How Mass Layoffs Of Federal Employees Could Affect The Economy | Global News Avenue

Experts have identified some of the potential economic benefits and huge risks of President Donald Trump’s massive dismissal of federal workers.

During his first month as president of Donald Trump, he and his Billionaire consultant Elon Musk Take action quickly to reduce the size of the federal labor force. Trump has frozen hiring in all federal agencies and ordered a “mass reduction” through acquisitions and layoffs.

Of the 2.4 million non-statistical and non-military federal employees, 75,000 accepted the offer to leave their jobs. Last week, many federal agencies launched thousands of employees in probation employment, mainly in their first year of work, a move that could affect hundreds of thousands of workers.

Most importantly, the government has demolished at least two agencies, Consumer Financial Protection Bureau and the United States International Development Agency and threaten Close the Ministry of Education. The union representing federal workers challenged the actions in the court.

How layoffs affect federal budget

Some economists see potential benefits of Trump’s policies to reduce federal spending.

The United States continues to have a budget deficit, which increases Treasury bonds every year and has the potential to threaten the country’s financial stability and its ability to deal with future crises. In 2024, the United States spent more than $1.8 trillion, increasing national debt. All others are equal, and lower spending on federal workers can help improve this.

“While they may damage growth in the short term, taxes and lower spending may help grow in the long run by reducing the swollen federal budget deficit, which brings interest rates in the case of swelling growth. Up pressure and squeeze out private investment. ” Independent Forecaster Robert Fry said in a comment.

However, large-scale shootings by workers may only create a small dent in the overall federal budget.

Assuming the federal labor force has dropped by 2.4 million, the government will save $25 billion a year, Deutsche Bank economists calculate. That would be less than 1% of federal spending, up $6.7.5 trillion last year.

Economists say that without raising new taxes or changing large entitlement plans, the federal deficit would not be greatly reduced. Social Security, Medical Insurance, Military and Interest for Treasury Debts Take most federal budgets each year.

How federal layoffs affect the economy

The firing of a large number of federal workers also poses some risks to the economy.

If the Trump administration meets its goal of reducing the federal workforce by 75%, unemployment will soar where the federal government is the primary employer. In Washington, D.C., for example, the unemployment rate will be as high as 9.6% from the current 2.8%, a think tank analysis discovered by the Urban Institute in January.

Democrats, union representatives and some economists have warned that many of the employees who were fired last week were doing important work.

The layoffs reportedly include staff from the Federal Aviation Administration for air travel safety; staff from the Food and Drug Administration work on infant formula safety; staff from the National Institutes of Health oversee external cancers and other diseases Grants for research; workers in the Ministry of Agriculture lab are working to control the ongoing avian flu epidemic Destroy the poultry and sheep All over the country; and workers at the China Internal Revenue Service during the tax season.

Disruptions to government services may backfire and fit in with Trump’s cost-saving efforts. For example, the IRS layoffs may delay the processing of taxpayer returns. They can also reduce federal incomes, as fewer IRS workers can make tax fraud less likely.

“Disappearing in protecting the public, supporting safety nets and enhancing products for U.S. products,” Adam Kamins and Justin Begley, economists at Moody’s Analytics, wrote in a commentary. The need-related organizations and work play a crucial role in many other functions.” “This injects additional uncertainty into an environment where risks are already scattered.”