The Trump administration is aggressively focused on cutting costs and reducing the size of government. To that end, President Donald Trump signed an executive order in February, aimed at reducing the federal bureaucracy.
Agency heads responded to the executive order, and, in conjunction with efforts by the Department of Government Efficiency (DOGE), more than 50,000 federal workers have been laid off from their positions.
Many of these firings have been challenged in court, with several judges issuing injunctions on the firings and ordering workers to be reinstated or placed on administrative leave. However, the Trump administration is appealing these orders, and there is a very real possibility that they will ultimately be able to follow through on their workforce reduction efforts.
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If the federal workforce does end up being substantially reduced, obviously it will profoundly affect the finances of government workers. However, every American could also find their finances affected by such a move.
Here’s how your finances — including your retirement and taxes — could be affected.
Getting help with Social Security benefits could be harder
The Social Security Administration (SSA) is one of the agencies that expects to reduce its workforce, indicating that it’s planning to cut as many as 7,000 jobs. The agency has also operated with a regional structure of 10 offices, which will be reduced to four.
NPR reports that one source at the SSA believes this will have dire consequences because people who need help with claiming retirement or disability benefits will not get the support they need.
"The public is going to suffer terribly as a result of this," the source wrote.
"Local field offices will close, hold times will increase and people will be sicker, hungry or die when checks don’t arrive or a disability hearing is delayed just one month too late."
While the Trump administration has pledged not to cut Social Security benefits, new plans to require in-person verification of identity have also raised concerns that not everyone will be able to access the benefits they need. The plans were partially walked back amid outcry from advocacy groups over concerns that seniors with disabilities might face challenges in accessing benefits.
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It may be more difficult to get tax help
The IRS is also on the chopping black. Around 7,000 probationary workers were laid off in February, although those workers have been reinstated, per court orders, and placed on administrative leave. The IRS is reported to be preparing for a 50% cut to its workforce, reducing it from 100,000 to around 50,000, by way of buyouts, attrition and layoffs.
While workers who are considered "critical" to processing tax returns have been prevented from accepting buyouts until after the tax filing deadline, downsizing the IRS could make it more difficult for people to get help with tax issues over the long-run.
Experts told Kiplinger that it is becoming more difficult to get someone to answer the phone at the IRS, and that high-value collections cases are no longer being handled properly because the revenue officers that were working on the cases have been fired.
Low staffing levels at the IRS could also result in returns and refunds being processed more slowly, taxes going uncollected and more people facing tax penalties because they can’t get their questions answered by knowledgeable staff members.
Consumers could become more vulnerable to financial fraud and abuse
Finally, the Trump administration has been very aggressive in making moves to shutter the Consumer Financial Protection Bureau (CFPB). All 1,700 workers were sent home in early February, and Elon Musk tweeted out "CFPB RIP."
While the bureau’s staff union and other groups have been fighting these layoffs, and some workers were called back, the reality is that the CFPB has spent years dedicated to fighting against consumer fraud and abuse.
When the agency’s work was halted, as reported by U.S. News & World Report, it put a temporary — and perhaps permanent — pause on several pending cases, including against Capital One for misleading customers and costing them $2 million in missed interest payments; against Zelle over fraud on its platform that caused hundreds of millions in losses; and against Walmart for charging millions in junk fees.
The CFPB also worked to limit excessive overdraft and credit card fees, restricted lending to high-risk borrowers and took other actions to rein in predatory lenders.
All of these efforts could end, leading to banking and other financial products becoming more expensive and consumers facing an increased risk of wrongful behavior by big companies.
Consumers will need to wait and see if these layoffs become permanent, and if the changes to these agencies actually go forward. If so, they may be left coping with the financial fallout — and with less resources available to help respond to newfound challenges.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
