The panel, chaired by former Federal Reserve Chairman Paul Volcker, issued a report Tuesday pointing to the new Homeland Security Department as an example of smart consolidation.
The department, created by Congress last fall, combines nearly 24 agencies and 170,000 employees. It's the biggest federal reorganization since the Defense Department was created in 1947. Congress also gave the Homeland Security Department greater flexibility to hire, fire and promote workers.
Other federal departments should be similarly realigned, the commission said, noting that 13 Cabinet departments run 342 economic development programs, 50 federal agencies are involved in the war on drugs, and 11 agencies run 90 early childhood programs.
"We're not arguing for bigger government or smaller government; we're arguing for better government," Volcker said.
In its final report, "Urgent Business for America," the commission said the federal government is running on a 50-year-old structure, despite huge changes since World War II.
"The federal government is neither organized, nor staffed, nor adequately prepared to meet the demands of the 21st century," the report said. "If we do not make the necessary changes now, when our needs are clear, we will be forced to cope with the consequences later in crisis after crisis."
Restructured agencies should have greater freedom to promote and demote federal workers, who in turn should have more autonomy and more responsibilities, the commission said. It proposed doing away with the current General Schedule governing most white-collar federal employees, who are given rigid pay grades and job descriptions.
The commission also proposed eliminating several layers of political appointees, giving more authority to career employees to carry out the policies of the administration in power.
Lack of flexibility in assignments and pay is hurting efforts to recruit talented people, the commission said. Agencies like the Centers for Disease Control, which would play a major role in a future bio-terrorism attack, and the Securities and Exchange Commission, which is being called upon to increase its reviews of U.S. corporations, have problems attracting employees with the right job skills, the panel said.
The commission also called for higher pay for federal judges, noting that their salaries lag behind private-sector law firms and law school professors.
The panel called for overhauling the process by which prospective federal officials must undergo background checks and fill out detailed financial disclosure forms.
"The ethics regulations imposed on public servants have grown out of proportion to public need and to common sense," the report said. "The system has become dysfunctional and must be re-examined."
The commission was put together by the Brookings Institution, a left-leaning Washington think tank. The report will be sent to lawmakers and the White House, and commission members hope to share ideas with Congress and Bush administration officials.
Commission members include Frank Carlucci, defense secretary during the Reagan administration; former Sen. Bill Bradley, D-N.J., Donna Shalala, Health and Human Services secretary during the Clinton administration; and former Rep. Vin Weber, R-Minn.
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