I just stayed with cousins on the East Coast for the weekend. (I was in town for my graduation ceremony, an amusing bit of theater with no intrinsic significance… but fun anyway.) The husband is a white-collar employee of New York's MTA; being of a conservative bent, he will readily tell of the many ways in which the whole system is dysfunctional.
One anecdote I found particularly striking. In 1981, my cousin was heading in to work with an acquaintance of his, a man who had direct oversight of several welfare programs (five, I think). This man had just been directed by President Reagan to cut one of the programs, as part of the general push to trim back government.
Now, the man said to my cousin, which program should he choose to cut? Should he choose the most bloated, inefficient program that is doing relatively little to help his constituents? One would imagine yes; but in fact, the man decided to cut the leanest, most effective program that was helping the most people!
Why? Well, if the man had ended the least effective program, then it would be gone forever and the small-government types would be proved right. That would translate into a loss of power for the man in question; instead of overseeing five programs, he would now only have four. But if he ended the most effective program, then his constituents would scream bloody murder, the government would be forced to restore funding, and his power would remain secure.
This is in fact what happened. And it happens constantly, on every level of government. Everyone is familiar with the dire predictions that such-and-such a cost-cutting measure will victimize "children and the elderly." Do fiscal hawks have a pathological hatred for children and the elderly? Of course not. But those with direct control of the programs in question have a vested interest in making any cutbacks as painful as possible, to ensure the survival of their fiefdoms. In government, prestige is measured by the sheer number of resources one has control over, not on whether those resources are being used effectively.
What this means is that would-be reformers cannot leave too much discretion to the mandarins when they mandate cuts; if they want cuts to be at all effective, they must micromanage them as much as possible to stymie any attempts at sabotage by the mandarin class. More than that, reformers must constantly push government agencies to measure their effectiveness, and then make those numbers public. Only if officials are punished for doing poor jobs, even if only by public ridicule, will we see improvement.