White House Budget Office Directs Federal Agencies to Prepare for Mass Layoff Plans Amid Shutdown Fears

White House Prepares for Layoffs Amid Shutdown Concerns

The White House Budget Office is directing federal agencies to prepare for mass layoff plans, specifically targeting employees serving in programs deemed "non-essential."

In a memo, the Office of Management and Budget (OMB) is asking agencies to identify programs and activities for which "discretionary funding" will expire on October 1 and which have no alternative funding sources. The OMB then directs agencies to draft layoff plans extending beyond routine furlough operations. If a government shutdown occurs, permanent employee reductions will be implemented for programs deemed "inconsistent with President Trump’s priorities.”

This approach represents a significant departure from government shutdowns in recent decades, which often saw employees temporarily furloughed, with their jobs restored once Congress voted to reopen the government and restore funding. OMB Director Russ Vought is now using the threat of permanent layoffs as leverage in the current standoff with congressional Democrats over government spending.

According to the OMB memo, “Programs that have not secured a statutory appropriation will be most at risk from the impacts of a government shutdown.” Agencies are also required to submit proposed layoff plans to the OMB and issue layoff notices even to employees who might otherwise be “exempt from furlough” or on “temporary furlough” during a funding lapse.

According to an OMB official speaking on the condition of anonymity, the following programs will continue to operate regardless of whether the government is shut down: Social Security, Medicare, veterans’ benefits, military operations, law enforcement efforts, Immigration and Customs Enforcement (ICE), Customs and Border Protection (CBP), and air traffic control.

These directives come as congressional Republicans and Democrats face a funding impasse, with just days remaining before the September 30 end of the fiscal year. The House has passed a temporary funding bill that would keep federal agencies open until November 21, but Senate Democrats are refusing to advance the bill, demanding that Republicans sit down and negotiate a “bipartisan funding agreement” that could include an extension of Affordable Care Act (ACA) subsidies.

The OMB notes in its memo that if Congress is able to pass a “clean continuing resolution” by September 30, the additional measures outlined in the message will not be necessary.

"Intimidation" Tactic Against Democrats?

The memo appears to validate previous warnings from some Democrats, most prominently Senate Minority Leader Chuck Schumer. During the last shutdown standoff in March of this year, Schumer advocated for the passage of an appropriations bill drafted by Republicans, arguing that a shutdown would become a “gift” to Trump and his aides to “destroy vital government services at a much faster rate than they are now.”

Schumer has since revised that view, saying this month that “this assault by this administration on federal agencies is going to escalate whether there is a shutdown or not, because Trump disregards the law.”

After Politico revealed details of the memo on Wednesday, Schumer reiterated the same point, calling the memo an “attempt to intimidate.”

“This is nothing new, and it has nothing to do with funding the government,” he said. “These unnecessary layoffs will either be struck down in court, or the government will eventually rehire these employees — just as they have recently (and even today).”

House Minority Leader Hakeem Jeffries took a different tack, posting on X (formerly Twitter) a post that appeared to take the threat seriously. His post was directed at “federal employee-heavy Virginia voters” — where a governor’s and other statewide elections are soon to be held.

“They want to ruin your lives and punish hard-working families already hurt by Trump’s tariffs and inflation,” he wrote. “Remember this when you vote in November.”

Understanding the Potential Economic Impact

While this article focuses on the immediate impact of potential layoffs, it's important to understand the broader economic consequences of a government shutdown. Disruptions in government services can affect various sectors, from tourism and hospitality to contracting and scientific research. Delays in permit approvals, contract payments, and data releases can create uncertainty and hinder economic activity. Analyzing the historical data from past shutdowns can provide insights into the potential magnitude of these economic impacts.