By Tory Newmyer
June 4, 2013

FORTUNE — What’s becoming clearer now probably should have been obvious from the beginning: The IRS scandal sprung from bureaucratic incompetence — and not some grand conspiracy to stifle the Obama administration’s opponents that goes all the way to the top.

That won’t deter the President’s lead inquisitor, House Oversight and Government Reform Chairman Darrell Issa (R-Calif.), from pursuing gossamer-thin suggestions that IRS officials were marching on White House orders. And that’s too bad. Because as this investigation circles the drain, it will almost surely focus on decreasingly relevant trivia while ignoring a big, actual problem laid bare by the scandal. It will let President Obama off the hook for a broken promise so far ignored. And good, or at least better, government will suffer for it.

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The problem quite simply is that the civil service is broken. I hear a version of the same line from Democratic staffers who leave comparatively lean Capitol Hill operations for executive branch gigs outside the White House: “I’m thinking about becoming a Republican,” they say, mostly joking. But they’re serious that the bureaucratic rot they encounter is bad enough to make them think small-government types have a point. It’s not just anecdotal: The federal government’s 2012 survey of 687,000 of its own employees found only 22% believe pay raises are linked to job performance; 34% think promotions are merit-based; and 29% see managers taking steps to deal with underperforming workers who can’t or won’t improve. And those numbers are all trending downward.

One manifestation of the anti-meritocracy is its job-security. A USA Today analysis in 2011 found in many agencies, workers are more likely to die on the job than get fired. Fairly or unfairly, that fact has been personified by Lois Lerner, the IRS official in charge of tax-exempt organizations now on paid administrative leave following her refusal to testify before Congress. Firing her, we’ve learned, could invite the administrative migraine of wading through months or even years of appeals. With that kind of career immunity it’s no wonder IRS employees spent close to $50 million on 220 conferences over the last few years — the latest revelation stoking outrage over the agency.

Obama diagnosed the government bloat in his 2011 State of the Union address, calling for a sweeping federal reorganization. He rolled out a reform proposal a year later and sent then-Controller Danny Werfel, now serving as the IRS’s interim leader, to testify on its behalf. Werfel told a Senate committee that “changing the way Washington works is a priority for the president.” But the plan went nowhere as election-year politics swamped policymaking, and it hasn’t gotten a mention since.

Now would be a good time to revive and revise it. “The current system fails in every task it was designed to do,” says Paul Light, a professor at New York University’s Robert F. Wagner School of Public Service. “It’s slower hiring new employees, permissive in promoting them with time on the job, and negligent disciplining poor performers.”

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Pointing to the last meaningful overhaul of civil-service rules — led by former President Herbert Hoover during the Truman administration — Light says Obama should enlist Al Gore to lead a commission that will tackle how to rewrite federal personnel policies. It may sound like a pipe-dream, but Light says, “I just don’t know anybody who’s got the guts or the commitment to do it” besides Gore, who made streamlining government the central project of his vice presidency. And there is a template for how to do it successfully, Light says — the Government Accountability Office has shed staff while dramatically improving its output, the result of a decades-long effort by the outfit to rewire itself.

The problem is that while scale of the mess calls for coordinated bipartisan action, the political incentives are all aligned against it. President Obama has better things to do with the remainder of his second term than tackling such a thankless project, especially as the economic rebound diminishes the urgency of deficit cutting. Congressional Democrats are loath to confront the public-sector unions invested in protecting the status quo. And Congressional Republicans are more interested in embarrassing the White House and demonstrating government’s core dysfunction than in doing the hard work of fixing it.

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