A New Political Reality: Administrative State Changes Impacting Business

In the final installment of A New Political Reality, Business for America’s three-part webinar series, we explored how the evolving administrative state is reshaping business operations, regulations, and economic stability in 2025.

With sweeping agency reforms led by the Department of Government Efficiency (DOGE), companies must prepare for both disruptions and opportunities. While reducing government waste is widely supported, the challenge lies in how these reforms are implemented and their broader economic effects.

The Pathway to Efficiency

Ben Bain, director of state capacity at the Niskanen Center, explained that while the goal is efficiency, the primary method — large-scale job cuts — does not necessarily lead to better government effectiveness. Structural issues such as bureaucratic complexity, outdated technology, and weak feedback loops often hinder performance more than waste or fraud.

He also distinguished between efficiency and effectiveness, noting that while businesses focus on cost-cutting, government must ensure service delivery to all citizens, including those in underserved areas. Maximizing efficiency alone may not achieve the intended public benefit.

“The government should serve all people… If you just go for efficiency and therefore don’t serve the people that are hardest to serve, you could probably become more efficient. But then you’re not actually delivering on the mission.”

Federal Contracting & Impoundment

David Super, professor of law and economics at Georgetown University, discussed DOGE’s approach to federal contracting, warning that some contract cancellations may lack legal authority. This could lead to uncertainty for private sector engagement.

“I’m concerned that this is going to add costs to the Federal Government in the middle and long term as businesses no longer regard the Federal Government as a reliable counterparty to their contracts and start demanding risk premiums. I think the attitude of many businesses up to this point is that the Federal Government is a pain in the neck, but at least they pay.”

Super noted that Congress appropriates funds with the expectation they will be spent, and unauthorized cancellations could violate appropriation laws. With litigation mounting at an unprecedented scale — comparable only to the Nixon-era impoundment crisis — businesses are already seeing potential instability in government contracting. The Supreme Court recently declined to intervene in a case involving canceled contracts, signaling that the justices may want lower courts to fully assess the situation before weighing in.

Workforce Reductions

Michelle Amante, SVP of government programs at the Partnership for Public Service, highlighted the impact of federal workforce cuts, particularly the loss of young talent. Employees under 30, who serve as a critical pipeline for future government leadership, are being disproportionately affected. Instability in the federal job sector discourages young professionals from considering government careers, which could weaken institutional knowledge and effectiveness.

“27% of those probationary period employees are under the age of 30, and this has been a constant struggle of the Federal Government to try to build that pipeline of young talent. Only 7% of the Federal workforce is under the age of 30… How are you going to serve the public if we can’t get this new generation of talent in?”

Looking ahead, Amante also pointed out that senior positions are increasingly becoming political appointments, leading to frequent turnover and further undermining government effectiveness. Businesses are already facing inefficiencies in their interactions with the government due to the loss of institutional knowledge and experienced contacts. As these cuts continue, the federal government’s ability to serve the public and private sectors is expected to decline further.

Business Advocacy

Lastly, the panelists emphasized that businesses and citizens should actively participate in the democratic process by communicating their concerns to their senators and representatives and advocating for reforms that ensure a stable and effective administrative state.

To learn more about Business for America and get involved, please visit bfa.us.

Watch the webinar video on YouTube or below.