Washington, 14 October 2025 — As the U.S. federal government shutdown stretches into its second week, the White House’s Office of Management and Budget (OMB) has publicly declared it will persist with layoffs (reductions in force, or RIFs), despite the budget impasse. The administration says it will maintain essential payments to the military and law enforcement, while cutting staffing elsewhere.
An OMB message posted on social media emphasized the strategy: “Pay the troops, pay law enforcement, continue the RIFs, and wait.” The White House budget office framed this approach as a way to “ride out” the shutdown rather than simply hunker down and halt operations.
Layoffs Already Underway
This escalation marks a shift away from the traditional shutdown approach, which typically imposes furloughs, temporary unpaid leave, on nonessential federal staff. In contrast, the current direction involves permanent cutbacks in some departments, a move announced earlier by OMB Director Russell Vought, who declared “The RIFs have begun.”
Recent layoffs have touched multiple agencies, including Treasury, Health & Human Services, Education, and Commerce. Early estimates suggest more than 4,000 federal workers have already been terminated under these reduction efforts.
Legal and Institutional Fallout
The administration’s approach has raised immediate legal and ethical questions. Historically, during funding gaps, agencies defer to furloughs. Utilizing RIFs in a shutdown raises concerns under the Antideficiency Act, which governs federal spending in times when appropriations lapse. Senior government officials have privately cautioned that firing employees during a shutdown could violate that law.
Unions and legal advocacy groups have already begun filing challenges, contending that firing workers without proper notice or funding authority is unlawful.
Broader Implications & Risk for Asia
For global markets and Asian investors, the U.S. shutdown and mass layoffs carry implications beyond domestic policy:
- Economic ripple effects: Reduced government activity may suppress U.S. consumer demand, ripple into supply chains, and dampen global growth, especially in export-oriented Asian economies.
- Currency & capital flows: Market uncertainty may push capital toward safer assets like U.S. Treasuries and the dollar, pressuring emerging market currencies.
- Policy precedent: The willingness to use layoffs as a political lever may shift expectations in other advanced economies during fiscal standoffs.
- Credit & sovereign risk: Prolonged shutdown costs could increase U.S. borrowing, affecting global interest rates and sovereign credit spreads.
In sum, the White House’s pledge to continue layoffs amid the shutdown signals a new, aggressive posture, one that may reshape how governments use federal employment policy as both fiscal and political instruments.
