stretch to say that I’m going to pay a great deal of attention to their wants and desires, because I want them on my side.

If I’m head of the National Cancer Institute, I can’t lobby Congress, but I can take meetings with the cancer advocacy groups and say, “Your voice is so important and it needs to be heard on Capitol Hill”?

The National Cancer Institute may be a bit of a tenuous example, because the director is a political appointee. But the other 26 institutes — let’s say the head of Heart, Lung, and Blood — what you said is exactly right: “We greatly value your support.”

There’s been a lot of turnover among the heads of Institutes and Centers (ICs). Let’s say I’m suddenly placed as head of one of them. What advice would you give to a new institute head?

I did have conversations with new institute directors. One very important piece of advice I gave was, “You should have an extremely low threshold to get in touch with me and ask even the stupidest question, because I could potentially get you out of trouble.”

Let me get to something very practical. When you run a grants competition where only 10-20% of applicants are going to be successful, you’re going to have many unhappy people. Some of them are going to be high-powered academics who know you from your previous life. They will try to lobby you for help on their individual grants. Or they may ask why their grant was not funded.

The piece of advice I would give is, “You need to stay as far away from this as you possibly can. Your role is to advocate for the agency and the public, not for individual scientists. Stay out of these small fights, because otherwise they will eat you alive. They’ll take up all your time and make you miserable.” You punt it off to your staff and let them handle it. But we tell people, “We’re very sorry that we can’t fund your grant because we don’t have the money.” That’s not a bureaucratic excuse. That is the truth. You don’t want to get into an argument about details on specific projects.

The main message that I gave IC directors is, “You’re in the government now. It’s a different environment than academia. There’s a different set of norms and rules. If you’re going to be successful, you don’t have to like them, but at least you have to respect them. I don’t mean this in a pejorative way, but if you pretend that you’re still in academia, you’re going to get yourself into a lot of hot water, and you will not be able to accomplish what you want to do.”

Did that happen — IC heads come in, act like they’re still academics, and get burned? Imagine I’m that guy: what am I doing wrong?

One thing you may be doing wrong — let’s put Trump aside here, before Trump — is that the administration may have a certain view of the world, and want to impose a particular policy, and you think that it’s stupid. You have every right to think that. But then you pretend you’re still in the university, where you can essentially say what you want, because academic freedom rules above all else. You’re open about your objections — so much so that you get in the way of the administration’s desire to accomplish a particular goal. That is a great way to not do things well.

In a university — let’s say I’m a department chair and I disagree with the university policy. I can be open about it. I’m tenured. My dean may not love me, but that’s the culture. In the government, it’s not quite like that. I have been in countless situations where I did not agree with what the higher-ups were doing. The way to handle it is behind closed doors. You present your arguments. You explain why you think there may be a better way of accomplishing whatever it is they want. In this discreet way, things get negotiated.

Ultimately if you’re not happy with the way things are turning out, you have two choices. You go along with it and help them out, even though you disagree with it — or you leave. To act like you’re in academia and scream out protests is not a wise strategy.

Mike, what did I forget to ask you today?

We did talk about the questions of faculty salaries. This was a big problem that came up in the early 1960s, when President Eisenhower put together a commission to look at the government-university partnership. Eisenhower strongly supported that partnership. But just as he was concerned about the military-industrial complex, he was also concerned about a bio-technical complex, or elite.

His advisory group expressed concern about government grants being used to support faculty salaries. They were afraid that it was going to create a soft money system. Nonetheless, they said the government should go ahead and support faculty salaries. They did not come up with a way of dealing with the problem. This set off the bubble that has only gotten worse, and has led us to our hyper-competitive state.

Another reason why that block grant system would work so well is that you say to the university, “You can use this money to support salaries and pay for research. You can also use it to support your facilities and administrative costs. But you only have a limited amount. You figure out how best to use it.” They would want to spend enough on indirect costs to provide appropriate support and oversight. But they wouldn’t want to spend too much, because that would take away from the science.

How does your typical institute head think about the difference between the intramural research they support and the extramural — the grants going out the door? Is one of them more valuable to society than the other? Is one of them more exciting to work on?

Some of our institute directors care very deeply about their intramural program. They have much more control over it — these are their scientists. They’re right there in Bethesda. Intramural is fundamentally different from extramural. You’re not bound by short-term grants, so you can think much more long term and develop programs accordingly. Scientists have their laboratories, research groups, and a budget assigned to them.

After four or five years, they undergo a formal, retrospective review. It’s very different from extramural, where peer reviewers are asked to predict what’s going to happen in the future. Here, the reviewers are asked to look at what a scientist has been doing over five years and render a judgment accordingly.

• If the scientist is doing outstanding work, they will maintain their budget.

• If their work is not so good, their budget may be shrunk.

• If it’s entirely unsatisfactory, the laboratories may be closed.

I’ve had an opportunity to see this in action. It’s very rigorous. The results of the program speak for themselves. Nobel Prize winners have come out of the intramural program.

I went to a fascinating lecture by Barney Graham. He was one of the key people who helped develop the COVID and Respiratory Syncytial Virus (RSV) vaccines. He worked in Vanderbilt, and then came to the NIH intramural program, where he developed this vaccine laboratory. He figured out a way to modify viral proteins so that they could be used for effective vaccines like the RSV and COVID vaccines.

I asked him afterwards, “Could you have done this work in the extramural world?” He said, “Absolutely not.” Within the intramural environment, he could take risks. He did. Some of what he did at the time seemed crazy. In retrospect, it was brilliant. But he didn’t have to worry about whether his lab was going to be funded next year or the year after. He could think long-term. It is a fantastic model for how to do research.

You’re saying we should create the conditions for extramural research to look more like that — to take these big swings for home runs, instead of for singles.

That’s exactly right.

One last thing I want to ask you about is the talent pool getting these extramural grants. The average age of grant recipients has crept up over the past few decades. There are arguments that, as science deepens, you’ve got to spend more time learning to get to the frontier of a field. There are counter-arguments: “If we want more breakthrough science, we should reverse these calcified structures that mean that a young gun is likely not getting a grant — it’s going to somebody who could be their father or mother.”

What do you think?

The fact that somebody doesn’t get their first independent research award until they’re in their mid-40s…

45 on average, right?

Yeah, it’s nuts. To put this in perspective, I went to medical school, went through internal medicine and cardiology training, and started taking care of patients when I was in my late 20s — as a fully-trained doctor. Somehow society thinks that’s okay.

But you need 15 more years before you should expect to start getting federal support for research.

Before you can become an independent scientist. I could be an independent doctor in my late 20s, but I could not be an independent scientist until my mid-40s. Absolutely nuts.

It’s a symptom of two things. One is what we’ve talked about: the inn is simply too crowded. It’s more difficult for people to get in. Then something very specific: back in the early ‘90s, mandatory retirement went away. That meant that successful scientists — I’ll define that as somebody bringing grant money into their university — didn’t have to retire when they turned 65. Of course they stayed on board. They were doing good work and bringing in money to the university. The universities were very happy.

As a result, the overall age of the workforce increased, because we had far fewer people retiring at the time they previously would. If they’re staying in the system and bringing in grant money, less is available for younger investigators who have not yet had an opportunity to put together a proven record. This is an unintended consequence of eliminating mandatory retirement.

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[This episode originally ran over Christmas 2023. That was about 20,000 subscribers ago, so we’re running it again. My guest, Dr. Chris Ellis, has a new book out titled Resilient Citizens: The People, Perils, and Politics of Modern Preparedness. I highly recommend you pick it up.]

Since 1958, the North American Aerospace Defense Command (NORAD) has tracked Santa Claus’s whereabouts on Christmas Eve. It originally provided real-time updates to America’s children via a hotline, and it now also maintains an online Santa Tracker. But it’s not easy to stay on top of Santa’s “achronal” movements.

We talked to NORAD’s chief Santa tracking officer about how it works.

What You’ll Learn:

• Why Santa slows down over North America

• The iron law Santa always follows

• Why Air Force pilots escort St. Nick in American airspace

Our interviewee today, Dr. Chris Ellis, was a combat career officer for 24 years. He now serves as Chief of Future Operations at NORAD, and is an expert on individual household disaster preparedness in the United States and other developed countries.

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I’ve got a quote here from a US Air Force memo, dated Christmas Eve 1948. ”An early warning radar net to the north detected one unidentified sleigh powered by eight reindeer at 14000 feet heading 180 degrees.”

How has the technology to track Santa changed over time? What’s the state of the art?

Back in 1948, we really just had the ground-based radar systems. We hadn’t put a man on the moon yet. We weren’t even officially tracking Santa until 10 years later in 1958, in the height of the Cold War.

But what we refer to now as the North Warning System is a system of about 50 radars across the globe. The majority of them are in North America (Alaska and Canada) primarily to detect threats. But we have them all across the globe. So that’s part A, and when we do track Santa, because he takes off from the North Pole, it’s perfect, he’s right within our detection zone and he pops up almost immediately in a ballistic trajectory. So thanks, Santa. I appreciate that.

For our lay readers, what’s a ballistic trajectory?

By ballistic trajectory, think missile. Anything that kind of lofts, it doesn’t have to be a nice arc, but also cruise missiles or things along those lines as well. Airplanes have a not-quite ballistic trajectory.

Santa’s sleigh and his reindeer work the same way. So when Santa goes to places that are far away from the North Pole, the great thing is we can pick him up in two ways by our satellites: one, just by his movements.

But he also helps us out, because Rudolph’s red nose does show up on the infrared spectrum. So we can track Rudolph. When he goes around to other places, like Kenya or New Zealand, we’re tracking him via those two means, and then we still maintain our satellite queuing of him when he comes across North American airspace, specifically Canada and the United States.

When he enters our air defense zone, basically he gets a personalized escort. So up in Canada, they have FA-18 Hornets that escort Santa and he’ll actually slow down, because he’s got to travel nearly the speed of light to hit all the kids around the world. But he’ll slow down for us.

One of the things we’ve learned after tracking him for 68 years is that he experiences time differently, which is fascinating. That’s how he’s able to hit all the kids around the world. But the third way we track him is not really tracking him, but we escort him with those fighters: Canadian in Canadian airspace, and then with our Raptors or Eagles, our U.S. aircraft, when he’s over the United States, including Alaska and Hawaii. [In a friend’s newsletter, Chris explained that “It is believed that A-10 Thunderbolts move too slow, even for reindeer at delivery speed. Sorry Warthog Bros.”] And then he also does visit the territories as well, so he hits Puerto Rico, he hits Guam etc., and we’re around him when he’s doing those things as well.

When does Santa pop up on your tracking?

The interesting thing about Santa is that he almost always takes off at the same time, usually around 6 a.m. Eastern time every December 24th. But his route does vary. He’s never had the same route twice. Our assumption on that is that his naughty or nice list is different every single year, and so he follows a different pattern to hit all the good boys and girls.

I would assume that if some kids are awake at a given time, or the kids in Kenya are staying up late on a given Christmas, that he might shift around and come back later.

He does. In fact, that’s one of those asynchronous things, where he experiences time differently. Again, we don’t know how he does it, but one of the other rules we’ve found is that Santa does not visit a house unless the children are asleep.

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Why is NORAD tracking him everywhere? There’s not somebody else we can hand him off to when he’s over Africa or Asia?

The biggest reason is that NORAD and NORTHCOM have a global presence. We have the geosynchronous satellites to follow him everywhere he goes, just because NORAD tracks all threats to North America, 365/24/7. While we don’t classify Santa as a threat, again, he maintains that ballistic or aerial profile.

And we’re a global force, that’s why we can do it. We know there are others that track him in certain areas, like the Canadian Broadcasting Company. But they don’t have the global presence like we do. We’re guessing that other localities and countries have their localized tracking for him, South Korea for example. But again, we’re a global presence.

And that fighter escort you mentioned, is that for him? Or for our peace of mind?

I think it’s a mix. For one, it’s a show of solidarity. We are not intercepting him, we are escorting him. It’s a friendly gesture, almost like welcoming a foreign dignitary.

And the other reason is more of my personal view, is that these are Air Force pilots, and sometimes they’re right on the borderline between naughty and nice. If you’re a pilot trying to get on Santa’s nice list at the last minute, escorting him may be a good way to get that final stocking stuffer.

What else do we know about Santa as a result of this once-a-year relationship?

He’s exceptionally friendly. It’s pretty standard in the Air Force, when you want to show a friendly maneuver saying hello, to rock your wings. And what Santa will do in return is rock his sleigh or smile.

And we do think that Santa’s giving his reindeers a little bit of a break when he’s flying over North America and Canada. He slows down again a bit for us. It’s a pretty taxing night for St. Nick. I think it’s just a show of mutual gratitude.

And what’s your involvement in tracking St. Nick?

Like Colonel Harry Shoup, who took that kid’s phone call back in 1958 and started NORAD’s Santa tracking, a few times a month, I will sit in on what’s called the “JOC floor.” The JOC (Joint Operations Center) floor’s motto is “We have the watch,” and we will watch live for any and all threats against North America. A few times a month, I’ll sit in that job as the chief of operations and monitor all indicators, warnings, and threats against North America.

I’m picturing a NASA control room kind of situation?

Yep. Watch Matthew Broderick in WarGames or any movie that shows a military thing with all the big screens on the TV. Just think of that with a whole bunch of computers and a whole bunch of TV screens. Maybe we do watch football every once in a while if it’s a slow night.

And are you pacing up and down behind guys at desks?

Sometimes. It depends on what’s going on.

Okay. No cigars. You’re not bright purple in the face.

I am not a screamer.

I’ll just give you some facts and figures on our tracking, because I find this pretty amazing. The website itself is now in nine different languages. We get calls and website visits from the United States, from Canada, Japan, South Korea, Ireland, Australia, Chile, Spain. I’m talking in the tens of thousands, if not hundreds of thousands, and in the millions for website visits. We get over a quarter of a million phone calls every single year in just one day.

And we live-answer roughly 80,000 calls talking to kids from across the world. Obviously the overwhelming majority of our volunteers speak English. For those who don’t actually get through to us, you’ll get a pre recorded message of where Santa’s at. But we do tell the children where Santa’s at, based upon our three systems. But we’re not able to tell them if they’re on the naughty or nice list.

I’ll tell you that we now get about 10 million hits a year just from Amazon’s Alexa alone. You can ask “Hey Alexa, can you ask NORAD where Santa’s at?” Alexa will connect to our systems and say, “Santa’s located over Portugal right now” or wherever he is. So it’s pretty extensive. And the roughly thousand volunteers that we have, from what I’ve heard, they really enjoy it.

The furthest call that I’ve known was someone from Morocco.

Wow.

Yeah.

When you say you can’t tell callers if they’re on the naughty or nice list, is that a lack of intelligence or lack of authorization?

No, that’s Santa’s OPSEC right there, his operational security. He keeps that close to the chest.

Walk me through the night of Christmas Eve itself, when you’re in that operations room.

Let’s say Santa is over, I don’t know, Italy. So we’re tracking him by satellite. And we see where he stops by, maybe he goes to Rome and maybe he’s moving northward to Venice and Vicenza and on his route to Austria.

That gets relayed up to our satellites. Our satellites then come through our system. We get a ping, for lack of a better term, of where Santa’s at, because, again, he’s got a sleigh-and-eight-reindeer profile. So we’re able to track, in near real time, exactly where he’s at.

I’m curious how he covers for the kids who stayed up late. Do you see last-minute switchbacks? What’s his method?

I would call it, and this is my non-technical term, it’s almost like a rubber band effect sometimes, where you’re watching a movie and things speed up and go back, like when your video is buffering.

That’s how Santa operates. Again, it’s that “achronal time” that he’s able to do outside of time. Even though children haven’t gone to bed, sometimes he’s able to achronally go back to a location that he’s already passed. We haven’t figured that out.

Talk to me about NORAD. What do you do?

On my day job for NORAD, I am the J-35. So in the military, anything that has a 3 in it, beginning after the letter code, that’s considered operations. And then the 5 are considered plans. So what I do is I’m a marriage in between the two. So the 35 is future operations. So I don’t handle the right now, nor do I handle the things that are far out in the distance, but the sweet spot in the middle.

For my job, I handle four buckets. One is homeland defense. Another is civil support. So when you think of hurricanes Hurricane Katrina, Hurricane Maria, that hit Puerto Rico, things along those lines, there’s going to be a federal response to those kinds of events. We go there.

If you see federal forces at big things like the Super Bowl or the Boy Scout Jamboree or the Republican or Democrat National Conventions, the folks that I work with plan that and assist the lead federal agencies like the Secret Service or the Department of Energy or the Department of Agriculture or FEMA, whoever is leading that.

Then three, I do a lot of interagency work, because the Department of Defense is not in the lead once we’re in the homeland. We look at the gates and the borders and out. So if there’s something like a threat to the homeland, or like a flyover for the Super Bowl, we are following another entity. So I do a lot of interagency work.

The last thing I do is quite a bit of the integration of training and exercises. We’re making sure our swords and our spears are always sharp. We need a tremendous amount of repetition on those things.

As a non-military guy, it’s surprising to me that you’re housed in NORAD doing all these tasks.

So NORAD and NORTHCOM are two different commands. NORAD is a bi-national command, both the United States and Canada. It’s older than NORTHCOM is: it’s been around since the Cold War. But it’s a lot of pilots from the Canadian and the U.S. side, mostly Air Force folks. I wear both the NORAD and NORTHCOM hat, and NORAD’s hat number one. When I sit in down in the JOC, my day job is NORTHCOM. It was stood up after 9/11 to cover everything else besides the air domain.

We have a little bit of the air domain as well, but we track all threats across all domains in NORTHCOM. So anything you can think of will route or at least coordinate through us in some way, shape, or form.

Was that function covered before 9/11?

If you remember when they did the 9/11 commission, they said there’s this wall in between the intelligence agencies, we have some gaps. So the mission itself was overall covered, but in a lot of different silos. And so NORTHCOM put everything in the military portion and then married it with NORAD, so that one commander, General VanHerck, who’s our current commander right now of both NORTHCOM and NORAD, would have oversight over all things.

So when you’re doing stuff alongside FEMA for emergency response, that’s in your NORTHCOM role.

Absolutely. 100%. And what FEMA will do is, for example, there was this earthquake in the winter. There’s an immediate need for power generators so people don’t freeze to death, or tents, or search and rescue, or military working dogs to search for survivors. FEMA goes, “Hey, US military. We know you have a lot of those things. Can you help us out?” It goes through the whole process of wickets, gets approved by the Secretary of Defense and then comes to us to adjudicate who that’s going to go to.

Chris, you’re a researcher in much of your career. Are you trying to better understand the nature of the relationship between time and space through this tracking?

That’s probably something for our more technical folks, but we got a lot of wicked smart people. We are co-located with SPACECOM, just the building next to us, so I probably have to go bug them and see what they’re doing for those kinds of things. But we’re more focused on the more mundane threats, potential adversaries.

Santa, while fun, is not our primary research focus.

You guys are mission oriented.

Absolutely.

How long have you been at NORAD?

I just got here this summer, but I plan on being here for a few years and I’ve been trying to get here for 10 years. I absolutely love this job.

And of the hats you wear, which have you worn the longest?

The future operations hat, but I do what’s called the pro shifting of the chief of operations. So I do more of the future operations as far as my day to day, or month to month, but I’ve worn both hats for the same amount of time.

As you’ve worked on future operations, how have you improved over time? What do you do now that you weren’t doing five years ago?

My passion for about 25 years has been disaster. The past 8-10 years, I’ve gotten to focus on it more professionally through the military. They sent me back to graduate school several times.

So that’s been exceptionally personally and professionally rewarding. And what I truly enjoy about my current job is the number of individuals that are absolutely fanatically dedicated to what they do. My crew here is one of the best, if not the best. I sit down with them on a regular basis, thinking that I know a pretty good bit about homeland defense and disaster since that is my baseline in academics and college degrees, and finding there’s just so much more to learn. It’s like being at a hospital and you might be the leading hematologist, which is great, but you’ve got dentists and podiatrists and cancer specialists and heart surgeons, etc. You’re just learning all the time.

Give me one more example of the disaster work you do.

So one of the things I’m focused on right now, and so is the Department of Defense, is this concept of resiliency. When FEMA talks about a tiered response, it basically means that when a disaster strikes, you’re your own first responder, then your neighbors and local fire department etc., then the county, then the state, then the federal government. FEMA is really focused on the individual having this culture of preparedness: You’re your own first responders. If a disaster strikes, either natural or man-made, How are we going to bounce back? How are we going to get up? How are we going to maintain the fight if we need to maintain the fight or provide support and resources to the American people?

If it’s a hailstorm or a mudslide or a tornado or a hurricane, because a lot of times those things hit our bases. I’ll give you one example of this: Typhoon Mawar hit Guam earlier this year. That’s in INDOPACOM (India-Pacific Command’s area) but it was very instructive because we have a lot of military assets there and there was this Category 5 super typhoon that landed a near-direct hit against a very small island, similar to what happened with Puerto Rico.

That base, that island needs to be exceptionally resilient to disasters of that type, but not exclusively natural disasters. North Korea has threatened Guam in the past with nuclear rhetoric. They threatened Guam in public statements all the way back to the Trump administration.

So there’s a lot of threats, natural and man-made, that the Department of Defense needs to be resilient against.

I once heard someone ask you about the single most important thing you need in the toolkit from a resiliency perspective. Would you fill in our readers?

Absolutely. A guy named Josh Centers said it on Twitter, in a way that didn’t come across the right way at first, but he was right as far as his philosophy. He said the best thing you need to have for disasters is a positive mental attitude. That is accurate, but I would add what you also need to have is a good community.

You’re statistically far more likely to be rescued by your neighbors than by anybody wearing a uniform, federal or local. It doesn’t matter. Having that rich community with your neighbors is not foolproof. But if you’re looking to do just one or two things: have a good attitude and have good neighbors.

You can call 1 877 HI-NORAD (1 877 446-6723) on Christmas Eve to receive a real-time tracking update of Santa’s location. NORAD’s online Santa Tracker is linked here and goes live on Christmas Eve.

Merry Christmas!

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Before joining the administration, Scott was a managing partner at Andreessen Horowitz — better known as 16z — where he spent 16 years building the firm. His book Secrets of Sand Hill Road is widely respected in the venture capital world. Now, Scott manages talent for an organization of 2+ million people with a $7 trillion budget.

Thanks to Shadrach Strehle, Harry Fletcher-Wood, Emma Steinhobel, and the IFP team for their support in producing this episode.

We discuss:

• How DOGE cut federal headcount — and what comes next?

• Why agencies rehired employees they had just laid off

• Why merit-based hiring is back

• How few federal employees get fired for poor performance

• What OPM can do without congressional help

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A few days after our conversation, OPM rolled out techforce.gov, a program in which technologists can serve for a two-year stint in the federal government.

For a printable PDF of this interview, click here:

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I would describe the Office of Personnel Management (OPM) as the HR function of the federal government. Would you accept that description?

I think of it as the talent management organization. Yes, there are HR policies that we promulgate that are relevant across government. But a huge part of our job is to make sure that we have the right talent in government, and the environment that fosters that talent. We’re trying to make sure that we have a culture and a set of people that can deliver on behalf of the American people. Talent maybe encompasses that better than HR.

What was it in your background that made you, as this administration saw it, the right fit for this talent function?

My career has been mostly in the tech community. I was at a startup called LoudCloud for about nine years — it ultimately became a company called Opsware. If you’re looking for other interesting books to read, my partner Ben Horowitz wrote The Hard Thing about Hard Things, which details his experiences there. Then I spent the last 16 years at Andreessen Horowitz, building up that firm, investing in companies, and sitting on boards.

What I hope I bring is a sense of, “What does it take to build high-functioning organizations?” Having been in a company for a long time, managed organizations, and then been an investor and seen thousands of companies — most of which don’t ultimately become Facebooks, Pinterests, and Airbnbs — you learn the core of the organizational dynamics that are required to make companies successful. As venture capitalists, we love to spend time talking about products, strategy, and all that stuff, and it’s all important. But the things that separate great companies from good ones, or companies that fail, often come down to:

• Do you have the right people in the right roles?

• Is the organization set up to be able to deliver the things we need?

• Is there good communication and alignment with what the CEO wants the company to do and what people ultimately do?

• Do you have a culture that enhances performance?

What I hope to bring here is a keen understanding of what makes organizations successful.

I want to start with layoffs, or RIFs — reductions in force — the technical term for these at the federal level.

The flurry of activity at the Department of Government Efficiency (DOGE) died down around the time that you were sworn in as Director of the Office of Personnel Management (OPM) in early July. There are some parallels you have with Elon: you’re a successful tech figure making your first foray into public service. Then some obvious differences: you’re less controversial, and you haven’t had a public falling-out with the President.

How do you see your approach as compared to DOGE’s?

To complete your comparison, the biggest difference between Elon and me is I have not created a set of massively successful companies. When you’re talking about a behemoth as big as the government — $7 trillion budget, 2+ million people — it’s very hard to incrementally change organizations of that scale. Elon and the DOGE team were a catalyst to say, “We have to think about things differently. We’re going to take an outside view. And sometimes to make change, you have to do something big and bold.” That was the energy that team brought. They did a great job. That work — as you’ve probably seen in the news — continues. There is lots of fraud, waste, and abuse that are still very actively engaged on by the members of the DOGE community.

What’s exciting about the role we have at OPM is, how do we:

• Institutionalize the concepts that DOGE created?

• Make fraud, waste, and abuse a day-to-day part of everything that people address in their government functions?

• Think about efficiency as a top-level metric for government?

• Think about all the talent-related things?

It’s perfectly consistent — the work that Elon and the DOGE team started and continue and the work we do at OPM — they’re all part of this broader heuristic of, “How do we make government function more effectively for and on behalf of the American people?” We ought to be able to deliver great services, but also do it at cost levels that are appropriate — that don’t generate $2+ trillion deficits every year.

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You’ve talked to reporters, and you’ve been writing a weekly blog on the OPM website, which I’ve enjoyed. On a podcast called The Federal Drive, talking about cuts and headcount, you said you acknowledge there are “some places where we’ve cut deeper than was appropriate.”

In your blog post Right-Sizing with Purpose, you said, “Eliminating jobs is not something that should be taken lightly. It is a fundamental breaking of trust between the leader of an organization and the employees — both those leaving and those staying.”

The admin has fired civil servants very publicly, and you’ve cut headcount at the OPM. I’m curious how you think about striking the right balance.

I want to take issue with “The admin has fired a lot of people.” Let me make sure you have the numbers. There are a little more than 300,000 people who will have left the government by the time we get to December 31st. A bunch of those people left on 9/30 as part of the Deferred Resignation Program (DRP). But there’s still people who are working their way through to 12/31. Of those 300,000 people, there’s two buckets:

• Probationary employees. Those were either one- or two-year tenured employees. They’re like at-will employees in the private sector — you can terminate them without going through formal, for-cause things.

• Reductions In Force (RIFs). We decided, ”This organization doesn’t need to exist anymore. It’s not delivering what it needs to do — we can’t be all things to all people.” We ultimately just eliminate a function.

Those two things combined are roughly 25,000 of the more than 300,000 reduction in headcount.

That means +90% of the reductions are a function of people taking the DRP, voluntary programs for leaving government — Voluntary Early Retirement Authority or Voluntary Separation Incentive Payment — and natural attrition that occurred over the year.

I say that not to make light of it — it’s meaningful. We started with an employee base of about 2.4 million. We’ll be around 2.1 million at the end of the year. But I do think it’s important to understand that, despite all the press coverage around firings, the actual numbers are a very small minority of what happened. My interpretation of why a lot of those people chose to leave the government was, they probably said, “This is different from what I signed up for. I get it. There’s a new leadership team.” That’s within any employee’s prerogative — if they decide, “The organization is not what I originally thought it was, or the terms on which we’re going to do business are different.” That was a very effective mechanism.

Any time organizations go through change like this, it’s a difficult thing. Again, I don’t want to make light of any of the probationary or RIF-related actions. Those are things where you do break trust with employees. You’re saying, “For no fault of your own, we’ve decided the organization can no longer support these activities, and therefore we’re going to make a change.” Those can and should be done in a way that’s respectful to those employees. Also, you’re being judged by the employees who remain in the organization. They want to see how you treat those individuals and how you realign the organization coming out of that. Those are the opportunities that we want to make sure we’re focused on.

Maybe two clarifications before I move on: The admin attempted more RIFs than it was able to complete this year, because some of those were pushed back in court. But for these judicial processes, many more people would’ve been RIF-ed. Is that right?

We don’t know the honest answer to that. There’s been a ton of court cases in this first year of the administration. On the employment-related stuff, very few of those ended up adversely, relative to the administration’s position. The only one that I can think of was a district court opinion that the RIFs that were attempted during the shutdown period were halted.

Part of the Continuing Resolution (CR) that came out from Congress to end the shutdown was saying, “While we’re in a CR, you can’t do RIF-related stuff. If you noticed a RIF during the period, you have to withdraw that.” That was the only one that ultimately was halted. There was a ton of litigation around DRP, RIFs, and probationary stuff. Almost all of those were resolved in favor of the administration.

To your point, which is fair, in the intervening periods, it turned out that there were more people who elected into the DRP programs. Many of the agencies feel, “We’ve done some of the right-sizing through these voluntary mechanisms.” So we didn’t ultimately need to do those. It’s speculative in the sense that we’re trying to argue what might have happened had there not been intervention on the legal side. But the outcomes are the outcomes: about 25,000 of the total headcount reductions — about 9% — were through those adverse actions.

I don’t want to nickel and dime on the percentages, and this is valuable, because I didn’t know that stat. The point I am pushing here is: Whether through firings, or through aggressively encouraging people to take things like the DRP, the admin has certainly been trying to cut headcount and signaling to civil servants, “We’re going to need to trim.”

I agree with that. The directive that the president brought to the government was, “We think we can perform better services for the American people at lower cost.” The idea of reshaping the federal workforce to make sure that it’s focused on the right things that are key to the success of the administration, and doing so with efficiency in mind — 100% agree with you.

That’s a good thing. Everything we do in the federal government is spending taxpayer dollars. We have a real obligation to make sure that those are spent as wisely as possible. If we can use technology, automation, or organizational restructuring to improve service delivery and reduce costs, that’s exactly what we should be doing. But I totally agree with your broader point — it was no surprise. Elon was literally campaigning with the government. There was no question that if President Trump was elected, efficiency and rooting out fraud, waste, and abuse was going to be a central tenet of his administration.

As I’ve said on here, I’m open to the idea that Elon, you, and the President are right, and that federal headcount is too high.

But I want to push you here. You flagged that in some cases, maybe the headcount cuts were deeper than was appropriate. There’s been lots of rehiring over the course of the year:

The Internal Revenue Service rehired thousands of employees.

The National Weather Service brought back about 100 meteorologists after firing a bunch of them.

The Food & Drug Administration rehired employees.

The Forest Service asked staff who took the “hard fork” to come back because it’s fire season.

The Department of Health and Human Services (HHS) told about 500 laid-off employees they’re un-RIF-ed.

Why did that happen? Should that happen in an organization with a good talent function?

Having lived through these things in the private sector — in companies that I was managing, as well as companies that I’ve been invested in and on the board of — this is not uncommon, unfortunately. In the perfect world, you would get all these things right and layoffs would be a one-and-done thing.

My experience is, in almost all these cases, you end up with two potential problems:

• Many times, you don’t end up cutting sufficiently. You think you need to do a 5% or 10% reduction, and it turns out the business was not sustainable at that level. You end up doing death by a thousand cuts, which is one of the most challenging things for a company to survive.

• Sometimes there are areas where, in trying to solve the first problem, you push people harder and say, “What you turned in here is not sufficient for the goals we have. You’ve got to do more.” In those cases, sometimes you do overcut. There may have been areas that you didn’t realize were as critical as you thought, and/or you didn’t understand the staffing levels appropriately.

In a perfect world, you would have none of that. Unfortunately, that’s not reality, particularly when you’re dealing at the scale we’re talking about — a starting workforce of 2.4 million people. All the examples you cite are accurate. I don’t know what they add up to, but you’re talking probably thousands of people. It’s unnerving and unpleasant for people to have to live through that. You certainly wouldn’t wish that on anybody.

But the process of reshaping organizations unfortunately has that as a byproduct. That’s not a failure of the process. These are complex organizations, and none of us gets it right all the time.

There is an executive order that OPM is helping to implement, asking every agency to do “strategic workforce planning” every year; to put out a document saying, “Here’s how we’re thinking about our workforce, here’s the right-sizing we want to do, or where we want to do aggressive hiring.”

When I talk to people who have been in OPM, or in past administrations, their sense has been, “Agencies are awful at this.” What can you do to make agencies better at it?

You have to exercise your muscles to make them stronger. My impression is probably not that different from what you hear from other folks — it’s a muscle that most people haven’t exercised in a long time. It’s foundational to the budget process. A budget is a reflection of your priorities. Once you understand that, the question is, “Are you staffed appropriately to fulfill those priorities?” That’s the exercise we’re asking people to go through.

The good news, at least in this administration, is we do have a lot of people who come from the private sector, and this is not a new concept for them. I can imagine, in the broader career milieu of federal employees, maybe this isn’t a muscle they’ve exercised. But many of the leaders of these organizations have done this in their private-sector areas. I hope it’ll be a very effective process.

We’re trying to say, “You’ve submitted a budget. What are the objectives that align with that budget? Are those objectives the right ones? Are we doing things that support the broad priorities of the administration? Or are we doing things because we’ve been doing them for 20 years and no one figured out, are they statutory, or in concert with what the administration wants to accomplish?” That would be an opportunity to potentially reduce or reprioritize headcount.

In the past, when the government has done restructuring, headcount numbers go down, contractor numbers go up. That’s an abomination of the whole purpose of the headcount exercise. At some point, headcount is a vanity metric. The real metric is, “Are you being efficient? Are you spending money in a thoughtful way?” One of the things we’ve asked as part of these headcount plans is, “You should re-look at your contractor headcount.”

There’s great roles for contractors where you’ve got plus-ups that may be time-limited — where you have to bring people in. Sometimes you do contractors because there’s a particular skill set that we don’t think we can recruit or retain in government. That’s fine too. But we’ve created this shadow Full-Time Equivalent (FTE) organization of contractors. It’s somewhere two to three times the actual FTE headcount. We spend $750 billion a year on it. It’s totally reasonable for us to ask folks to do that.

If strategic workforce planning is important, should the big RIFs at the beginning of the admin have had a strategic workforce planning element to them?

I wasn’t here, and one of the things I’ve learned from being on boards and part of organizations is, if you’re not day-to-day inside the organization, you don’t understand all the ins and outs of what’s happening. Trying to Monday-morning quarterback it and ask, could’ve, would’ve, should’ve — I don’t think I’m the best person to do that. Maybe your next podcast should be with Elon, and he can decide if he wants to critique anything there, but I don’t think I have the context to be able to thoughtfully answer.

There have been a couple of folks from DOGE I would love to have on, and those offers are still on the table.

You just mentioned the federal government spends about $750 billion on contractors every year, and there are about 2x as many contractors as there are full-time workers. We pay contractors a significant premium to do this work.

Does that suggest federal headcount should be higher — and we should massively reduce the amount we spend on contractors?

The quick answer, which you won’t like, is maybe, but let me give you the reason for the maybe. If contractors are substituting for full-time employees, that’s a bad thing. I love contractors. Some of my best friends are contractors. They perform a very vital role.

Some, I assume, are good people.

What’s happened — you have to go back to Clinton-Gore. They were the first DOGE people. To their credit, they did try to do some meaningful work on efficiency, and they did a very good job on reducing top-line headcount by 200,000. [Statecraft interviewed John Kamensky, who led this effort.]

They got it down to about 2.1 million, which is where you are now.

The unfortunate thing was, that’s where you see contractors start to substitute for FTEs. It’s unfair for me to blame everything on the Clinton-Gore administration, because they’re not here to defend themselves. You see this in companies too. When they do restructurings, the Chief Financial Officer will say, “You need to cut 10% of heads.” Mark Zuckerberg made an announcement on December 4th at Meta that he’s cutting the metaverse significantly. More generally, he’s asked all of his managers to go back and cut 10%. The problem is some people will hear 10% and say, “I’ve got 100 people, I’m going to cut 10.” What Mark means, I believe, is, “Cut 10% of your expenses.” Maybe that means cutting 5% of your people and 20% of your contracts. So I worry about using headcount alone as a metric, because it doesn’t tell the story.

Maybe the right answer is we should have more FTEs and fewer contractors. That’s a better solution for everybody: you’ve retained the knowledge in the organization, it costs you less money. You referenced that memo we put out on strategic hiring. In my blog post, I was very clear that we would look favorably on increases in headcount that generate savings overall from a reduction in contractors. The reason for my “maybe” is, honestly, I don’t know what the right number is. The agencies know that better than I do. Part of this process is to hopefully push them to think about those trade-offs and get to a more optimal mix.

One concern is, if you’re reducing headcount, keeping the process the same, and not reducing what you’re asking agencies to perform, you reduce government efficiency, because you’re asking fewer people to do the same work.

I’m going to give you a yes-and-no answer. The no part is the assumption that the existing headcount is optimal. It’s hard to assume that. It’s a misnomer to say, “The government was this well-oiled, massively efficient machine.” If we’re starting for an efficient organization, we end up cutting things, and we don’t also revisit “What are the actual deliverables for that organization?” Then I agree. I’m not trying to be argumentative.

I’m being argumentative, that’s fine.

But there may be parts of the organization where we cut too many heads, and we didn’t reset our expectations on what should be done. Therefor,e we made a mistake and we’ve got to hire back those heads. This is not a broad statement, but the key assumption in my mind is, “Is the government optimally maximized for efficiency?” I don’t think it’s that controversial to say it was not.

But the real way you get to efficiency is — I’ll make this up.

“I’m HHS. There’s 20 things that I’ve been doing for the last 20 years. These 10, we absolutely have to do, they’re statutory, or they add a huge amount of value. Don’t touch those things. These five, we need to do them, but the organization’s not set up right, or we have too many people, or the metrics are wrong — let’s go fix that. Then maybe there are five where the honest answer is, they’re not statutory, they don’t add value, and we should consider reducing them.”

In a good financial-planning process, all those things are required.

This gets us to the question about how you engage with Congress. My worry is there are areas that are statutory — Congress has said, “You shall do X or Y” — and they’re low value. The Paperwork Reduction Act is statutory. It makes the Executive Branch’s performance worse [as Statecraft has discussed], but OPM can’t un-pull that lever.

How are you thinking about working with Congress on this?

There has to be a legislative agenda. We do have that. We work with the Office of Management and Budget (OMB), figure out the priorities, and then determine the right things to go forward. We’re going through the budget process for 2027 right now. We have submitted what are the important priorities to OMB. We’re waiting for passback — we’re in the sausage-making on budget and priorities.

There are things we cannot do without legislative authority. If we want to say, “Everybody at General Schedule (GS)-15 should make $300,000 instead of $159,000” — I can’t do that on my own.

What we can do — which is part of the opportunity and challenge in the Executive Branch — is there is a whole regulatory apparatus through which we can go through rulemaking processes. One of my positive surprises, coming into government, is there are quite a few degrees of freedom you have to use the rulemaking process to change a certain number of things. We’re going to have to do that.

We’ve got to start to crawl before we walk and run. We have to get to a budget, for example, before we can find substantive pieces of legislation that we can attach our objectives to. Order of priority: let’s get through the Continuing Resolution process in January, and hopefully we will have a budget.

Let me stop being such a pessimist and ask you about three things that seem to be making real changes to the hiring process:

In 2024, the Chance to Compete Act passed: a bipartisan bill which pushed agencies to hire based on merit as much as possible.

A court victory this summer for the administration overturned the Luevano consent decree, which barred the use of a particular objective screening test in federal hiring. Now you can use these tests.

The third is one you’ve championed: the move to a two-page resume.

This is a great example of where we can work effectively with Congress and then, through our rulemaking process, promulgate rules and advisory guidance that’s consistent with the rules. That’s what happened here. You got the Chance to Compete Act. Then, when the president came into office, he put out an Executive Order around merit hiring and directed OPM to promulgate the appropriate policies. If everything worked that way the world would be a much better place. Hopefully that’s a harbinger of good things to come.

Several things had to fall into place. The first was the Chance to Compete Act and the EO. The second was the Luevano decision, which goes back to 1980-81 — to the Carter administration. We used to use a civil service test called the Professional and Administrative Career Examination (PACE). It was demonstrated that it had a disparate impact: the results for minorities were lower than for others. The government entered into this consent decree — it just sat there for 40-plus years. We were able to reengage with literally the original plaintiffs and end that consent decree as part of this broader merit-hiring process.

The third piece that we have to do, and we’ve started, is make sure we have appropriate assessments. I would bifurcate it into:

• Technical assessments: You’re applying for a financial analyst job — we ought to test, “Do you understand what a balance sheet looks like? Do you know what debits, credits, and discount rates are?”

• Social-psychological assessments: “Are you a good team player? Are you going to be able to work well with others? Do you play in the sandbox well?”

We are further ahead on the psychosocial than the technical merit side. We have a group called Human Resources Solutions that leads this. We need to develop, where appropriate, the technical assessments. But we also put a Request for Information out two weeks ago to ask the private sector, “Here’s the long list of things that we think we want to do on the technical merit side. Are there things that we should consider from the private sector?”

“If you guys already have a test for financial analysts and it matches our analyst role, can we just buy that off the shelf?”

That’s exactly right. The directive that I’ve given the team is, “Let’s figure out what are unique government jobs, for which we have the only appropriate skill.” We have procurement officers. It’s not that those don’t exist in the private sector, but the rules of government procurement are pretty specific. We probably need to go build that test to figure out, “Can somebody be a good procurement officer?”

At IFP, we’re hoping to do some work to change that. It should not be that specific. I think at the Department of War there has been some movement on this incredibly arcane process.

Right. Under the existing process, unfortunately we probably have to build that test. But, “Can you be a nurse? Can you be a software developer?” Those tests exist. We need to validate them — to make sure they don’t have inherent biases or things that might make them not useful in the government context. But my hope is there’s a lot that we don’t need to create on our own. Then all we need to worry about is, “How does that test integrate into our broader USAJOBS suite?” That’s thing number one we’re working on.

Thing number two is making sure that job classifications reflect the use of these merit-hiring tests.

Why does the job classification system matter? There’s a bajillion classifications in the federal government for different roles. It seems ugly and clunky. But if you streamline those down to 80 job classifications, what does that give you?

A lot of things in government developed out of very risk-averse behavior where somebody got sued at some point. Now we’ve built this entire apparatus to never have to go through that lawsuit again. I don’t want to be in the business of defending lawsuits. But when you unpack these things, people have way overestimated the risk and way underestimated the upside value of having a more streamlined classification process.

That’s a common theme in a lot of these interviews: lawsuits are bad, but the odds of getting sued over this tend to be much lower than the most risk-averse actors think.

A lawsuit is just like any other risk that a business takes. Let’s try to assess the likelihood and the economic impact. We shouldn’t do things that invite lawsuits, but there are times where we might say, “The upside benefit of having 80 classifications instead of” — I think we have 614 or some crazy number — when you balance that against, “Are we making the hiring process so complicated that we’re not able to get great people to apply for these jobs?” That’s a trade-off we should make.

You started this question about the two-page resume. The honest answer is it should be a one-page resume. The only people who have long resumes are academics and people who work in government. It’s a test of your communication skills, “Can I convey what I think my qualifications are for this job that’s relevant?” You probably ought to be able to get that on one page. Because the resumes were ten pages to start with, two probably sounded better than one. My hope would be people realize that the value of a resume is to give a recitation of some of the things that you deem relevant. But if we have merit-based hiring assessments that complement the resume, and you do some interviews, I don’t think you need a ten-page resume — you probably don’t need a two-page resume. Maybe I should be able to send you my LinkedIn, and that should be sufficient.

Let me push a little more on the history:

Why are federal government resumes typically 10-15 pages?

Regular readers [see our interview with Judge Glock] will know that many job applications in the federal government have relied on “self-attestation,” where you just say, “I’m a master-level JavaScript coder.” That has been taken at face value.

Both those things seem wild. Where did they come from?

Prior to Luevano, the vast majority of jobs were hired based upon some test. Then we enter this consent decree and for 45 years — it goes back to this litigation risk-averse culture in government. “We have to let people do self-attestation because if we introduce a test, maybe that will also show disparate impact. Or maybe the Luevano consent decree is so broad that we immediately create a legal claim for somebody saying, ‘You guys are violating this.’” Those may have been well-reasoned ideas, but they go to the same cultural question, “Are we balancing the value of merit-based assessment relative to self-attestation?”

The self-attestation thing is crazy. It can’t be the case that you can represent that you have certain skills when you know you may not. Some of it may not be bad actors. I think I’m an expert at Excel. Compared to my buddies from private equity, I’m a kindergartner. My assumption is all those things built up — the ten-page resume, the self-attestations — from the fact that we were looking for substitutes for merit-based functional tests. My hope is that we have turned a new page where we can say, “We are now ready to go back to a more rational process of skills assessment and hiring that would include assessments as a key part.”

Once the system allows bad actors to game it, it creates this enormous pressure on people who don’t want to be lying. The only way to get hired is to fudge a little bit. Somebody’s trying to hire you, and they say, ”Just check those boxes.” That’s the only way the hiring manager will even see you.

I’m willing to start with the assumption that most people are good and well-intentioned. When people see that the playing field is not level, they don’t want to disadvantage themselves. Sometimes they’ll do things that may not be 100% truthful. The fundamental problem with non-merit-based hiring systems is exactly that — they can and will be gamed. Even in the merit-based system, it’s not going to be perfect. People may have an AI bot do the software development test for them. You can’t blindly go by, “Did they get 100% on the SAT?” as an answer to determine, “Are they qualified for this job?” Even in the merit-hiring principles, an assessment is one tool, but there have to be other things. At some point, there’s no substitute for an interview or some other form of determining people’s qualifications for jobs.

I’m thinking in particular of the Federal Aviation Administration hiring scandal that played out over the last 10 years. It was this big class-action lawsuit where the test was designed to fail a bunch of people and privilege a specific racial group.

People can use their skills for evil as well as for good, hopefully on net, we have systems and we design ways to them and hopefully roots that out. But it’d be crazy to think that there aren’t bad people out there who are either cheating on things and/or trying to disenfranchise certain groups through the way they developed a test.

In 2024, fewer than 6,000 government employees were removed from their jobs for poor performance or bad behavior through the Merit Systems Protection Board process. That is 0.2% of the federal workforce. Based on the private sector, in a given year, what percentage of people should be removed for not being good at their jobs?

There’s clearly organizations where everyone is truly world-class class and maybe the answer could be 0%. But if you look across the private sector, 5-10% involuntary turnover of employees would probably be where the 90th percentile of almost all companies would fit. 0.2% is way outside that.

It’s a function of a number of issues. One is that we have a performance management system that is not well run. 0.2% is exactly identical to the percentage of people that were ranked below meeting expectations that year.  I don’t know if those were the same 6,000 people, but mathematically it’s about the same. 98% of federal employees in government receive a “fully successful,” which is a 3 or higher on a five-point scale. 70% are 4s and 5s, the rest are 3s, the 0.2% are below that.

The protections that we have put in place for civil servants can be very onerous and make it difficult — even for people who truly are not performing their jobs and/or who commit acts that are not deserving of [being] a federal employee. It’s very difficult, time-consuming, and expensive because of this whole appeal process.

We’ve got to have a performance management system that works. We also have to figure out ways to streamline that process — without compromising civil service reforms and patronage concerns — but getting to a system that allows this to happen. I don’t want to be cavalier, but I guarantee if you sampled everybody in every organization, they could tell you, “Here’s the two or three people who we don’t think are carrying their weight.” None of this is a secret. If you look at the Federal Employee Viewpoint Survey, one of the consistent things we see is people saying, “I don’t feel poor performers are well managed out in government.” These are endemic challenges.

I don’t think there’s anything evil about trying to have an organization where — if people are given feedback and can’t conform to the standards that are required — they ultimately decide, “You can’t stay in this organization.” That’s a fair, well-functioning organization.

In past conversations, people have lumped this into the problem of “broadbanding”: pay scales are compressed in both directions.

The bottom to the top pay scale should be wider. We put out guidance for the Senior Executive Service crew, effective for Financial Year 26. Not only are we limiting the number of people who can be rated above “fully successful” — 4 and 5 — to 30%. But we’ve also given guidance that 60% of the bonus pools should go to that 30% of the population.

We need to address both things. There should be way greater distinction for people who are truly knocking the cover off the ball: rewards, recognition, paid time off — all the things that we can do. We’re never going to pay people half a million dollars. I’m not advocating for that. But we could have a wider band and a much more disproportionate bonus pool. On the other end, we do need to have a system where there’s greater differentiation between a 1, 2, or 3, and across the full GS scale, so that you can reward behavior.

The third thing is you need to eliminate tenure requirements that drive the step functions in the GS schedule. I want to hire somebody and they can perform at a GS-15 level, but they haven’t worked the 10 years or whatever the tenure requirement is — that’s silly. We should hire that person and hold them accountable to a GS-15. I don’t care if they’ve worked one year or fifty. Those are proxies for success, but they’re not real metrics. At the same time, if somebody’s doing a great job, we shouldn’t have to wait 12 months to promote them. We shouldn’t make people sit on this plateau if they’re truly outperforming. Some of those are things that will require Congressional help. But we need to at least do all the things within our own authority at OPM to create a proxy for a system that fundamentally needs to be re-looked at by Congress.

The basic civil service pay scale is capped by Congress. How much of a constraint does that pose for you?

That’s a real constraint. I cannot change the top end of the GS-15 scale without Congress. That’s a legislative priority — whether it sees the light of day, your guess is as good as mine.

What can we do? One is basic education, which we do at OPM, but we can do a better job. We’ve got to help people understand all the tools that are available to managers. I didn’t know this, but OPM has the ability — for limited numbers of total headcount across government for critical skills areas — to approve higher compensation — up to a certain cap, but above the traditional GS levels. If a manager comes to us and says, “We need this technical person in this area, but I’ve got to be able to pay them more than I can pay at a GS-15,” we have authority to do that. It’s capped at 800 people. But there is a process by which we could go to the President and say, “This is an important area,” and the President could waive that cap or give us authority to do stuff. There are a bunch of tools that are imperfect, but — at least in limited circumstances for critical areas — [can help]. There’s Special Act Awards, there’s retention bonuses. There are other things that very well-educated CHCOs understand, but don’t always filter to the managers.

CHCOs?

Sorry, Chief Human Capital Officer, the HR heads in the organizations. I stumped you on an acronym in government. That’s good.

It happens all the time. I’ve got my Anki flashcards of horrifying acronyms — I’ll add that one to the rotation.

There’s a bunch of authorities we have that we need to educate people on and make sure they’re used appropriately. We should not arbitrarily hand out candy to everybody, but there are policies and procedures for this stuff.

The second thing — which goes to the classification and job description side — is through reclassification we can eliminate tenure and degree requirements from all job requirements. That will be helpful because there are some artificial barriers that are a function of that. I believe, and my team is working on it right now, we don’t need Congress to pass a law to do that. That would help. If we can’t change the pay schedule, some of it’s making sure we can hire people at a level that is commensurate with their demonstrated skill, instead of saying, “You’re great, but we’ve got to hire you at a GS-7 because you failed the tenure requirements.” We can and will do those things.

We’ve got to use our bully pulpit with Congress and, with the President’s support, say “There are particular things from a legislative perspective that could and should make sense here.”

The final thing we can do is provide regulatory authority around forced distributions of performance management rankings for people, and then correspondingly how that drives bonus-based compensation. Even if we can’t change someone’s pay grade, if they’re doing great, we can disproportionately reward them from a bonus perspective. I’m not nihilistic about, “We’re totally at the mercy of convincing Congress to do these things.” That would make our lives easier, but there’s things we can do — even in the absence of congressional action.

Some of my new colleagues, the inaugural leadership of the CHIPS Program Office, are doing a lessons learned project for IFP called Factory Settings. One of the biggest things they talk about is hiring. They got Direct Hire and Excepted Service Authorities — two ways you can do end runs around the GS scale. That enabled them to hire a huge amount of private-sector talent from Wall Street institutions. It’s hard to see where those folks would’ve come in absent that authority. But that took going to the White House and saying, “These 25 spots.”

There’s other agencies — the Securities and Exchange Commission, for example — they’re on a totally different pay scale because they’ve determined, “We cannot recruit and retain people.” I think the Defense Department has some authorities. There are piecemeal things we can do in the absence of wholesale review of the GS schedule. The answer may be — in this political environment, given the narrow margins that exist in Congress — that’s the way to do it.

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You’ve been doing a big push trying to get young folks into the federal government. For some of the reasons you mentioned, it’s quite hard: the tenure requirements, to get into these roles you have to know how the system is played, the pay scale, and maybe the boringness of DC — the perceived boringness. The median federal employee is much older than in the private sector.

7% of the federal workforce is under the age of 30, versus 22-23% in the non-federal workforce. 42% of the federal workforce is over the age of 50 compared to about 33%. We definitely have a demographic skew.

What tools do you have?

We have two fundamental challenges in the government. One is — and this is not an ageist comment — we have an aging demographic in the federal workforce. If people stick to normal retirement timeframes, lots of them will be retiring over the next 5-10 years. We’re doing a bad job of replenishing that with a pipeline of people who are early-career.

Problem number two is, it’s particularly acute in areas where the pace of change probably requires people who have recent training. Tech and AI would be a great example. I can say this because I’m in the over-50 crowd: my ability to adopt new technology is less good than my 25-year-old daughter. She’s at a different stage in life and she’s grown up around these tools. We have a dearth of people who are modern in their thinking around some critical areas.

We have to solve both these problems. Endemic problems make this hard:

• There are tenure or college degree requirements. We can solve those problems.

• The hiring process is clunky. It’s hard to get through the whole process. We can solve that.

• We can do more centralization of hiring through OPM and make it easier for people.

• We’re not going to solve the pay gap problem, but if we can solve the leveling problem, that reduces the pay gap problem quite a bit.

• We do have special authorities where needed for particular roles.

The other piece, and this is what I’m very excited about — we’re going to have some more news on this, hopefully shortly — we’ve got to tell people the exciting narrative about coming to work for government. One of my first meetings, the story I heard from one of the managers here was, “Generally, people have joined the government because of lifetime employment. That’s been the pitch.” I said, “Sorry to tell you, but number one, that doesn’t exist. People have been lying to you if they’ve been telling you that. Two, that’s a terrible marketing message for an under-30 person who’s early in their career. They’re not making a decision for 40 years when they take a job. They’re making a decision for two or three years.”

We need to message, “Here’s all the cool stuff you can do. There are critical problems. You can do it at a scale that you can’t even see in the private sector. We can eliminate a lot of these bureaucratic and other things that prohibit you from being able to progress through the organization as you demonstrate your skills. By the way, it’s totally fine for you to go back and forth between the government and the private sector. If you want to come to government and you think it’s awesome for two or three years, and then, God bless you, you want to go work for Zuckerberg at Facebook — that’s awesome. Go do that.”

Let’s not build an entire system around a tenure-based promotion and career path that isn’t consistent with how people in the early-career stage think about the world anymore. That was probably true in the ‘50s and ‘60s, and maybe even in my generation — we thought about more lifetime-employment things — but that’s not how the world works anymore.

This is critical. If we don’t solve this problem, we certainly won’t solve the tech and AI needs the government has.

Are you familiar with the Revolving Door Project? They’ll have a fit when they read this.

There’s no question — there are some bad actors. I’m sure some people will take advantage of it and will violate the conflict-of-interest rules. I don’t want to make light of it. But I don’t think that means we should force people into 40 years of indentured servitude working for the government — because we’re worried that there are some bad actors out there. Maybe there’s a happy medium somewhere.

Today, I’m lucky to have three of the founding members of the CHIPS Program Office team with me:

• Mike Schmidt, the inaugural Director,

• Todd Fisher, the Chief Investment Officer, and;

• Sara Meyers, Chief of Staff and Chief Operating Officer.

Mike, Todd, and Sara have a clear sense of what went right for them, what went wrong, and what they’d do differently the next time. They’re working on a big project for IFP called Factory Settings, in which they describe what they learned.

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Thanks to Katerina Barton and Harry Fletcher-Wood for their support on this episode.

For a printable PDF of this interview, click here:

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When you entered the CHIPS office, what did you have to work with?

Mike Schmidt: A bill passes, and what you’re talking about is a startup. There’s nothing — no people, no processes, no strategy. I was the first employee of the CHIPS team. I started in September 2022, about a month after the bill passed. On my first day of work, Secretary Gina Raimondo introduced me to Todd Fisher, who would become our Chief Investment Officer. The key imperatives were:

• Building a vision: how are you going to measure success?

• Building a team: we knew we needed an extraordinary group of people to help us get it done.

• Building a program: the nuts and bolts of how it’s going to work.

The early days were characterized by trying to figure those things out.

Sara Myers: To design a program is to design hundreds of processes from scratch. We had a couple of things going for us in the beginning. We had 30 detailees from across the Commerce Department, trying to help us build the thing. We also had the attention of the senior operations and administrative folks around the Commerce Department, who understood that this was coming and that we were going to need to ramp quickly.

Todd Fisher: The Secretary [had a] sense of urgency and a willingness to do unnatural things, including helping to recruit people — that was critical.

Secretary Raimondo helped you recruit talent?

Todd: This was obviously one of the biggest priorities for the Biden administration; one of, if not the, biggest priority for Secretary Raimondo. She viewed her role — and played it exceptionally well — as helping to break through barriers for us and be the lead recruiter. And the way the statute was created allowed us some flexibility in how we designed the program.

Mike: The other thing we had was $780 million of administrative funding. Most people operating in government are hamstrung by budget. We expected to have to live within that budget for 20-30 years in total, and the spending would be more early on as we ramped up and allocated the funds. But in those early days, we knew we had the resources we needed to make it happen.

Sara: I remember interviewing with you and being like, “So what do we have, resources-wise here?” You were like, “Just don’t worry about it.” I was like, “It’s a thing that you always must worry about in my experience. So what are you talking about?” When you said $780 million, I was like, “He’s not right. He doesn’t know what he’s talking about.”

2% of the total money allocated for CHIPS was for your administrative operations, which is not a huge percentage; but it’s more than enough to run an office.

How do you know CHIPS was a success?

Mike: CHIPS was passed because semiconductor manufacturing capacity had declined pretty dramatically over the course of a few decades, from around 40% to around 10%. Semiconductors are foundational to the entire modern world. On the leading edge — the most advanced chips — production declined to zero. Those are the technologies that are most critical for AI, and the technology and geopolitics of the future.

At leading-edge logic, which is a critical aspect of the supply chain, all the production is happening in Taiwan — a geography of intense geopolitical sensitivity. CHIPS is a bipartisan statement saying, “We have to reverse that trend. That is not sustainable from a national security standpoint. We need to onshore production of semiconductors, in particular leading-edge semiconductors.”

In terms of measuring success, one is we got it done: we allocated the funds. It’s very hard to execute in government. In less than two and a half years, we awarded $34 billion, starting from nothing. That stands up to parallels in the private-equity world.

Towards the end of the program, we were meeting with the Secretary weekly to go through the pipeline, deal by deal. She was turning the screws, as she should have, to make sure we were going to get it done — but also offering to help: “What CEO can I call? How can I unlock this to help you guys get it done?” We were walking out of her office one day — we knew we had 15 or 20 deals to close in the next few months. Todd worked at KKR, a renowned private-equity fund. I said, “Todd, how many big deals do you think KKR will close between now and the end of the year?” He was like, “Two or three.”

Todd: I think people don’t understand what it takes to get a significant deal done. In the private-equity world, maybe a firm would get five or six transactions done in a year. But remember, all of the processes are in place: they have lawyers; they know all the terms that need to be agreed. We had to get the whole process out there: the application process, a portal, get applications in, evaluate and negotiate them — and get a final, signed agreement in place. Not to mention hiring 180 people, getting them integrated, and creating a team spirit. All those things are taken for granted. There’s a reason you don’t give $39 billion to a startup, because it’s complicated to get it up and running.

Mike: The other obvious measure of success: awarding funds doesn’t matter unless that’s having the outcome you want. We’ve seen a massive amount of private investment catalyzed in semiconductor manufacturing here in the US: over $600 billion in announced investments. There are five companies in the world that can produce leading-edge chips: TSMC, Samsung, Intel, Micron, and SK Hynix. All five of them are expanding here. There’s no other place in the world that has more than two of those companies.

The scale of each individual investment is extraordinary. TSMC’s investment is the largest foreign direct investment in the history of the country. Now it’s $165 billion, but the $65 billion deal we signed with them was the largest. They’ve announced the full plan to build out their site there, and plans to build out a second site. TSMC is producing leading-edge chips in the United States — the first time for any company in a decade — including the most advanced chips in the world, Nvidia Blackwell chips.

It’s still early innings. This is an initiative that will play out over the course of decades. But where we are in the game, it’s looking pretty good.

Todd: When the CHIPS Act was passed in 2022, the US produced exactly 0% of any leading-edge logic or memory chips — all of which are critical to AI, and to all GPUs that Nvidia manufactures, not to mention iPhones and other infrastructure. We are on target to produce — by the end of this decade — 20% of all leading-edge logic chips in the world, and up to 10% of all leading-edge memory chips by some time in the mid-2030s.

Those massive investments draw very significant investments up and down the supply chain, which creates ecosystems that become self-sustaining, which creates dynamism in the economy. We are not there, but all the announced deals, and what’s being done on the ground now, should get us there in that timeframe.

The bill passes late in 2022; you’re hired in the months following. By 2023, what are you doing day to day?

Mike: The Secretary said, on my first day of work — at the White House podium — we were going to put out our Notice of Funding Opportunity (NOFO) in six months. A NOFO is how you describe what the application’s going to look like, how you’re going to evaluate it, how you’re going to get your deals done — “Here’s what we want companies to do.”

So those early days are figuring out, “How is this thing going to work?” We put out our Vision for Success.

Mike: It’s the basic architecture that you then have to fill out. As you’re designing the big picture, you begin to think through the small picture. We were doing a lot of resource planning. Todd, you remember those early meetings with the Secretary?

Todd: “How many people do we need?”

Mike: “Are we going to be ready? When are the applications going to come in?” Trying to project that out. Once the NOFO was out there in February of 2023, we wanted to be ready for contact.

The funny thing was, it took companies longer to apply. There was this weird period over that summer of 2023 where we were waiting. There’s plenty to do in terms of standing up the program and hiring the team. But it wasn’t until late summer or fall of 2023 that we were actively evaluating and negotiating.

That’s because a company like TSMC is going to take its time figuring out how to angle for $7 billion in government incentives?

Todd: We control when we put our funding opportunity out and the rules of the road. We don’t control how fast someone responds. We set the process up so that these leading-edge companies could apply quicker than others, because we thought they were going to be ready to go. I think we got Intel’s last application in September 2023 — six months after we put out the NOFO. You can’t control these things.

Sara: It was a little bit of a blessing, because by the time we hit June, we were at 100 people and we were reasonably ready to rock and roll.

The development of the NOFO is the thing you negotiate with the interagency. That first six months — from August to January — there were five official employees, between 0–30 detailees, and negotiations with the interagency about what should be in and out.

Mike: Six months to write a NOFO means three months to write a NOFO and three months of interagency negotiation.

We’ve talked about the interagency a bunch over the last two months on Statecraft — with Judd Devermont, who was on the National Security Council (NSC), and Dean Ball, formerly of the Office of Science and Technology Policy (OSTP). Were you all in the room with folks from this panoply of agencies? What were they pushing you on?

Mike: The White House set up some governance around the interagency that was hugely helpful. There was a CHIPS Coordinator that operated at the deputies level: Ronnie Chatterji [who spoke to Statecraft a year ago] and then Ryan Harper. The Coordinator was reporting into all the relevant principals: the Chief of Staff, the National Economic Council, NSC, and OSTP. We had a node of coordination.

Still, the interagency is a lot. You write a NOFO and send it to the Office of Information and Regulatory Affairs. Your NOFO goes out, not only to every agency with a potential interest, but to every White House office that interacts with those agencies. For every subject area — national security, cyber, environmental — you’ll have multiple sources of input, which might not always align.

What you’re sending around to the interagency — is this a Word doc that everyone’s adding their comments on?

Sara: That’s right. Then you’re responsible for responding to everything.

Mike: NASA wanted us to make clear that we’d fund semiconductor investments both on Earth and in space. We were able to say, “The statute requires it to be in America, which is Earth.” The way to move quickly is to accept comments. But if you accept every comment, you lose the thread on what you’re trying to achieve.

Sara: We didn’t have to write a NOFO. The NOFO required us to go through the interagency process in that more fulsome and traditional way. It was a choice that offered us structure, and protection from critiques that we were doing it in isolation. But it added time to the work.

Todd: Early on, we faced a bunch of criticism about “Everything-Bagel Liberalism.” Part of that is trying to find the balance between moving quickly and resolving interagency issues — and getting everything perfect. We had designed this in a way that allowed us to have a much more holistic approach [to evaluating applications]. We felt we could accept some of the comments from a bunch of the interagencies, move fast, and still have some flexibility as we made decisions.

For the first six months, it was all about getting ourselves up and running, and putting rules of the road out for those who were going to apply. The next six months was about starting to engage out in the world with potential applicants, and pushing them on what we would like to see, until we finally get those applications in, and start to evaluate them.

Phase three is the Preliminary Memorandum of Terms (PMT) stage. “Now we’ve got all these applications, how do we figure out how to enter into agreements on what these deals will look like, on a preliminary basis?” That’s a massive puzzle that you’re trying to put together, and use your $39 billion in an effective way. That was another six or so months.

The final stage is, once you have these PMTs, getting to legally binding agreements. That was a very tough process that got us to, at the end of the Biden administration, this $34 billion of deals.

You brought up the “Everything-Bagel Liberalism” critique…

Mike: Todd brought it up, just to be clear. Thanks, Todd.

This was a phrase that Ezra Klein originally used — the idea that the Biden administration wasn’t picking specific targets and then building programs around them. The CHIPS program was one of his examples. A component of CHIPS that came in for a lot of heat was that companies with large awards had to have a plan for childcare in their site. That’s one example of a broader critique of the Biden administration, and it’s a critique I’m sympathetic to.

I know all three of you have thoughts about that.

Mike: The core thing that the criticism missed was that we had set up an evaluation and negotiation process that was iterative and holistic. Our North Star was economic and national security. We were very clear about what that meant in the Vision for Success. For childcare, the statute required that we asked for a workforce plan.

Congress made you do that.

Mike: I think that’s fully appropriate. Workforce was a hugely important priority. We wanted to see childcare as part of that workforce plan. In terms of programmatic impact, I think we ended up getting some positive commitments from applicants. But it was not a sticking point.

It didn’t slow down the process?

Mike: Definitely not childcare. I spent hundreds of hours negotiating with these companies. I probably spent 30 minutes talking about childcare.

We thought that childcare, and workforce in general, was an important part of meeting our overall goals. Where we ran into problems is where there’s an institutional actor outside of the Department of Commerce that controls your fate and that may have different incentives. Those can be real choke points.

Todd: If you’re doing industrial policy like this, where the main thing is national security, that needs to be the priority. It is hard to stop other priorities from inundating you when there’s a lot of money around. We didn’t get it perfectly right. If we’re successful, CHIPS will drive jobs, but in my mind, it’s not a jobs program.

Micron, when this was all going about, was building a big childcare facility in Boise, because they recognized that in order to get people to come and work for them, they needed to provide childcare. If you go to Taiwan or Korea, all of these ecosystems have massive childcare facilities, because it is all about talent. If you talk to the companies about the biggest risk to this program, workforce is going to be in the top one or two.

I want to hear where you made hard calls in the interagency to keep stuff off the menu.

Mike: We had a fair amount of friction with applicants on requirements related to national security: cybersecurity, operational security, and the use of Chinese equipment. We were making some discretionary calls around what expectations we wanted to set, and they required a fair amount of negotiation. This is all on top of the national security requirements of the CHIPS Act, which constrained, for example, investment in manufacturing facilities in China. There were real trade-offs and healthy tension within our teams.

Sara: Something that we rejected out of the interagency process: we were pushed pretty hard to say what recipients were going to have to report to us upfront, as is normally required in a NOFO. We were able to say, “We are not ready for that. We have so much more to figure out here.” It ended up taking us two years to figure out exactly what that reporting was going to look like — how to make it not overly burdensome, and give us the data that we needed.

Mike: I remember you calling me and explaining, “With the Paperwork Reduction Act (PRA), we’re going to have to publish our reporting requirements for companies in the next few weeks.” My reaction was, “No, we’re not,” because we knew these were commercial things: we were going to have to negotiate it. Whatever we were going to have to do — emergency PRA exemptions, whatever pain we were going to have to take with the Office of Management and Budget — was necessary.

Why is that such a big deal?

Sara: Designing what people are going to have to report is always a big deal in government. There’s an inherent tension between getting everything the program might usefully use and anything that a recipient might want to do — it’s a huge burden. As somebody who’s been a recipient of federal dollars, all that reporting stuff might make sense to the federal agency. It makes zero sense to the people who have to do the reporting.

PRA makes it so that you have to pretend you can understand the trade-offs between the burden and the benefit in advance. [Statecraft has covered the Paperwork Reduction Act’s failings.] In this context, it’s even more complicated, because there are different deals, actors, and operating models on their side. Not to mention that we have to build the reporting system to ingest all this information.

Todd: This is not an interagency thing, but there were lots of internal debates about stock buybacks. These were a big thing for certain parties on the left.

People opposed companies buying back their own stock if they received CHIPS funds.

Todd: Obviously none of our money could be used to do stock buybacks. That was in the statute. The question was, “Can companies do stock buybacks at all?” You’re trying to incent the private sector. 5%-15% of the total money was coming from our office. The majority was being put in by these companies — who have to go out and talk to investors every single day. What you’re focused on is getting these companies to make significant investments in the US. But if there’s money after that, allowing them to give some back to shareholders is not crazy. Trying to focus on, “What are we trying to do?” and then allow companies to engage with the investors that they need — it was very complicated.

Let’s talk about Davis-Bacon, a law that requires federally-funded public works contractors to pay construction labor the local prevailing wage. This posed some issues?

Todd: Davis-Bacon was passed in 1931 — the Herbert Hoover administration — in an effort to create local construction worker markets. Many things about it are a bit anachronistic, but we all agree with the intent of trying to pay local construction workers the prevailing wage. The challenge is it had never been applied to something of this magnitude. There were tens of thousands of workers on a site like TSMC’s in Arizona. They come in and out, because they’re different types of contractors.

We weren’t paying for 100% — the companies were paying for a significant amount. We were trying to get people to start their work before they got their award, so we didn’t lose time. That created a retroactive issue: “What happens to all the work that was done before you got an award?” That had never been dealt with at the federal level for Davis-Bacon. That was the challenge that we, the Labor Department, and others were trying to deal with. It’s a whole administrative burden: how do you go back in time, for tens of thousands of workers, with thousands of subcontractors, and figure that out?

Mike: The industry got that it was part of the deal — it was in the statute and manageable. For fabs under construction, our strategy was to say to companies, “You’re building Fab One. We want you to build three fabs, so we’ll fund a little bit of Fab One, and then use that as negotiating leverage to get commitments for Fabs Two and Three.” But taking money on that first fab triggered this retroactivity issue. You need to look back at every contractor who’s done work on that fab and figure out if they were paid Davis-Bacon wages. That requires tracking down potentially 20,000 employees who are no longer on the site. That administrative challenge was very difficult to work through with applicants.

I’m seeing a through line with laws like the National Environmental Policy Act (NEPA), which we’ve talked a lot about on Statecraft, and Davis-Bacon. In these cases, the concrete requirement of the law — paying a little bit extra in wages — is not as burdensome as the process is. Is that right?

Mike: I think there’s probably some similarities. Both NEPA and Davis-Bacon are governed outside of the implementing agency. Davis-Bacon by the Department of Labor, NEPA ultimately ends up in a court, and a judge determines your fate, which is a terrifying thing if you’re trying to execute industrial policy.

In the Davis-Bacon case, you have a high volume of regulations and administrative case law built up over time. It’s mostly in contexts very different from semiconductor manufacturing. It’s a question of, reckoning with the existing body of administrative law in this new context.

Similarly, you’ve seen an increase over time in what NEPA expects, and that’s driven by litigation. Judges can ask for more every time. There’s case law that triggers an expectation that the implementing agency is going to do more for NEPA, and that accumulates.

Back to the CHIPS timeline. We’re in late 2023–spring 2024. You’re starting to try and get these deals done. You’re negotiating with some of the biggest companies on Earth. What’s your strategy?

Todd: PTSD is coming back. I think the most complicated period was trying to get these Preliminary Memorandum of Terms (PMTs). We put preliminary offers on the table starting around Thanksgiving of 2023. Then it took time — between November and April — to negotiate those. We had $70 billion of requests from just the leading-edge firms that were going to get some subset of the $39 billion. The expectations were way too high, so we had a lot of negotiating. You have to figure out how much you’re giving to each of them, you’re negotiating with all of them at the same time, and trying to get that puzzle to come into place.

Leading-edge companies between them asked for something like $75 billion. You ended up giving them ~$25 billion. In the process of negotiation, you cut them down two-thirds?

Todd: That’s correct. And everybody focuses on the big numbers, but there’s also a whole series of, “When are we going to get that money? On what milestones? How much comes early versus later?” They’re the most valuable and sophisticated companies in the world for a reason.

These companies are hard negotiators?

Todd: They’re tough negotiators — and there’s a reason for the CHIPS Act. TSMC has a credible option to do more fabs in Taiwan. Micron has fabs in Singapore, Taiwan, and Japan. They’re making a real choice: “What is the amount of money that will make it positive for us to put all this capital?”

Sara: By the time we got those PMTs on the table, everyone was exhausted. We had done so much process-design work — every single thing from accepting the applications to how the Investment Committee was going to work. If you asked us a year later, I don’t think we realized how much more intense it could have gotten.

You’re sprinting to stand up this thing, and at the end of the sprint, you start negotiating with some of the biggest sharks in the world.

Mike: Some of them were sharks. Maybe not all.

Sara: When you are standing up a program from scratch, you have to design every single process you run. That is a gift: you get to choose and learn from all your prior experiences. And it’s real hard. The minute the process you’re focused on is stable, you’re onto the next thing. We were designing, testing, implementing, and then just repping out processes, from January 2023 through January 2025. We did not stop.

Mike: Our first PMTs were two small deals. We announced BAE, a small defense manufacturer, for $35 million, and Microchip was $162 million. After we announced BAE, it felt like this Herculean thing. We had an all-staff meeting right after, and I said, “Congratulations. We just need to do 1,400 more, and we’ll be done with the program.”

The core governance of our investment process was the Investment Committee. It had to evaluate the economic and national security benefits, sign off on the merit review — but another important function was figuring out the right size of the award. We had created a framework for sizing awards based on the rate of return of the project. The basic idea was, “We need to make this project make sense for you economically — to make your hurdle rate. How much of our money is going to be necessary?” That is as much art as science.

For those early deals, we were spending hours in the Investment Committee, trying to figure out how to make this internal rate of return analysis work. A lot of people on the team were terrified. People on Todd’s team who we were torturing with all our questions were like, “If you’re asking about this for the small deals, how are we going to do the big deals?” But every time we went through something new, we had to build the muscle. If it wasn’t working well, we had to go back, reiterate, and do new process design — to create as much efficiency as possible, while maintaining the standard we had set for ourselves in terms of analytical rigor.

Todd: This was modeled as a world-class investment firm, where the returns were to national and economic security. Me, with an investment background; others on the Investment Committee that come from the semiconductor industry and had deep technical expertise; Mike with his background in government — trying to get everybody around a table to understand what a good investment looked like. When you’re at an organization, you don’t even recognize the norms and processes that are in place. We were putting all that in place.

You came from a professional environment where these are all fundamental norms. You had to rebuild this for a bunch of folks who have no experience in the boardroom?

Todd: The core investment team all had experience there. The goal of any investment decision-making is, “How do you get people with diverse expertise around a table, where everybody’s incented to voice their views, and make good decisions?” That’s what we were trying to embed. We’d hired many people who were working at the world’s greatest investment firms — Blackstone, Goldman Sachs, VC firms. We had a whole group that had semiconductor experience, that were chief technology officers at GlobalFoundries, worked at Intel, or in the industry for 30 years. Mixing that with the relevant expertise in national security, workforce, and environmental was the challenge and, ultimately, the magic.

BAE and Microchip are the two “small” deals you land. Then TSMC is the first big one?

Mike: I think we announced Intel first, TSMC shortly after, and then Samsung and Micron. Those are our big four.

Mike, you and I were talking recently about you flying to Taiwan for the negotiations with TSMC.

Mike: We had signed our preliminary term sheets with the big four. We had negotiations ongoing with a set of smaller, but strategically important deals — companies like Amkor, SK Hynix, Entegris, Texas Instruments, GlobalFoundries, Legacy.

To get these term sheets to a final award, we knew we’d have to negotiate a lot of the details around policy commitments, like workforce and environmental. There was this general sense that the lawyers on both sides were going to figure out the detailed terms. But when we came up with our draft award documents and sent them out to market, the initial reaction was very negative. Not on the policy stuff, but on, “What is the core legal relationship between the United States government and these companies?”

What were these companies upset about?

Mike: It was conditions precedent, representations, warranties, and covenants…

Todd: It’s all about who bears the risk: the US government, or the company?

Mike: “When can we stop funding? When can we call funding back? How much discretion does the government have? When can the government or the company terminate the agreement?” The default in federal programs is, “Give the government a huge amount of discretion.” But that is not something that these companies were used to seeing when dealing with Singapore or Japan. It became something we had to manage very aggressively.

They would say, “We’re nervous. This agreement is going to last for 10-plus years. Who’s going to be at the CHIPS Program Office in 10 years?” They were making decisions on billions of dollars of investment, based on how much money they were getting. They wanted certainty that, “If we hold up our end of the bargain, we’re going to get that money.” It was a very real and fair discussion.

You hadn’t expected to have to do that — you thought this is primarily the lawyers’ job?

Mike: We had hoped that it could be worked out in the legal details. Very quickly, Todd and I had to become personally involved in understanding the structure of the agreement, where the pain points were, and navigating towards a solution. We spent days in a conference room in TSMC headquarters working through these legal details. I remember one of our lawyers explaining to them what the Fly America Act is. I’m sitting there thinking, “What is the Fly America Act?” It’s a cross-cutting statute that says, “If you receive federal dollars, you can’t support travel that isn’t on US airlines.” We’re explaining that to them, and they’re saying, “How can this work?”

You’re kidding? They have to document that when they fly to the US, they’re not flying on foreign flags?

Mike: For the Fly America Act, it ended up being, “If you use our dollars to do it.” It’s just an example of what you’re wading through within our legal construct. We did a week in Taiwan, then the TSMC team came and did a week in DC. Everyone was tired and wanted to be done, and we were grinding through the details. To keep morale up, we worked with Ryan Harper to do bowling at the White House bowling alley with the TSMC group. It was great for the deal and our relationship with them.

But I remember asking their key lawyer, “How does our contract compare to Japan’s contract?” He goes, “We don’t have a contract with Japan. We just submit evidence of our investment, and they give us the money.” That probably undersells the complexity of Japan’s system. But it was such a stark indication of the difference between our system of government and law, and other countries.

Todd: In June 2024, nobody on the team thought we were going to get all these deals done, because it felt like the system was clogged up. Mike and I felt we had to get involved. If we could land TSMC, and say, “The most important company in the semiconductor industry has agreed to this,” we could then move much more rapidly with others. That ended up being true, but it took longer.

Take Intel, for example. We sent the first [draft] PMT on Thanksgiving of 2023. I flew out on the Monday after Thanksgiving to Santa Clara to meet with their CEO to talk about it. We announced the Intel PMT on March 20th — so four months to finalize, negotiate, and get all that in. We thought that once you had these PMTs in place, the next stage would be easier. Lots of things happened post-PMT, including Intel’s August results announcements, where their stock went down by a significant amount — they ultimately fired their CEO. This space between, “You have an announced agreement and everybody’s excited because we think we’re close to the end,” and getting a final agreement in place, was very complicated.

Mike: It required a huge amount of governance within the team, because we had to figure out how to make quick decisions on what the companies were asking for. Sara stood up internal governance committees so that she could resolve issues, or we could escalate them and design together. You might be spending eight hours with a company in an office. You spend three hours negotiating, then maybe you break up for an hour and quickly call the general counsel, or come to a decision internally, and come back in the room and say, “We’re good to go with X. Can you deal with that?” They would often say, “We’re still waiting for legal to get back to us,” or, “Our head of finance is on vacation.” We were feeling so much urgency, and we had created a pretty nimble structure — it was the bureaucracy of the companies that was sometimes holding us up.

What’s the structure that let you move faster?

Sara: We had office hours, and a steering committee to litigate between the teams: what we would be looking for in due diligence, what our terms in that first iteration of the term sheet would be. Once you create some structure and do a couple of reps, you have precedent for some decisions.

Todd: Two times a week we would get together and go through our priorities: where we were, what needed to happen. You need to have a willingness to make decisions quickly, then a structure that says, “What do we have to do this week?” Then later in the week, “What haven’t we done?” Creating the battle rhythm in any organization to make decisions quickly is critical.

Mike: That started with the Secretary. When we got to this phase, it was every Monday morning with her. We would print out our tracker, deal by deal, and talk about where we are.

The other thing is we had a hugely constructive and regular dialogue with the General Counsel of the Commerce Department. She always knew exactly where we were in every deal, what the pain points were. There would be times where we would have a company in the building. If we reached an impasse, we’d call her up and say, “We need you down here at noon. Can you make it work?” She’d come in and negotiate. Maybe the Secretary would stop by, not to negotiate, but to give a little pep talk.

What I’m hearing is that some of the things that were reported as roadblocks, like childcare requirements, weren’t. What slowed you down was that figuring out complicated financial deals takes time. In practice, where did the slowdown happen?

Todd: In the PMT stage, the commercial deal — “How much? Over what time period? What are the milestones?” — took by far the longest period of time. The next [source of delay] is the contract. That’s not specific, like Fly America — it’s typical contract negotiation in almost any large private-sector deal. You’re always trying to find, “Who’s got the risk?” and negotiate that. The government is used to having all the power. But these are big organizations that are trying to find a more reasonable — “Where are you on the fairway?”

Most of the other things that are talked about — workforce or childcare — did not take a lot. For some of the companies, there were specific national security things that we cared about. Those were important, but some took a lot of time. Then there’s the classic things like NEPA and Davis-Bacon, that took a bunch of time, discussion, and our own understanding. But those were one-offs dependent on individual company situations.

Sara: To the extent that there was a niche thing that was holding anything up — we wouldn’t have let it. We would have reorganized ourselves in service of the highest-priority things, if something in the panoply of requirements had threatened to derail the awards.

Mike: I think that gets to the core point, which is: “Where does discretion lie? Are there other institutional actors who can hold you up?” For Davis-Bacon, we did have some real challenges. NEPA, we ended up with a statutory carve-out for most of our projects. We had already posted public Environmental Assessments. There were some clear signals that litigation might be pending, and Congress intervened.

Todd: While it ended up not being that critical, because of Congress intervening, we knew that NEPA was going to be a big challenge. We set ourselves up to be able to serve that. We had an incredible environmental team that was very proactive, we asked for information, and worked with these teams early. NEPA ended up being legislated away — but even if they hadn’t, the way we got ahead of it — there’s probably some lessons there.

Sara: I think that is the core lesson. We can do a lot of complaining about how hard it is. Maybe Congress is going to come to the rescue — and also you’ve got to just get ready to do the work. In a lot of cases, we did a lot of extra work that maybe we didn’t need to, because it was a better use of our time to get to grinding than it would’ve been to fight the thing that was frustrating. That was certainly the case with NEPA. We would have done the work, and done it as well as we possibly could have.

Todd: I had no idea what Davis-Bacon was, and we didn’t realize that that was going to be an issue. We would’ve set ourselves up differently and tried to get ahead of it — we ended up being behind the ball there.

The way that we set up the decision-making process — we keep saying it was holistic, and we had a lot of flexibility. Most grant programs have this scoring mechanism — three people score it, average it out, and let the chips fall where they may. We didn’t have that. We had a much more holistic process, where we were clear that we had these six categories. The first category, national and economic security, was going to get the most importance in any decision-making. But there were no formal scores or anything like that.

While we had a lot of things in our application that said, “We need to see your workforce plan and your childcare plan,” that didn’t mean that there had to be something specific on that. We could make some decisions on, “This is so important to national security that these issues don’t matter as much.” Our judgment, to the Everything-Bagel point, was, we are comfortable letting people give us their childcare, environmental, and workforce plans, because we’re not saying, “And you must do this.” We’re saying, “We’re going to take that into consideration in a holistic way and make determinations.” We had the flexibility to decide what was in the final award documentation.

If one of these big companies that you felt, for national security reasons, we had to strike a deal with, hadn’t made the cut on this metric, you had ways to make sure you could still find a grant?

Mike: They needed to meet a minimum threshold for each of our six categories. But beyond that, we had meaningful discretion. That’s something I thought about while we were designing the process, because if we had done the default — six points for this, eight points for that — the comfort in that is, by getting rid of administrative discretion, you are getting rid of oversight risk.

You’re being fair.

Mike: We’re being exactly fair, we’re doing what we said. Except I had this inverse intuition, which is, if TSMC had ended up not meeting a threshold, for some reason that we didn’t foresee, because this was so complicated and designing evaluations up front is so hard — figuring out how to change the process so that it was above the threshold — that’s not a comfortable position to be in. I ended up with a good relationship with the lead lawyer on this — we would say, “We need to design this process based on how we’re actually going to do it.”

Todd: Typically, there’s not a lot of proactive engagement with the applicants. Most grant programs are set up where — put in your application, maybe we’ll set up one or two conversations — so that everybody’s treated the same way. We wanted to shape what was coming in. We didn’t want to just do the things that the companies wanted to do. We wanted to push them to do different things. We hired a team of people that could engage with these companies in a sophisticated way. There’s a little bit of risk in it, but we could regularly engage, push back, say, “You should do more here, because that would be more powerful from a national security perspective.” If you want to make sure you have zero oversight risk, you would have gone a different direction, but you might also not get as much done.

I think most people think the Inspector General roots out waste, fraud, and abuse; congressional oversight stops you guys from cheating — Todd is rubbing his eyes and Sara is shaking her head. You have this visceral reaction to that claim. [Sara discussed her experience with the IG at length here.]

Sara: I am fully supportive of there being inspectors general (IGs), the Government Accountability Office, and congressional oversight. It comes down to the execution. I have lived through experiences where they get it wrong — it’s so easy to get it wrong. In particular, when we’re conditioned to say, “The way the government’s supposed to operate is fully-documented, fully transparent, fully fair in everything it does.” It means that you have to do all of the things that we had the luxury of being thoughtful about at the outset: write everything down, then do it exactly that way. If you don’t, there’s a million threads to pull on. IGs get congressional appropriation, and they have to deliver work.

They have an incentive to have a big headline. One of the ways in which this has all gotten unhelpful, in the typical government experience, is we have so much fear of oversight. Having a constructive relationship with your overseers is an important thing that lots of programs don’t ever experience or try.

We tried to do that, and it makes all the difference in the world, because then you at least start to level the playing field in terms of the information-asymmetry problem. They don’t know all the context for the program you’re operating. We tried to anticipate, “What are all the places where, in our process design, it’s going to be important that we write down why we made this choice?” We erred on the side of more documentation than we needed.

Mike: There are two pathologies that emerge because of concerns about oversight risk. One is that you design a process to be immune from criticism. Our mantra was, “The biggest risk is that we don’t get this done.” If we’ve successfully implemented the program, and a year and a half from now there’s a negative IG report on the process, I can live with that. That doesn’t mean we’re not going to engage proactively and have documentation, but that is a trade-off I’m willing to take if, a few years from now, fabs are being built and chips are being produced.

The second is a paralysis around risk of bad outcomes. You do one deal that goes poorly, and that ends up driving a narrative about the program, headline risk, and congressional oversight. You want to have all the analytical rigor deal by deal. But we thought as much about risk of omission as risk of commission, and we thought about risk at the portfolio level, not just the deal level.

You had this portfolio of companies, and you weren’t expecting that every single investment would be a massive success?

Todd: Inside government, you always hear about “Solyndra risk” — something goes really sideways. A knee-jerk reaction is, “We don’t want another Solyndra.” I think that is a very wrong way to frame things. If we’re eliminating risk from the portfolio — we’re not doing things that have no risk of failure — then we’re not doing anything that the private market won’t do themselves. We need to take educated bets, and do good underwriting and analysis.

We had this robust debate with Secretary Raimondo about, “We need to make sure the world understands that we’re trying to incent something, and not everything’s going to be successful. But it’s okay if some of our investments don’t go as well as others if we’re accomplishing the ultimate goal.”

In leading-edge logic, we gave awards to all three — Samsung, Intel, and TSMC. What we said up front is, “We need at least two ecosystems in this country to be successful at leading-edge.” The market’s going to sort that out, and hopefully all three will be, but at least we know we’re on target for getting that 20%.

Sara, will you tell me about some of the challenges with the IGs?

Sara: We were wildly successful at hiring very quickly. Our average time to hire was something like 67 days at the end of 2023, after the big surge that we did. The benchmark for the government is 80 days, and I don’t know that agencies have ever actually achieved that. It’s more like 101 days, the last time I looked at the Office of Personnel Management (OPM) Dashboard. We hired more people than we expected to be able to in that first nine-month sprint. The whole time I’m there, I am anticipating when the first call from the IG is going to come. We get the first one, and it’s about hiring, which makes sense.

Hiring’s always a big risk. You could get a bunch of money from Congress, and if you don’t have the people in place to deliver the program, you’re going to be behind. We felt pretty confident going into that. We handed over all the data and answered all their questions. We get the draft report back, and the headline is, “CHIPS succeeded in hiring all the people that they wanted to hire, they exceeded their hiring goals, but they did not develop a comprehensive workforce plan.”

What’s a comprehensive workforce plan?

Sara: I don’t even know — I’ve been in government for a long time. This is a recommendation from OPM that you do this multi-stage planning document, which makes sense in some abstract way.

What did they want you to have developed?

Sara: Literally the number of positions — in government HR language, “What are the functions and capabilities that you need? Why? How many people in each thing and over what time?” I’m sure there’s all kinds of stuff about estimating attrition and whatever to come up with some very formulaic answer for what you should then go hire for.

I have actually never conducted one of these things. I think usually they are for an entire agency. They were applying this standard to us. I’m sure there’s also history with the work that they had already done to look at the National Institute of Standards and Technology and Commerce in the past. They’re bringing some of that baggage to it. But that is the headline, and it takes up two thirds more real estate than the fact that we succeeded.

That you hired ahead of schedule?

Sara: Absolutely absurd. We had hired ahead of schedule, faster than the benchmark, and had a highly efficient process.

Mike: Not to mention, we’d built an unbelievable team. They didn’t even get into that. The mindset that one has, to provide that feedback — there’s such a delta between that process bureaucracy and what it took to build the team.

There were some notions about what the org would look like. I thought I needed to think about it. The Secretary said, “You have two weeks.” I met with her two weeks later. I laid out a vision for what the organization would look like. I’d say, “We’re going to have an investment team, a strategy team, ops, risk, legal, external affairs. We need to find all-star people to lead these teams.” Todd was going to lead investments, Sara was going to lead ops and be chief of staff. “Find those people.”

When Todd took over investments, she was like, “Todd, what do you need?” It was that level of urgency, reporting weekly to the Secretary on how the team was being built. The Secretary designated her most senior person within the Secretary’s office at CHIPS to work full-time on supporting recruitment.

Todd: Her message was not, “I want to hold you accountable.” It was, “Tell me where I can be helpful.”

Mike: She’s very charming. You get her in the room with someone, and she would always close.

Sara: The IG asked us, “If you didn’t workforce plan, how did you decide? Where are your planning documents?” I said, “We got the leaders of each of the organizations in, and we said, ‘Run and find the best people to do the job.’” You could trust that the humans that you put in the seat had the right experience to design this. But that almost struck them as foreign. They criticized it in the report.

I do want to hear more about how you did hire, because you hired a lot of top talent with the capability to execute these deals — talent that usually you cannot get into the federal government.

Todd: We can attract these people to government. I just don’t think we have tried that much.

Sara: We had ample administrative funding and no real Full-Time Equivalent cap — we could hire the number of people that we needed. In the CHIPS Act itself, we had an authority to hire up to 25 people with higher salaries — more than Senior Executive Service roles. It’s nothing like people are making on Wall Street, but it is significantly more than most civil servants make. We also asked for Direct Hire and Excepted Service authority from OPM. They give you an easier, faster process to get folks in the door, and one that gives you more discretion in making your selections.

One thing that is worth repeating — Statecraft recently discussed it with Judge Glock — is that most people in the federal government can’t identify a talented person and say, “We’d like to hire you.”

Sara: That’s correct. In my 16 years in government, I don’t think I have ever had the benefit of having an Excepted Service or Direct Hire slot. It is an enormous advantage. It has a lot to do with our average time to hire, because we relied on those slots, in the first instance, for nearly all of our positions.

On recruiting private-sector folks to government — it is a learning curve for everybody. But having the diversity — people who are not typically in government and people who’ve spent some time there — was pretty magical, and hugely important to our success and credibility.

Todd: We needed different types of people. We were going to have these small deal teams, similar to consulting or investment firms, that would be the Intel or the TSMC team. That drove the kind of people you needed. We needed a senior person that had the experience, the gray hair, and could stand side-by-side with the CEO of Intel. And we needed some mid-level and younger people who were strong analytically, strategically, and financially.

There are a ton of people out there who have a strong desire to work in government and give back — and believe in the mission. We did get a number of close-to or at-retirement people — 30 years at Goldman Sachs, or Lynelle, who worked in the industry for decades and was retired. We got a number of them to come back out of retirement, which was amazing. I think the most impressive thing was to get these young and mid-level people — who were climbing the ladder in the private sector and making real money — to take a risk and come into government. They knew they liked the mission, and they wanted to do something where they could use their skills.

If you now look, the vast majority of those people are back in the private sector doing cool things. Their career trajectories have taken off. They all are going to look back on this period of time as unique and transformational — and they’re back. If more people would feel like, “I could go do something in government for a handful of years and then go back into the private sector,” that would create more dynamism.

Sara: It is also self-reinforcing. Todd, you and Sara being recruiters, and then your senior people being recruiters — that sends a signal to these younger people. “You have real serious people who have experience that is relevant to me.” I imagine that that has to have played a real role.

Mike: Todd and I went on Odd Lots in April ‘23, and we probably had five or ten people who listened to that, thought, “That sounds cool,” and ended up working on our team.

It would be a mistake to say, “We brought in this private-sector talent, and that was the magic.” We also attracted unbelievable government talent. One of the cool things was watching the mutual respect emerge, as people learned to work together. Government lawyers talking to Taiwan at 11pm every night for a couple of weeks to get a deal done — and then being up in the morning to turn the docs. It was incredibly arduous. It is extraordinary what people will do if they feel connected to the mission.

One of the hard things about procedural barriers — whether that’s an internal process design or an external barrier — is you feel it immediately in the team’s morale, because the teams are saying, “We’re trying to do something important. Can’t you solve this for me?”

Over the coming year, we’re discussing many of the lessons you learned in Factory Settings. I think this is a good lesson to end on. You spent an inordinate amount of time actively hiring, and trying to get senior politicals engaged in the hiring. It’s not just that you had on-paper hiring authority from Congress to make these discretionary calls — you have to go and use it.

Todd: Mike used to say, “We need to view the bureaucracy as our dance partner.” It’s not that we need legislation, or everything needs to fundamentally change. We need to work with some of the rules that are in place as well. There’s things that can happen tomorrow without any changes in government. That’s a lot of what we did. We figured out ways to take days out of onboarding people. There are a million different things, but they all add up.

The reason we’re doing Factory Settings — we were having dinner at Mike’s house one night, and he asked me whether I thought we were going to get this done. My comment was, “Yes, but nothing about it seems repeatable or sustainable.” Our goal is to try to impart some of those lessons so that it can be repeatable — it’s not just a bunch of people doing 24/7 for two and a half years to break through everything. Rather, there’s some structure around it that is repeatable and transformational over time.

If you get that grant, your university might get an extra $500,000. That money is called “indirect costs,” but think of it as overhead: that money goes to lab space, to shared equipment, and so on.

This is the system we’ve used to fund American research infrastructure for more than 60 years. But earlier this year, the Trump administration proposed capping these payments at just 15% of direct costs, way lower than current indirect cost rates. There are legal questions about whether the admin can do that. But if it does, it would force universities to fundamentally rethink how they do science.

The indirect costs system is pretty opaque from the outside. Is the admin right to try and slash these indirect costs? Where does all that money go? And if we want to change how we fund research overhead, what are the alternatives? How do you design a research system to incentivize the research you actually wanna see in the world?

I’m joined today by Pierre Azoulay1 from MIT Sloan and Dan Gross from Duke’s Fuqua School of Business. Together with Bhaven Sampat at Johns Hopkins, they conducted the first comprehensive empirical study of how indirect costs actually work. Earlier this year, I worked with them to write up that study as a more accessible policy brief for IFP.

They’ve assembled data on over 350 research institutions, and they found some striking results. While negotiated rates often exceed 50-60%, universities actually receive much less, due to built-in caps and exclusions.

Moreover, the institutions that would be hit hardest by proposed cuts are those whose research most often leads to new drugs and commercial breakthroughs.

Thanks to Katerina Barton, Harry Fletcher-Wood, and Inder Lohla for their help with this episode, to Matt Esche and Caleb Watney for their work on the graphs, and to Beez for her help translating this topic to a general audience.

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Let’s say I’m a researcher at a university and I apply for a federal grant. I’m looking at cancer cells in mice. It will cost me $1 million to do that research — to pay grad students, to buy mice and test tubes.

I apply for a grant from the National Institutes of Health, or NIH. Where do indirect costs come in?

Dan Gross: Research generally incurs two categories of costs, much as business operations do.

• Direct or variable costs are typically project-specific; they include salaries and consumable supplies.

• Indirect or fixed costs are not as easily assigned to any particular project. [They include] things like lab space, data and computing resources, biosecurity, keeping the lights on and the buildings cooled and heated — even complying with the regulatory requirements the federal government imposes on researchers. They are the overhead costs of doing research.

Pierre Azoulay: You will use those grad students, mice, and test tubes, the direct costs. But you’re also using the lab space. You may be using a shared facility where the mice are kept and fed. Pieces of large equipment are shared by many other people to conduct experiments. So those are fixed costs from the standpoint of your research project.

Dan: Indirect Cost Recovery (ICR) is how the federal government has been paying for the fixed cost of research for the past 60 years. This has been done by paying universities institution-specific fixed percentages on top of the direct cost of the research. That’s the indirect cost rate. That rate is negotiated by institutions, typically every two to four years, supported by several hundred pages of documentation around its incurred costs over the recent funding cycle.

The idea is to compensate federally funded researchers for the investments, infrastructure, and overhead expenses related to the research they perform for the government. Without that funding, universities would have to pay those costs out of pocket and, frankly, many would not be interested or able to do the science the government is funding them to do.

Imagine I’m doing my mouse cancer science at MIT, Pierre’s parent institution. Some time in the last four years, MIT had this negotiation with the National Institutes of Health to figure out what the MIT reimbursable rate is.

But as a researcher, I don’t have to worry about what indirect costs are reimbursable. I’m all mouse research, all day.

Dan: These rates are as much of a mystery to the researchers as it is to the public. When I was junior faculty, I applied for an external grant from the National Science Foundation (NSF) — you can look up awards folks have won in the award search portal.

It doesn’t break down indirect and direct cost shares of each grant. You see the total and say, “Wow, this person got $300,000.” Then you go to write your own grant and realize you can only budget about 60% of what you thought, because the rest goes to overhead. It comes as a bit of a shock the first time you apply for grant funding.

What goes into the overhead rates? Most researchers and institutions don’t have clear visibility into that. The process is so complicated that it’s hard even for those who are experts to keep track of all the pieces.

Pierre: As an individual researcher applying for a project, you think about the direct costs of your research projects. You’re not thinking about the indirect rate. When the research administration of your institution sends the application, it’s going to apply the right rates.

So I’ve got this $1 million experiment I want to run on mouse cancer. If I get the grant, the total is $1.5 million. The university takes that .5 million for the indirect costs: the building, the massive microscope we bought last year, and a tiny bit for the janitor. Then I get my $1 million. Is that right?

Dan: Duke University has a 61% indirect cost rate. If I propose a grant to the NSF for $100,000 of direct costs — it might be for data, OpenAI API credits, research staff salaries — I would need to budget an extra $61,000 on top for ICR, bringing the total grant to $161,000.

My impression is that most federal support for research happens through project-specific grants. It’s not these massive institutional block grants. Is that right?

Pierre: By and large, there aren’t infrastructure grants in the science funding system. There are other things, such as center grants that fund groups of investigators. Sometimes those can get pretty large — the NIH grant for a major cancer center like Dana-Farber could be tens of millions of dollars per year.

Dan: In the past, US science funding agencies did provide more funding for infrastructure and the instrumentation that you need to perform research through block grants. In the 1960s, the NSF and the Department of Defense were kicking up major programs to establish new data collection efforts — observatories, radio astronomy, or the Deep Sea Drilling project the NSF ran, collecting core samples from the ocean floor around the world.

The Defense Advanced Research Projects Agency (DARPA) — back then the Advanced Research Projects Agency (ARPA) — was investing in nuclear test detection to monitor adherence to nuclear test ban treaties. Some of these were satellite observation methods for atmospheric testing. Some were seismic measurement methods for underground testing. ARPA supported the installation of a network of seismic monitors around the world. Those monitors are responsible for validating tectonic plate theory. Over the next decade, their readings mapped the tectonic plates of the earth. That large-scale investment in research infrastructure is not as common in the US research policy enterprise today.

That’s fascinating. I learned last year how modern that validation of tectonic plate theory was. Until well into my grandparents’ lifetime, we didn’t know if tectonic plates existed.

Dan: Santi, when were you born?

1997.

Dan: So I’m a good decade older than you — I was born in 1985. When we were learning tectonic plate theory in the 1990s, it seemed like something everybody had always known. It turns out that it had only been known for maybe 25 years.

So there’s this idea of federal funding for science as these massive pieces of infrastructure, like the Hubble Telescope. But although projects like that do happen, the median dollar the Feds spend on science today is for an individual grant, not installing seismic monitors all over the globe.

Dan: You applied for a grant to fund a specific project, whose contours you’ve outlined in advance, and we provided the funding to execute that project.

Pierre: You want to do some observations at the observatory in Chile, and you are going to need to buy a plane ticket — not first class, not business class, very much economy.

Let’s move to current events. In February of this year, the NIH announced it was capping indirect cost reimbursement at 15% on all grants.

What’s the administration’s argument here?

Pierre: The argument is there are cases where foundations only charge 15% overhead rate on grants — and universities acquiesce to such low rates — and the federal government is entitled to some sort of “most-favored nation” clause where no one pays less in overhead than they pay. That’s the argument in this half-a-page notice. It’s not much more elaborate than that.

The idea is, the Gates Foundation says, “We will give you a grant to do health research and we’re only going to pay 15% indirect costs.” Some universities say, “Thank you. We’ll do that.” So clearly the universities don’t need the extra indirect cost reimbursement?

Pierre: I think so.

Dan: Whether you can extrapolate from that to federal research funding is a different question, let alone if federal research was funding less research and including even less overhead. Would foundations make up some of the difference, or even continue funding as much research, if the resources provided by the federal government were lower? Those are open questions. Foundations complement federal funding, as opposed to substitute for it, and may be less interested in funding research if it’s less productive.

What are some reasons that argument might be misguided?

Pierre: First, universities don’t always say, “Yes” [to a researcher wishing to accept a grant]. At MIT, getting a grant means getting special authorization from the provost. That special authorization is not always forthcoming. The provost has a special fund, presumably funded out of the endowment, that under certain conditions they will dip into to make up for the missing overhead.

So you’ve got some research that, for whatever reason, the federal government won’t fund, and the Gates Foundation is only willing to fund it at this low rate, and the university has budgeted a little bit extra for those grants that it still wants.

Pierre: That’s my understanding. I know that if you’re going to get a grant, you’re going to have to sit in many meetings and cajole any number of administrators, and you don’t always get your way.

Second, it’s not an apples-to-apples comparison [between federal and foundation grants] because there are ways to budget an item as a direct cost in a foundation grant that the government would consider an indirect cost. So you might budget some fractional access to a facility…

Like the mouse microscope I have to use?

Pierre: Yes, or some sort of Cryo-EM machine. You end up getting more overhead through the back door.

The more fundamental way in which that approach is misguided is that the government wants its infrastructure — that it has contributed to through [past] indirect costs — to be leveraged by other funders. It’s already there, it’s been paid for, it’s sitting idle, and we can get more bang for our buck if we get those additional funders to piggyback on that investment.

Dan: That [other funders] might not be interested in funding otherwise.

Why wouldn’t they be interested in funding it otherwise? What shouldn’t the federal government say, “We’re going to pay less. If it’s important research, somebody else will pay for it.”

Dan: We’re talking about an economies-of-scale problem. These are fixed costs. The more they’re utilized, the more the costs get spread over individual research projects.

For the past several decades, the federal government has funded an order of magnitude more university research than private firms or foundations. If you look at NSF survey data, 55% of university R&D is federally funded; 6% is funded by foundations. That is an order of magnitude difference. The federal government has the scale to support and extract value for whatever its goals are for American science.

We haven’t even started to get into the administrative costs of research. That is part of the public and political discomfort with indirect-cost recovery. The idea that this is money that’s going to fund university bloat.

I should lay my cards on the table here for readers. There are a ton of problems with the American scientific enterprise as it currently exists.

But when you look at studies from a wide range of folks, it’s obvious that R&D in American universities is hugely valuable. Federal R&D dollars more than pay for themselves. I want to leave room for all critiques of the scientific ecosystem, of the universities, of individual research ideas. But at this 30,000-foot level, federal R&D dollars are well spent.

Dan: The evidence may suggest that, but that’s not where the political and public dialogue around science policy is. Again, I’m going to bring in a long arc here. In the 1950s and 1960s, it was, “We’re in a race with the Soviet Union. If we want to win this race, we’re going to have to take some risky bets.” And the US did. It was more flexible with its investments in university and industrial science, especially related to defense aims.

But over time, with the waning of these political pressures and with new budgetary pressures, the tenor shifted from, “Let’s take chances” to “Let’s make science and other parts of government more accountable.” The undercurrent of Indirect Cost Recovery policy debates has more of this accountability framing.

This comes up in this comparison to foundation rates: “Is the government overpaying?” Clearly universities are willing to accept less from foundations. It comes up in this perception that ICR is funding administrative growth that may not be productive or socially efficient. Accountability seems to be a priority in the current day.

Where are we right now [August 2025] on that 15% cap on indirect costs?

Dan: Recent changes first kicked off on February 7th, when NIH posted its supplemental guidance, that introduced a policy that the direct cost rates that it paid on its grants would be 15% to institutions of higher education. That policy was then adopted by the NSF, the DOD, and the Department of Energy. All of these have gotten held up in court by litigation from universities. Things are stuck in legal limbo. Congress has presented its point of view that, “At least for now, I’d like to keep things as they are.” But this has been an object of controversy long before the current administration even took office in January. I don’t think it’s going away.

Pierre: If I had to guess, the proposal as it first took shape is not what is going to end up being adopted. But the idea that overhead rates are an object of controversy — are too high, and need to be reformed — is going to stay relevant.

Dan: Partly that’s because it’s a complicated issue. Partly there’s not a real benchmark of what an appropriate Indirect Cost Recovery policy should be. Any way you try to fund the cost of research, you’re going to run into trade-offs. Those are complicated.

ICR does draw criticism. People think it’s bloated or lacks transparency. We would agree some of these critiques are well-founded. Yet it’s also important to remember that ICR pays for facilities and administration. It doesn’t just fund administrative costs, which is what people usually associate it with. The share of ICR that goes to administrative costs is legally capped at 26% of direct costs. That cap has been in place since 1991. Many universities have been at that cap for many years — you can see this in public records. So the idea that indirect costs are going up over time, and that that’s because of bloat at US universities, has to be incorrect, because the administrative rate has been capped for three decades.

Many of those costs are incurred in service of complying with regulations that govern research, including the cost of administering ICR to begin with. Compiling great proposals every two to four years and a new round of negotiations — all of that takes resources. Those are among the things that indirect cost funding reimburses.

Even then, universities appear to under-recover their true indirect costs of federally-sponsored research. We have examples from specific universities which have reported detailed numbers. That under-recovery means less incentive to invest in infrastructure, less capacity for innovation, fewer clinical trials. So there’s a case to be made that indirect cost funding is too low.

Pierre: The bottom line is we don’t know if there is under- or over-recovery of indirect costs. There’s an incentive for university administrators to claim there’s under-recovery. So I take that with a huge grain of salt.

Dan: It’s ambiguous what a best policy would look like, but this is all to say that, first, public understanding of this complex issue is sometimes a bit murky. Second, a path forward has to embrace the trade-offs that any particular approach to ICR presents.

From reading your paper, I got a much better sense that a ton of the administrative bloat of the modern university is responding to federal regulations on research. The average researcher reports spending almost half of their time on paperwork. Some of that is a consequence of the research or grant process; some is regulatory compliance.

The other thing, which I want to hear more on, is that research tools seem to be becoming more expensive and complex. So the microscope I’m using today is an order of magnitude more expensive than the microscope I was using in 1950. And you’ve got to recoup those costs somehow.

Pierre: Everything costs more than it used to. Research is subject to Baumol’s cost disease. There are areas where there’s been productivity gains — software has had an impact.

The stakes are high because, if we get this wrong, we’re telling researchers that they should bias the type of research they’re going to pursue and training that they’re going to undergo, with an eye to what is cheaper. If we reduce the overhead rate, we should expect research that has less fixed cost and more variable costs to gain in favor — and research that is more scale-intensive to lose favor. There’s no reason for a benevolent social planner to find that a good development. The government should be neutral with respect to the cost structure of research activities. We don’t know in advance what’s going to be more productive.

Wouldn’t a critic respond, “We’re going to fund a little bit of indirect costs, but we’re not going to subsidize stuff that takes huge amounts of overhead. If universities want to build that fancy new telescope because it’s valuable, they’ll do it.” Why is that wrong when it comes to science funding?

Pierre: There’s a grain of truth to it.

Dan: With what resources though? Who’s incentivized to invest in this infrastructure? There’s not a paid market for science. Universities can generate some licensing fees from patents that result from science. But those are meager revenue streams, realistically. There are reasons to believe that commercial firms are under-incentivized to invest in basic scientific research. Prior to 1940, the scientific enterprise was dramatically smaller because there wasn’t funding the way that there is today. The exigencies of war drew the federal government into funding research in order to win. Then it was productive enough that folks decided we should keep doing it. History and economic logic tells us that you’re not going to see as much science — especially in these fixed-cost heavy endeavors — when those resources aren’t provided by the public.

Pierre: My one possible answer to the question is, “The endowment is going to pay for it.” MIT has an endowment, but many other universities do not. What does that mean for them? The administration also wants to tax the heck out of the endowment.

This is a good opportunity to look at the empirical work you guys did in this great paper. As far as I can tell, this was one of the first real looks at what indirect costs rates look like in real life. What did you guys find?

Dan: Two decades ago, Pierre and Bhaven began collecting information on universities’ historical indirect cost rates. This is a resource that was quietly sitting on the shelf waiting for its day. That day came this past February. Bhaven and Pierre collected information on negotiated ICR rates for the past 60 years. During this project, we also collected the most recent versions of those agreements from university websites to bring the numbers up to the current day.

We pulled together data for around 350 universities and other research institutions. Together, they account for around 85% of all NIH research funding over the last 20 years.We looked at their:

• Negotiated indirect cost rates, from institutional indirect cost agreements with the government, and their;

• Effective rates [how much they actually get when you look at grant payments], using NIH grant funding data.

Negotiated cost rates have gone up. That has led to concerns that the overhead cost of research is going up — these claims that it’s funding administrative bloat. But our most important finding is that there’s a large gap between the sticker rates — the negotiated ICR rates that are visible to the public, and get floated on Twitter as examples of university exorbitance — and the rates that universities are paid in practice, at least on NIH grants; we think it’s likely the case for NSF and other agency grants too.

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An institution’s effective ICR funding rates are much, much lower than their negotiated rates and they haven’t changed much for 40 years. If you look at NIH’s annual budget, the share of grant funding that goes to indirect costs has been roughly constant at 27-28% for a long time. That implies an effective rate of around 40% over direct costs. Even though many institutions have negotiated rates of 50-70%, they usually receive 30-50%.

The difference between those negotiated rates and the effective rates seems to be due to limits and exceptions built into NIH grant rules. Those rules exclude some grants, such as training grants, from full indirect cost funding. They also exclude some direct costs from the figure used to calculate ICR rates. The implication is that institutions receive ICR payments based on a smaller portion of their incurred direct costs than typically assumed. As the negotiated direct cost falls, you see a university being paid a higher indirect cost rate off a smaller — modified — direct cost base, to recover the same amount of overhead.

Is it that the federal government is saying for more parts of the grant, “We’re not going to reimburse that as an indirect cost.”?

Dan: This is where we shift a little bit from assessment to speculation. What’s excluded from total direct costs? One thing is researcher salaries above a certain level.

What is that level? Can you give me a dollar amount?

Dan: It’s a $225,700 annual salary. There aren’t enough people being paid that on these grants for that to explain the difference, especially when you consider that research salaries are being paid to postdocs and grad students.

You’re looking around the scientists in your institution and thinking, “That’s not where the money is”?

Dan: It’s not, even if you consider Principal Investigators. If you consider postdocs and grad students, it certainly isn’t.

Dan: My best hunch is that research projects have become more capital-intensive, and only a certain level of expenditure on equipment can be included in the modified total direct cost base. I don’t have smoking gun evidence, it’s my intuition.

In the paper, there’s this fascinating chart where you show the institutions that would get hit hardest by a 15% cap tend to be those that do the most valuable medical research. Explain that on this framework. Is it that doing high-quality medical research is capital-intensive?

Pierre: We look at all the private-sector patents that build on NIH research. The more a university stands to lose under the administration policy, the more it has contributed over the past 25 years — in research the private sector found relevant in terms of pharmaceutical patents.

This is counterintuitive if your whole model of funding for science is, “Let’s cut subsidies for the stuff the private sector doesn’t care about — all this big equipment.” When you cut those subsidies, what suffers most is the stuff that the private sector likes.

Pierre: To me it makes perfect sense. This is the stuff that the private sector would not be willing to invest in on its own. But that research, having come into being, is now a very valuable input into activities that profit-minded investors find interesting and worth taking a risk on.

This is the argument for the government to fund basic research?

Pierre: That argument has been made at the macro-level forever, but the bibliometric revolution of the past 15 years allows you to look at this at the nano-level. Recently I’ve been able to look at the history of Ozempic. The main patent cites zero publicly-funded research, but it cites a bunch of patents, including patents taken up by academics. Those cite the foundational research performed by Joel Habener and his team at Massachusetts General Hospital in the early 1980s that elucidated the role of GLP-1 as a potential target. This grant was first awarded to Habener in 1979, was renewed every four or five years, and finally died in 2008, when he moved on to other things. Those chains are complex, but we can now validate the macro picture at this more granular level.

Dan: I do want to add one qualification which also suggests some directions for the future. There are things we still can’t see — despite Pierre’s zeal. Our projections of the consequence of a 15% rate cap are still pretty coarse. We don’t know what research might not take place. We don’t know what indirect cost categories are exposed, or how universities would reallocate. All those things are going to be difficult to project without a proper experiment.

One thing that I would’ve loved to have more visibility into is, “What is the structure of indirect costs at universities across the country? What share of paid indirect costs are going to administrative expenses? What direct cost categories are being excluded?” We would need a more transparency into the system to know the answers.

Does that information have to be proprietary? It’s part of negotiations with the federal government about how much the taxpayer will pay for overhead on these grants. Which piece is so special that it can’t be shared?

Pierre: You are talking to the wrong people here because we’re meta-scientists, so our answer is none of it should be private.

Dan: But now you have to ask the university lawyers.

What would the case from the universities be? “We can’t tell the public what we spend subsidy on”?

Pierre: My sense is that there are institutions of academia that strike most lay people as completely bizarre.

Hard to explain without context?

Pierre: People haven’t thought about it. They will find it so bizarre that they will typically jump from the odd aspect to, “That must be corruption.” University administrators are hugely attuned to that. So the natural defensive approach is to shroud it in secrecy. This way we don’t see how the sausage is made.

Dan: Transparency can be a blessing and a curse. More information supports more considered decision-making. It also opens the door to misrepresentation by critics who have their own agendas. Pierre’s right: there are some practices that to the public might look unusual — or might be familiar, but one might say, “How is that useful expense?” Even a simple thing like having an administrator who manages a faculty’s calendar might seem excessive. Many people manage their own calendars. At the same time, when you think about how someone’s time is best used, given their expertise, and heavy investment in specialized human capital, are emails, calendaring, and note-taking the right things for scientists [to be doing]? Scientists spend a large chunk of their time now administering grants. Does it make sense to outsource that and preserve the scientist’s time for more science?

When you put forward data that shows some share of federal research funding is going to fund administrative costs, at first glance it might look wasteful, yet it might still be productive. But I would be able to make a more considered judgment on a path forward if I had access to more facts, including what indirect costs look like under the hood.

One last question: in a world where you guys have the ear of the Senate, political leadership at the NIH, and maybe the universities, what would you be pushing for on indirect costs?

Pierre: I’ve come to think that this indirect cost rate is a second-best institution: terrible and yet superior to many of the alternatives. My favorite alternative would be one where there would be a flat rate applied to direct costs. That would be the average effective rate currently observed — on the order of 40%.

You’re swapping out this complicated system to — in the end — reimburse universities the same 40%.

Pierre: We know there are fixed costs. Those fixed costs need to be paid. We could have an elaborate bureaucratic apparatus to try to get it exactly right, but it’s mission impossible. So why don’t we give up on that and set a rate that’s unlikely to lead to large errors in under- or over-recovery. I’m not particularly attached to 40%. But the 15% that was contemplated seems absurdly low.

Dan: In the work we’ve done, we do lay out different approaches. The 15% rate wouldn’t fully cut out the negotiation process: to receive that, you have to document your overhead costs and demonstrate that they reached that level. In any case, it’s simplifying. It forces more cost-sharing and maybe more judicious investments by universities. But it’s also so low that it’s likely to make a significant amount of high-value, life-improving research economically unattractive.

The current system is complicated and burdensome. It might encourage investment in less productive things, particularly because universities can get it paid back through future ICR. At the same time, it provides pretty good incentives to take on expensive, high-value research on behalf of the public.

I would land on one of two alternatives. One of those is close to what Pierre said, with fixed rates, but varied by institution types: one for universities, one for medical schools, one for independent research institutions — because we do see some variation in their cost structures. We might set those rates around their historical average effective rates, since those haven’t changed for quite a long time. If you set different rates for different categories of institution, the more finely you slice the pie, the closer you end up to the current system. So that’s why I said maybe, at a very high level, four categories.

The other I could imagine is to shift more of these costs “above the line” — to adapt the system to enable more of these indirect costs to be budgeted as direct costs in grants. This isn’t always easy, but presumably some things we currently call indirect costs could be accounted for in a direct cost manner. Foundations do it a bit more than the federal government does, so that could be another path forward.

There’s no silver bullet. Our goal was to try to bring some understanding to this long-running policy debate over how to fund the indirect cost of research and what appropriate rates should be. It’s been a recurring question for several decades and now is in the hot seat again. Hopefully through this work, we’ve been able to help push that dialogue along.

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As we enter the holiday season, I thought it’d be fun to pull together a gift guide for the state capacity enthusiast in your life.

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Below, we have:

1. Books featured on Statecraft

2. Non-book recommendations from me

3. Recs from the IFP editorial team

4. Recs from everyone else on the IFP team

Enjoy! And let me know if you shop off the list.

Books featured on Statecraft

The ones whose authors we interviewed

Death Is Our Business: Russian Mercenaries and the New Era of Private Warfare, John Lechner, 2024, $15.

• John went everywhere for this one: Mali, Ukraine, Syria. The best book on the Wagner Group you’ll find.

Back from the Brink: Inside the NYPD and New York City’s Extraordinary 1990s Crime Drop, Peter Moskos, 2024, $25.

• I really loved reading this. Peter’s a gem. His other stuff’s good too.

Recoding America: Why Government Is Failing in the Digital Age and How We Can Do Better, Jennifer Pahlka, 2023, $15.

• The OG. Required reading.

Breakneck: China’s Quest to Engineer the Future, Dan Wang, 2025, $32.

• Breakneck received an appropriate amount of buzz on its way to topping the charts this fall. Run, don’t walk.

Analytic Culture in the U.S. Intelligence Community: An Ethnographic Study, Rob Johnston, 2005, $7.

• Why our spooks act the way they do.

Rebooting a Nation: The Incredible Rise of Estonia, E-Government and the Startup Revolution, Joel Burke, 2024. $26.

• We just scratched the surface in our conversation — fascinating history.

Other books recommended on Statecraft

I did a lot of reading about Russia this year, including:

• Collapse: The Fall of the Soviet Union, Vladislav M. Zubok, 2021, $25. Here’s my review of Zubok’s book.

• Imperium, Ryszard Kapuściński, 1993, $12.

• Stalin’s War: A New History of World War II, Sean McMeekin, 2021, $26.

• The Anatomy of Revolution, Crane Brinton, 1938, $15.

Next year I’m hoping to read The Russian Revolution, Richard Pipes, 1990, $6.

Other books we talked about include:

• Informing Statecraft: Intelligence for a New Century, Angelo M. Codevilla, 1992, $28.

• Plain, Honest Men: The Making of the American Constitution, Richard Beeman, 2009, $17. I published a review for July 4th. Great history.

• The Origins of Efficiency, Brian Potter, 2025, $37. Brian is a colleague, of course, and he writes Construction Physics. I think I can honestly say I’ve read Brian more closely than anyone else in the world (I’ve been his newsletter editor for several years). He’s really good at what he does.

Non-book recommendations

I have it on good authority that a certain senior White House advisor burns this candle in his office.

Offer the penitent DOGEr in your life some rare DOGE collectible cards.

Get ahold of this DVD of Heat (1995) (very good condition) for insight into the minds of the weirdest think tankers in Washington.

Recommendations from the IFP editorial team

I have two editorial colleagues at IFP, Beez and Rita, both of them with far better taste than mine. They both swear by this bag. Beez baked IFP’s contest-winning pie this year in this all-American bad boy. She also got me this notebook, which I now swear by.

Rita and I both love A Swim in the Pond in the Rain by George Saunders, a close reading of great Russian short stories. At the most recent IFP team retreat, Rita presented on Nabokov’s English translation of Pushkin’s Eugene Onegin, which is a mammoth text but purportedly rewarding; I led a short seminar drawing from Nineteen Ways of Looking at Wang Wei: How a Chinese Poem Is Translated — more of a stocking-stuffer.

Bonus: Emma Steinhobel does a lot of our design work (including every title card you see in this newsletter. She designed this groovy font (pay-what-you-want).

Recommendations from the IFP team

Macroscience head honcho Andrew Gerard recommends “some classic, actual men’s dress shoes,” like these: “Shoes that click when you walk around.” He says eBay is an underrated supplier.

• For care of these shoes, Beez recommends

  • this repair cream

  • this cleaning and polishing cloth

Tim Fist runs our emerging tech team, and provides the IFP coffee loadout:

• A subscription from SEY

• Aeropress

• TIMEMORE manual coffee grinder

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A special word from Claire, our chief of staff

In general, one area that is often overlooked in policy work is looking the look — unfortunately, it typically does not matter how good your ideas are if you show up in a crumpled t-shirt or otherwise are presenting as disheveled or overly casual. If an aspiring policy entrepreneur in your life doesn’t yet have a suit, buy them one! The best dressed young man in our office previously recommended professional menswear from Suitsupply, Spier & Mackay, and Proper Cloth. Meanwhile, the women of IFP are partial to Theory and Argent. Of course, you might want to also gift a good lint roller or steamer along with the new attire.

In addition to clothing, it might behoove your network to pay closer attention to their hair and face as well. Sunscreen is never overrated — most of the people in our office have been bullied into buying this one. The return of the Trump admin has meant a lot more time spent on hair styling for the women of DC. Bleaching your hair blonde? Treat it periodically with a bond repair, like this one from Epres. You might also benefit from a deep conditioning mask like this one. For styling and volume, the Dyson Airwrap is a classic (but please use heat protectant like this one beforehand!), and the person with the finest, flattest hair on the team swears by this mousse.

And a few words from Tim Fist, again

• A gift for the forward-deployed think tanker in your life: an NVIDIA DGX Spark desktop computer — 1 petaflop/s of FP4 AI performance to help you outwork your CCP counterpart.

• A complete rare earths metal set to start creating your own local strategic stockpile.

• For the white collar worker in your life: a GoPro with a head strap. Do your duty: start collecting the task-level data that American frontier labs need to win the AI race.

• A 15kW portable natural gas generator from Home Depot: enough power output to sustain an NVIDIA DGX B300 server at maximum power. Beat NEPA by deploying your own BTM generation facility, all in the comfort of your own backyard.

• Embrace differential technological development with this framed photo of John von Neumann. Show your dinner guests that the appropriate safeguard for dual-use technologies is a long sequence of small, correct decisions.

Municipal pension funding may not sound like the most fascinating topic, but I hope this conversation illustrates two things: First, how our pension systems work matters to all of us — whether or not we are enrolled in a municipal pension. Second, these questions go to the heart of how our cities are run, why they fail, and how they can be improved.

In the sections on Chicago, I’m drawing on coverage from sources including the Chicago Tribune, A City That Works, Illinois Policy, friend-of-Statecraft Judge Glock, the WSJ, and Austin Berg, among others. Thanks to Harry Fletcher-Wood and Katerina Barton for their judicious transcript and audio edits.

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For a printable PDF of this interview, click here:

Print this interview

Most Statecraft readers are Gen X or younger. I would hazard a guess that most are not in jobs with pensions, although a large number of readers are civil servants. Most of you readers, like me, have zero personal experience dealing with pensions, and you won’t in the future. This is just my mental model of you, the reader.

So, David, if we’re not future pensioners, why should we care how state and local governments run their pension systems?

To the extent that jurisdictions spend a lot on it, they’re not spending money on other things. When a pension system is indebted, you’re paying for services you received in the past. We’re paying, not only for our school system today, but for our older school system. That means we can invest less in today’s system, because we still have to pay off the money we effectively borrowed when we employed people in the ‘70s and didn’t save for their pensions. It has an effect on budgets; it limits what jurisdictions can otherwise buy.

A pension is just a form of deferred compensation. When you work for any employer, they pay your salary and something for retirement. People who are used to a 401(k) or a 401(k) match understand that the company might help you with retirement. State and local pensions are traditionally not “defined contribution” but defined benefit. If you work for a certain amount of time, you get some kind of annuity — a certain amount of money every year — that begins when you retire. The idea is that the employer will save money while you work, they’ll invest it, and they’ll have enough money when you retire to pay for this annuity every year.

Governments have always offered some kind of pension — there are Civil War pensions. But the modern system of state and local pensions really takes off in the 1950s, ‘60s, and particularly the ‘70s.

A couple of things happen to make it different and notable. The first one is you see public employee unions asking for pensions in negotiations. You start seeing bigger pensions offered.

The second thing is a legal change. Prior to this period, it differed by state, but pensions were called in the law a “mere gratuity.” The government offered them, but then could just not pay them if they wanted to. Then states — through constitutional amendments or judicial decisions — gave pensions the status of either contract or property. What this meant was that they couldn’t not pay them. Pensions had the same legal status as debt, and they were protected by state constitutions and the federal Constitution’s Contract Clause.

Some states went further than this and adopted the California Rule: The pension you’ve already earned is guaranteed by law, and any potential future earnings you have under your current pension policy are also guaranteed, and can’t be changed unless there’s an offsetting benefit. In a California Rule state, which includes New York, Illinois, and a bunch of other states, if you start working as a teacher aged 24, your pension policy can’t be changed until your retirement, unless it’s made better or there’s some offsetting benefit.

Normally, a person borrows money to get an asset, like a house, and governments borrow money to build a bridge. Traditional debt is limited by debt limits. State constitutions have rules governing when debt is issued. Many readers have voted in a debt election, where there’s a bond on the ballot: “Should we borrow $10 million to build a swimming pool?”

By contrast, pension debt — workers worked, but you didn’t save the money for the retirement you are legally required to pay — isn’t covered by these debt limits. In some jurisdictions, it is a particularly attractive place to hide deficits. If you’re legally required to balance your budget and you can’t, underfunding your pension system is a way to bury your fiscal imbalances, by borrowing that is not limited or regulated.

So I’m a governor, and my state legislature slashes taxes, or we promised some big new benefit, and I’m having trouble making the math work. The first place I go to try and make the accounting work is the pensions.

You underfund your pensions. You can do it in all sorts of ways. The biggest way jurisdictions have done this is say in their pension accounting that they’re going to get a big return every year. “We’re going to get 8% returns every year.” They might, but they might not.

New York just did 10.5%.

Sometimes it’s good. But because you’re legally required to pay, an economist would say you should assume the “risk-free rate of return.” If you have an absolute legal obligation to pay something, you can’t take the risk that it’s not going to be there. You’re supposed to account for only those returns that you’d get if you invested in Treasury bills. But that’s not how any jurisdiction works. There are other things you can do to hide how indebted you are, or just get yourself more indebted.

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Let’s pretend I’m the governor of New Jersey, which has poorly-funded pensions. It comes to the point where I just can’t pay our debts. I’m supposed to start paying pensions to teachers who’ve just retired. That money does not exist. What happens next?

We haven’t had a state default since the 1930s, because states have extraordinary taxing powers. They can raise the income taxes to very high rates — if they want to. That’ll cause some exit and some problems.

What it means to not be able to pay is an interesting question. Take Detroit. Legally, states can’t file for bankruptcy. Cities can. Detroit did file for bankruptcy under Chapter Nine. But at the moment it filed for bankruptcy, it wasn’t unable to make its next payment — it probably could have, if it sold City Hall. It just would’ve meant that it couldn’t make its future payments. The legal requirement for bankruptcy is insolvency, which is understood to mean not making your payments and not able to make future payments. But what that means is not obvious.

Courts, in the case of Detroit — this is interesting and weird — created an idea called service-delivery insolvency. It was first created for Stockton, California. It was a rule that said, “If your services get too bad, then we’re not going to make you pay on your debts.” What “too bad” meant in this context is not clear. They note in the case — it takes an ambulance an hour to get to you, it’s really bad. But if you are in the Upper Peninsula of Michigan, who knows how long it takes an ambulance to get to. It might take three months.

It’s hard to think of one metric of service delivery that you could apply perfectly across jurisdictions.

There are no positive rights in these state constitutions. Education’s a little different, but there is no right to a level of policing service. But what happens if you can’t pay differs by jurisdiction. States have sovereign immunity: you can’t sue them in their own courts, or federal courts, unless they allow you to. You can’t make them pay. What happens when a state defaults? Mostly, nothing — except that they have trouble borrowing for a long time. With cities, they could be forced to pay, but the state can authorize them to file for bankruptcy.

In the last few interviews I’ve done, I’ve realized that only people in the world you and I inhabit use certain phrases. “Service delivery” is one that I hear used in wonk-world to mean “services the government provides,” but I’ve never heard it in any other context.

It’s true. But also “service-delivery insolvency” — a court just created it out of whole cloth in the mid-2010s. It’s not in the law. The law says “insolvency,” but in order to understand what insolvency means, they insert this wonk-speak, which is not in the statute. It serves a purpose, but it’s just made up. There’s a wonk-to-law channel going through the judicial opinion.

Insolvency is really hard to define here. Let’s say New York has some catastrophic financial crisis. It could sell off huge amounts of property. It could reduce the number of cop cars on the streets by 95%. It’s still doing “policing.” But there’s all these toggles you could turn down before it ran out of things.

This problem emerges in these cases. The courts are struggling with it, and it’s not obvious how to handle them. I don’t think that what they’re doing is best understood as applying a legal test. They’re saying, “When are things so bad that we’re going to allow you to use bankruptcy?”

Let’s talk about your book, In a Bad State: Responding to State and Local Budget Crises. For a book about budget crises, it’s remarkably engaging.

In it, you tell a story of a world a couple years from now, where Illinois and Chicago leadership call a joint press conference and say, “We’re bankrupt. We need the feds to step in and bail us out. The pensions are completely underfunded. Teachers, police, and civil servants won’t get paid unless the feds step in.”

What would happen next?

The book sets out three possible federal responses.

1. Bailout. We’ve done it a number of times over the course of American history. A jurisdiction is on the edge of bankruptcy, and the federal government — or, with respect to a city, a state government — offers it a bunch of money. Probably the most famous fiscal crisis in American history is the first major one. The states were on the edge of bankruptcy, and Alexander Hamilton and the federal government assumed the state debts.

2. Creditor loss. The federal government could provide a legal mechanism or otherwise force the creditors to eat the loss. This is bankruptcy, but there are other tools that do this as well, that make it hard for people to recover against governments that they’ve lent to.1

3. Austerity. Enforce those contracts very aggressively and also not offer bailouts. The loser then would be the people. The jurisdiction would have to raise taxes, cut spending, and sell everything. Maybe that won’t be enough, in the case of a small local government. But Illinois has extraordinary taxing authority. This would be very costly. It would be a huge spending cut during an economic decline. In a decline, people have greater need for social welfare services. You’d be cutting those.

Over the course of American history, governments have toggled between bailout, austerity, and credit loss.

What’s the problem with bailouts? Why can’t we say “We’re going to bail you guys out,” every time?

It’s the problem of moral hazard. If we offer bailouts, everyone will get themselves into trouble, so that they get bailouts. This can operate through two channels. The traditional idea is that governors will look around and say, “They’re getting a bailout. We should also be spendthrifts and get a bailout.” The degree to which that happens is debated, because you’re making predictions across time. Does anyone say, “40 years ago New York City got a bailout. Therefore, I will get it”?

The other mechanism for that moral hazard is bond markets. Lenders can say, “When push comes to shove, they always get a bailout.” There’s a good bit of evidence that that channel works. One example is, a bunch of states got into fiscal trouble in the late 1830s. Nicholas Biddle — who, for American history buffs, was the head of the Second Bank — after the end of that bank, he’s still the head of the US Bank of Pennsylvania. He goes to London and says, “You don’t have to worry about your Pennsylvania bonds. The federal government always bails out states.” Then they didn’t.

It’s famously hard to short municipal bonds. Why can’t I say, “Chicago or Illinois are not going to pay these back,” and make money on that?

There are credit default swaps on some municipal bonds. They’re generally pretty thinly traded. There are technical reasons why an actual short, to do with the reason people like to hold them: interest on municipal bonds is tax-exempt. Changing hands would change who would gain income from them, so it means that shorting is quite difficult. That’s the broad story, but it’s just not a thing. There’s no mechanism.

If you were able to short municipal bonds…

The default rate in municipal bonds is extraordinarily low. There have been many historical instances where that’s not true. In the Great Depression, there was a huge number of defaults of municipal bonds. In the 1860s and 1870s, after the Civil War, municipal bonds were defaulting left and right. The default rate is quite low on municipal bonds: it’s in the 1% rate. The big spike involved Puerto Rican municipal bonds. So another reason these markets don’t develop is because it seems pretty unlikely.

What about Chicago and Illinois makes them the canonical example of state and municipal budget trouble?

This is a famous case — I don’t mean it’s Taylor Swift famous.

It’s the Taylor-and-Travis news of the pensions world.

Chicago has four separate pension funds. All are in dire shape:

The Chicago Municipal — the regular civil servant pension system — is one of the worst-funded in the country.

The Chicago public schools operate one of the most underfunded teacher pension plans.

Illinois has the worst-funded state pension system in the country.

No major US city has a worse credit rating than Chicago. It’s got more pension debt than 43 US states.

7 of the 10 worst-funded local pension systems in the nation are in Illinois.

How does something like that happen?

In the 1970s,  the big question was why was Chicago so fiscally well run. There’s a wonderful book by political scientist Ester Fuchs called Mayors and Money. Why did New York go bankrupt when Chicago didn’t? The answer she gives is that in New York, the political machine died, and the result was no centralizing function: they gave money to everybody. Whereas in Chicago, people were either for or against the Daley machine. That machine had an incentive not to get into a lot of fiscal trouble, because if it did, it would be punished politically.

One of the ironies is that Chicago’s fiscal troubles get a lot worse when Daley’s son is the mayor. He’s a much weaker political figure, and ends up spending more than they have across multiple dimensions. Pension debt is the biggest, but Daley also sold off parking meter revenues to balance the budget. Selling off future revenues is not debt, but it’s like debt.

All it takes to have a pension crisis is to have budget deficits forever. In Chicago’s case, they also offer rich pensions. But to have a pension debt, you don’t need to have particularly expensive pensions; You just need to not save money for them. Some jurisdictions have very expensive pensions. New York State has a pretty well-funded pension system: they have very high taxes and they pay for them.

Chicago has just not saved enough. Unlike the federal government, they can’t print money to solve their problems, and they don’t have the taxing power: people can leave Chicago — many people do.

Right now, Chicago is paying its teachers, police, and civil servants their pensions. It actually just juiced the amount it’s paying out, and the state General Assembly unanimously said, “Go ahead.” What is the problem for Chicago now?

They pay out the teachers every year. But the increasing amounts they have to, or should, pay on their pension squeezes what they can pay on everything else. That amount of money they can pay for other things shrinks every year. Eventually the piper has to get paid.

40% of the money the city of Chicago spends every year is debt and pensions. No other big city in America burns as big a chunk of its budget that way.

That’s what it actually pays. Never mind what it should pay. To amortize the debt over time, it should be paying a lot more. You are really talking about all of the money.

In theory, the state could authorize them to raise taxes. Chicago already has quite high property and sales taxes. Chicago voters turned down — I thought it was pretty poorly conceived — a property transfer tax recently, that was designed to pay for an additional set of programs. There are just limits to how much people will pay in tax. At some level, you start to see exit and economic pain.

You have seen that in Chicago, especially compared to other big cities that have contemplated raising taxes. Flight from New York is more of a media thing than a reality, when you look at the data. California, there is some exit. But Chicago has had outflows of very rich people to all kinds of other places.

The studies on flight are really interesting. They are usually about top-end personal tax increases. The evidence is that there’s a very little bit of flight in response. Part of the challenge is that all these studies are pre-COVID and pre-Zoom. Whether that changes things is a little unclear.

The social meaning is a little more complicated. One thing is the tax rate going up 2%. Another thing is the message, “You’re not wanted.” I don’t know what’s going to happen with exit. But one of the challenges for these jurisdictions is a lack of entry.

Meaning no mega-rich people are moving to Chicago?

I’m thinking about New York. Their share of the richest 1% has declined over time. A little bit of that is exit, but some of it is the absence of entrance.

As we see greater income inequality, one person can be a big deal. There’s a famous story involving a very rich person named David Tepper. He owns Charlotte Football Club and the Carolina Panthers. He left New Jersey and the lost tax revenue was a big deal. Ironically, he moved back during COVID.

In addition to the exit questions, it’s just economically punishing to have higher taxes and worse services. If you actually try to pay back your pensions — as opposed to getting a bailout or stiffing the investors — the result is a depressing politics for a long time, where you’re spending less and taxing more.

Connecticut is remarkable. It was one of the most underfunded pension systems, but since the late 2010s it has been extraordinarily responsible. It’s a much more complicated story about budget controls and bond covenants, but they’ve saved a lot of money every semester. The result of this is they’re neither cutting taxes — they cut taxes a little bit last session, but not this session — and they’re not raising spending. It’s just a downer.

Another way of saying this is you start thinking about generations. Why is politics so depressing in Connecticut? The boomers spent all the money and we’re paying off their debts. But Chicago might be much worse than that. It’s more than just something that can be solved by making your politics a little bit of a downer for a couple of years.

What other big cities or states are in the comparable range?

Pensions are in much better shape now than they were 10 years ago. We’ve been discussing the pension crisis for a long time, and the last number of years have been quite good for state budgets.

How much of that is that COVID?

A good bit of it. The states got a huge amount of money from the federal government. They were not supposed to spend any of it saving for pensions, but they made their pension payments. Even the most spendthrift ones — New Jersey would issue press releases, “We made our pension payment this year.” Which is like issuing a press release, “I paid my credit card.” You’re supposed to! State budgets were in bad shape before, but they’re not getting worse in most places. The desire to hide budget deficits has gone down.

In terms of jurisdictions, Illinois and Chicago are much, much worse than all the others. There are other measurements you could use that have Connecticut and New Jersey in bad shape, but those are the richest places in the history of Christendom. Their ability to bear the debt is better.

The real problem of Chicago is that the city has these unbelievably indebted pension systems — 18% funded. But then they’ve got the school districts. The complex relationship between those two entities — who’s borrowing to help who — is the subject of a huge fight right now. But the overlaying — the city, the school district, the parks district, the county, the transit district, the state — leads to nesting dolls of debts.

From the perspective of a taxpayer, you have to pay out all of it. This is something people don’t often realize about jurisdictions, but when most people pay their property taxes, they are paying to multiple jurisdictions. In Illinois, people will pay taxes to 13 separate jurisdictions that are overlapping in complex ways.

I’m still curious about how something like this happens. There was a bill that passed the Illinois General Assembly — Governor Pritzker just signed it — that boosts benefits for the city’s first responders to the same level as other people in the pension system. The cost is about $11 billion in pension liabilities. It deepens next year’s projected deficit by more than $1 billion dollars. It’ll probably receive another credit-rating downgrade for the City, and it passed the Illinois State Assembly unanimously.

How does something like that pass unanimously, when every accountant looks at it says, “This is horrifying”?

Chicago has what are called tiers of pensions. This is driven by the fact that they can’t change pensions policy for current workers at all. There’s a great Illinois Supreme Court case where they tried to do this, and the court said, “You can’t change things for current workers.” What they do is create a new tier when they want to cut pension spending going forward. They create these second tiers for workers. Those workers — who are doing the same jobs as previously-hired workers — will be earning pensions according to a different policy. What this did was change the policy for one of those tiers of workers to make it more like the other tiers of workers. It made it sweeter. But remember this is happening for police officers and firefighters. One side of this argument is scolds…

People like me and you.

Exactly. “This is going to be a problem in the future! My bow tie is out of whack!” The other side of this argument is the extremely powerful moral claims of police officers and firefighters who’ve been putting their bodies at risk for you, the citizenry. The problem is accruing over time, but probably won’t come to a head this year, or next year, or maybe not for fifteen years. Current officials face incentives where it’s, “Should I help out the firefighter today? Or should I think about the fiscal health of the city twenty years from now?”

When you put it that way, it’s pretty obvious.

This dynamic is exactly the central problem. The Illinois legislature — when they were creating their California Rule-like constitutional protection for pensions — had a debate about whether this exact dynamic would happen: whether jurisdictions would have incentive to under-save. What they said was, “We’re not going to put in a mandatory savings rule. We’re going to make it legally protected. The legislature will never take risks if they have a legal requirement to pay in the future.” They were wrong.

I get that it’s hard to go against the firefighters, the police, and their unions, and it looks really bad. Especially at a municipal level: if you’re in Chicago itself, they’re breathing down your necks.

But if you’re a state assemblyman from way out in rural Illinois, why isn’t there more incentive for you to be the brave truth-teller saying, “Chicago has been putting off its responsibilities for too long and I’m not going to put up with it any more”? Why is the vote unanimous?

Part of it is that you regularly see, with respect to local legislation, what are called universal logrolls. If you are from Springfield, you don’t want to get in the way of what Chicago wants — if you do that, the Chicago representatives will get in the way of what you want for Springfield, when you require state approval. That dynamic also helps explain the budget problems at the city level. Officials who want money for a new park know that this is going to crowd out their ability to borrow or spend in the future. But the go-along-to-get-along politics, particularly in the absence of sharp partisan competition, can result in these universal logrolls.

This is a point Barry Weingast famously made in the political science literature: it’s just the logic of the pork barrel, but applied to lots of different things. That dynamic is pretty powerful in the state legislature, and that’s what you saw. There’s an interesting question of why the governor didn’t veto the bill. If anyone’s in a position to be the voice of reason here, it’s the governor.

He’s got national political aspirations too.

He’ll have to defend it. But that goes both ways, because he’d have had to defend vetoing it, if he’d done that, to the teachers and firefighters.

Let me go back to your book, In a Bad State, about what the federal government should do if it’s asked to bail out Chicago. No matter what you do, somebody is holding the bag at the end. What principles should our president in 2030 use to think about this?

All the choices are bad. There’s austerity, usually in a recession; default, which limits your and maybe other jurisdictions’ ability to borrow in the future; and bailout, which creates moral hazard. What should you pick?

The US has picked all three at different times. You can go through different fiscal crises. The best responses are not all one or all the other. They mix elements of bailout, austerity, and default. For instance, in the New York City fiscal crisis, famously, there’s a headline, “Ford to City: Drop Dead,” where President Ford is saying, “I won’t bail out New York.”

But after the city quasi-defaults, engages in austerity, and creates a new governance structure, the federal government offers emergency loans through the Seasonal Financing Act. There’s a marginal increasing cost to all three [responses]:

• A big default will stop you from borrowing for a very long time. But a small default: “We might get over it, especially if it’s a technical default.”

• Austerity: if you have to cut everything, that’s bad. To cut some things — that’s less bad. It gets increasingly bad over time.

• A big moral hazard is much worse than a small degree of bailout: jurisdictions are getting money from the federal government all the time.

Engaging in a little of all three is much more attractive than choosing one or the other.

What would this look like? For instance, bankruptcy. Jurisdictions regularly engage in a good bit of austerity, because of the insolvency requirement. Once they do, the court will say, “Now you’re insolvent. Therefore you can start impairing creditors.” After the bankruptcy started, Detroit found a combination of foundations and the state government offered money to help the city pay off some of its pensions. So it got a bailout, but after it already suffered.

That reduced the amount of moral hazard. If you are a politician, you’ve already taken the hit for going bankrupt. You’re living in infamy forever. Getting the bailout later reduces the harm without putting in much moral hazard. That would be one good metric: “What can we do to do a little bit from all three of these, rather than doing all of one, or all of them?”

The other thing you should be thinking about is taking advantage of these crises to set up rules that work well in the future. In the wake of the New York City fiscal crisis, a requirement was imposed on it to use honest accounting rules that limit your ability to get excessively indebted going forward.

Were they using dishonest accounting rules beforehand?

100%, yes. Government jurisdictions account on what’s called the cash basis. Do you have as much money coming in as going out? But that doesn’t affect whether you accrue debt over time. New York City was borrowing money to balance its budget every year. Jurisdictions do all sorts of weird stuff.

What are the most malicious ways to hide problems with the budget?

The funniest are what are called lease-and-buyback agreements. To balance its budget one year, Arizona sold the State House, then made an agreement to buy it back in the future, with payments every year. This looks just like a loan. You make annual payments and a lump-sum payment at the end — but it didn’t count as debt. The craziest ones are when they do lease-and-buyback for jails.

Another trick is not paying your suppliers for a long time. Governments use a lot of paper. You can pay a premium for paper, but agree, or tacitly say, “We’re not going to pay you for six months.” That turns the paper company into a lender. They’ve cleaned this up a bit, but Illinois had a very long lag time in paying off ordinary suppliers. That increases the cost, because it’s a loan. The idea that everyone who provides staples is effectively a bondholder of the State of Illinois is a pretty amusing one.

One move you mentioned in In a Bad State — it felt obvious the moment I read it, and I’d never thought of it before — was creating a new legal entity, shifting all of your debts onto it, and then saying, “Sorry, you can’t sue us, we’re a city with no debts.”

A number of jurisdictions did that; Port of Mobile is the one that made it to the Supreme Court. The City of Mobile owed money, so they created a new city called the Port of Mobile. The state legislature is allowed to create new cities. The Port of Mobile contained most of the city of Mobile. Now the power to tax property is given to the Port of Mobile and not the City of Mobile. By the way, the Port of Mobile is going to buy Mobile’s assets for a dollar. The Supreme Court just said, “You can’t do that. We don’t really know why, but you definitely can’t.”

It’s not really obvious why that’s constitutionally illegitimate, but you can’t do that.

Now we explain that as a violation of the Contract Clause: states can’t impair contracts, this is understood as a functional impairment of contract.

These massive public pensions are relatively modern. Why are public pensions structured so differently from private ones? If I’m a private company and I want to offer a pension to my employees, I have to use real actuarial projections, fund the pension every year, and buy pension insurance. I can’t pull accounting tricks.

If I’m a state or local government, I don’t have to do any of those things. Why not?

It used to be that defined benefit pensions were much more common, and they were getting into trouble. Congress passed the Employee Retirement Income Security Act (ERISA) that imposed all sorts of obligations upon holders. Most of your readers don’t have these things because companies have moved away from them, towards defined contribution systems, and 401(k)s particularly.

Congress didn’t apply ERISA to state and local bonds for two reasons. One is that state and local governments don’t default that much. Secondly, these restrictions would be thought to be a pretty big imposition on the rights of states. States and cities were very resistant to any limitations on their ability to do their own internal budgeting. That’s how they diverged.

The big story is that the defined benefit pension has fallen out of most of the private sector, but remains in the state and local sector. A few states have experimented with moving to defined contribution systems, but it’s a rarity.

One thing we haven’t talked about so far is how you should manage pensions. Some are passively managed. Famously — or “famously” — Nevada has fully passively-managed pensions. The guy who manages the pension puts the money in indexes, and he sits in his office all day and plays Doodle Jump on his phone. There’s an interesting report that if Chicago’s pensions had been passively managed in 2024, instead of spread across more than 80 management firms, the city would’ve saved $40 million in management fees and returns would’ve been about 25% better.

Should everybody passively manage their pension?

It’s something that the literature is a little unclear about. It depends a lot on the jurisdiction and how well-managed its pension fund is. There are potential gains from active management. The question is, should you expect your jurisdiction to achieve them? There are jurisdictions that are just very well run. Utah — they just run everything very well in Utah. I don’t know how they do it. Everything works out. If I were talking to Utah, I’d say, “You guys are pretty good. You do what you want, you can take some risks.” Other jurisdictions, I don’t know.

One thought is that because you’re creating a long-run obligation, like a university endowment, it provides capacity to invest in things that don’t have short-term returns. They should be able to invest in weirder things that give them greater returns, because they’re managing in the long run. Pension funds are the classic source of funding for alternative investments: private equity and hedge funds.

The challenge emerges: you have the world’s sharpest financial figures on one side of these negotiations; on the other, you have well-meaning civil servants who are a little bit outmanned. They’re holding giant sums of money. This has led to all sorts of abuses, like the disputes around Alan Hevesi, former New York City Comptroller, and Steven Rattner, a big-time investment banker who manages Michael Bloomberg‘s and the New York Times‘s money. [Pension funds are] also the biggest players in securities fraud litigation: a huge percentage is brought by CalPERS, the California pension funds. There’s a question: can they do this?

Some jurisdictions around the world have turned their pension funds into extremely well-paid financial firms. The Ontario funds: the managers make millions of dollars and it’s a pretty fancy operation. There’s potential gains to be had from this. The question is, can you pull it off?

Even if you’re [earning good returns], you shouldn’t account for that. Jurisdictions traditionally use their expected earnings to target what they should save going forward. They say, “We made 8% this year. We should save as if we are going to earn the same amount in the future.” But that doesn’t track, because you have to pay regardless of whether the financial year is a good year.

There’s a complicated thing about what the money should go into relative to the jurisdictions. You would prefer it to be things that are up when your budget is down. But there’s political pressure to do the opposite. Some jurisdictions invest their pension funds in affordable housing in their own jurisdiction.

Which is tightly correlated with the success of the jurisdiction.

On the other hand, there’s a lot of political pressure to do that. It can be a real challenge.

Do we have any evidence that the places that pay their pension managers a lot more do better at active management? I would imagine, if you’re getting paid millions to manage the Ontario pension plan, odds are you’re doing a better job.

There just aren’t a lot of instances of these [funds]. And it’s not like we’ve randomly dropped them on jurisdictions. One reason you’d move to having a privately-run organization, that’s outside of your control, is because your jurisdiction is incapable of doing so otherwise. Just like if someone is a problem person, you might want to put all their money in trust. So it’s a little hard to say.

Because you are a Renaissance man with a wide variety of interests, I’m going to ask a few rapid-fire questions. Let’s start with your pitch for building more big infrastructure at the federal level: The Priority List. Sell it.

It’s widely understood that American infrastructure has a cost problem. It costs more to build subways in America than it does anywhere else in the world, by huge margins. The cost of building highways is both more than in other jurisdictions and increasing over time. [Zach Liscow recently discussed why this is on Statecraft.]

Similarly, there’s research into what might fix this. One big bucket of potential problems is about management of projects: states and cities plan badly, plan weirdly, and are overmatched by their contractors. The second is regulations driving up costs. You guys are state capacity people, the National Environmental Policy Act (NEPA) stuff, CEQA — you get the idea [Statecraft has covered the challenges NEPA poses].

Everyone knows these reforms are politically difficult to achieve. The priority list is an idea of how we might enact them. The idea is that Congress should, when it’s approving its general transportation bill, give the Secretary of Transportation the ability to designate 10 or 20 super-duper important, super-popular projects. This would involve sending a crack team of federal experts to help jurisdictions plan, giving them special financing tools, and exempting them from a whole variety of regulations — for just these projects.

The idea is that Congress might not be able to pass NEPA reform, but for the projects that are most important, they could attach these exemptions, and use the projects’ popularity to achieve the political reform they can’t achieve more broadly. Then those projects would be an example.

What kinds of projects would fall into that super-popular bucket? I’m having trouble picturing what would be overwhelmingly popular.

Think of whatever China’s doing, and then imagine it on an American scale: a giant new subway system, a new big highway, a big transmission system, big pipelines. [Statecraft has discussed what China is doing with Dan Wang.] You can imagine any number of things that fit within these categories. You’d have to spread them out, because it’s Congress. But it’s not that hard to imagine. If you think on the scale of the Golden Gate Bridge and the bridge that connects Detroit and Canada — big deal projects. Anything that the president would find it useful to go and do a ribbon-cutting for. For the current president, we could coat it in gold.

When you say, “transmission systems,” or “subway systems,” these have widely-shared benefits. You could bring down energy prices with better transmission and reduce travel times all over a city with a subway system. But famously, the costs are concentrated and any of these big projects would have a strong lobby of people who hate it.

Why would this get around the problem that people always hate projects with more ferocity than the people who want to build them?

These would be national goals and they’d be the kind of thing that the president and leaders in Congress could brag about at election time. “I was able to achieve the new Big Dig. While everyone else talks about doing infrastructure, I did it, and here are my 10 examples.” That mass politics could defeat NIMBYish politics.

Another easy question. Does zoning matter more or less in an era of remote work?

It matters both more and less. Across cities, we’ve seen an increase in the value of office, rent, and housing space in suburbs and exurbs [compared] to downtowns. We may have seen some movement across jurisdictions. That has the effect of making suburban land a little more valuable, relative to urban land.

It may reduce housing costs where it’s reducing demand, but it will increase demand in other areas. It might make commutes better, so there’s more developable land, which might reduce housing costs. But those areas are themselves tightly zoned. [Statecraft has discussed zoning problems, and the Senate Housing Bill addressing them.] The ability for the market to allow housing to be built in the exurbs of New York City, relies on agricultural space being turned into housing.

One of the big areas that has seen huge run-ups in value in the post-pandemic era was in Connecticut, in Fairfield County. But you see one or two-acre lots by law. These are the richest places ever: Greenwich and Westport, Connecticut. There’s been even greater increases in the value of these things, as people are commuting a little less. But you can’t build housing there. There’s still a housing crisis in New York City, even if it has taken a little bit of the edge off it. It’s not like it’s become not a problem in those places.

Also zoning can be a problem even in places that are losing population in the Midwest. It can limit the ability to transition land uses.

If I’m a city in rural Illinois and I’m losing 500 people a year from a city of 50,000, why should I care about zoning?

Zoning controls not just the building of new apartments — which is the example that people leap to — it involves the uses of land. What you might want in a jurisdiction like that, is to knock down houses and put up a tree farm. Anything that’s changing, if the law doesn’t change to match current demand, that can create a problem. You see real problems in declining jurisdictions related to the ability to open home-based businesses in areas that had previously been all residential. These jurisdictions need jobs very badly. The land-use problem is about transition. We have a law that fits current uses, and then the world changes. If the law doesn’t accommodate that, then we can run into dislocations.

We haven’t talked much about the New York City Charter Revision Commission, which — relative to pensions — is even less famous. You could change all kinds of ways New York is governed and some people would still not want more housing. Explain to me why you’re optimistic. [This interview was recorded before the revisions were approved by New Yorkers.]

There’s a famous quote from H.L. Mencken: “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.” The modern political-science response to this is, “Democracy can be structured in many different ways, and those things will have different outcomes.” New York City won’t become Houston, no matter how you aggregate votes.

The Charter Revision Commission is about changing the methods of aggregation. One simple thing it does — it’s going to require the state legislature to agree — is move election day to an even-numbered year. Why is this important? It would mean more people vote. There’s a lot of evidence that when you hold elections in odd-numbered years, fewer people vote. This has systematic effects on who votes. When you have elections in odd-numbered years, you have much more turnout among homeowners and much less among renters. It’s much whiter and richer. Both [odd and even year elections] are democratic. It’s just that this system would encourage different people to vote, which will have different systematic outcomes on housing.

There are other reforms to the process of decision-making. Zoning changes that include a degree of affordable housing need to go through a process that includes getting voted, “Yes,” by the city council, and the mayor. There are steps before that, but those are the two final steps. In the context of a legislature that doesn’t have partisan competition, we generally see something called councilmanic privilege (or or member deference). The idea is that when a zoning change is made in a neighborhood, that councilperson gets to decide, with no one else having any input. It’s the exact same dynamic we talked about earlier about universal log-rolls.

What the charter revision does is change it. Even if the City Council votes, “No,” after it’s gotten, “Yes,” through all the other processes, that decision can be vetoed by a combination of the mayor and the borough president. It creates a check on this, “Neighborhood gets to veto what happens in its neighborhood.” The borough president is the county-level official. The mayor’s a five-county-level official. Again, both rules are democratic. They’re just different rules that say, “Broader elected officials can veto this neighborhood-level competition that’s driven by dynamics in the city council.” This should make rezonings easier, because mayors and borough presidents are generally more pro-growth than individual members. [For more on how New York City works, Statecraft recently spoke with Maria Torres-Springer, who is running Zohran Mamdani’s transition team.]

This might be the most interesting conversation I’ve had on pensions and local-government bailouts in a long time.

There are really dramatic stories here. If you want to know why the South didn’t develop infrastructure in the second half of the 19th century — it wasn’t able to borrow. If you want to know about history of corporate suicides like Port of Mobile, or what happened in New York in the 1970s — municipal debt seems boring, but it’s the history of America.

This conversation is about the mechanics of diplomacy: how US engagement with Africa actually works, and why it falls short. Judd explains diplomatic “care and feeding” — the constant effort required to maintain relationships with African countries, while competing for presidential attention with Europe, the Middle East, and Asia.

I wanted Judd’s perspective on American goals for diplomacy in Africa, but also his honest appraisal of where the administrations he served in failed to execute, and what he wished he’d done differently. Why do presidential initiatives in Africa fail so often? Does the National Security Council deserve to be cut down to size? Why do CIA analysts have such a high opinion of themselves, and is it warranted? How should you negotiate with a military junta?

We get into all this and more, and Judd was very game to argue with me about all of it.

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We discuss

• What “care and feeding” means in diplomacy

• What went wrong with the relationships with Niger

• The problem with envoys

• Whether the NSC has been neutered under Trump

• Why most intelligence analysis doesn’t cut it anymore

Thanks to Harry Fletcher-Wood, Katerina Barton, and Rona Fe Cruz for their support in producing this episode.

For a printable PDF of this interview, click here:

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I want to start with a thought experiment. Let’s imagine that you get to reallocate American diplomatic resources globally. You’re being asked to rebalance how much focus, attention, and touch different regions get, but you’re not allowed to increase the total amount of diplomatic resources or staffing. Do you put more resources into Africa? If so, from where do you pull them?

It’s hard for me not to say, “Put more resources in Africa,” so I won’t be provocative or disappoint. Currently, I don’t believe we’re doing enough for our national security interests, based on how much effort and time we put into Africa. I experienced this throughout my career as an intelligence officer in the Obama and Biden administrations. There come times where we are at a crunch point and someone says, “We need to get the Africans on board,” or, “How can we work with the Africans on this critical issue?” Or there’s a problem that’s developing in Africa and it’s in our interest to be able to resolve it. We haven’t done the legwork, because we said that Africa as an area of focus is near zero, and I think that’s really problematic.

Let’s pretend that the value of Africa is X. I would bump it up by 10 points and give us the opportunity to have that grow as the continent becomes more significant. Then I would question, “Do we need to put as much effort in parts of the Global North, like Europe, as we do?” There’s too much legacy in the investment in Europe and not enough investment in where the bulk of the population of the world is, which is in the Global South.

Would the counterargument to that be our European allies matter a lot more for our national security interests than our friends in Africa?

We have an extraordinary amount of alignment with the European partners already, or at least we certainly did pre-Trump. So some of the care and feeding that we do with the Europeans, and the endless amount of touch points and high-level meetings that they get, are probably unnecessary to have the same outcome.

Meanwhile, the kinds of investments we need to make in Africa to have outcomes that are in our interest are insignificant. Meanwhile, many of our allies and adversaries are spending more effort in Africa. They are getting more trade, and alignment in international forums. They are getting the benefit of voices supporting their positions and their vision of the world. I’m not discounting the importance of France or Great Britain. What I’m saying is that you probably don’t need to put as much effort into those relationships for the same results. If you don’t put more effort into our partnerships with Africans, we are going to miss out in the future.

I like the phrase you just used: “care and feeding.” What constitutes care and feeding in a diplomatic relationship?

What we’re mainly talking about is senior-level engagement. Who gets to go to the White House? Who gets a visit by a senior US official? For too many countries in Africa, the most senior US official they will ever meet is the ambassador of that country. If you don’t have a peer-to-peer relationship with Africans, it is going to be to your detriment.

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I’ll tell you a story from a couple of decades ago. President George H.W. Bush was trying to cultivate [UN] votes ahead of the Persian Gulf War against Saddam Hussein. Côte d’Ivoire [also known as Ivory Coast] was on the Security Council, and the foreign minister of Côte d’Ivoire, Amara Essy, comes to Washington and meets with Secretary Baker. Essy says, “I’ve been to Washington countless times, and until today, I have never met with anybody higher than the assistant secretary of state.” Baker, to his credit, was like, “We will change that. Next time you are in New York or you’re here, I will meet with you. I’ll come up to meet you in New York, or I’ll bring you down by train.”

Here we were, at the precipice of a critical vote and the foreign minister of a country had only met with — an important figure in African policy, but in the scheme of things, not a very senior official. Think about the other way: what if the US president, or Secretary of State Blinken, went to an African country and they said, “You can meet with this guy in the middle of the Ministry of Foreign Affairs, the desk officer for the US.” That’s what I mean by care and feeding: accruing mutual respect to people who are your equals.

Of the five most recent presidents — I learned this from your Substack — only George W. Bush spent significant time with African leaders. Presidents Clinton, Obama, Trump, and Biden spent far less time with African leaders. Compared especially to JFK, Nixon, Reagan, H.W., Carter, modern presidents spend less time on Africa. Why is that?

President George W. Bush was remarkable in the post-Cold War era with how many African leaders that he met with. I have found in my research that that’s correlated with a whole bunch of different things, including major development programs, travel, consultations on the biggest global issues. A lot of this goes credit to President Bush, as a leader. But also I found a nice quote from him that said Condoleezza Rice told him when he took office, he’s going to be spending more time with Africans and with Africa. And he really did that.

A colleague of mine told this story to me: President Bush met with President Museveni of Uganda. President Bush asked Museveni about his views on the Iraq war. Later he was asked, “Why did you bring up the conflict in Iraq?” Bush said, “I read his bio. He was an insurgent leader, and we’re leading a counterinsurgency. I wanted to get his firsthand insights.” I love that story because there he is, not just doing African issues with President Museveni, he’s talking about the biggest topics that are top-of-mind for him. That’s phenomenal.

You asked a bigger question: why has there been less engagement from the post-Cold War presidents vs. the Cold War presidents? For the most part — outside of George W. Bush — I don’t think that there has been a real connection with why Africa’s important. In the Cold War — this is crazy — President Kennedy spent 25% of all foreign leader meetings with Africans. He truly believed that if we were going to shape the Cold War and the international order, we had to be working with Africans. Not only did he engage with Africans, he established USAID and the Peace Corps. For me, those two presidents stand above all the others.

You worked in the Obama and the Biden administrations, different roles, but both pretty senior, focused on Africa issues. In terms of meeting its own goals on Africa, which of those two administrations was more successful? Which of them executed better?

That’s really hard. I feel conflicted loyalties. I’ll tell you what I thought was a strength of President Obama’s administration on Africa and I’ll tell you what went right with President Biden. For President Obama: not just his own background in connection to Kenya — I don’t even think that’s relevant here. He had a bunch of senior leaders in the Cabinet who also thought Africa was important:

• National Security Advisor Susan Rice had been assistant secretary for Africa.

• Head of USAID Gayle Smith had been a senior director for Africa [on the National Security Council] in the Clinton administration.

• Samantha Power, in New York, had spent time thinking about Africa.

That allowed us to do some big programs, like Power Africa, or the Young African Leaders Initiative, or decide that we are going to send the military to the West Coast of Africa to deal with Ebola over anyone’s objections. Those were the things that were working in the Obama administration.

Sometimes there was a little too much preachiness about Africa, and in ways that — we don’t do it anywhere else in the world. We have complex, complicated relationships with India, or the United Arab Emirates, or Vietnam, and we don’t do as much lecturing. But the Obama administration in Africa, there was a little too much of that.

In the Biden administration I think we did less lecturing. But we did less engagement. I’m proud of a lot of the things that we did, particularly in terms of, “How do we get Africans to have a bigger voice in international forum?” Getting the African Union to join the G20, calling for African seats at the UN Security Council. But I don’t think there was enough of an echo chamber around President Biden to break through — to get the engagement we needed on the continent. Also, the war in Ukraine and the conflict in Gaza were huge sucking sounds, and they really strapped the bandwidth. I do think that Jake Sullivan and Tony Blinken would [have done] more on Africa, but they were pretty limited given how much those two particular conflicts, as well as competition with China, was limiting the space for other engagement.

While prepping for this interview, I asked quite a few people — from the Biden admin and from outside — about their views on the Biden admin’s engagement on Africa. They didn’t all line up, but a big theme was the admin was blindsided by how much time was taken up by Ukraine and Gaza.

Maybe there’s one more point, Santi, on the rhetoric. Those of us who focus on Africa, in some respects, often we write checks that we can’t cash. We hope that we can cash them. We write them down so that we can use them as a bludgeon, to push people to get to them. But at the end of our administration, we’re stuck with some very aspiring rhetoric about where we want to take the relationship, and then the reality that we didn’t meet that. Partly that was because we couldn’t drive the system to get to where we had hoped to be at the end of the day.

You said a moment ago the Biden admin was less “preachy” in its engagement with African countries. But people who follow Africa policy will remember that in March 2024, Niger’s military junta ordered US troops doing counter-terrorism work to leave the country. The decision came after what the junta called a “condescending attitude” from US Assistant Secretary of State for Africa Molly Phee during an American delegation’s visit.

You worked with Phee. What was your read on that encounter?

I left the administration in February of 2024; the Niger coup had happened in July [2023], and I was in a number of meetings where we knew that we had to engage the junta about the direction that they were taking. We wanted to see a pathway back to democratic rule — although we were flexible about how long that would take, we wanted it to be a conversation. We had this outstanding issue about the future of our military bases, both in the capital and in Agadez, and some concerning information about our foreign adversaries. I can’t speak to what happened in that meeting, because I wasn’t there. I do know the intention was to say:

“How do we find a way forward together? We’re under our own domestic constraints, as much as you are as the junta: in terms of things that you’re promising your populace, or the justifications you’re giving for your coup, and your dissatisfaction with a number of relationships that you have. How do I identify the things that are making it even more difficult? Is there a way forward on that?”

That was the intent of the conversation.

What is missed sometimes in the public conversation is that we weren’t saying, “Don’t have a relationship with Russia.” We were trying to be very specific about the things that would be concerning to us — considering that we have military bases and operations in Niger — there may be certain types of weaponry that the Russians want to provide, or access the Russians want, that would be problematic for our ability to maneuver. We actually had more flexibility and openness to thinking about these arrangements than sometimes is given credit. We wanted to understand what their ultimate trajectory was towards democracy; what was going to be the final disposition of the former head of state, Mohamed Bazoum, who is still, to this day, under house arrest.

But when I left in February, our goal was to have this conversation in person so we can figure out a way forward. Let’s express our concerns and where we think we can partner. I don’t think that is paternalistic. Again, I don’t know what happened in that meeting. Obviously the outcome and the perception of that meeting is not very good, and it’s not where I would’ve liked us to be.

I’ll tell you that’s the conversation that I had when I met with the coup leader in Gabon. I led the delegation. We talked about the things that are important to us and to them: “Can we find a way forward?” We largely have; they’ve transitioned back to civilian rule. The military junta leader is now the president, but they did it in two years. It’s faster than any of the countries in the Sahel, and we’re having constant engagements with them. The relationships with Niger, Mali, and Burkina Faso — it’s a much slower process and there’s a lot of hurt feelings on both sides perhaps, and a lot of sensitivities.

You’ve written about the fights that happen over when the US should engage with foreign leaders. There are always forces who will push against the idea of senior officials meeting with a country’s authoritarian leaders. Then there are folks on the realist side who will say, “The US has an interest in sitting down with these people, even when we have lots of disagreement.” How have you seen that dynamic play out?

There’s two villains here. Villain number one is the generalist who says:

“Africa’s too complicated, just give me the good news stories. Let’s have the heroes, the saints, the countries that represent values that we cherish. Let’s have them have the meetings, so they could stand up as some sort of exemplar or totem of what we want to be. These countries that are really complicated, these leaders that have past that we don’t agree with, let’s not spend time with them.”

That’s the generalist side and I’m talking about both politicals and civil servants.

On the other side, there’s the Africanists who also play this game, who just want us to make sure that we’re rewarding good behavior. I had a meeting with an ambassador who told me, “Why are you guys even considering a meeting with that guy? Don’t you know how bad he is? You should be meeting with my leader from my country.” Instead of an argument on the merits of what the problems are that we were going to address in the Oval Office, he was trying to figure out who had more virtue, which is crazy.

That’s a dynamic and I’ve seen it play out so many times where, even when you have US presidents who aren’t spending a lot of time on human rights issues, people below them will say, “Should we really be engaging with this leader? I read a Human Rights Watch report, or this cable, and it looks like they’re pretty bad.” I would pull my hair out — I don’t have much hair, but what I had — because the day before that, the president engaged with a leader from the Middle East, or Southeast Asia, or Latin America, who had an equally torrid past. There’s a lot of double standards in the African engagement space. It’s not to our benefit.

One last point, because it gets back to how many leaders that you have in the Oval Office. This is where I did have a problem. If I was only going to get four African political leaders in the Oval Office — if I was only going to be allotted one or two a year — then I was going to pick Nigeria, South Africa, and Angola, or Kenya. I didn’t have the luxury of saying, “Let’s bring in a variety of leaders,” in the way that President Bush or Kennedy did. That is one of the challenges when you’re only given so many slots — it’s never explicit — then you are being more careful. You’re not only trying to get the most strategic countries in there, which is a good thing, but you’re not willing to take the risk of having the country and the leader who you’re going to get a lot of hell from the Hill from, or from activists, or the bureaucracy. That’s the third dynamic that I want to be confessional about.

In what implicit way are you told, “You only get so many slots”?

A couple of things happen. Sometimes, after you have a big meeting like the Africa Leaders Summit, you’re told, “Don’t bother us for a while.”

By who in the Executive Office of the President?

Sometimes it’s by the people who run the access to the president, or people who have to rack and stack all the foreign leaders. “You had a great event. I’m very thankful that we had that event, but take a beat for a little while.” That’s one of the ways it’s done.

The other way, which is a little more subtle, is, “We put this list together. Your country was on it. It didn’t make the cut line. We were told we didn’t have ten, we have five, so you dropped off.” You start realizing that you’re only going to get a couple of these, at least in my experience, and you’re going to have to be persistent about it. One of the things that I did as a trick is that I would send a request. I would be told, “No.” I would send a second request. I would be told, “No.” Then I would say to myself, “I’m really uncomfortable that I keep asking for this, so I definitely need to do it one more time.” You just have to keep pushing and try to keep refining the arguments and not give up. You have to be that pain in the ass. But maybe in retrospect, I needed to be a bigger pain in the ass.

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In your newsletter, “On engagement,” you said that at times you had to tiptoe around big events to make sure that you didn’t have the wrong encounter between Americans and an African political leader. You had to “choreograph an elaborate two-step” to keep the US delegation at arms length from the Zimbabwean president at this big council event in 2023. I want to know about choreographing that two-step.

So the Corporate Council on Africa (CCA) — which is not a US government institution — has an annual business forum. Sometimes they do it in the United States, sometimes in Africa. They just did one in Angola, next year it’s going to be Mauritius. In 2023 it was in Botswana. The council and the government of Botswana work together to decide who’s on the invite list.

Because Zimbabwe, which is Botswana’s neighbor, is part of a larger regional grouping called the Southern African Development Community, they were on the list. They were there for the 2019 summit in Mozambique, we were all fine with that. There’s a sanctions program on Zimbabwe, and there was an uproar by different parts of the federal government legislative branch about the fact that a sanctioned individual, the President of Zimbabwe, was going to be there.

Even though it’s not a US-hosted event?

We would’ve done a family photo where the US delegation and the African leaders stood together. We could no longer do that. There were a whole bunch of other things that the CCA had to do. The “Investing in Zimbabwe” breakfast couldn’t happen any more. The President of Botswana at the time, Masisi, was actually very understanding about it, but we created a political headache for him. This is his neighbor. He doesn’t have sanctions on Zimbabwe, and he’s now having to figure out how the US delegation for the US-Africa Business Forum can be quarantined from the Zimbabwe leader. That just felt over the top.

The main political driver for the US here was, “We can’t give them the photo op, or the moment that can be read as us being too buddy-buddy”?

That’s it. But this is a forum about increasing US trade investment in Africa. Let’s not get twisted on what we’re trying to do, which is invest in Africa. While there are sanctions on Zimbabwe, there are not sanctions on investing in Zimbabwe: it’s with particular individuals and entities. For the sake of a photo op — at the minimum it was a distraction.

What about another example: You had to make sure President Biden stood far enough away from certain leaders without breaking diplomatic protocol during the US-Africa Leader Summit in 2022? How far away is appropriate?

I don’t know how far away — but I played the game a little bit too. We invited about 50 leaders on the continent. We didn’t invite the President of Zimbabwe and Eritrea, because they’re under sanctions. Usually the photo is organized by — alphabetical, reverse-alphabetical, protocol order — there’s all these different ways, and it’s a Rubik’s cube. You’re like, “I don’t like the way that this looks, try a different one.” Then we would try the different one. “Actually, the line of leaders on the second step is going to end here and we start the third step, so we’re OK.” I played into it too, but I keep thinking to myself, “What was it all for?” Was it as important as all of the stress that we had?

Doesn’t it matter? Let me make the argument that it does. I understand much of diplomacy as these elaborate, stuffy games that you play in order to send very concrete signals. Who stands next to who in a photo op is a sign of legitimacy. There’s a reason that we have this whole elaborate, invented-by-the-French language of diplomacy: to send messages.

That would be the argument: that by virtue of being next to the president, a leader is accruing some legitimacy. But you also have already invited that leader to Washington to attend a three-day summit hosted by the President of the United States. If you wanted to make a political point and say, “Because our relationships are cordial enough that you’re invited but not warm enough that you need to be the next to the president” — it’s not like we told those leaders that.

They’re meant to pick it up from where they got staged in the photo op?

They’re unlikely to pick it up. So it’s a kabuki dance for I don’t know who.

Who’s it for, then? Is it a dance for an American audience?

I think at the heart of it is a fear that someone would see it, get upset, and yell at us. That you would have activists, or the Hill, or legitimate civil society in those countries, express deep frustration with the US for doing that. You’re fighting against a potential future, trying to ward off a scenario that would be uncomfortable.

We have all these different events throughout the three days, and African leader X will speak at this summit event and African leader Y will do this one. Then we shared the schematics with the African diplomatic corps. A couple of diplomats were like, “Where is our leader? How come they don’t have any speaking engagements?” Nine times out of ten, it was because that was a leader we had a challenge with, and we ended up fixing that. But the African ambassadors are right. “You’re going to be inclusive and ask our leader to come here, but you don’t want to give them anything to do the entire three days?” We did fix it, but it was out of that same sense, “Uh oh! Someone’s going to be annoyed at us.” I think that got in the way of doing good policy.

What’s the value of a convening like this? In a past job, I used to help run a retreat that I really loved. It was a fantastic event, mostly because of all the serendipity that happened. You put a bunch of people together and they formed companies and built lifelong relationships that you didn’t plan exactly in advance. You choreographed the whole event, but you couldn’t foresee specific outcomes.

An event like this, where you’re convening all 50 African leaders, I assume there’s some of that. But do you have very concrete goals as well? How does the National Security Council (NSC) think of an event like this? What constitutes success?

There’s a couple of metrics that we use, like:

• How many private sector deals were announced?

• What kind of initiatives did we launch?

• How is it received by Americans, by our African partners, and, quite frankly, by our adversaries?

We’ve only done two African summits, in 2014 and in 2022. China does one every three years. Japan does one every three years. Most allies and adversaries do it much more frequently. But what’s special — particularly when we do it in Washington — is for three days, this town is about Africa. You hear a traffic report: “Because of the Africa Leaders Summit, it’s going to be more difficult to go down Pennsylvania.” It’s both symbolic and literal that Africa becomes the focus of Washington DC.

• The Secretary of Transportation’s like, “Where’s my Africa meeting?”

• All the think tanks that may spend very little time on Africa are like, “We’ve got to have a big Africa thing. Let’s make sure we host this African leader here during the summit.”

• All the private sector companies are like, “You’re having a summit? Let’s hold back our big announcement, so we can announce it at the summit.” Or, “Is there a leader or a country that we’ve been on the fence about, that maybe we can have an initial engagement, that we can start talking about an MOU.”

The Trump administration for a minute talked about doing it in New York, and I thought that was a disaster. You wouldn’t get the focus, time, and attention to do it in New York on the sidelines of the UN General Assembly. You wouldn’t have the Secretary of Commerce or Housing and Urban Development coming up. There’d be too much distraction. Doing it in DC is important. One day it’d be great to do it on the African continent. But for a town that doesn’t spend a lot of time thinking about Africa, you force the issue with those summits.

The metric that you mentioned about how many initiatives are announced — you had a piece about the more than 60 US government-launched initiatives on Africa, often presidentially-backed, since the early ‘90s. You’ve got your shortlist of the successful ones: it’s a little bit more than a handful. The vast majority flame out or don’t last past the administration. I have a sense that the number of deals and new government initiatives announced at something like this is vaporware. Am I right in taking that cue from you?

It can be. There’s a good and a bad way to do initiatives. The best way to do an initiative — and I would put PEPFAR, the President’s Emergency Plan for AIDS Relief as a great example [Statecraft previously spoke to Mark Dybul about why PEPFAR worked], or Power Africa under Obama — where the administration team sat down and thought through what they were going to do, without a hook. It was: “This is important and we’re going to take the time. We’re going to build stakeholder buy-in, launch it, and work with Congress.” Those stand the test of time. That’s the best way to do it.

The bad way to do it is, “We need a deliverable because the president’s going somewhere. Can you guys come up with something?” You’re robbing Peter to pay Paul. The reality is somewhere in the middle, which is that when you have a president like President George W. Bush — who’s going to support you even without a summit — you have an ability to do some big things. When you have presidents that are going to spend less time on Africa, you need those summits or initiatives to break through the bureaucracy.

What I did with some of them — most of them didn’t survive, in part because the Trump administration cleaned the decks a little bit — is instead of being, “Here’s the big initiative that’s going to define our Africa policy that we’re using the trip or the summit to do,” I had the view, “Let’s use the summit to get a crack in the door of something cool and interesting.” With 21PAS, we had this idea for how we do positive conditionality for security assistance. “Let’s call them a pilot. We can birth them with the summit, and then let’s spend the next months and years to see if they’re a real thing.” If they are, you have the momentum to make them long-lasting and core to what we do.

That was my middle road. I needed the summit to have leverage, but I didn’t want to over-promise, and so I actually put in three or four initiatives. None of them would get all of the attention and die under the weight of the attention. They were creative and different, and they needed some nurturing and bureaucratic buy-in to see if they could leave the home and fly away.

When you reflect on that tactic of throwing a bunch of small initiatives in and trying to see which ones take root, would you do that again?

I would do a little of that again. I would carve out more space to think about the big project. I really wanted to do something in urbanization. I hid it in the strategy and I just couldn’t find the time to do it, and I really do regret that. On the initiatives, I learned a little bit from that process. On ADAPT: I had a lot of stakeholder buy-in. I had USAID and State working on it, and a lot of test cases with the coups to work them through. I think it would’ve probably lived on. As the end of the Biden administration was upon us, the team spent all the money because they thought it wouldn’t live in the Trump administration. But the concept was solid, and we were seeing people think about, “How do we use this?” That was a positive one.

The positive conditionality, which we called the 21st Century Partnership for African Security, 21PAS: we shoved it down DOD’s throat. We literally had Jake Sullivan call Secretary Austin, and they found money for it. DOD hated the idea and did not want to do it. They fought us tooth and nail, and there was no other agency or department that had any skin on it, so DOD were able to say, “We’re not going to do it. We’re just going to appropriate the money as we always have.” It was really unfortunate.

So I would probably do some of the same things, but I would think even more deeply about the construction, the stakeholders, how it could grow over time, and make sure that even if we had this spark from a summit or a trip, that I had enough momentum and buy-in to actually build it over time.

We’ve talked a lot about the US government’s interest in supporting democracy in Africa, and this was a big theme with the Biden administration. That sat next to more realist moves, like an embrace of Angola for geostrategic reasons. Angola is not a thriving democracy, but it matters for critical minerals. How did you guys think about that balance internally?

They don’t have to be in tension: our realist geopolitical goals vs. a values agenda. But sometimes they are. There were a number of important things that were happening in Angola, not just geopolitical. The leader who had been in power since 1979, left power in 2017; peacefully handed it over to his successor. His successor was looking at economic reforms, being more active in the region, and we were making all these investments in the rail. It continues to have challenges with growing its democracy, but it was making important steps.

We have to take these countries in full. We have to think about the progress that they’re making on democracy and values, as well as the geopolitics — not letting one be hostage to the other. Too often, we were letting one particular factor — it could be democracy, but if you look at today, critical minerals is the most important factor. The way that I wanted us to think about the continent is, think about each of these countries having multiple points of value to us. This country is doing important work on hydro energy, or it’s leading the charge on climate change, or it’s been a remarkable partner on COVID, or it’s a democracy, or it’s a counter-terrorism partner. I wanted us to inject more complexity in these relationships. If we’re going to meet with a leader about China: maybe we are in alignment on some of the issues around China; we could also talk about some of the things that we disagree with. I would tell a couple countries that we have one of the most mature relationships on the continent because we fought hard about a bunch of things and cooperated so well on a bunch of others.

What are those countries?

One is South Africa. We were having difficult conversations with South Africa about Ukraine, and whether or not it’s non-aligned.

Because South Africa is aligned with the Russians?

South Africa, during Russia’s war with Ukraine, took a much more neutral position. Sometimes they would reiterate Russian talking points. They wouldn’t vote with us in the [UN] General Assembly. At one point they had a dueling General Assembly resolution. They wanted to negotiate, which is not what we wanted to do. We had a line, “Nothing about Ukraine without Ukraine.” They did naval exercises with China and Russia.

But they’re also a vibrant democracy. The ruling party lost its majority in 2024. President Biden and President Ramaphosa had productive conversations, where they talked about their differences of opinion, and particularly on the Russian war in Ukraine. We didn’t necessarily see eye-to-eye, but we were able to narrow those differences. Jake Sullivan had a productive relationship with his counterpart, Sydney Mufamadi, where they would talk on the phone. He invited Sydney to join him at a couple of these meetings of national security advisors in Malta.

South Africa’s in the news right now with President Trump in this false allegation of white genocide. Certainly there are real problems with corruption and violence in South Africa, but we took South Africa as it is, and I thought that was a more mature relationship than the sort of one-note approach that we can have in other places.

Was that allegation of white genocide, of the killing of farmers, one of the things that you talked through with the South Africans?

There is no white genocide. There are more black South Africans killed in South Africa than white South Africans. It was part of the bilateral conversation about violence, police training. It was not brought to the level that it was under Trump I or Trump II. But our embassy did engage on a bunch of law enforcement and security issues as much as they could. It is a big issue for South Africans. One of the many reasons why the African National Congress lost its majority is because there is rampant crime in lots of parts of South Africa. It’s a concern to all of its citizens.

Let me ask you about another case of engagement you’ve written about, with Equatorial Guinea. There was a presidential vote that the Biden admin publicly condemned. The admin said there were, “Credible allegations of fraud, intimidation, and coercion.”

Then a few days later, you personally had to call the Equatorial Guinean foreign minister to congratulate the president and invite him to this summit at the White House, despite what the US had publicly affirmed. Tell me about that incident.

Secretary Rubio’s decision not to comment on elections was a spur for writing about it. The US government comments on more African elections than any other region in the world. With maybe one or two exceptions in the last four years, we commented on every single election. Some statements were pretty paternalistic, some were pretty vanilla, but almost every single one. That’s not true for Europe, US diplomats almost never comment on European elections, or Latin America — they’re actually the most vociferous of comments, on Maduro’s elections in Venezuela — or in Asia-Pacific.

Because we had traveled to Equatorial Guinea, Jon Finer, and then myself and the Assistant Secretary Molly Phee, and then they had this election, it was problematic. There was a statement that was pretty punchy, and it was just before the Africa Leader Summit. The Equatorial Guineans called up and said, “Why are we coming to Washington if this is what you think about our election?” That was not the outcome that we wanted. We have a whole bunch of issues that we wanted to engage with them about. We were on the record that we thought the re-election was problematic, but we were saying, “We don’t recognize that President Obiang had won his election.” So I called up the foreign minister and said, “We look forward to working with President Obiang and his next term and that smoothed it over.” He tweeted about it.

I remember it was 6 AM and I’m outside of my house on the phone, chatting with him about this election. This gets to this question about balance. We should be able to talk about democracy and human rights. I just think it’s one of the many things that we need to think about in our relationship — and figure out how we do all of these things in a way that not all of them are canceled out.

Why can’t we walk and chew gum? We should be able to do that in Africa, because we do it everywhere else.

Let me tie this back to the discussion happening among Democrats about the legacy of the Biden admin. One of the big regrets I hear is, “We tried to walk and chew gum at the same time, and it turns out that we couldn’t.” You see this in the everything-bagel critique of domestic programs.

Isn’t there a grain of truth to this critique in foreign policy — that you have to prioritize? That might mean making the decision Secretary Rubio has made, of not commenting on elections, so that you have firepower for other issues that you care about.

I take it a different way: it’s not really about the Biden administration. If we are going to behave in a way, in other parts of the world, that allows space to be critical, to promote trade and investment, and to talk about global issues, why shouldn’t we be doing that in Africa? The challenge is that because Africa is given so little space, both generalists and specialists want to narrow the way we talk about Africa to very specific issues, and let those issues be the ones that wag the dog.

Those issues typically being democracy promotion?

Not really. It depends on the country, but in the post-9/11 era, it was about counter-terrorism. Then starting in the Trump administration and for the Biden administration, a lot of it boiled down to China. Then in this administration, I’m not sure, is it migration and critical minerals in Africa? Those are the issues.

Those are such narrow sets of issues. What we need to be doing is talking about trade-offs and calibration. We should be talking about democracy. When we’re talking to governments that have had military transitions, we should be talking about, “How do we get back to civilian rule?” because Africans, more than any other region, believe in democracy. That’s what polling suggests, that they have the highest percentage of belief in democracy. But they also believe that it is not delivering for them. It’s in high demand, but the supply of it has been pretty low.

So what do we do to get back to democratic rule? What do we do to work with African leaders? Democratic rule has dividends, but we still need to talk about the extremist threat, issues like critical minerals, and the shape of the global order that we are moving into. We should be able to do all that. We have to get off our high horse sometimes, and not let ourselves be captured by single issues. [NB: I’m not sure Judd is right that Africans believe in democracy more than others. See page 23 of this Pew Research study, on attitudes to representative democracy. The African countries included score substantially lower than the Western European countries.]

Let me ask you about the tools that we use to do diplomacy in Africa. A State Department ambassador is the standard way that we interface with other countries, but sometimes a president will appoint a special envoy. You worked with three Horn of Africa envoys, covering Somalia, Eritrea, Ethiopia, and Sudan. Based on that experience, you said we need to reconsider the whole approach to envoys.

What’s wrong with envoys?

The reason why we often do envoys in Africa is because we’re quite short-staffed. Most of our embassies aren’t fully staffed up. With 49 countries as a responsibility, and sometimes multiple crises at the same time, sometimes those crises sort of spill over geographic or bureaucratic boundaries, an envoy ends up being a fix to a problem at the State Department or a problem in the broader national security apparatus.

The envoy is a solution to an American internal problem first: it’s not necessarily the right tool for that job over there, it’s that we need to fix some bureaucratic tangle over here, and the envoy cuts through that?

Exactly. The envoy helps with staffing issues, bureaucratic seams, and focus. Now there’s another thing that happens often with envoys: sometimes it’s virtue signaling too. You’re saying, “This issue is so important that we’ve named an envoy. The President has picked Joe Smith to deal with this problem, hence, we’re on it.” My view, which has been refined having worked with lots of envoys, is that we should be very clear about what we’re trying to solve for. Particularly in places where the issue is bigger than one embassy, or maybe is so challenging and difficult that it would subsume all the time of the assistant secretary and deputy assistant secretaries; then it’s really useful to have someone. Or it’s an issue that is both about Africa and the Middle East.

A great example is negotiations. Sometimes we have an envoy to deal with a negotiation between several countries, and that’s going to be 100% of your time.

I was going to mention Steve Witkoff in the Trump admin, who has been a pretty successful envoy in terms of being empowered to go do a bunch of things, and that’s a primarily negotiating role.

It’s primarily negotiating. But in some respects, Witkoff is running into the same problem of a regular assistant secretary: I think he’s got too many of them to do.

It is a huge brief.

It’s an insane brief. So the problem with our envoys — we don’t staff them up very well either. We didn’t have the staffing to deal with the problem. We’ve named an envoy and that envoy has only one, two, or three people working for him or her. So they don’t have the power to deal with it themselves, to process all the paper, to do the thinking. They sometimes sit outside of the bureaucracy, so they can’t tap into the rest of the country team or the folks back in Washington.

I don’t think envoys are a bad thing, but you have to understand what they’re trying to do. You want to make sure they’re not trying to solve everything, which was one of our problems with our Horn of Africa envoy: they’re trying to do Somalia, Sudan, Ethiopia, Eritrea — with three people. That’s insane. You need a lot of Witkoffs for that. Then making sure that they’re staffed successfully so they can do the work — and thinking about, “What’s their exit strategy?” as well.

You say the White House and the State Department should build a team, agree on what the job is and who’s going to do it, and pick the right person for the gig. You describe that coordination as “fairly obvious, but crucial.” It does sound obvious and crucial. Why is it so hard to get right?

The dirty secret is sometimes envoys are appointed because there’s a view that the current team isn’t getting the job done. That’s not a negative about the current team, it’s just that the issue is beyond them, it’s too immense. You need someone who’s going to run point on this. So sometimes there’s tension by virtue of having an envoy, because it can suggest…

The envoy shows that you don’t necessarily trust the team.

Not necessarily you don’t trust them, but you’re taking a portfolio away from the current bureaucracy and that’s really sensitive. So ideally you all agree that this would be a force multiplier for everyone, and it’s not a fix for something that we seem to not be able to solve in our current arrangement. Then you have to find the individual with the personality that’s going to be effective, not just the resume. Sometimes there’s a lot more about resumes: “This person was a diplomat, he worked at the UN; this person has Middle East experience.” I’m a big fan of one of our envoys, Mike Hammer, who’s just a really smart people-person. He came to Africa late, he was our ambassador to [the Democratic Republic of] Congo. Then we asked him to do this and he hit the ground running. He’s very good at relationships, very dogged. He ended up being the right person, and knew how to work well with the bureaucracy, which was also important.

Say more about the personal qualities of an excellent envoy. What personality types do a decent job?

It depends on the challenge that you’re trying to solve. Envoys that are doing negotiations, I think you really want people-persons. I’ll give you an example from the Obama administration: we had two envoys for the Great Lakes. We had Tom Perriello, who ended up being our envoy for Sudan. He is a lawyer by background, he did serve one term in Congress. Prior to Tom, we had Russ Feingold: longtime Africanist, long time in the Senate. I would watch Feingold engage with African leaders and he built relationships and then stuck the démarche [a formal diplomatic solicitation] somewhere in there.

Politicians are actually better than diplomats. An extension of that is, can you work with the bureaucracy? Make all the bureaucracy feel you’re not taking away something for them? Not that you’re operating outside of them, but you’re doing the work, keeping them informed, being inclusive, and it’s to everyone’s advantage that you succeed.

Let’s say that tomorrow, by some twist of fate, I’m named as an envoy to solve a thorny African issue. I don’t have deep expertise in the region. How do I keep the bureaucracy on my side? What are my first steps?

You spend a lot of time with the staff: getting to know them as people, asking for their expertise and feedback, and finding opportunities to bring them with you. In your conversations with foreign leaders, you’re referencing other senior leaders in the government, and how, “We’ve all worked together on this approach.” You’re not only back-briefing your peers back in Washington, but even setting up calls so they’re involved in the conversation. You’re setting up side meetings for strategy, sharing what you’re learning and asking for their opinion.

It’s a lot of ego stroking.

It’s a lot of care and feeding. Government is full of people. I spent so much time thinking about, “How do I make people believe, feel, understand that I may not do what they say, or what they recommend, but I want to hear their recommendations and I want to hear their input, and I want to be cordial about it?” I don’t think I got that right 100% of the time. Sometimes I think maybe I should have done less of it. But you want people to believe that this is a one-team, one-mission effort — that it’s only because all of us together are in it, sharing expertise and leveraging relationships, that we can move forward, even if one is the one with the ball.

Where is the line on bringing people in? You’ve gone to meetings where there’s a massive American delegation — five or six pretty senior people — to engage with one foreign counterpart. That seems suboptimal.

This was a meeting we had in New York with a foreign minister, and it just seemed like all of us were there. The value is maybe showing this is important, or that we were all hearing the same things, but it probably wasn’t a good use of our time. I don’t know if it was that instrumental in moving the ball forward.

Is the National Security Council (NSC) neutered today? There were lots of stories about how it was one of the most important policy organs of the Biden administration — the nerve center of the White House. What’s your read on it right now?

One of the things that I’m most concerned about is that, for the first time, the Africa Directorate at the National Security Council has been folded into the Middle East Directorate. So there are two people who do sub-Saharan Africa, and they’re part of the larger Middle East team. That really concerns me, because it’s challenging to work 49 accounts. Some you work more than others. But to have responsibility for a very large continent and your boss — in a team of five or six, I don’t know — is also responsible for the Middle East: that’s a challenge. I don’t know the current senior director; I wish him the best. I do think that it’s hard, if you have a couple of slots for a phone call or a meeting with the president, and now you have to pick between Middle East and African countries. That’s hard, if you’re not someone who’s invested in Africa. You’ve only got a certain amount of meetings you can host in a day. My fear is that it relegates Africa even further down the pecking order.

I don’t have a strong view on how to organize the different functions. But if I was steelmanning the administration, I’d say something like this:

In recent administrations, the State Department has often been sidelined by the National Security Council. We’ve had past guests on Statecraft say it’s bad that this whole State Department apparatus doesn’t make some major diplomatic calls. The National Security Council is tiny compared to State, and it’s often the first institution to talk to the President about the Middle East, or Africa, or what have you. Secretary Rubio is clearly a trusted member of this administration, and he’s Secretary of State. Maybe that’s good for Africa.

What would you make of that rhetorical approach?

My experience is not that the NSC was the most powerful player on Africa in the Biden administration. I’ve seen lots of different administrations on Africa; some where that’s clearly the case — the NSC is the most powerful.

Which administration would that be?

In different moments, the NSC was more powerful under President Obama. Under Presidents W. Bush and Clinton, you had the senior director [at the NSC] and the assistant secretary [at State] in lockstep about what they were doing. In the Bush administration, it was almost a division of labor: I’m going to take the lead on some of these countries and issues, and you’ll take the lead on others.

Why that’s important for Africa is that it allows you to “crowd in,” to put pressure on both systems. You’re moving up to the Secretary of State and to the National Security Advisor: they’re hearing the same policy recommendations. When they get together, they’re much more comfortable making a big decision. I had a good relationship with my counterpart. But I do think that under Bush and Clinton, the alignment between the two was closer than I have ever experienced or read about. It allowed for a very powerful catalytic effect.

The NSC is like the emperor with no clothes. It’s only as powerful as people want to believe in it. If they don’t think that the senior director is speaking for the president, all they’re doing is calling meetings.

You always knew if you were doing well depending on who came to your meetings. When I was a director under President Obama, I was constantly looking, “Are you pushing it down from the deputy assistant secretary, to the office director, to the deputy director, to the desk officer? If you keep pushing it down, you don’t think this meeting is very consequential.”

What [makes] the NSC important is giving a space for all the departments and agencies to come together. All of them have their own equities. They all have different tools and goals and you need someone to adjudicate that. Yes, the NSC can get over-dominant and push people around. But the best NSCs are ones where all the agencies believe that they’re going to get equal hearing. That we’re going to make a decision that is going to move us all forward. Not that we’re just getting told what to do and then we’re going to do it poorly, or at least “weapon of the weak”-resistant.

That’s a good reference. James C. Scott keeps coming up on Statecraft. We’re going to have to do a Scott special.

What is the risk, exactly, of cutting the NSC down to size? Of saying, “The NSC has no clothes, the President trusts other organs and voices; we’re slashing NSC headcount.”

The concrete problem is that the only space then for you to adjudicate or talk about Africa is at the cabinet level. Otherwise it’s all within Rubio’s purview. DOD has an important role, and has really important assets and equities. Same for Treasury, when it comes to the International Monetary Fund or the World Bank. Or Commerce. Where is the place in which they go? They are going to disagree with State. That’s not a bad thing, that’s part of the process. If the only time when the heads of agencies and departments are meeting are at the cabinet level, or even at a principals level, you don’t have enough of the rumination, the back and forth, the kicking of the tires, the hardening of positions that you need for a good decision.

I’ll give you one example. Sometimes the State Department would push back, “Why are we having this meeting? We’ve already made a decision, we’re going forward.” Sometimes I would say, “It’s important that the rest of the US government understands what you’re trying to do.” That’s if I was being nice. Other times, I would think to myself, “By coming to our meeting and writing talking points for yourself, getting your staff, and coordinating, your plan is going to be sharper, more refined, and more articulate.” It’s not just performance art so that everyone is included. It’s also about getting the best version of an idea on a table — because of this action-forcing event — kicking it around in that meeting, coming back to it, and moving it up further. At its best, the NSC provides a space for debate, refinement, negotiation, and a hearing of all the different things that have to come into place for us to have a good policy.

This is why we created it in ‘47. If you let State do its thing and DOD do its thing, they often go in different directions, particularly in Africa. Counter-terrorism and security partnerships get prioritized over some diplomatic issues where you need a vote somewhere. You’ve got to coordinate somehow, and you can’t be doing it at a three hour cabinet-level meeting on camera.

When you were at the National Security Council, you would get a lot of intelligence analysis. You didn’t always find the analysis on the big crisis of the week helpful. I want to hear why not.

When you’re an intelligence analyst, you’re consuming and absorbing different streams of reporting: from the embassy, from all the clandestine avenues that one has. But you’re also not exposed to a lot of the email traffic that is happening. You’re maybe not aware of conversations that people are having, but haven’t written up and put into the system in a formal way. The crisis du jour moves fast.

You’re telling me that the spooks are not listening in on NSC calls?

I don’t think people have broken that law yet.

They’re at a disadvantage by giving oftentimes the tactical: “Here’s what’s happening.” I understand the reasons why you want to do that. But I found that the Intelligence Community (IC) — on the crisis du jour — is much better with standback pieces that we can debate on. “It’s been six months into the conflict. We’re at a stalemate. These are the key factors shaping the stalemate. Until one of these moves, we’re unlikely to be right for negotiations.” Or, “We are probably on the precipice of more conflict, or the opportunity for an adversary to come in and exploit this dynamic.” Those stepback pieces are pretty good. But the more tactical pieces, in the throes of a conflict, one or two pieces may shed light on something, but we’re moving pretty fast.

What I appreciated is, “Tell me what’s happening in some of the smaller countries that I’m just not spending a lot of time in.” Maybe I should be worried about a development there. Maybe there’s an opportunity that we can seize. When there’s a crisis taking all my energy, that’s less for other developments elsewhere.

I spent 16 years in the intelligence community. I understand why the IC wants to be in the room, and have something to say in the biggest crises. But that is sometimes very costly to having insights in other parts: to help us have strategic depth, be aware of discontinuities, and help us with strategic surprise.

How much of your work at the National Security Council was reactive and how much was proactive? Was there any room to wake up and say, “This is the priority of the president. I wonder how I can advance it today?”

It was probably 70-80% reactive. The initiatives actually helped us focus on other things. We made a commitment to do the initiative and that gave me some time. I probably thought about this too late — I always had this board in my office of the big things that I wanted to accomplish, and I would look at it and raise them with my team. But in my last month or so, every day or two, I’d put the board in the main room and go through them. That was much more powerful. To have that checklist in our face all the time. My team was working — not just for me, and those are things that I want to do — because we all wanted to do them. But it really helped focus us: to have that checklist and keep nailing it, as opposed to being pulled into the quagmire of whatever the problem of the day was.

At the NSC, you’re working till nine or ten every day. You get home and you’re still dealing with emails. It’s nonstop. You don’t have enough time to do everything that you want. So it’s a big percentage, but in my last month or so — there was probably a better way to keep everyone focused on some of these other tasks, and then we could have a conversation about, “Did we get the balance right?” I found that to be too little, too late. But that was a useful tool.

I’ve been struck by how many people come out of an administration and then say, “If you wanted to do any forward-looking, proactive planning, you had to do it before you went into the executive branch.” Because by the time you’re in, it’s too late. Dean Ball, who was at the Office of Science and Technology Policy, said something to that effect. I’m hearing some of that from you here.

I agree with it in some part. But also before you get into the administration, you don’t understand the administration’s DNA. Unfortunately, it takes a little time to figure out, who are your advocates? What is the leverage that you have? What is the cadence of the administration? You need to sit a little bit in the space. I was very fortunate because I was brought in exclusively to write the Africa strategy and then I became senior director. I was the guy at the poker table that didn’t play any hands. I just looked at people’s tells.

By the time it was my job, I had already seen what kind of emails are effective with Jake Sullivan. I had seen, “What are the trade-offs I need to make with State to have a positive relationship?” I’m thankful for that. My predecessor had to get working on day one, and figure all that out on the job. I had a little more space to observe. More critical is being able to stop and say — and not just in an offsite way — “Are we doing the things we want to do? If we’re not, how do we change our routine so that they’re not aspirational, they’re part of the agenda.”

As I understand, nothing in the White House has one author, everything gets touched by a million people. But you’re the primary author of President Biden’s 2022 US Strategy Toward Sub-Saharan Africa. Coming out of the admin, you said, “I dislike the way we write and present strategies.” What was so wrong about the process for writing and presenting that strategy?

It’s a little bit unique to be brought in from the outside to write the Africa Strategy, as opposed to the team doing that. But it’s a huge credit to my predecessor and the administration that that’s what they decided to do. The irony was, I had written strategies in the Obama administration, classified and unclassified, and I wasn’t a big fan of them. But this was an opportunity, it was an incredible responsibility, and I had done a lot of thinking about what our approach should be. I had written a document at the Center for Strategic & International Studies, in August 2020, called A New U.S. Policy Framework for the African Century, which had a lot of my ideas. I assumed there was already somewhat of a co-sign on what I wanted to do.

The challenge with strategies is, first of all, we call them, “strategies.” Most of them aren’t even strategies. They’re a series of values and objectives, and framing language, but they’re never about, “If we do X concurrently with Y and then follow that up with Z, we can get to our goal.” Our goal is advancing democracy, and increasing trade and investment. Those are pretty abstract concepts and some of them are not even measurable.

When I came in, I remember having this conversation. I said, “Are we writing a strategy, or is the task to write a public diplomacy tool? Is the task to give directive to the interagency that may have budgetary implications? Is the idea that this will be a platform to launch new initiatives? What is the goal?” Unfortunately, the answer was, “All of the above,” and that is probably not the right answer.

I am really proud of probably the first two or three pages of that strategy. It is a vision about the importance of Africa, and how we have to engage with our partners and treat them as real partners. I also — because I am an amateur historian — really like the text box looking back at 30 years of Africa policy. I continue to believe that we had a policy for the last 30 years that had a lot of benefits for Africans and Americans. But the world and Africa have changed, and we needed to update our approach. So I’m proud that we changed the rhetoric and introduced ideas that even Project 2025 mirrored.

The back half I could have done without. It was four objectives. I really struggled with, “Are they even new?” It’s the same ones I put in, one about climate and the post-pandemic world. Different departments and agencies put their little pet rocks in there. That was the trade-off: between getting a strategy document that said something I believed we needed to say; a North star for our policy. And having something that the agencies could say “On page 13, it says that we are going to do Y.”

If I did it over again, I would just say we’re going to do a vision statement. I do like the idea of engaging publicly about our thoughts. A speech is insufficient. Being quiet on it, which some administrations do, isn’t that useful either. But I wouldn’t throw a whole bunch of objectives into it: I wouldn’t have a Christmas tree. I would be very clear about — “Intellectually, how do we think about this moment in Africa and the way in which we want to engage with our African partners?” — and probably leave it at that.

What’s an example of a pet rock that was left in the strategy document?

There was something from the DOD about how we’re going to invest in African defense industries. Maybe not a bad idea. I don’t think we ever did any of that. The one that I always think about is an Obama administration one. Because Secretary Clinton was interested in clean stoves, you would find the clean stove people adding that to every document they had. Ours wasn’t that bad and I kicked out a bunch of them, but that’s the totemic version.

16 pages is long, but it’s not so long that the clean stoves folks can get their point in.

I don’t know where the clean stoves folks were in the Biden administration.

Our assistant secretary had a great idea. She sent a cable to all of our embassies to provide their input before I even put pen to paper, talk to their African government partners, maybe talk to partners in Europe or the Indo-Pacific about what the strategy should be. I talked to a whole bunch of different think tanks and shared drafts of different versions. I tried to consult and get the best ideas, both because that would make the document stronger, but also I wanted people on the other side to validate it, to say, “This is a good, thoughtful strategy in the right direction.”

You were an intelligence analyst for 16 years. How has the profession changed most since you started your career?

There is more competition for insights than there has ever been before. When I first started as an analyst, what the agency said, particularly on Africa, was pretty singular. You couldn’t have that kind of insight. I’m talking about finished analysis. No one was producing that work in a significant amount that you could shop around. In my lifetime — whether it’s the proliferation of geopolitical risk firms, the ability for people to self-publish on the internet, just social media in general, or the fact that at the NSC, I received raw intelligence reports and all the back and forth with the embassies — the bar became higher for the analysis to say something different and new.

I don’t think that they’ve grappled with that enough. [Intelligence] is not the only piece of information that can be exquisite. Exquisite has a meaning, probably different than I am suggesting here. It often means satellites, secret stuff. But I mean an insight that is sophisticated and refined — that will deliver decision advantage now.

I don’t want to put words in your mouth, but you’re saying that some chunk of what the agency provides is on par with the stuff that you could get from a geopolitical risk firm?

Sometimes. I took the bus off into the agency and I would be on my phone scrolling through Twitter, when Twitter was good, and I was at the 80% solution most of the time. When I was at a think tank and wrote my own papers, I was highly competitive with anything the intelligence community said. I don’t think that’s a bad thing per se. But it does put extra emphasis on not just regurgitating reports: diving deep into history, thinking about context, and drawing on political science to challenge a policymaker.

Sometimes, as a policymaker, I wanted you to just tell me, “This thing is about to happen.” But the best pieces were the pieces that challenged me to think differently about the way I was going at a problem. I think you realize that you need to do that when you see that you don’t have a monopoly on insights anymore.

On this podcast, I’ve heard a lot about the US versus China on the continent of Africa. Things that they’ve done well, diplomatically, that we haven’t done. I haven’t heard much from folks on this show about where we stand relative to them in intelligence gathering. Do we have any frame of reference for them versus us from an intelligence perspective in Africa?

It’s a great question. There’s no way I can even figure out how to answer that question without getting in trouble.

I should’ve known. Judd Devermont, thank you very much for joining.

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Today’s guest is still active in NYC political life, and it was clear I would not get an answer to that particular question.1 Instead, I took this opportunity to investigate how City Hall actually runs, and how the past three mayors have structured their administrations. But if you read between the lines, you can treat this conversation as a guide about what has worked in New York’s governance over the last 20 years, and the likely stumbling blocks for an ambitious new administration.

Maria Torres-Springer moved to New York City a week before 9/11, and spent most of the following 20 years in city government — first as a top appointee in the Bloomberg administration, then in several high-powered roles under Bill de Blasio, and eventually as second-in-command for Eric Adams. Her most recent role was as first deputy mayor: functionally the Chief Operating Officer of New York City. Torres-Springer resigned in February 2025 (she was not implicated in the overlapping Eric Adams corruption scandals).

To put it lightly, Torres-Springer has fans. In November 2024, City & State New York wrote a cover story titled, “The Vibe at City Hall is Thank God for Maria Torres-Springer.” It quotes political figures from the far left, center left, and right, calling Torres-Springer “a phenomenal leader,” “a very classy, charismatic, knowledgeable individual,” and, “a serial overachiever in a good way.” When Adams appointed her as first deputy mayor, he said, “She has the ability of landing the plane.”

Torres-Springer is widely described as one of the most effective political operators in New York City, and she’s been linked in media stories as a potential official in the next mayoral administration (although she recently took a role as President of the Revson Foundation, a NYC-based philanthropic organization). She’s maybe the best possible guest to talk about steering City Hall.

Given constraints on what Torres-Springer could discuss, I wanted to get into two big topics. One is process. What does it take to run City Hall? How have different mayors done it differently? The other is outcomes. Torres-Springer was one of the champions of City of Yes, the Adams-backed initiative to build 500,000 new housing units in the city over the next 10 years. I wanted to better understand City of Yes, what she’s most excited about, what didn’t make the cut, and how it all came together politically.

We discuss:

• What it takes to succeed working for three very different mayors

• How Bloomberg, de Blasio, and Adams governed differently

• How to work effectively under constant pressure

• The political coalitions that made City of Yes possible

• Why it takes over a year to turn over a NYCHA apartment

• How to fix the plumbing of government

• What the next mayor should prioritize to keep New York thriving

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Thanks to Harry Fletcher-Wood, Eamonn Ives, and Katerina Barton for their judicious audio and transcript edits for length and clarity.

For a printable transcript of this interview, click here:

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Maria, I’m glad to have you. You’re headed back into the nonprofit sector, after working for three different New York City mayors: first Michael Bloomberg, then Bill de Blasio, and most recently for incumbent mayor Eric Adams.

Are there many people who have worked for at least three mayoralties?

It’s fairly atypical at the senior level to have worked for three consecutive mayors. But in the public-sector workforce — 300,000 strong — there are many dedicated employees who have worked across different administrations. I feel very fortunate to have been able to work — at times of both growth and crisis — in three different administrations, each trying to move the city forward.

Readers who are loosely familiar with New York City’s political history will note that those three mayors didn’t just have different policy outlooks — they’re very different characters. In New York City, the personality of the mayor is a topic of much public discussion: how they interact with different stakeholders in the city, whether they’re more public or private, etc. How did those mayoral personalities shape how they governed and how their administrations worked?

They say it’s the second-hardest job in the United States. You’re not just managing that 300,000-person workforce; you’re the CEO of a company that has 8.5 million shareholders, and they all voice very loudly how they feel about your performance. And you have a media environment where everything is under scrutiny, so it’s not for the faint of heart.

I started as a policy analyst in the Bloomberg administration and over the course of 20 years was able to work in three different agencies and at City Hall, until I was appointed first deputy mayor. The love all three mayors had for New York City, and their commitment to moving it forward, was irrefutable. But they all had different ideologies and styles of governing:

• Mike Bloomberg had a very purposeful governing and management philosophy. He hired well and delegated responsibility to agency heads and deputy mayors. For young staffers, that meant you saw some very good techniques for how to manage a sprawling bureaucracy. They say that New York is ungovernable, but that administration did as much as it could to bring order to what can often be a chaotic environment.

• The governing philosophy of Mayor Bill de Blasio I would describe as: he knew what his North Stars were. There were some very important initiatives and priorities — universal pre-kindergarten, his affordable housing plan. Because it was so clear what those priorities were, that allowed government to organize itself — [which] allowed for the quick and successful implementation of ambitious initiatives.

• Mayor Eric Adams prioritized being accessible to everyday New Yorkers and creating a porousness to ensure that the voices of those New Yorkers who may have been betrayed by the government, or didn’t have access to it, were heard. That meant we had to be focused on constituent services and making sure that we were thinking about how government needed to work better for the greatest number of people.

Despite three different mayors, there is a workforce within city government that is incredibly focused on not just responding to shifts in the political wind, but turning vision and mayoral agendas into very practical results for New Yorkers.

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You mentioned that Bloomberg came in with a history of management and ideas about personnel, hiring, and delegation. In your time as first deputy mayor, you spent time reviewing City Hall personnel, policies, and programs, and trying to figure out, “What’s the right way to manage and structure the inner workings of this massive administration?” What did you learn from Mayor Bloomberg — whether it’s broad principles or specific things about how City Hall needs to run — that you’ve tried to implement?

I learned from each of the mayors. From the Bloomberg administration, the use of data — the importance of answering, “What is the best solution to this problem?” before you start trying to triangulate and solve for politics — was a very early and useful lesson. The need to build the right teams: one of the most important assets that any senior leader has in government is the team he or she is leading. If you create an environment where team members are empowered and trusted, where they can not just execute programs but also imagine how government can do its best work, then you create these “ride-or-die” teams. I knew every day that my life depended on the strength of the teams that I was working with. Those were early lessons that I learned from Bloomberg: how to make sure you assemble, nurture, and empower the right people, with the right expertise, in the right formation, toward the right goals, at the right pace, to get done what needs to get done.

Can you get a little bit more specific? In practice, what have you done to make sure you have teams that are operationally excellent?

When you hire for particular positions, it’s important not just to ask: “Are they qualified for the job?” There are a number of people who have the right skill sets and background for a number of positions. But in government you’re also solving for a couple of other questions. For example, “Why are they interested in this business?” It can’t just be because of a desire to give back. Those who I’ve seen step up over time and be resilient are those who have a sense of personal mission and of what they uniquely can accomplish in government.

Sometimes that’s because they have a particular lived experience. In my case, I grew up with housing insecurity and I knew what it felt like for government to work or not work. We grew up with a Section 8 voucher and we depended on it. That translated to a career in public service where I never forgot what was at stake. This wasn’t just about high-falutin policy, or jargon, or a bunch of policy wonks trying to find solutions. It was a matter of life or death for the people we were trying to serve.

Over the course of hiring and managing, did you find applicants who want to work in city government but don’t have that specific sense of what they can do? They’ve got a generalized sense that, “It’s a good thing to work for your city.”

I do, but that’s okay, especially for early-career professionals. You might not come in saying, “I want to fix this crisis, and here’s the long list, here’s my autobiography, and why I’m uniquely positioned.” But I would test for a sincerity in why they want to be in government and an aptitude for solving problems in government.

You get more responsibility as an early-career professional than you probably should. Those who take that responsibility seriously say, “I’m not going to squander this opportunity. I’m going to be the type of professional who is curious and will stop at nothing to find the right set of solutions.” Importantly — and this is prized in most work environments, but in particular in government — [we need] someone who works well in teams and is able to collaborate across different agencies, inside and outside of government, under extraordinary time constraints, and where a lot is on the line.

I’ve got here a picture of the open floor plan that Mayor Bloomberg had in his office, which I understand was novel at the time. Was he right to get rid of the big-box cubicle model and put everybody in the bullpen together?

It was the first bullpen I ever knew. If it’s any indicator, that setup still exists — persisting through the de Blasio and Adams administrations. Some of the conference rooms in the last two administrations were converted back into offices, but most of the City Hall staff still sit in the bullpen.

It was novel at the time, maybe even radical, but it had benefits. Some are probably pretty obvious. New York City government is at a scale and pace that is unimaginable. On any given day, there are 12,000 tons of trash that have to get picked up, one billion gallons of water that need to be supplied, 30,000 acres of parkland to be maintained. Anything that you can do, office format included, to create a better velocity of communication and action is helpful.

The other thing is transparency. You knew where everyone was. You could overhear who was having an argument and how issues were getting resolved — from the first deputy mayor to a policy analyst who just started the week before. In fact, when I was appointed as first deputy mayor, one of the things that I did was to create a rotating desk up in the bullpen, do various deputy mayors would spend time upstairs. This wasn’t just symbolic; it was a way to show that we prioritize accountability and transparency. You create an environment that prizes execution and low drama versus palace intrigue. That’s the type of culture that every mayor should strive to create.

I’m wondering for you and for the mayors that you’ve worked for in this environment in which everything happens incredibly fast — and at least in the 21st century, it’s been very much an open office, info-sharing environment — when do you get time to sit and think? When does the deep work or the processing happen?

That’s a good question. Probably those moments didn’t happen often enough or at the length that is necessary to do that type of deep processing, but I was very intentional about creating spaces for that. There’s a crush and heave to the work, and it’s very easy for you to let the work happen to you. There’s a crisis every day, there’s a press story every minute, and meanwhile the deadlines continue.

When I was appointed in the Adams administration as deputy mayor I brought back a practice that I saw in the Bloomberg and de Blasio administrations. I brought together all of the agency heads within my portfolio for a monthly lunch. That might sound very basic, but it was a rare opportunity for leaders to come together, and share not just the critical priorities of the month, but to hear from other leaders, tackle problems together, and syndicate their strategic plans. You have to be very intentional, especially at the beginning of an administration, because you are trying to do three things all at once — running a government, changing a government, and building a government.

It was important to me to have a process in the beginning of agenda-setting. We have blueprints on housing, economic development, workforce development, and climate, that were established early on. This was an exercise, not just in creating glossy brochures that no one read, but in ensuring that we set some markers about what needed to happen with a particular policy domain or agency in order to not mistake activity in government — which is always quite feverish — for direction.

What kinds of benchmarks did you set for yourselves?

A major one in housing, for instance, was a moonshot goal of 500,000 units of new homes over the next decade, backed up with very detailed plans about how we were going to get there. For economic development, it was not just regaining the one million jobs we lost during the pandemic, but also topping the total employment and private-sector employment records the city held before the pandemic. On workforce development, we had a goal of 30,000 apprenticeships, which was a new model for workforce training in New York.

Each of these blueprints had a major overall goal and a number of intermediate key performance indicators that we wanted to track, in order to ensure we were making good progress, because the goals were meant to be moonshots. They weren’t foolishly derived, but they were ambitious enough to galvanize and inspire public servants and partners outside of government to do more and better for New Yorkers.

In the transition from Mayor Bloomberg to the next mayor you worked for, de Blasio, what changed about how City Hall was managed?

After three terms in the Bloomberg administration, we had new leaders, new energy, and new plans. The styles were different. For Mayor de Blasio, in order to make sure we had the right process for decision-making, [we used what] we called the decision memo matrix. We had to be very clear about what exactly we were trying to accomplish: what was the decision? Who had to sign off? What were the budget implications? Every mayor has his or her own way of making decisions, but in a new administration the principal has to set some guardrails for how he or she will decide on matters small, medium, and large. It was a process of getting acclimated to a new way of making decisions, a new set of priorities, and new people in these roles.

What do you think are the pros and cons of that decision memo matrix in the de Blasio administration? What did it help City Hall do better? What did it trade off against?

It establishes — just because of what you had to write down — a framework for what’s important, what needs to be addressed, and who needs to sign off before something is ready for a decision by the mayor. To the extent that there were informal ways that other administrations may have come to decisions, that type of process makes very clear the different components of a good decision.

There are a couple of drawbacks. One is that our problems are so complicated and nuanced in New York, and there’s something about putting it in a memo that almost flattens or simplifies it. It was important to supplement [the memo] with discussion in real time — with people looking at each other eye-to-eye, to contend with gnarly decisions you can’t quite summarize in a particular memo.

The other thing that every administration needs to think about is: “Does the process create structure, but also bottlenecks?” If at the end of the day you were left with 200 decision memos — that had to be read, vetted, and resolved — but it slows down the process, there’s room for tweaking and modification. [The new mayor has] to figure out what process they need to make the right decisions — and make sure that that process results in a quality and speed of decision-making that is commensurate with the complexity of the job.

Are there specific steps that any of the administrations took on revamping the org chart or improving efficiency that you would 100% say: “Yes, the next administration should copy-paste that particular practice”?

There are principles that I have observed and learned that if anyone asked me, “What does it mean to govern? What does it mean to structure City Hall?” I’m a broken record about.

Number one is to make sure that the system is simple and transparent. That starts with reducing bureaucratic friction by having an org chart people can understand and doesn’t have too many silos or portfolios. Not because you think your senior leaders won’t get along, but because it is just human nature that silos create competing priorities and personalities. Anything you can do to have the minimum number of direct reports to the mayor allows for the trade-offs and decision-making to happen more readily.

Number two is focusing on communication, internally and externally. The major currency in a place like City Hall is information and access to the mayor. If you make those things scarce, then that results in confusion and game-playing that you don’t want.

What kind of game-playing?

Everyone is vying to get access. Everyone is trading on information — it’s not that it’s secret, it’s just that a decision is made and it hasn’t been communicated back to the teams. So that discipline of feedback loops, of communicating big policy decisions, certainly before they’re in the press, matters. You’ll be surprised how important that is to ensure that the staff at City Hall trust their leaders and therefore act in trustworthy ways.

The third is anything you can do to minimize drama. The public servants I’ve worked with all want to focus on the very hard work of government. The less intrigue, infighting, public spats, and scandal that they have to contend with on a daily basis, the more they are focused on the work. All the ways to create a low-drama culture where you show that what is prized is quiet execution, not intrigue, will go a very long way.

How did you try to reduce the amount of drama in City Hall? What are the concrete tips there for dialing it down?

Always operate honestly and transparently. I can’t tell you how important having those North Stars was. In any administration there will be natural or manmade crises. We had this mantra in my team: “We have to walk a straight line through the initiatives that we set out — to combat the housing crisis, to bring back jobs — despite all of the distractions that will come our way.” There was clarity about what the priorities were. There will always be a day where there is stuff in the news. It’s human nature to pay attention for a second, but my team knew what their day jobs were. That type of clarity — those types of playbooks of what needed to get done — was important.

Most important is doing everything that I could to model low-drama behavior. Everything within City Hall and government is contagious. You set the culture early on, and it spreads and embeds. As senior leaders, if you want a no-nonsense, low-drama — “This is a place of employment, we are here to make sure that tax dollars are spent wisely” — and that’s what you model, then you have teams that do just that, even during times of crisis.

On that point about culture flowing down from leadership, I’m curious about your time as commissioner of the Department of Small Business Services under Mayor de Blasio. He famously was not especially friendly with the business community. I’ve got an interview here in which he said: “Mayors should not be too cozy with the business community.” How did that attitude from the top affect how you ran the department?

…Here’s what I’ll say. There are the words that people use and then there’s the business of government. The private sector is obviously not monolithic. There are major corporations which employ many New Yorkers, small businesses where a lot of job growth happens, and all the types of firms in between — architects, builders, and other professionals. Everything I did — in Small Business Services, at the Economic Development Corporation (EDC), or in housing — doesn’t happen just because of government alone. Every unit of housing that was built was built because it was a partnership between public and private. In the EDC, when we were growing industries — from life sciences to fashion — that involved private-sector partnership as well. In the Department of Small Business Services, the programs that we ran were all about: “What does it mean to help our mom-and-pop businesses and higher-growth companies hire more people, and have a better experience dealing with government?” For too many of them, it was Kafkaesque.

What I relied on in each of these roles under the three mayors was thinking, “How do you use the superpowers of that agency to help New Yorkers who are running a business or employed by a small business?” That kept me and the teams focused on the mission, versus the back-and-forth in the media more generically about the business community.

Let me ask you about another initiative under Mayor Adams on which you spent a huge amount of effort: City of Yes. I’m probably oversimplifying by calling it a major rezoning effort, but that’s a big part of it: opening up land in the city for housing. I’d be curious to hear what in that massive body of work you’re especially excited about, and what didn’t get into the final version that sailed through the city council on a fairly close vote. Obviously it had to get trimmed down to meet the moment politically. I’m curious what you wish, in retrospect, could have been squeezed in there that might have to be left for the next round.

I am very proud of the work that we did through City of Yes. It was three different citywide text amendments [to the zoning code]. One focused on our goals in carbon neutrality, the second on economic development, and the third — the one that garnered the most headlines and was most difficult politically — was the City of Yes for Housing Opportunity.

It is the most pro-housing set of zoning reforms the city has ever seen. It enables a little bit more housing in every neighborhood of New York, by clearing out a lot of the barnacles in our zoning code and relaxing certain requirements. There are close to 60 community districts in New York and we’ve seen more housing production in 10 of them than in all of the other 50 or so combined. So something is obviously amiss here.

The reforms you mentioned run the gamut from:

• Saying, “We can add a little bit more density if you build more affordable housing.”

• Legalizing Accessory Dwelling Units (ADUs): the cottages, basements, and garage conversions that we’ve seen in other places are quite helpful to boosting housing supply.

• Looking at the more modest housing [developments] — transit-oriented and what we call town center — two-to-five-story apartment buildings, the mainstay of so many neighborhoods. We made it illegal to build them for a very long time, so re-legalizing those.

• Relaxing parking requirements, making it easier to convert, and so much more.

In total, that’s over 80,000 new units, from our projections, over the course of 15 years.

I’m proud of the technical work, and it is significant. But what I’m most proud of is that we turned a corner in our city on imagining how we can modernize the regulatory system and do things that are politically hard. I’ve been in the housing business for close to two decades, but there was a shift, where we said, “It is not okay that there are more than 100,000 — mostly women and children — sleeping in shelters. It’s not okay that we have a historically low vacancy rate. It’s not okay that more than 50% of renters are rent-burdened.” The sobering statistics go on. But we also realized that we didn’t have to live this way. Hence City of Yes for Housing Opportunity, which cleared the city council review — the local legislative body — at the end of 2024.

You’re right that there were modifications to certain proposals, whether it’s parking or how we thought about ADUs. That was expected because this is a political process. You have to have enough humility to say, “We didn’t get every single proposal 100% right.” But there are two things that are important for moving forward. One is, as we look at the implementation of City of Yes for Housing Opportunity, to have the willingness to make amendments to where the nips and tucks were made [in zoning rules], if they are not helpful to addressing housing. Also, as significant as it was, this was only one piece of a larger strategy to confront the housing crisis. All of those initiatives — using public land more efficiently for housing, financing affordable housing production, revising our charter as we are trying to do — have to keep going with energy to make an enduring dent in the housing crisis that New Yorkers have been facing for too long.

I do want to push you on the zoning components of City of Yes. What you guys originally proposed was slightly more ambitious than what was eventually passed, because that’s politics. But are there things that you think, “If we could get another bite of that apple, we want to push for — this or that zoning reform — that didn’t get through the first time”?

I would pay attention to whether or not we are seeing the building of Accessory Dwelling Units as aggressively as we want. There were modifications made to where and how they can be built. I would also track how the new parking rules get implemented and where we are seeing housing being built, or not, as a way to ask ourselves the question: “Is there more that we can and should do here?”

I’d also want to make sure that we’re seeing growth, whether it’s from office conversions or transit-oriented development more generally. On transit-oriented development, as improvements are made to our mass transit system, we will see building coming out of City of Yes. But there are other opportunities outside of City of Yes to better map where transit improvements are happening and think about what that means for rezonings. The goal is always to ensure that growth is happening where there is proximity to jobs and transit that can accommodate that growth. So I’m very excited, for instance, to see where the aspirations for building more that we announced in the Manhattan Plan will lead us.

I’m curious about the politics of City of Yes. City council members have their own local constituencies, and often t’s easier to advocate for more housing at higher levels than at local levels. The State of New York has a lot of say in the regulations governing housing production here in the city. How did you think about putting together a coalition that could pass City of Yes?

City of Yes was not just a set of technical reforms, but it became a political, institutional, and in many ways even a moral project for those of us who were involved. This was a matter of who belonged in our city and whether we were going to create a city for generations to come or a city for the privileged few. If we were looking at this as not just a technical project, but a moral project, that meant we had to transcend our routine politics. It doesn’t mean that it was easy, but we did receive the support of the city council, with enough votes to ensure that it passed. They wanted to make sure that it wasn’t just zoning reform, that it was an entire package of investments, which we were prepared to do all along. So there was $5 billion committed to housing programs and infrastructure upgrades. A billion of that came from the governor. So Albany, the state legislature, and the governor were critically important.

The state legislature, some months before the City of Yes for Housing Opportunity was approved, also passed reforms to lift an artificial cap on density — that [change] made it possible to do conversions. So it’s necessarily many levels of government working together because the policy mattered.

Importantly, Santi, it was a very big tent: an exercise in coalition-building from housing advocates to developers, houses of worship to labor — very important that they were part of this — cultural institutions, the business community, and many others in between.

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As I was getting ready for this interview, I talked to a New York real estate developer. One of the things he praised was that when a developer submits plans to the Department of Buildings (DOB), they can submit them through an online portal. The DOB reviews them, gets you back the notes and annotations, and that all happens on the portal. He talked about how in Los Angeles you have to roll up your plans in a big tube, and drive it over to the office. They eventually lay the plans out on the desk and annotate them by hand. Then you’ve got to go pick up your tube.

In your experience, how important are those kinds of procedural tweaks — not about zoning, but how we run that process? Is it more of a cosmetic thing?

No, it is not at all cosmetic. This is fundamental to fixing what people have called, “the plumbing of government.” Whether it’s the permitting for the building of housing, or for a restaurant to have all of its permits to start operating — too often that experience is Kafkaesque, where you have more than a dozen agencies not talking to one another, and you literally have to make your way to each one. Throughout this entire time you are losing time and money. That is not a good situation.

In the housing space, every day of delay where you can’t occupy a unit, that’s a family staying another day in a shelter. So the fixing of the plumbing, the automating of the systems, the digitizing of the processes is fundamental to fixing the process. The work I was focused on with many colleagues is to map it out from the beginning — through the entire environmental review, the land-use process we just talked about, then the permitting — and say, “How long is it taking? Where are the bottlenecks?” Have a system that works better for the constituent, the consumer — rather than a system that reflects the government org chart, which is too often what happens. We made a lot of good tech-enabled progress there, but there’s a long way to go to make sure that we are reducing the procedural bloat that exists in too much of government.

Is there one procedurally bloated process that you managed to wrangle into something more reasonable? And is there something that the next administration, whoever leads it, should look at and tackle — a bloated process that needs love?

If a small business is trying to operate in New York, it has to interface with a dozen agencies. In the previous process, you had to fill out who you were and all of the vitals of your business multiple times and a new form each time. What we have migrated to in New York is a unique identifier, so every agency in government knows who you are. It sounds simple, but the amount of time that a small business has to take just to get to the starting line was just too long.

There’s wonderful progress made, as you mentioned, with agencies like DOB. There are many other agencies who are involved and have to sign off. There’s DOB, the Housing Preservation & Development Department (HPD), the fire department and others. The work ahead is to not just improve the systems of those agencies, but to ask, “How can we build a better overall process for the user, and not just automate current processes, but get rid of steps that no longer serve a use?” That’s where you move beyond what’s cosmetic to something that truly does save time and energy.

As first deputy mayor in this most recent administration, housing was your portfolio: not just the City of Yes and zoning reforms, but managing the New York City Housing Authority (NYCHA). There’s been reporting over the last few years about the vacant units that NYCHA manages. It takes, on average, over a year to get tenants into a NYCHA apartment. A chunk of that — a few months — is because NYCHA has to renovate a huge amount of apartments. These were built a very long time ago, and the federal government has pushed NYCHA to get rid of lead and all kinds of other issues. But I’m curious: what are the other things that are making it take a year to turn over an apartment?

NYCHA is the largest public housing authority in North America: about 350 developments, more than 170,000 units, and 1 in 17 New Yorkers, which might even be an undercount. It’s a massive operation. You mentioned the vacant unit challenge, but for everything that might go wrong at NYCHA, the easiest thing to do is to say, “This is managerial incompetence.”

There are certainly examples of that. But this is a deeper, harder story about governance and investment. You mentioned some of the most important elements. It’s an aging housing stock — NYCHA developments average about 50 years old. So every unit requires the type of upgrade that deals with lead or sometimes asbestos, plus any electricals or plumbing that needs to be fixed. What might look like delay is the effort needed to make sure that a deeply-deteriorated unit is habitable.

There’s also structural underfunding. The last assessment for NYCHA totaled the capital repairs needs at about $80 billion. That is not coming in one big check from the federal government. That requires the type of financing where you braid together different revenue streams in order to rehab that unit. There are also realities in terms of the workforce, from civil service rules to union contracts, that have to be considered.

There’s also the environment that NYCHA operates under. There is a federal monitor. Everything that goes wrong is in the front of one of the tabloids. In that environment, the teams have to work with an extraordinary amount of care and discipline.

NYCHA is tasked with caring for the nation’s oldest housing with thin resources and challenges that no private landlord has to deal with at that scale. This doesn’t mean that it can’t do more and better: it should. That’s where we need to diagnose what is causing the failures in the system, and then for all levels of government to come together to fix those failures.

If you were going to give a laundry list to the next administration of the things in your control to make sure more people are moving into those houses — since, as you pointed out, every day a family is waiting to move in is a huge cost — what is in the next administration’s control? What could it do to refocus the city on getting that number down?

You have to identify the specific problems. You can have big goals, but you also need to think about those issues that affect individual people and families, and make no sense at all to the average New Yorker. It probably is infuriating and confounding that there are vacant units anywhere in New York given our housing crisis. Say you want to fix them, make a list, and they may not be the only problems to fix within an agency, but you’re clear about what you’re going to measure and focus on. Then get to fixing the underlying issues that are causing that problem.

So go about it methodically:

• What’s the funding situation?

• What is needed in order to make the investment? Because it can’t all come from government.

• Do you have the right models that involve different parties, including the private sector, to stretch the public dollar?

• Are you thinking as carefully and strategically as you need to about work and civil service rules? That’s the environment — it’s not going to go away. You have to understand where you can make changes that are feasible and will be impactful: where the juice will be worth the squeeze.

• Finally, how do you hold yourself accountable? How do you set a goal for the clearing of those units? Be clear about what your goal is, and tell New Yorkers how you did in that year towards that goal.

I want to ask you about an equivalent issue in the private sector. There was a program called Unlocking Doors, which pledged up to $25,000, and later up to $50,000, for landlords if they would renovate low-cost apartments and get them back on the market. Only one landlord applied in the first iteration of that program and didn’t end up following through. A property manager was quoted in the Gothamist saying he’d rather take money from the mob, because the process to get reimbursed from the city was so onerous you couldn’t rely on it. There were other complaints as well.

I know, going way back in New York’s history to the ‘80s and ‘90s and these cash-crunch times, one of the things that the city had to do was slow-walk paying contractors. During that financial crisis this was a huge gripe — that you couldn’t trust New York to pay you. How do you manage paying contracts? Because there’s a perception, at least in some corners, that you don’t want to be waiting to be paid by the City of New York.

That’s an interesting program that you mentioned. It had very laudable goals: with some funding, you could unlock units that otherwise were laying vacant in the private market. Uptake, from what I understand, has not been particularly strong. That’s a perfect example of, “This program has not met its original aspirations. Is it because it’s taken too long to make the payments once someone is signed up? Or is it that there’s something more basic about its terms that is just not as attractive?” Because if the economics don’t work, then owners certainly are not going to go through the paperwork pain of waiting for those payments to come through. That’s the analysis that needs to be done so that the program gets modified.

Here’s where it becomes hard for the work of public servants. When someone takes a risk on a program, one that hasn’t happened before, some of those programs are not going to be successful. That’s inherent in trying to solve novel problems with novel solutions. Too often when something doesn’t work, it’s called a failure. The tone is too accusatory — and public servants won’t take the next risk. That’s a shame, because if it’s only programs where all the dies have been cast that we know will absolutely work, you are not incentivizing the type of innovation that’s needed in government.

I should clarify for readers: the practical reason people said they were not entering that program was what you described: the terms did not make sense financially or economically. It is not the case that people went through and didn’t get paid. That was a worry that came up in reporting. I do want to hear your point on payments.

The system to pay our contractors and vendors is a product of rules and regulations to safeguard against waste and fraud. There are good reasons why we create these systems. But over time, what that means is that it takes too long and the steps one has to go through in order to get paid are hard for any organization. It’s certainly very hard for a not-for-profit and a small business. That’s where the plumbing needs to get fixed.

There has been good work in government to better automate those systems; to ask whether we need all the approvals that are currently embedded in the process. Is there a way where we can think about reordering some of the steps to make it more conducive? We should remind your readers, this isn’t just the mayor’s office. The process of paying requires many different organizations outside of the mayoralty. All of that has to get broken down and rewired. Probably the least glamorous work in government is to fix procurement. But it’s so critical because how we run government is through partners who depend on that payment to keep going and keep delivering what we ask them to.

I want to look ahead and ask you — agnostic of whoever wins the mayoral election — what do you see on the horizon for New York. I’ll flag a couple of things that I’m especially interested in and ask you to respond. New York City’s under-five population is almost 20% smaller than it was at the very beginning of the pandemic. In 2024 there was some great population growth and good signs for New York on these metrics. But broadly, when you think about the big hit that New York took from COVID, what do mayors over the next decade have to prioritize to undo some of those losses?

It starts with the belief that, as mayor, your job is not to just manage decline. That means not taking for granted what makes New York City so amazing. We’ve been the global hub of commerce and culture. That doesn’t mean it will always be that way. We’ve been the type of place that welcomes people from all over the world, and because there’s an opportunity — I mean, I came here as soon as I could. I didn’t grow up here. I didn’t know anyone.

You and me both. I also came here as soon as I could.

I’m curious for your thoughts on the future job market in New York City. Only about 5,000 jobs have been created in the city this year to date, which is the lowest number since 1995. Since 2020, healthcare has added a huge amount of jobs — 250,000. Many of those are home health aides through programs that the city and the state support. Those in some ways are dependent on Medicaid — there may or may not be cuts there. What should the next couple of mayors prioritize if they want to see New York boom as a jobs market and continue to be the center of professional opportunity that it has been?

Over the last two decades, I was in government at critical moments where the prognosis was, “New York is dead, the jobs are leaving. This is finally it.” After 9/11, after the Great Recession, and during the pandemic. In each of those moments, New York stepped up and proved the critics wrong. That didn’t happen by accident. It’s because we have an extraordinary constellation of public and private actors who are invested in this city and want to make sure that it continues to thrive.

So what should the next set of mayors focus on to keep this standing strong? On one hand you have to be agnostic of sectors. What I mean by that is, government’s not always that great at saying, “This is the next booming sector.” That’s not its superpower. But what it can do, needs to do, and has done, is make sure that the foundations for investment and job growth continue to be strong. That is public safety, quality of life, and increasingly it’s infrastructure, transit, and housing — because businesses make decisions based on where talent is.

Nevertheless, and despite what I said about not picking sectors, it’s also important to continue to diversify the city’s economy. After the Great Recession, what that meant was a focus on tech and entrepreneurship. We’re seeing some green shoots in life sciences or in AI. So those are emerging sectors that can be nourished, because they are the engines of job growth.

The responsibility and opportunity in government isn’t just to make sure that the job numbers are up or certain sectors are strong. It’s to ensure that more New Yorkers have access to those particular jobs. That’s where the public workforce system is critical, so that growth happens in ways where the benefits accrue to as many New Yorkers as possible.

What would you recommend for folks like me, or for people who are reading this and want to better understand either how New York City works or how governance works in general?

That’s a good question. You mean aside from the Mayor’s Management Report?

Surely everyone listening to this has read the Mayor’s Management Report already.

You’ll disseminate a quiz to your readers.

I’ve found that you can triangulate the truth with a few different sources, starting with what comes from government because it has to tell its own story. That might be wonky material from agencies, or even the Mayor’s Management Report — there’s a ton of content and information. I see more and more publications like Vital City, for example, that are trying to tell the story of governing, versus other publications that, unfortunately, it’s just the news of the day or where the conflict is.

For example, New Yorkers have a decision to make this fall about how to vote on changes to our city’s charter. There are important questions that will be on everyone’s ballot about proposals that would streamline the process for building housing. It is important for New Yorkers to get educated about what is at stake in those ballot initiatives, which they can do by looking at the Charter Revision Commission website, by reading up in other publications, and by being in conversation with their neighbors, and with those who were involved with the Charter Revision Commission. That will be well worth their time, because everyone has a role to play to help address the housing crisis.

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Three things today:

1. The Recoding America Fund just launched

2. Reflections on the 2025 Progress Conference

3. Interview with OSTP Director Michael Kratsios

For a printable transcript of this piece, click here:

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1. The Recoding America Fund just launched

First order of business: Jennifer Pahlka has been working on this project for a long, long time, and I’m privileged to be a part of it. Here’s the announcement:

Eating Policy

Announcing the Recoding America Fund

I haven’t been writing much lately. But I haven’t been slacking. Some colleagues and I have been working on a new effort I want to tell you about today…

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6 months ago · 110 likes · 14 comments · Jennifer Pahlka

TLDR: The Recoding America Fund (RAF) is a new philanthropic effort to deploy $120 million over 6 years into building state capacity. Specifically, the fund aims to help government:

• Attract and retain the right people

• Task them with the right work

• Via purpose-fit systems

• And test-and-learn frameworks

Some of this may sound familiar, and of course it is: Jen’s been on Statecraft more than any other guest, and her book Recoding America has been hugely influential for my generation of policy thinkers. In particular, Jen helped me get my head around an idea I’ve been writing about over the past three years: if you want federal bureaucrats to act less like federal bureaucrats, get rid of the rules that require them to act like federal bureaucrats. Most of our frustrations with government inefficiency and ineffectiveness come from rules that constrain people working in those systems. Reform efforts that just focus on headcount or on further constraining the government may be good or bad ideas on their own merits, but they won’t make the government more efficient, because bloated headcount is not why the government is inefficient in the first place.

I’ll be serving on the RAF board. Jen’s assembled a really special team from both sides of the aisle. Especially exciting to readers of this newsletter will be Anne Healy, the new CEO, who served as Dean Karlan’s #2 when he was chief economist of USAID. We talked to Dean on Statecraft, and you can get a sense of the lens his team brought to policy impact here:

2. Reflections on the Progress Conference

This is my second time attending the Progress Conference (and its second year running). Suffice to say, I have strong preferences about how conferences should be structured and run, and each year I’ve attended this conference, I’ve been wowed (and both times I’ve learned new tricks for hosting vibrant intellectual events). Brilliant people, excellent venue, the right balance of structure and serendipity, high production value. Get your tickets early for next year.

A couple of friends wrote up their thoughts on the conference, including Quade MacDonald, Corin Wagen, Shreeda Segan, and Simon Grimm, and I’m sure there will be more write-ups elsewhere. Some discrete takeaways for me:

• Last year, I thought global fertility was a strangely overlooked topic at the conference. This year, there were several scheduled conversations on the topic, and far more interest.

• On the flip side, this year’s edition was missing a battle royale between Tyler Cowen and the Lighthaven rationalists on whether AI doom can be modeled economically.

• Jan Sramek of California Forever presented a very compelling case that the new city they are building northeast of San Francisco has legs: both that they will be able to build it, and that it can be viable in the long term as a midsize urban agglomeration.

• Marc Dunkelman presented a very interesting case study on why *picking* bad infrastructure projects may be as big a problem as spending too much on the projects we do pick. I’m not sure if it fully convinced me, but it was a new lens on an old problem.

• IFP co-founder Caleb Watney analyzed the American scientific portfolio, sliced along several axes. One stark conclusion: we may be overweighting project-based grants, relative to all the other ways one can fund science.

• There was more conversation about industrial production than expected. Dan Wang and Brian Potter have successfully convinced this corner of the intellectual world that physically generating things is important.

• Speaking of physically generated things, previewed their print edition, and it looks both beautiful and readable (sometimes, fancy new print editions of things only go 1 for 2).

• Following a productive dialogue, I resolve to dunk less on Europe and its anemic economic growth. Specifically, Simon Grimm convinced me that while the EU itself is as bad as Americans perceive, there are all kinds of useful state capacity lessons from individual European countries. I must paint with a finer brush.

• 13 years ago, and I spent a summer together scrubbing toilets and operating industrial dishwashers at a summer camp in Ligonier, Pennsylvania. Although the conference was made possible by many hands, Ben was the most hands-on organizer. Operational excellence is operational excellence.

• I asked OSTP Director Michael Kratsios if the US government has secret stargate technology, and he did not say no.

On that last point:

3. An interview with OSTP Director Michael Kratsios

This episode was originally recorded on October 18th at the Progress Conference in Berkeley. Because of the federal shutdown, Director Kratsios called in virtually.

Kratsios is Director of the White House Office of Science and Technology Policy, and the president’s top science and technology advisor. In the first Trump administration, Kratsios was US Chief Technology Officer, and later acting Under Secretary of Defense for Research and Engineering, where he championed emerging tech like AI, quantum, and autonomous systems in defense.

Given constraints in the topics Kratsios could speak on, my questions focused on understanding the administration’s AI and science policy. We talked about the recent AI Action Plan: what AI can do for America and the world, and how the administration plans to ensure US leadership. We discuss the administration’s vision for gold standard science, and whether the structures we use to fund science need to change. We also touched on how the second Trump administration differs from the first, and Kratsios’s take on AI safety.

Thanks to Harry Fletcher-Wood and Katerina Barton for their light edits for length and clarity in the transcript and audio, respectively, and for a tight turnaround. The White House has not yet cleared the full video for publication, but we’ll share it here if it is cleared.

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You gave a speech in April about the new “Golden Age of American innovation.” You said it’s “On our horizon, if we choose it.” It was a compelling speech about how stagnation is a choice. You also said, “Our technologies permit us to manipulate time and space.” I saw quite a few conspiracy theorists jump on the turn of phrase. Does the US government have secret wormhole technology that you’re hiding from us?

I will tell you that was one of the most exciting speeches that I think we gave this term. It really set the foundation for where we want to go as a country on technology policy more broadly. The main thrust of the speech was around technological stagnation. To me, it’s an absolute tragedy, the extent to which progress in the world of atoms has slowed down over the last few decades. Part of the way that we’re going to get out of [this stagnation] is the agenda that the president is laying out, and the important role that the federal government can play in driving broader scientific and technological discovery.

To me, one of the biggest reasons why we as a country will succeed is because of the innovation that we can have in science and technology. There’s a very deep and rich history of the federal government in the United States being part of a larger innovation ecosystem.

The challenge that we have faced over the years — and one thing that we think a lot about at this office — is the changing nature of where early-stage, basic pre-competitive research and development happens.

If you go back to the era post-World War II, the vast majority of R&D was being funded by the federal government. Over the last 70 years, we’ve had this inversion where now the majority of R&D is funded in the private sector. We have to ask ourselves every day: what role does the federal government play in a world where the private sector is investing more than any time in history in this research and development?

The biggest example, the one that’s screaming in our face every day, is with AI. You look at these numbers, the types of investment that are happening in infrastructure and R&D that’s supporting the AI revolution. Even for many of us that are deeply immersed in tech, and have been for decades, these numbers are crazy. They are truly unbelievable levels of investment and it doesn’t seem like it’s stopping. Every week there’s a new big one. Policymakers like us here in Washington have to sit back and say: “There are billions, if not trillions of dollars being invested by the private sector in AI, but what role can the federal government play?” That’s the same type of question we ask for any of these emerging technologies.

Going back to the speech, the point was that there always will be a very important role to play. The government has to make that choice to say: “We do not accept that stagnation. We want to work hand in glove with the private sector to make it happen. There are levers that we control which can make a big difference.”

You were confirmed as the director of White House Office of Science and Technology Policy (OSTP) in March. Since then, you’ve tackled a whole bunch of things: science, drones, supersonic flight, quantum, energy for data centers. You rolled out the AI Action Plan in July. Give us the high-level takeaways.

It all began on the third day of the administration where President Trump, signed an executive order revoking the disastrous Biden executive order on AI, and essentially gave us a 180-day shot clock where myself, Secretary Rubio, and David Sacks were on the hook for delivering the national strategy for the US, called the action plan. We delivered it in July. That was launched at an event here in Washington. At the same event, the president signed three executive orders [on permitting data centers, preventing woke AI, and promoting the export of American AI] that generally mapped to some of the priorities in the plan. But the vision essentially laid out in the plan has three core policy thrusts, or main pillars:

• The first is the US has to continue to out-innovate and continue to be the leader in AI innovation. There’s lots of work in there around regulatory issues, around R&D, and we can get into those.

• The second is the US has to lead on AI infrastructure. This revolution is going to be powered by electricity and by data centers, and we have to have those built in the United States as quickly as humanly possible. There’s a lot we can do to accelerate that process and get the government out of the way as we build that infrastructure.

• The third is the importance of exporting American AI — essentially creating an ecosystem globally that is reliant on American technology. Lots of projects are being launched on that front as well.

Thematically, that’s the core themes of the action plan. There are almost 100 actions enumerated in it, but they generally fall into those three buckets. [For more on the detail of the action plan, Statecraft recently interviewed its lead author, Dean Ball.]

Let me ask you about that third bucket, export. One of the flagship programs of the action plan is this export promotion program, which provides financing and assistance to promote the adoption of the US AI tech stack overseas. The admin has also talked a lot about AI sovereignty — about not wanting global governance for AI, wanting each country to be able to develop its own roadmap.

Are these two things in tension? Do we want every country to have full AI sovereignty? Do we want the US tech stack to dominate in certain areas? How do you think about balancing those two priorities?

I think of them in concert, not in opposition. For us, the core challenge we’re facing — maybe if we zoom out and think a little about how we got to that third pillar, it came out of a lot of work that we did in Trump 45 around telecom. If you think of that era, the first big rollouts of 5G happened at the tail end of Trump 45. We, as a country, found out pretty quickly we were in a tough spot. We had no American manufacturer of advanced telecom kit. There were two allied partners, it was Nokia and Ericsson that could provide those. Then you had an upstart which was pretty good, which was Huawei. In the early days of that challenge, one could argue that the Huawei technology certainly was inferior to the US technology, but nonetheless, because of the heavy subsidy by the People’s Republic of China (PRC), they were able to aggressively go out and get their kit all over the Global South and even deep into the networks of some of our partners and allies.

Me, as the CTO of the United States and kind of our tech minister, was left running around the world talking to my counterparts, trying to convince them to either rip and replace their Huawei or make the expensive decision to buy Ericsson or Nokia. There were a couple of lessons that I learned out of that. The first was that just because you have the very best technology doesn’t mean it’s going to be adopted. Price does matter, and the buyers are ultimately going to be quite price-sensitive, especially if at the end of the day you can get pretty much the same service by someone else. That created a very interesting national security problem for the US, where a lot of these networks could potentially be compromised and could have back doors, back to the PRC.

If you fast forward to where we are today, one could argue that the export of American AI is arguably even more important than telecom, in the sense that the models of choice, and the stacks that are used around the world, are going to be critically important in the way that lots of governments and economies function. The ultimate software that is used to power healthcare services, to run tax services, to essentially be the platform in which all governments run all their AI services is really, really important. You want to be in a position where American models are ultimately the ones that are fine-tuned to run all these applications.

Now the advantage we have, and what’s different than before, is that we actually do have the very best technology. I think China at the moment is actually quite constrained in their ability to fabricate enough chips for export. The ones that they do fabricate domestically, there’s more than enough demand internally. There just isn’t enough excess to export. So we have this window of time — in the next year or two — where we truly can be the single powerful supplier of the totality of the stack, meaning chips, models and applications. The other advantage we hadn’t before is we — America, our companies — are leading in all three layers. We have the very best chips in the world, the very best LLMs, and the very best applications on top of it.

The thesis of the program is: let’s try to bring all those together, make turnkey solutions that countries around the world can easily adopt and implement, and do that as quickly as possible, so that we can start creating these networks and ecosystems where developers, countries, and governments around the world are all using American technology.

You described this year-long lead time that we have as a result of the lead technologically. What does that mean for you in this role over the next year or so? You’re doing a ton of travel, a lot of international diplomacy.

The president signed the executive order in July of this year. There’s a shot clock at the Department of Commerce to stand up the program in the next week or two. You’ll see some announcements out of Commerce coming soon. Then the ball is ultimately handed to a committee [the Economic Diplomacy Action Group] that’s led by the Secretary of State, that includes the Secretary of Commerce, me and a few others, to go out and do the export early next year.

We want the world to know that America is open for business. We want the world to be running on our technology stack, which we think is the best — and we want to go out in the world and tell them that. I was at the Asia-Pacific Economic Cooperation Digital Ministerial in Korea a few months ago where we shared this message and we essentially said that, “The US is open for business. We do want to sell you chips, and we deeply believe that the ideals and the priorities that you have as countries ultimately are ones that are aligned with the US.”

It goes back a little bit to the sovereignty question — I didn’t quite answer it, but to answer it: the reality is we have a stack which can answer the mail to the priorities of individual countries. If you’re a country and you have sensitive government data, you obviously don’t want to be running an AI system where there’s an API call to a foreign country, even if it is the United States. We understand that, and the hope is that we can design a system, with the great technology companies we have today, which can allow them to operate American software in a way that ultimately is able to meet whatever standards they have in-country.

You and I talked about a year ago, before the election and this role, and you were reflecting on the balance during the first admin between “protect” actions and “promote” actions: protecting the American tech industry and promoting the tech stack abroad. We talked a little bit then about trying to get Huawei technology out of the infrastructure of our allies.

Tell me how you’re thinking about the protect side of things.

• In the last couple of weeks, the Secret Service uncovered this massive telecoms hacking network in New York City.

• Earlier this week, a former National Security Council staffer in the George W. Bush administration was arrested after the FBI raided his home and found thousands of top-secret Air Force documents that he’d been passing along.

• This week, the British government admitted Chinese hackers have been inside the UK’s classified network for over a decade.

Given these stories, how are you thinking about the task of protecting American infrastructure?

It’s a little bit of what you said, and it’s a lot about the world of exports and constraints for some of our adversaries from accessing our highest-end technology. On one hand, there’s an incredible amount that we need to do to secure our critical infrastructure. We have a new National Cyber Director here at the White House that’s very focused on that, along with the folks at the Department of Homeland Security, and we need to be very vigilant in tracking the type of hacking that ultimately happens by a lot of our adversaries. We see it all the time, and it’s disheartening, but we’ve got to do better.

On the more “protect” side of technology, a policy that we’ve maintained and kept in place is — particularly in the world of AI — our most high-end chips are ones that we are limiting the ability for adversaries to have access to. That’s something that had started as early as the [first] Trump administration where we put export controls on some of our advanced lithography equipment, which ultimately has paid big dividends in limiting the ability of the PRC to develop high-end chips. That will continue. Finding that balance of needing to promote as much as possible — get American tech out there — and also rate-limit our adversary on the very high-end stuff is the general strategy.

Tell me about the data center build-out work that you’re doing. Folks will be aware there’s a huge need for energy if we want to build this out domestically, and that this admin cares about that. But practically, what are you and this admin trying to do over the next year to make that happen?

Our second pillar of the strategy is, how do we accelerate our ability to build both the data centers and the power capacity? It’s a very tricky and interesting problem. There is one part that’s federal-government-related, and there is certainly National Environmental Policy Act (NEPA)-related things you have to get through and other types of federal permitting. [Statecraft previously discussed the impact of NEPA.] That’s the stuff that we as a government have a lot of control of.

The president directed in his executive order on AI infrastructure that we need to, as quickly as possible, accelerate that effort to remove those barriers and make it much easier to get your adjudication done on approval or not for your projects. That’s an ongoing effort, and we want to make it as easy as possible, essentially a one-stop shop to come to the government and say, “Look, I want to build this AI infrastructure, help me get all the necessary permits and approvals,” and we can help you do that. That’s in the works.

The second piece, which is a little trickier, is state and local. If you talk to a lot of people who are building data centers and trying to do the energy build-out, a lot of the bottlenecks end up at the state and local level. We’re trying our best to liaise with a lot of state governments to try to make it clear that this is a priority for their country. They as a state can benefit if these build-outs ultimately happen.

The third piece around that — of things that the federal government controls — is we have our own real estate. We have federal lands, which can be used for build-outs themselves. Many of you may have been tracking the Department of Energy program. The Department of Energy has already announced four locations for build-outs of data centers. That’s already underway. We did that in the first six months of the admin.

What policy levers do you have at the Office of Science and Technology Policy (OSTP)? Folks who are interested in the executive branch will know OSTP doesn’t have the formal statutory power or the budget that other Cabinet-level roles do. It has this convening power, and you’re an advisor to the president. It has all kinds of power that are not formal or statutory.

But as I understand, you have a fairly small team compared to other parts of the executive branch. In his interview with Statecraft, your former colleague Dean Ball described it as the “little brother” to the National Security Council, especially on tech-related issues. Two questions:

1. How does implementation work on the AI Action Plan when you don’t have all the levers that, say, the Department of Energy does?

2. Between Trump I and Trump II, have those balances between different organs in the executive branch changed at all?

Maybe there’s a slight misunderstanding. [NB: I am not sure to what misunderstanding Director Kratsios is referring.] In the Executive Office of the President (EOP), there is no component which has any budget to really do anything. The EOP is designed by law to be an advisor to the president, and a convener to drive interagency policy on a variety of issues. Generally [you have] councils at the White House which drive different policy — you have an economic council, a domestic council, a National Security Council, and science and tech [managed by the OSTP]. Each of those has their own category of work.

In Trump 45, science and tech was exclusively at our office. The Biden people made the choice to absorb some of the tech effort at the National Security Council. In Trump 47, it’s all back in the office that has statutory authority over it. But what’s key for us… is that it’s a federated approach to science and technology policy. Almost all of my counterpart tech ministers or science ministers around the world have a single agency that attempts to do everything on their own. They have one person that tries to decide the best way to deliver on whatever the mission is of that country.

In the US, we’re blessed — and sometimes it’s a little challenging because you’re wrangling people — with having lots of agencies that do different aspects of the larger S&T portfolio. At the Department of Energy you have all the national labs: almost $10 billion in spending just under the Under Secretary of Science that runs the labs. You have the National Science Foundation, which is basic research, in the neighborhood of $9 billion. There’s the National Oceanic and Atmospheric Administration, that does everything related to weather and weather satellites, at the Department of Commerce. There is the National Institute of Standards and Technology that does all the standard-setting. There’s the United States Geological Survey that does our geological surveys. There’s NASA.

The most exciting meetings for me are when we convene our NSTC — National Science and Technology Council — and all of the heads for all science agencies come to the White House. We’re able to ultimately chart out: if we want to drive US leadership in AI, or quantum, or nuclear, or 6G, everyone has a piece to play. There isn’t one place that’s singularly responsible for that. Each individual agency has a piece of the puzzle.

You talked earlier about lessons from your time in the first Trump admin with the Huawei wars. What other lessons have you brought from those first four years? I’m curious especially for differences: how does this admin look differently from the first Trump admin?

The main thing I’ve generally seen is that the issues which our office and the president were championing in 45 have become far more prominent in 47. The example I always give is the event we had for the signing of the executive orders and the release of the action plan in July. At that event, I spoke, five cabinet secretaries spoke, the president gave a speech for half an hour on AI. It’s incredible. When we want to drive an effort on a topic like AI, the challenge we have is that everyone in the cabinet wants to participate, be part of it, and bring the muscle, power, and statutory authorities associated with their agencies to bear on the issue. That creates an incredible opportunity.

One thing that’s changed culturally between 2016 and today is, a lot of folks might be familiar with this idea that it’s easier to get your ideas in front of people in positions of authority, that there’s more of a horizontal information flow. In the past week we’ve seen colleagues of yours like David Sacks and Sriram Krishnan engaging on Twitter with small posters about these big ideas. What’s your media intake like? Are you experiencing this horizontal dynamic? Are you lurking on Twitter?

We try to connect with all Americans as they share great ideas with the White House. As you mentioned, I have amazing people on my team, that work on our AI staff, that are absolutely terrific in driving that and being very good. One of my former analysts, Dean Ball, was probably one of the most terrifically connected people in the Valley. He served as a great avenue for lots of people to bring ideas to the table. I think those were ultimately manifested in the Action Plan.

I think you’re actually right. People are more engaged in having conversations with Washington — and our office and the White House more broadly — on tech policy by many multiples than they were in 45. Obviously it’s a consequence of these much bigger issues being much more front-burner. But at the same time, the way that the media landscape has changed and the way that people communicate — it’s much better information flows, and ultimately the policy ends up in a better place. If you try to do a lot of this stuff in a vacuum, it obviously doesn’t end well.

What about talent flows? As a public figure, you’ve talked about some of the challenges and opportunities of getting more technical talent into the government. In this administration, at senior levels, there are a lot of tech figures who have come in, including some of the people we just mentioned. Are you seeing that technical talent also come in at lower levels, or are there opportunities or places where you’d like more technical talent to be entering the government currently? Any call to action for this audience?

I’ll be honest: if I was going to rank places where I wish we could do better, I would rank this one pretty highly. It continues to be a real challenge. The rules and regulations around bringing people into government haven’t changed [Statecraft recently discussed how to improve government HR with Judge Glock]. A lot of those are in statute, and it’s continually hard to get people in. Scott [Kupor],1 who runs the Office of Personnel Management, came from Andreessen. I think he’s spending a lot of time thinking about this issue, and hopefully we’ll have a lot more to talk about soon. Our hope is to try to find ways to bring more people into government.

We’ve chatted ourselves about: are there ways that you can do rotations or find ways for people to know that they’re time-limited? They can come in then go back to the job they had, or find easier pathways to flow in and out. I see it every day as I try to assemble my team. Very talented people — if you come work in my office, you can’t hold any equity in anything related to tech. A lot of talented people have spent a lot of years building large venture portfolios or having worked at companies, and asking them to divest of all that is a really big ask. I totally understand the rules and it makes sense that they’re there, but you can imagine that there are challenges. So my hope is that we can continue to bring great tech talent in, and we need it more than ever.

Talk to me about this admin’s vision for science, because we’ve spent a lot of time here on AI, but you’ve spent time in the public eye also making the case for higher standards for scientific work.

As many people in this conference know, the federal government has been funding basic research for many years. It all started with Vannevar Bush when he released “Endless Frontier,” and that led to the creation of the National Science Foundation. I think what’s really important for the government to always remember is, we have an obligation to the American people to spend that money very wisely on research that is in the public interest. and is of the highest possible ethical quality.

The president signed an executive order around gold-standard science. Within that executive order — you guys can look at it — general tenets of things like reproducibility are in it. We want to create an environment where the research that the government funds is one that is of the highest standard, the highest caliber. When we shared the construct of all of these core tenets in gold-standard science, it was quite comforting, because everyone essentially was like, “Yes, we want this. This is what we believe as scientists. We want the work that we do to be highly defensible, something that we can be proud of, showing that we have followed the scientific method.” That’s something that’s being implemented across our agencies quite rapidly since the executive order was signed.

But the larger question that comes about around science more broadly is: are we spending our taxpayer dollars on the right things that are in the national interest? I think in the early days of the administration, what we identified and what was exposed was that hundreds of millions of dollars was being spent on bad science — on things that most American people would not want their taxpayer dollars spent on. That correction was necessary and important. We can get to a better place where we’re driving the next great discoveries here in America. Back to your question of [how] have we achieved stagnation? The dollars that the federal government spends are going to be an important part of getting us out of that rut. If we can focus them in the right areas and spend them in the right ways, that’s how we can make a difference.

As part of that executive order, and more broadly on the science agenda, one thing is the mechanisms by which we disperse federal funds. We have been on this autopilot mode, where the same methodologies of choosing which grants and who to fund have essentially been stagnant for many, many years. The reality is, there’s lots of ways to give out money. You can do fast-track grants that allow you to quickly make decisions — rather than waiting months. There are private sector organizations that could be recipients of federal funds that typically would go to, let’s say, universities. There are other ways to do science than the exact ways that have been done in the last 30 years. That could be a big driver and supporter of greater innovation in the US.

Will you say a little bit more about that? New institutions of science, like the Arc Institute or focused research organizations, is that the sort of thing that your office is considering?

Precisely. These focused research organizations are ones that can be doing incredible work and they should have access to the competitions to be able to access federal dollars. As a government, we should be laying out what the priorities are of the United States, and whoever’s best suited to do the science and research to deliver on those priorities should be the ones that are funded. Universities do not and should not have a monopoly on doing basic research funded by the federal government. There’s lots of amazing institutions out there that do that.

If you look at who is funding basic research over the last 10 to 20 years, you’ve seen this incredible growth in the philanthropic focus on basic research. Folks like the Simons Foundation and many others are doing incredible work in funding basic mathematics and lots of other work. Again, I say this too many times, but it’s true: we have to understand as a federal government, where do we sit in the landscape of the broader funding community? If philanthropy is doing X and the private sector is doing Y, what is Z that the federal government should be doing, which can fill a gap that is not currently taken by the private sector?

Back to your point, there are lots of other models. I would love to get a readout from your conversations [at the Progress Conference], to be honest. Send that to the White House. We are trying to figure out the best way to activate our science enterprise and recharge it as quickly as we can.

Let me ask you about the university side of this. Obviously there’s a lot of enthusiasm here for other kinds of science-funding institutions. The OSTP head in the first Trump administration — your predecessor, Kelvin Droegemeier — has been working with universities to have this conversation about how university indirect costs and these grant systems work. What do you see as the opportunities for universities to work collaboratively to reform how science is conducted or funded?

When I talk to university groups, I think the agreement that I tend to always see in the room is that no one believes that the current F&A [Facilities and Administrative] — or overhead cost regime — that exists today is one that would exist if everyone was given a blank sheet of paper and said, “Come up with the right way to do this.” Everyone knows it’s broken. Everyone knows it’s wrong. [IFP has looked at how indirect cost recovery works, and possible reforms.] The other thing that everyone realizes is it’s not trivial to fix it. Because of the high activation costs of fixing it and aligning it correctly, people have not wanted to deal with it. The lobby has been strong enough to essentially beat down any efforts to change it.

Luckily, we have a president that isn’t affected by that and is willing to make the important and necessary change to actually bring some level of sanity to the way that F&A is calculated and paid out by the federal government. At the end of the day, whether they say it publicly or not, private universities know that the current system is wrong and they’re working behind the scenes to figure out the best way forward. I think what Kelvin did, and what the group presented as a whole was — the reason they even did the report was a concession that the status quo didn’t work.

We are taking their recommendations and our team at the Office of Management and Budget here and others are working through what the final policy will be. But at the end of the day, both taxpayers and universities are going to be much, much happier.

We’ve spent a lot of time on AI and a little bit of time on science. For the intersection there, how are you thinking about the federal government’s distinctive role in getting science more ready for AI?

This is probably what I’m most excited about when it comes to the future of our AI agenda. It is this intersection of AI and scientific discovery. Artificial intelligence is going to be probably the greatest unlock for science in the history of the world. This is a technology which will accelerate the way that we’re able to make scientific discoveries more broadly. What’s most important about this is how we get there. How do we get to a point where we can leverage AI to drive scientific discovery?

I’m very heartened to see a lot of private-sector companies are jumping on this. OpenAI had some great announcements about it very recently. Google just had an announcement a couple days ago — obviously they did a ton of work in years past on things like AlphaFold. But the question that we ask ourselves again is: “What role can the federal government play in it?” One thing I always think about is the incredible amount of scientific data that the federal government has, that’s valuable in training large language models (LLMs) for scientific discovery.

At the end of the day, a lot of LLMs are trained on what’s out in the open internet. A lot of the code-specific LLMs are trained on code that’s out there, but the science LLMs can be trained on science data, and that’s far more siloed and not necessarily in the public domain. There’s a ton that places like the Department of Energy and even the Department of Commerce — there’s data there that can be tapped into to drive the science.

Michael, I have to ask: we’re at Lighthaven. The folks who are hosting us tend to have a more worried view of the trajectory of AI than some of the other participants here, or you. What would you say to them about this admin’s approach?

You have no administration that has been more committed to delivering the benefits of technology to the American people than this one. Between me, the president, and the broader cabinet, there is a deep and fundamental appreciation for the value that technology can bring to changing the lives of Americans for the better. As we write in the title of our report, we are in an AI race. The reality is that pretending that there aren’t other people out there that are developing AI that is in very stark difference to our approach and our values is something we can’t ignore.

We can’t live in a world where we believe that we can fully control what happens here, and the rest of the world is going to play along. What we need to do — and that’s why the AI export program is so important — is share this great American technology. All our great companies think very carefully around how this technology is going to be developed and how it can be developed in a way that benefits all the American people. That’s the type of technology that we want the rest of the world to be using and running on. There are a lot of perils if we don’t do that.

I’m extraordinarily enthused about the benefits, and I don’t want to wake up in 20 years, when my kid’s about to go to college, and think to myself, “Wow, I wish we could have done more to make sure the US was leading,” because this is so important for the country.

When you zoom out a bit, what’s happened here is pretty surprising. The chair of the committee, Republican Tim Scott, and the Ranking Member, Elizabeth Warren, a Democrat, co-sponsored the bill. The bill is the committee’s first bipartisan housing markup in over a decade. Passing through committee unanimously doesn’t happen often for serious bills of this sort. I wanted to understand how this bill happened, and came to have a serious shot at passing. And I also wanted to get a better sense of what’s actually in the bill, and why it matters for housing. If you’re like me, most of the debates you hear about housing policy focus on zoning, which is a local issue — very little federal say. So what are all these pieces of legislation? Do they matter?

Joining me is an unorthodox trio:

• Will Poff-Webster was legislative counsel for Senator Brian Schatz, a Democrat from Hawaii. He’s our inside guy today: he worked on the bill within the Senate. Now, he covers housing policy at IFP!

• Alex Armlovich is Senior Housing Policy Analyst at the Niskanen Center. He has been working on housing issues for a long time, and his fingerprints are on parts of this bill package. He’s my advocate from the outside.

• Brian Potter is Senior Infrastructure Fellow at IFP and author of Construction Physics, which I very much enjoy editing. If I can make one newsletter recommendation to you besides Statecraft, it’s Construction Physics. He has a background in private-sector home building. And has written about several of the proposals in this package.

Table of contents:

• What’s the federal role in housing policy?

• What’s in the bill?

  • Regulatory reform

  • Technical assistance plus incentives

  • Funding and financing reform

• A brief sidebar on manufactured home chassis

• Will the bill matter?

• How did the bill happen, politically speaking?

• The policy wonk success story

If you’re interested in housing, check out last week’s episode:

Thank you to Harry Fletcher-Wood and Katerina Barton for their judicious transcript and audio edits.

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Let me start with Will, as our inside guy. The ROAD to Housing Act is a partial acronym: the “Renewed Opportunity in the American Dream to Housing Act of 2025.”

It’s one of these classic, vaguely ridiculous congressional acronyms. I’ve heard that LLMs have made it way easier to come up with funny acronyms for bills. Is that true?

Will Poff-Webster: It’s something that people on the Hill spend time thinking about: how do you develop a catchy acronym for your bill? There have always been some staffers who have a knack for it and others who delegate to them. The LLMs definitely have that knack too. Eight out of ten of their suggestions are bad, but because two out of ten are good, it is not an uncommon way to get a bill title. One of the funny parts is, you’ll see more bills now where the title is catchy and alliterative, but it’s totally unrelated to the bill subject. You’ll see a title that makes you think it’s about ocean science and then it’s a housing bill. But it’s one of the ways that AI maybe has some positive productivity benefits. But there’s still people coming up with the acronyms the analog way, I promise.

What’s the federal role in housing policy?

Treasury Secretary Scott Bessent recently said that President Trump may declare a national housing emergency. Listeners who live in big, expensive cities — I’m in New York, we have listeners in LA — will have a visceral sense of this. But why should I think the cost of housing is a national issue? Why is it not just an issue in New York, San Francisco, and a grab bag of big cities?

Brian Potter: There’s a couple of reasons. One is that these big, expensive metro areas are huge drivers of economic growth. If you can get more people living in these places, contributing more, and growing GDP, that helps the country as a whole. The other thing is that a lot of cities are now following the path of these big metros. I live in Atlanta, which historically was a place where housing prices were relatively inexpensive. But over the last several years, they’ve ramped up. You see that in a lot of metros across the country. This problem, that was once concentrated in these expensive coastal cities, is becoming more universal.

Will: COVID has an interesting influence here. If you look at the data from Up for Growth, one of the premier national housing organizations that studies this, you see a change over the last few years. There were already trends leading to more places suffering from severe housing shortage. But [after COVID] you have more people moving out of places like California into places like Montana. If you talk to legislators in Montana who did their zoning reform work, a few thousand additional Californians had a big impact on their housing stock.

If you have a place that isn’t growing very much, and then suddenly gets an influx of work-from-home folks or folks who are leaving the city, that matters. What used to be a regional problem has become a national problem. The latest report from Up for Growth shows that most metropolitan areas in the United States now have a housing shortage.

Alex Armlovich: It is a national problem that you see spreading: wherever people want to live, and there’s bad zoning, you have a problem. Montana had maybe a 7% vacancy rate before the pandemic. Their housing stock is smaller than Queens in New York City. 50,000 Californians is enough to drive Montana’s vacancy rate to zero. Pretty soon you have to have a construction response to that.

That said, I still like to take an urban-economic-disciplined look at this. A housing affordability problem is the combination of two problems: incomes and high housing costs. You can have a place that has very low incomes and high housing cost burdens, but houses are not sold for more than it costs to build a structure. YIMBYism and zoning reform can’t solve a problem where houses are selling and renting at their construction cost. That’s a problem of people having low incomes and not being able to afford construction costs.