Author: Gregory Epstein (No relation)
Graphics: Business Review at Berkeley
The federal government is shrinking at an unprecedented rate and the 2025 shutdown has aggravated the already extreme layoff crisis that started earlier this year. Thousands of federal employees have already been laid off and hundreds of thousands more are left waiting to see if their paychecks or even jobs will return.
Introduction
The phrase “smaller government” has been thrown around in various budget debates and campaign speeches. However, it became a reality with President Trump’s administration and the creation of the Department of Government Efficiency, led by Elon Musk at the time. Launched in January 2025, DOGE has been attempting to aggressively reshape the federal workforce. At the time, few in Washington and around the world thought much of what just seemed like another “political cliche.”
Eight months later, federal offices are closing, scientists and analysts have been dismissed, and agencies are being hollowed out as the government is grinding to a halt. The layoffs have begun, and there is no sign of a stoppage in sight. A reckoning every American will feel as the nation’s institutions strain under its own weight.
From Policy to Pink Slips
President Trump signed an order creating DOGE in January 2025, instructing the new initiative to commence large-scale reductions in the government workforce to create a new framework of efficiency.
Just weeks later, on February 26, the Office of Personnel Management (OPM) and Office of Management and Budget (OMB) issued a joint memo that directed every federal agency to submit a detailed plan that identified which positions could be eliminated, consolidated, or reassigned. They were merely bureaucratic directives on paper. Yet in practice, they marked a blueprint for the largest federal downsizing in modern history.
By August, government records and OPM briefings confirmed that at least 148,000 federal employees had left their jobs, voluntarily and involuntarily, since Trump’s inauguration. Some retired. Others took buyouts. But many were simply discouraged and uncertain about whether their department would even exist by the year’s end. OPM officials projected that the number of government departures could reach numbers as high as 300,00 by the end of 2025.
Image 1: Interactive graph from FRED showing monthly federal employment trends
President Trump saw the creation of DOGE as a fight against the expensive and poorly run state of the U.S. government. He argued that the years of unchecked hiring had turned into a waste and inefficiency that had to come to an end. By shrinking the size and streamlining agencies of the government, President Trump claimed to restore discipline and return the power back to the U.S. people.
However, this wasn’t happening in a vacuum. OPM data shared that the civilian federal workforce already dropped from over 2.3 million employees in late 2024 to around 2.2 million in mid 2025. That’s not catastrophic on its own, but the trend was clear: a government that had expanded by over 700,000 federal employees just two years prior was contracting at a rapid rate.
These reductions continued for most of the year through attrition and voluntary exits. However, when Congress shut down at 12:01 AM on October 1 and failed to pass a national budget, the slow drip turned into a flood.
The Shutdown that is Becoming a Layoff Machine
Shutdowns typically mean temporary furloughs where workers are sent home without pay and receive back pay once funding resumes. This time, the OMB broke precedent when it ordered agencies to prepare mass reduction-in-force (RIF) plans, which would convert furloughs to permanent layoffs during a funding collapse.
The effects became visible within ten days. Backed by President Trump, the OMB confirmed on October 10 that major layoffs have begun and that 4,000 RIF notices had been issued across major departments such as Treasury, Health and Human Services, and Commerce. Moreover, 1,000 positions were cut at the CDC in disease-tracking and global-health units.
As the shutdown continues, many federal employees remain unpaid as agencies freeze contracts and daily operations. The CBO warns that funding gaps slow economic activity and delay spending that supports local economies. Areas that rely on federal payrolls will soon feel reduced small business income and a strain on household budgets. These layoffs create a domino effect as each new unpaid worker deepens the loss of expertise, and restoring that capacity after funding returns is far slower than cutting it. Even if funding restarts, agencies cannot instantly rebuild teams or trust.
Economic Fallout
Cuts of this scale already dented aggregate demand and GDP growth. The Hutchins Center estimates that fiscal tightening has subtracted about 0.6 percentage points from the U.S. GDP growth in mid 2025. This has cost roughly 15 billion dollars per week in lost output. With federal spending making up about 23% of GDP, every 100,000 government layoffs can remove tens of billions in annual consumer demand. As these layoffs spread, local economies dependent on federal spending in areas like D.C. and Virginia are bracing for slower growth and higher unemployment through the end of the year.
Each week of ongoing government shutdown is estimated to cost the U.S. economy about $7 billion and reduce quarterly growth by about .01 percentage points per week. This strain is echoed by financial indicators. The University of Michigan’s Consumer Sentiment Index fell 5% from August to September, reaching its lowest level since 2023. These trends are point towards an economy slowly losing momentum as confidence and spending fade.
Conclusion: Why it Matters Beyond Washington
It’s easy for everyday individuals to dismiss government layoffs as distant politics. But fewer air-traffic controllers mean longer delays; fewer food inspections mean slower recalls; fewer CDC scientists mean weaker and slower outbreak response. Whether you work for the government or not, the impact reaches you.
Federal employment has already fallen by over 100,000 workers since 2024, with 4,000 new layoffs and possibly hundreds of thousands furloughed. The administration’s pursuit of efficiency may leave Americans with a government too thin to function. This isn’t only a budget fight. It’s a test of whether a nation can still deliver essential services when ideology turns public service into collateral damage.
Take-Home Points
- The Department of Government Efficiency, launched in 2025, started an aggressive campaign to consolidate, restructure, and eliminate federal jobs.
- Following a OPM and OMB memo in early February, many government agencies were forced to share what positions could be cut and left hundreds of thousands of federal employees worried about the foreseeable future.
- Government records show that by August over 148,000 federal employees had left their jobs, with prediction of another 150,000 more by the end of 2025.
- With the government shutdown on October 1, the OMB escalated the crisis as furloughs were converted to permanent layoffs.
- 4,000 employees have been permanently removed already, including those in essential agencies such as Treasury, Health, and Human Services and the CDC.
- These cuts have halted research, delayed inspections, and frozen thousands of contracts, showing that the road to efficiency actually leads to a slowdown of the government most crucial functions.