Eye on Policy

Although delayed at the last minute by immigration politics, it seems like Congress will end up funding the government for 2026. The fiscal year will only run eight months, but at least agencies will be able to proceed with new initiatives on the technology and customer experience fronts.

And the government certainly has a long list of items to deal with, much of it having to do with contractors. Relations between the federal government and its suppliers often get tense. They are hitting a bit of a rough patch now. As outlined in the story below, the Trump administration likes to throw out the baby with the bathwater when it does not like a contractor.

In other cases, you wonder what a contractor thought it was signing up for. A story published last week in the Wall Street Journal detailed a spat between the Defense Department and Anthropic, one of its prime artificial intelligence vendors.

The company was already at odds with the Trump administration, because Anthropic does not want its technology used for surveillance. Now it does not want its AI to be used for autonomous weapons.

Notwithstanding the fact that anyone signing up with the Defense Department should realize what the department does, the incident shows the need for clarity and purposefulness the government will need as it approaches AI, in some ways already a mature technology.

At the moment the administration is focused on getting the states out of AI regulation so there’s a single national framework coming from the federal government.

Still, earlier last year the administration issued some guidance to agencies on use of AI for their own purposes. Now, agencies are free to launch planned initiatives that were held up by last year’s shutdown and subsequent continuing resolution.

Aside from AI, there’s the slightly ominous request for information from the General Services Administration to “enhance reseller market oversight in value,” in the agency’s words.

GSA—in the spirit of its OneGov initiative—essentially wants to make sure that value-added resellers charge only for the real value they purport to add. GSA says its analysis might “include establishing additional controls to ensure the government receives fair and reasonable pricing when markups exceed a certain percentage threshold.”

The survey gets down to some pretty basic basics. To wit, GSA asks, “Is there a widely accepted commercial definition for reseller? Yes or no” followed by “If a widely accepted commercial definition for reseller exists, please provide.” And so on.

How this will shake out depends on the answers, of course. Companies that presume they are in fact value-added resellers should jump on the survey, so their point of view gets folded in. What definitions and normal practices characterized VARs in the heydays of 1980s and nineties have changed a lot.

And it is good to see GSA pay attention to the venerable Multiple Award Schedule system, which in come ways constitutes the original “one gov” program.

Service does not improve if you fire everybody

It might not come to mind intuitively, but organizations serving the public regularly deliver less experience, less quality or less quantity—not by accident but rather as a strategy.

Often these changes follow inflation and other economic movements. That is how we get the fluctuations in sizes and prices of chocolate bars or “pounds” of coffee.

Airlines most famously have squeezed people tighter and tighter, while giving fewer rewards. People like to refer to the so-called golden age of flying when everyone dressed up and had plenty of legroom (forgetting how much greater danger they were in than today).

Government, although it has different objectives from profit-making companies, has much in common with industry when it comes to delivering services and, sometimes, goods. It relies on contractors for technology and other requirements. It establishes metrics for what it hopes to deliver, and how well it delivers it. And government delivery quality also runs in two directions.

I say this as prelude to commenting on a couple of recent developments at the Treasury Department. The 2026 tax filing season has opened. The IRS has not lost its way, but it is battling strong negative currents.

First is the DOGE-like, wholesale cancellation of contracts with Booz Allen Hamilton. The department cited the case of former Booz employee Charles Edward Littlejohn, now serving federal time for leaking the tax records of President Trump and a couple of hundred thousand other people starting back in 2018. The government took a widely different action than it took after short-term Booz employee Edward Snowden leaked millions of pages of national security secrets back in 2013. (Snowden now advocates for privacy and press freedom as a citizen of Russia, apparently with no sense of irony.)

“The Treasury Department currently has 31 separate contracts with Booz Allen Hamilton totaling $4.8 million in annual spending and $21 million in total obligations,” Secretary Scott Bessent wrote. So not big dollars. Federal News Network reported Booz Allen received more than $7.5 billion in obligations across the government last year.

Unclear is what Booz was doing on the 31 contracts, but the company still supported the IRS with technology consulting among other things. And it worked across the department on cloud computing initiatives.

The cancellation is in keeping with the Trump administration’s approach, which means nothing is final. Can the department get along without Booz Allen? Stay tuned to this one.

The other development concerns the IRS itself. The Treasury Inspector General for Tax Administration now points out that IRS staffing levels have shrunken to where they were in 2021. TIGTA reports the backlog of unprocessed paper returns, amended returns, correspondence, error resolutions, and other matters has risen to two million, more than twice the level in 2018, before the pandemic. Staffing peaked at 100,435 in October of 2024. Now it is down to 81,456—exactly where it was in October of 2021. That is, before the Inflation Reduction Act gave the agency an extra $80 billion over 10 years specifically to improve taxpayer service.

Now TIGTA wonders if the IRS can manage the 2026 season. The agency is deliberately cutting back telephone service level goals. In-person assistance centers are understaffed, with dozens still not open since the government shutdown last year. The agency’s IT staff has been cut 16%, so the IRS will struggle just to implement the yearly tax law changes, never mind the modernization efforts that were in the works.

In short, turmoil from many angles threatens a signature digital government initiative that dates to the Clinton administration. The reductions result from actions the government itself took.