If you’re a federal employee, the headlines this week probably hit like a gut punch. The Office of Management and Budget (OMB) has directed agencies to prepare reduction-in-force (RIF) plans in the event of an October 1 government shutdown. In plain English: not just furloughs, but potential permanent layoffs. That’s a major shift from previous shutdown protocols, where most employees returned to work when funding resumed.
Let’s unpack what’s happening, why it matters, and how you can respond strategically rather than react emotionally.
OMB’s Memo in Context: Project 2025’s Playbook
Russell Vought, the current OMB director, is widely known as one of the architects of Project 2025; the Heritage Foundation’s 900-page blueprint to reshape the federal government. One of Project 2025’s core recommendations is to make the federal bureaucracy more responsive to the president’s agenda by reclassifying roles, streamlining terminations, and reducing what it calls “bureaucratic resistance.”
This new OMB memo aligns with that philosophy. By instructing agencies to plan for permanent RIFs instead of just temporary furloughs, the administration signals it’s willing to go beyond stopgap measures and use a shutdown as an opportunity to permanently reshape the workforce. Whether you agree with that approach or not, it is entirely consistent with Project 2025’s stated goals.
But here’s the key insight: this announcement isn’t just aimed at agency heads or civil servants. It’s aimed squarely at Congress, especially Democrats, as a pressure tactic.
Behavioral Economics: Fear, Loss Aversion, and Ambiguity
Behavioral economics helps us see the psychological levers at work:
- Loss Aversion: People fear losing what they already have more than they value equivalent gains. OMB’s memo reframes shutdown risk from a temporary inconvenience to a permanent career loss, increasing its psychological impact.
- Ambiguity Aversion: When outcomes are uncertain, most people prefer to avoid the gamble altogether. By leaving the scope and timing of RIFs vague, OMB increases stress and uncertainty, encouraging employees and lawmakers to push for resolution sooner rather than later.
- Scarcity & Cognitive Load: Chronic uncertainty taxes our mental bandwidth. Workers under threat of RIF are less likely to resist organizational change or take risks — and more likely to seek the “safe” exit option.
For lawmakers, these same dynamics apply. Democrats face the prospect of being blamed for a shutdown that doesn’t just furlough workers but fires them. The fear of that political loss is powerful.
Game-Theoretic Model
Let’s take a look how this situation plays using Game Theory.
1. Players
- Player 1: White House / OMB (representing executive branch)
- Player 2: Congressional Democrats (or more broadly, Congress as the appropriations authority)
- Player 3: Federal Workforce (indirectly affected but can exert pressure through unions, media, public opinion)
2. Game Setup
- Decision: Pass a Continuing Resolution (CR) or allow a shutdown.
- White House Strategy: Issue memo threatening permanent RIFs during a shutdown → increases potential costs to Democrats and federal workers.
- Democrats’ Strategy: Decide whether to hold firm on policy riders / funding levels or concede to avoid damage.
Simplified Payoff Matrix (Two Players)
| Democrats: Pass CR | Democrats: Don’t Pass CR (Shutdown) | |
|---|---|---|
| White House: No RIF Threat | Status quo funding continues (WH dislikes if CR includes things they oppose) | Shutdown occurs, furloughs happen, both sides share blame |
| White House: RIF Threat (current) | Dems may cave earlier, White House “wins” policy concessions | Shutdown + mass RIFs → White House risks backlash, but bureaucracy shrinks (a “win” if that’s the goal) |
Key Observation:
The threat of RIF shifts the Democrats’ payoff for “Don’t Pass CR” from a temporary negative (furloughs) to a much bigger loss (permanent job cuts). This can make “Pass CR” relatively more attractive.
Game Theory: A High-Stakes Game of Chicken
This is a classic game of chicken scenario. Each side is racing toward a collision:
- White House/OMB: By publicly threatening RIFs, they signal commitment: “We’re willing to bear the pain of a shutdown and even permanent layoffs.”
- Congressional Democrats: Must decide whether to hold their ground (risking being seen as causing mass job loss) or pass a Continuing Resolution (CR) closer to Republican terms.
Game theory teaches us that the winner of chicken is often the player who credibly shows they won’t swerve. By “locking the steering wheel”; making the threat credible; OMB is trying to force Democrats to blink first.
But this is risky: if neither side swerves, we get the worst outcome, a shutdown plus mass layoffs, hurting workers, agencies, and public trust.
How Federal Employees Should Respond
Here’s where I switch from analyst to coach. You can’t control what Congress or OMB will do, but you can control your own position on the field.
- Get Clarity: Know your employment category (competitive service, excepted, Schedule F, etc.), your rights (MSPB appeals, union protections), and your agency’s shutdown plan.
- Prepare a Backup Plan: Update your résumé and USAJOBS profile, research lateral transfers, and build your professional network.
- Strengthen Your Safety Net: Build an emergency fund, pay down high-interest debt, and consider side income options.
- Stay Engaged: Don’t retreat into fear. Ask questions in town halls, stay connected with peers and unions, and make informed choices about buyouts or reassignments.
Financial Resiliency: Your Secret Weapon
Living below your means and building financial independence is the single best way to take power back from uncertainty. Behavioral economics calls this restoring agency; reducing the mental tax of scarcity so you can make clear-headed decisions.
When your core expenses are low and you have 6–12 months of savings, you can weather a furlough, a RIF, or a political standoff without panic. You move from being a hostage of events to being a free agent with options.
Coach Holdren’s Simple Formula
At simpli-fi.money, I teach my athletes and students the same formula I use myself:
Spend Less Than You Earn + Invest the Difference + Automate the Habit = Freedom
This isn’t just personal finance advice. It’s a mindset shift. The goal isn’t just to survive OMB memos or shutdown politics. It’s to build a life where you’re free to choose the work you do, not forced to cling to it.
Stay informed, stay resilient, and keep playing the long game. That’s how you win on the field, in your career, and in life.
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