COVID-19: Government Workers — Prepare for Layoffs

We are a reactive society, so don't expect preventive actions.

by Eric Holdeman / May 19, 2020

When federal legislators are scared, they throw money at issues. As they become less scared — the checkbooks close. This is especially true when the cash going out is going to people or things they don't like. 

The initial onslaught of federal funding has been what I call CPR for people and "some" organizations who have access to the funding. The patient, that is us, is alive, but not thriving. Job done, game over. Open things up and everything will return to normal. That is certainly what the president is thinking and saying.

Here's the testimony to Congress that came earlier this week, Mnuchin, Fed Chair Powell Testimony On Coronavirus Relief.

One thinks that more economic stimulus is needed and the other believes we can wait. How long will we have to wait?

Everyone admits that the second quarter will show a disastrous financial outcome from the coronavirus. Then, there is hope for the third quarter — when things will come roaring back — as some hope.

Here is my projection. This is an election year. Likely more stimulus funding will be coming, but not until September. The money that was going out the door will dry up in July, six months of the additional $600 going to laid-off workers ends. Congress will be in their August recess, out campaigning for re-election. They will get an earful from constituents out on the campaign trail and will come back motivated (fear factor again) to do something, aka pass funding legislation to ensure they get re-elected. 

Which brings me to government workers. States and local jurisdictions can't print money and they need to balance their budgets. At a minimum, there will be a 20% hit to tax revenues and I would not be surprised to see even 25-50% in some places. For instance, here in Washington state, we have no income tax, so revenue comes from business taxes and the sales tax. Both will be down significantly.

With employee headcount and salaries counting for much of the government's costs, expect a reduction in force that will impact everyone. This time around, first responders will not be spared. Happy September!

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