Neal Desai Tries To Save the Federal Workforce: Part 1

This conversation was a fascinating, in-depth look from an expert, on a critical subject – which of course means that it's pretty bleak right now. Neal Desai is currently the head of HR for the State of Maryland, a job he has taken after being at the federal Office of Personnel Management. Neal has a unique front-row seat to the importance, challenges, and modern-day assaults on government workers, and our conversation is a great way to understand what's really at stake. 

In this first half, we talk about what drove him specialize in government workers, the kinds of problems he solves, and how DOGE is actually *costing* us hundreds of billions dollars.

Below is the unedited (and AI-generated) transcript of this first half hour! I also have video that I intend to upload but as the first video feature I've made, I'm still working out the details.

Enjoy!

Alex Loewi (01:28.44)
Beautiful. welcome back to The Plan, which is the show about saving the world because we have to and rock and roll because I want to. But today we're talking about saving the world and today I'm very excited to talk to rock star civil servant and close personal friend, Neil DeSye. And he's currently the chief human resources officer for the state of Maryland under Governor Wes Moore. But he has also been many other things in the past and excited to talk about all of it. Neil, thanks so much for being here.

Neal (01:55.378)
Pleasure Alex.

Alex Loewi (01:57.196)
Now, there has been a lot of news in the last few months about government workers, and whenever I see more of that news, I think about you, because you actually specialize in government workers. Now, could you explain both what that means and how that came to be a specialty of yours?

Neal (02:16.107)
So I'll explain sort of how it came to be first, perhaps. And it really started, I worked for four and a half years almost in Kenya for a small strategy consulting company that focused on sort of local small businesses, social impact, social enterprise, that kind of stuff. I had lots of really cool, exciting, interesting clients. My bent has always been

my brain always goes to government to solve problems. Like I always think about what can we do with scale and that drives me to government interventions. And so when I was there, I was one of the early employees and as we got a little bit bigger, I tried to start building out the public sector business in Kenya. And that was a total flop in the end of the day because

corruption in Kenya is endemic. It's just, it's everywhere. And so we were not successful at getting public sector business because we weren't able to, we weren't going to pay bribes. And so we weren't going to get any business. And just the day-to-day experience of Kenyan life is one where, you know, there's a constant understanding that government officials are looking for personal gain.

rather than for the public good. that was like a, sort of experiencing that really brought home the contrast with the US and Western democracies where you have a professional nonpartisan civil service that is focused on, for whatever your complaints about the civil service might be, they are focused on delivering the services and...

activities and benefits to people that they're supposed to be doing. And so, and it wasn't like it wasn't always that way. Like it was 150 years ago in the United States, like that wasn't the case, right? Like you could bribe people in the United States. And it's not that we're perfect today, far from it, but there's this enormous sort of cultural predilection and orientation.

Neal (04:39.896)
of the civil service that like, yeah, if you tried to bribe a cop to get out of a parking ticket now, like you'd go to jail. Like if you walked up and were like, hey, you know, let me have this permit for, you know, and I'll give you a hundred bucks. they'd be, people would be appalled. And so that is like, it's a huge thing. It wasn't true in the United States at some point. It's absolutely crippling to economies when it doesn't.

happen when it's not true, right? It's just absolutely crippling. And it's both from a macroeconomic perspective and also from your sort day-to-day interactions perspective. And so what did the US do in that time? And what they did is we built a professional nonpartisan civil service. And it is foundational to everything you want to do. You'll never meet a senior government leader who doesn't

Alex Loewi (05:12.558)
Mm-hmm.

Neal (05:37.84)
leave the job saying, you the most important thing, the biggest indicator of my success was the quality of the people that I led. I mean, I think that's probably true universally. I don't think it's probably a government thing. Like everybody who leads large organizations understands the like absolute centrality of their human resources and the human resource system that they have set up, right? If they don't have good human capital, they don't have a business, they don't have a...

Alex Loewi (06:01.23)
You

Neal (06:05.704)
an institution, like you can't do anything. I don't care how amazing of a leader you are, if your people aren't well fit, like you're not going to be successful. And so this is the one issue that like one of several, but like if you wanted to improve everything about how government delivers service across every policy area, every activity, everything we do, if you can make the human capital infrastructure of the federal government.

5 % better, 10 % better, that's going to be an enormous change for the entire delivery of services across the entire government. And that's, as we are seeing, the federal government does an awful lot in the world and does an incredible amount of good for people of all political stripes, of all locations. yeah, I think it's, so it is the issue that spans across everything.

or least one of the issues that spans across Africa.

Alex Loewi (07:07.854)
Pretty compelling answer, to me anyway. That's a great story. I didn't know that it went all the way back to Kenya, but that makes complete sense.

Neal (07:15.1)
Yeah, it was kind of a build after that, right? I sort of, I was very interested in public sector. I sort of understood the importance that the civil service and the nonpartisan, nonprofessional civil service had. And I sort of then went into BCG and I worked in public sector more generally and sort of got more and more into it intellectually. And then when I actually joined the government, that was my focus.

Alex Loewi (07:41.23)
Very cool. Right. So you were at Office of Personnel and Management, which is the sort of HR hub for the whole US federal system.

Neal (07:48.208)
Yeah, it's the central policy making entity for all civil servants in the federal government.

Alex Loewi (07:57.054)
and

Neal (07:57.76)
Well, Title V civil servants. There's Title X and there's a few other things where OPM doesn't have the same sway. yeah, for a huge percentage of the federal civil servants, OPM is the primary policymaker.

Alex Loewi (08:16.238)
Cool. Let me put this gun on the mantle for later, but I'm curious sort of when you were there, what were the things that you were working on? What were the sort of big targets that you had as OPM?

Neal (08:28.444)
Yeah. So it's interesting. There were a bunch of different things. I started in the office of transformation for, they had recently created this office, the chief transformation officer position, and he had a small office. was David Pedrino, who was the CTO, and two of us in the transformation office.

and we did a huge, it was a real team effort. we had a whole bunch of different elements for it. It was, I think, I think you could, we could say it was predominantly focused on kind of internal OPM transformation. So thinking about how do we make OPM more effective at delivering for, you know, all federal agencies. And so there were a couple of major initiatives. We did a.

I did a lot, sort of my personal projects, I did a lot on our internal HR function within OPM. how do we, OPM is a relatively low budget organization, particularly when you pull out the sort of the non-appropriated funds that they get. And so building the capacity of OPM was a big focus and being able to do that strategically because we were in a generally limited resource environment.

was really important. And so we had to think carefully about how to do it. They also come out of the first Trump administration had had a substantial amount of upheaval and turnover, nothing like what we're seeing right now. But it was, they tried to dissolve the agency that led to a lot of, it was a huge hit to morale. A lot of people left, a lot of really good senior tenured people left.

there was a lot of uncertainty and so a lot of things were kind of falling through the cracks. So it was a rough time coming out of the first Trump administration for the organization. And so there was a lot of focus on how do we rebuild? How do we get the capacity back? Very much in that like, if you can get your human capital right, you can do fantastic things. I also spent a lot of time on the budget for OPM helping the chief financial officer's office.

Neal (10:54.856)
build the budget and the budget justification and kind of the story and priority set that we were gonna highlight and using that to get additional budgets so that we could reinvest in people and do more stuff that we wanted to do. I also had a big project on the OPM website, which is like, know, it's a primary vehicle for federal workers and federal HR specialists to get information about

what the policies are, what their benefits are, what their rights and opportunities. It's where a lot of the definitive information about this stuff lives. It was not very well updated or very user friendly. And I think in its current form still is not that. And so we did this big project. We had gotten some money from the Technology Modernization Fund at GSA to fund an initiative.

And so I was very, very involved in getting that stood up, bringing on support to help fund it, getting the basic structure and sort of direction that we would go, setting a lot of the kind of foundational orientations of how we were going to build this website. Some of the big choices like, are we going to port over all existing websites or pages, or are we gonna just kind of go fresh? We had like 20,000 plus web pages, individual.

pages on the old website, which was vastly more than we needed. And there were like all kinds of old and inaccurate outdated information. So anyways, there was a, there were a lot of those kinds of kinds of choices at beginning, the transformation team, more generally also, and this wasn't my primary project, but you know, it was a small team and we all kind of pitched in with thought partnership and problem solving, though it was not my primary project was the postal.

Alex Loewi (12:25.757)
well.

Neal (12:51.964)
health benefits program, postal service health benefits program. Congress had passed a law that required the postal service sort of shifting over postal health plans. So something like 2 million, I think it like 1.9, something like that, beneficiaries of the postal plan. We had to stand up basically a new health exchange, port all of their information over, run a whole open season specifically for them that...

allowed them an opportunity to review and change plans. had to get the carrier set up. had to get, like, it was standing up what I think, and I could be wrong about this, but I seem to remember is the, it's basically the equivalent of standing up the largest state exchange that any state put together. And I could be wrong about that. Don't quote me on it. But I think that's, I think that's right. So it was a huge, huge undertaking and actually just went off pretty well.

this past open season. The website on the other hand, I think has been, we had gotten a public preview up and they were launching it and they were transitioning all the content over and they had a web team stood up and they were like, they was sort of really rolling. And I think that has been completely abandoned in the last two months. But.

Alex Loewi (14:13.292)
Yeah. Yeah. Sorry about that. that is all great. Let me, let me just own for a second, my complete neo-physm as a visual, medium and one, see if I can make the light have me look less dead. And two, if I could ask you to reduce your like headroom somewhat. So there's just like a smaller gap between.

top of the grids. Yes, perfect. think that's excellent. Thank you.

Neal (14:44.744)
I'm sorry.

Alex Loewi (14:51.212)
Learning all the time. I'll cut that out later.

Neal (14:52.776)
Okay.

We'll solve it in post. It's fine.

Alex Loewi (14:56.878)
There are...

Alex Loewi (15:04.605)
I have cursed myself and you have frozen because I have tried to improve what I was doing.

Neal (15:09.98)
Yeah, any movement? All right. The magic words have been spoken. The incantation has been successfully completed.

Alex Loewi (15:11.308)
Okay, fixed. Cursed undone. Let me...

I'm

Let me touch back quickly on two things that you mentioned. First of all, you said there were a lot of senior people who had left after the first Trump administration. Now, in somebody said once that at Facebook, if you were there for more than two years, you were senior because the churn was just constant. What exactly does senior mean in the context of federal workforce?

Neal (15:41.287)
Yeah.

Neal (15:46.556)
That's a great question. yeah, I was at the IRS after OPM briefly for about a year and I used to get introduced. We would be doing introductions and people would be like, yeah, I've only been here, I'm real new still, I've only been here for six years, I still feel like a newbie. And you're like, right, okay, I've been here for two months. So...

Alex Loewi (16:07.019)
Yep.

Neal (16:14.62)
But I mean, think you're talking about people with decades of experience doing the things that you do, which is, I mean, again, like I know lots of people and there's an argument to be made that people with decades of experience don't, you know, okay, hey, we need new thought, we need new sort of things like that. Having a mix of people is great. Losing somebody with 30 years of experience, doing the job, understanding it, you're losing just an incredible amount of knowledge and expertise.

And so, and particularly, you know, if the person has risen through the ranks and they're capable and they really know the systems and they're used to, mean, like, my goodness, it's like, it's a real, it can be a real.

Alex Loewi (16:58.318)
Because this is often, in my own experience, these are not people who are like 75. These are people who came in at 25, and they're in their middle of their career. They know all the systems. And the people like me who had two months of experience have absolutely no idea what's going on without the help of folks like this.

Neal (17:07.43)
Yeah. Yeah.

Neal (17:18.184)
Yeah, that's exactly right. There are people who get 40, 50 years of service in the government. So you're talking 20, 30 years, you're still talking to a person, often very much in the prime of their life.

Alex Loewi (17:37.72)
The other thing I wanted to mention that you brought up was, so this was four years ago. Yes, it was after the first Trump administration, but it was also during the Biden administration. And you said that even in those circumstances, you were still in a really resource constrained position. This was not like just, you know, we talk about the federal government having trillions of dollars available and it does theoretically, but that was not like a position of abundance that you were working from.

Neal (18:04.776)
Yeah, I mean, for what you're... So it is... The numbers are large by any individual reckoning, right? Like if you are a human in the world and you're like, wow, I would love X million dollars and I would be set for life, the numbers are larger. But for a organization writing policy for 2.234 million people doing health benefits for...

that many people writing, doing all the retirement processing for that many people. It's a providing expert specialty HR services for hundreds of federal agencies. Like the amounts for what you are being asked to do are quite modest. And also the federal budget, mean, is the non-defense, the non-defense discretionary budget.

is something like 12, 13, and 14 % somewhere in there of the total federal budget. I mean, you're talking about a, you know, it's, I think the budget was something like 300-ish. I'm gonna get these numbers wrong, because it's been a little bit since I looked at them. But it's, you know, it's in the range of three, two, three, $400 million for OPM's non, sorry, appropriated fund.

Alex Loewi (19:08.268)
Okay.

Neal (19:31.046)
dollars. There's a non-appropriated chunk and there's some mandatory payments that go to funding the health benefits and health administration and services to other agencies and stuff like that, but kind of for OPM itself. And a lot of that goes to foundational IT systems. A huge chunk of that is your foundational cybersecurity, right? Like they, OPM has data on like lots of personal data on every federal employee. There was a really bad

Alex Loewi (19:50.109)
yeah, right.

Neal (20:00.644)
Example of there being a breach on that where all federal employees, know personal information was leaked that's obviously a huge problem and so like a lot of that a lot of money goes to to that but I mean as an example the office that That ran all that wrote all policy for two point say two million civil servants Was like a hundred and sixty people

And so you're talking about like, I don't know what those numbers calculate out at, but it's like some obscenely large number of individual people for each policymaker you're doing. And they're covering the full gamut, right? They're covering your hiring policy, your labor relations, your payroll and benefits set of things, your leave.

Alex Loewi (20:31.234)
Wow, okay, yep.

Neal (20:58.14)
your performance management. mean, like the whole human capital life cycle is covered by this policy set of things. They're doing classification for every job in the entire federal government. And that team is like 10 people, right? so, you know, each of these, when you actually get into the specifics of what you've got, it's quite constrained. And so, yeah, and we, the team was quite successful at growing the budget.

Alex Loewi (21:14.318)
Cheers.

Neal (21:28.072)
while we were there, right? mean, so we laid out a good case of how we wanted to use the money. We were able to convince Congress to allocate it. But I mean, you're still talking about, you know, you're getting 10 % growth, 15 % growth on it, which is fantastic and enormous. But this is not, you know, we aren't getting a billion extra dollars off the side. You know, the current proposal for DOD is like, you know, potentially like increasing it by several, you know.

and he's like $150 billion or something like that. I mean, those are numbers that are like way outside the conception of a place like OPM.

Alex Loewi (22:10.082)
Wow. since you, since you mentioned defense, I had a lot of fun doing research in prep for this because there were a lot of things just sort of about this sort of table stakes for federal government that I had no idea of. the first of which being, if you sort of break down sector by sector, DoD is... Let's see. Do you, do know these numbers off the top of your head? We could do a fun guessing game if you don't, but you-

Neal (22:37.896)
for what's the number of employees?

Alex Loewi (22:41.292)
The, let's see. So first of all, there are about three million total federal workers in the whole.

Neal (22:49.232)
if you include the military, that's including postal employees, presumably. Or, cause the active duty military is like, I wanna say like, well active and reserves and guard is something like 3 million. Active is I think 2 million. I could be getting my numbers flipped here. It's been a little bit since I looked at these. And then postal is about six,

Alex Loewi (23:06.733)
Bye now.

Alex Loewi (23:12.61)
Wow. Okay.

Neal (23:19.463)
5,700,000 people, I want to say. And then the Biden administration grew the federal workforce pretty substantially. And so it was hovering around 2 million, which by the way is where it's been since like 1960 for civilian federal employees. And it turns out we do a lot more things than we did in 1960 because great.

Alex Loewi (23:45.788)
Yeah.

Neal (23:47.4)
A lot more stuff going. But yeah, so about 2 million total. And I think by the end of the Biden administration, we were up around 2.3, 2.4 million non-postal non-defense, sorry, non-postal civilian employees in the federal government, is I think where we're.

Alex Loewi (24:06.264)
Damn, I trust everything you said more than any of the research I did myself.

Neal (24:10.246)
I know, mean, my numbers can be, my numbers can certainly be off here. I check in on these things every now and again, but it's like, you know, don't, it can be a little bit since I look at them and could be off for sure.

Alex Loewi (24:25.742)
So the things that I saw were that about half of, so the numbers I was looking at were definitely without all of the folks on reserve since they would completely swamp the numbers I'm looking at. But even with them, looked like half of the federal workforce is in defense, the veterans administration or department of Homeland security. security of some kind is like just literally half of the book. So we're talking about in the first place when anybody says,

government.

Neal (24:56.976)
Yeah, think it's actually, I think those three represent a substantial bit over half the civilian workforce.

Alex Loewi (25:04.682)
once you add in reserve and so forth. at all. Uh-huh.

Neal (25:06.694)
No, no, no, mean just on the civilians. Just on the civilians. think it's like, yeah, it's...

Because because VA is like 400 ish K people. Yeah, so guess it's yeah, it's gonna be around a half half for a bit over. Yeah.

Alex Loewi (25:21.09)
Uh-huh. Yep.

Alex Loewi (25:26.232)
There's a remarkably long tail because you've got these behemoths and then pages upon pages of like, know, 25 people in the CFPB and 48 people in USDA and et cetera. like, fun.

Neal (25:29.286)
Yeah.

Neal (25:36.872)
Yeah, yeah, yeah. Yeah, it's, yeah, like DHS, it's like DHS, Treasury, VA, Justice, and I'm forgetting one or two other that are like, you know, you get to the 80-20 real fast.

Alex Loewi (25:54.316)
Yep. So for more sort of fun trivia, and maybe these are more interesting to me than to you, but I feel other people would be shocked by these because I was myself. So that's about, you said under Biden, was two and change, two to three million-ish people.

Neal (26:14.712)
Yeah, again, out postal workers, the historical average since the 60s has been around 2 million and it kind of drops down a little bit, it bumps up a little bit, but it's kind of been hovering around 2 million for whatever that is, 60 years. And I think we're in a bump up. So I think we ended at around 2.3, 2.4. I haven't looked at FedScope recently, but the...

Alex Loewi (26:18.147)
Mm-hmm.

Neal (26:43.72)
I've seen press reporting around that number. The number of ascensions over turnover increased a fair bit under Biden. It was of usually around 200,000. I think Biden bumped it up to around 3, 350 most years.

Alex Loewi (26:58.926)
Cool. your statistical number, your historical numbers, excuse me, were right on as well. It's super interesting to see this over the last century. We've got practically 8 % of the federal, of the United States, whole country, 8 % of them were working for the federal workforce in some capacity during the years of World War II. Then immediately post 1945, you dropped to about 4.5%.

And since 1945, we've had this slow slide down to about 2 % since then. But it's just this slow trickle bleed off up through the present.

Neal (27:39.206)
Yeah, I mean, and a lot of that has been, a lot of that has gone into contracting, basically. I mean, there's a substantial number of contractors. It is notoriously hard to calculate how many contractors work for the federal government because a lot of times you buy a good, you know, you don't buy a person, a person's services, obviously you don't buy people, but like, you know,

Alex Loewi (27:45.39)
Mm-hmm.

Neal (28:05.64)
You can have a contract for personal service where like a doctor comes and works for the VA or where, you have three lab techs who come in and your contract is for the services of those three lab techs. Very easy to count that. But like you buy, you know, an F35, tons of people are involved, obviously, but you buy the F35. How do you, you know, figuring out exactly how much of that is going to humans is when you're doing it at...

Alex Loewi (28:18.499)
Yep.

Neal (28:35.88)
the scale of the federal government, hundreds of billions of dollars of contracting every year. It's notoriously hard to calculate. Paul Light, who was a professor, did a bunch of work trying to calculate this a little while ago. haven't seen, I have not looked or read if there are recent numbers on it, but a lot of the, you know, like,

Alex Loewi (28:54.648)
Hello.

Neal (29:02.504)
there is more work to do now than there was in 1960. We have great society, we've had all kinds of significant changes to law and services that are expected and the population has stayed the same. a lot of contractors, both the federal government, like each individual person is doing a ton.

and the scope of your responsibilities is larger and larger and larger, but also you plus that up in some ways with contractors.

Alex Loewi (29:38.798)
So that's to say that this 2 % number is actually probably quite a bit larger in terms of the people who were employed in federal projects, but it takes literally a professor to even guess at what that larger number would be.

Neal (29:52.22)
Yeah, it's very hard. It's hard to calculate.

Alex Loewi (29:57.246)
One thing that still stuck out, even if that's, you know, an undercount by, you know, full 50 % is if you compare this, let's say the number of 3 million, because that's sort of rounding up a chunk, compare it to other industries, you've got professional and business services, which is things like accounting and management and administration. That's the biggest single sort of economy sector job wise, and that counts 23 million people.

And then you've got sort of health services. That's 22 million. State and government, fascinatingly, we'll, that'll be another gun on the mantle, but state and government, 20 million actually employees. But things like, you know, hospitality, retail manufacturing, construction, transportation, education, these are all vastly larger than the whole federal government workforce, which is helpful for me because when Elon Musk says things like the federal workforce is going to bankrupt the United States, like that's just silly.

to like look at the numbers next to one another and be like, this is, this is a very, very small part of what we're doing altogether.

Neal (30:56.167)
Yeah.

Neal (31:03.686)
Yeah, there was reporting and I think there's reason to like most people e-file most taxes collected and pay like throughout the year. So I'm not sure where these numbers are coming from, but there's been public reporting that the IRS collections on taxes are down potentially up to 10 % this year. If that's true, and again, I don't know where those numbers are coming from. I don't necessarily trust the specifics because there's...

Alex Loewi (31:32.075)
something similar.

Neal (31:33.138)
There's something fishy about that. But if you're looking at that, that's a IRS collects something like $5.2 trillion a year. If collections are down by 10 % because of the upheaval at the IRS, you're talking about a $500 billion, $500 plus billion reduction in government revenues.

which mind you is not like reduction in tax obligations, right? Like Congress has not changed. All the IRS does is collect taxes based on the laws that Congress has passed, right? So people's tax obligations have not changed. We're just not collecting that money from people who owe it. And again, I don't know where these numbers are coming from. I don't know the specifics of it. My incoming, my guess would be that the people who are best positioned to

take advantage of this situation are people who are sophisticated and have sophisticated filers, people who are, have more complicated taxes because they have more, they have more income to deal with. And they are corporate taxpayers, people who are, you know, taking advantage of more aggressive interpretations of tax law than you might otherwise get away with. I have no, this is purely speculation on my part. I have no knowledge directly.

Alex Loewi (32:41.24)
Yes.

Alex Loewi (32:57.39)
Great. Yep.

Neal (33:01.756)
but if that number is true. So you've got this $500 billion reduction in income from existing tax obligations. It's like if you were a business and you sold somebody something and you just didn't bother to collect the payment due. I think, again, I don't know the numbers here, but I've seen press reporting that the total federal payroll

for employees is something on the order of $200 to $300 billion.

So you're talking about a half a billion, half a trillion dollar reduction in revenue off of a 200 and say 50 to hit the midpoint of that range, like billion dollar. you could get rid of the entire, you could fund the entire federal workforce on half of what we would lose in tax revenue, right? So, you know, and again, we'll see where the tax revenues actually land. I'm a little.

Alex Loewi (33:54.872)
possibly twice. Right.

Neal (34:04.218)
I'm a little, I would like to see where the calculations came from on that number. But like, you know, just the argument that we're balancing the budget or like we are making even substantial changes from a physical perspective. Like we are going to be paying so much more money for what is like, if only what they were doing was actually about efficiency. Like, yeah, so.