The effects of DOGE job cuts could ripple across financial system

The Internal Revenue System (IRS) expects over a 10% drop in tax revenue by April 15, losing more than $500 billion. The decline stems from deep staffing cuts by the Elon Musk-led Department of Government Efficiency (DOGE).

The IRS has already dismissed 11,000 employees, with plans to remove 20,000, weakening enforcement and delaying investigations into high-value taxpayers.

These reductions have also raised concerns about the security of taxpayer information, as DOGE has sought access to confidential tax data, prompting legal challenges and the removal of top IRS officials.

DOGE cuts also threaten the financial systems
A government watchdog is sounding alarm bells that cuts at a crucial regulatory agency, the Federal Deposit Insurance Corporation (FDIC), could have far-reaching consequences across the financial system.

According to a senior agency official, the move could strain a smaller agency as it may have to perform the same duties as a larger one.

The FDIC has two vital roles: insuring depositors’ funds and supervising banks for safety and soundness.

Since January, the FDIC has seen a staff reduction of 9%. Additionally, ~450 employees opted for deferred resignation, while 160 probationary workers were dismissed. Currently, FDIC has just about 5,000 employees, of which nearly 17% will retire this year. 

The remaining staff may not be qualified to lead bank examinations, which are typically conducted by a commissioner. (It takes three years to train new commissioners.)

Other departments, such as the Department of Health Education, veterans, health agencies, and NOAA, have also seen mass layoffs.

The cuts align with Trump’s push to streamline government functions before September 30. So far, 125,000 staff have been removed.

As agencies adjust to the reductions, questions remain about the long-term impact on essential services.