Shutdown as leverage: How President Trump is using the government closure to fire and punish

President Donald Trump is using the government shutdown to push a hard line on federal staffing and spending, threatening mass firings of workers and hinting at “irreversible” cuts to programs favoured by Democrats.

White House press secretary Karoline Leavitt said layoffs were “imminent,” while the Office of Management and Budget announced it was freezing roughly $18 billion in infrastructure funds for New York’s subway and Hudson Tunnel projects — located in the home districts of Democratic leaders in Congress.

Thursday marked the second day of the shutdown, and the administration’s aggressive posture reflects concerns from lawmakers and budget experts about what could happen if Congress fails to act on funding legislation.

President Trump and congressional leaders are not expected to meet soon. Thursday’s congressional schedule was paused for the Jewish holy day, with senators returning Friday and the House resuming next week.

Democrats are insisting on continued health care funding, warning that millions of Americans could face sharply higher insurance costs if subsidies lapse. The Kaiser Family Foundation estimates that premiums for those purchasing coverage on Affordable Care Act exchanges could more than double.

The Republicans have opened a door to negotiating the health care issue, but GOP leaders say it can wait, since the subsidies that help people purchase private insurance don’t expire until year’s end.

“We’re willing to have a conversation about ensuring that Americans continue to have access to health care,” Vice President JD Vance said Wednesday at the White House.

Bessent said “we could see a hit to the GDP, a hit to growth and a hit to working America” as a result of the government shutdown.

Bessent made the statements on CNBC’s “Squawk Box” on Thursday morning.

Data from previous shutdowns have shown little impact on U.S. GDP unless they’re extended, according to Congressional Budget Office Director Phillip Swagel. “The impact is not immediate, but over time, there is a negative impact of a shutdown on the economy,” he recently told The Associated Press.

The government shutdown that began Wednesday will deprive policymakers and investors of economic data vital to their decision-making at a time of unusual uncertainty about the direction of the U.S. economy.

The absence will be felt almost immediately, as the government’s monthly jobs report scheduled for release Friday will likely be delayed. A weekly report on the number of Americans seeking unemployment benefits — a proxy for layoffs that’s typically published on Thursdays — will also be postponed.

If the shutdown is short-lived, it won’t be very disruptive. But if the release of economic data is delayed for several weeks or longer, it could pose challenges, particularly for the Federal Reserve.

The Fed is grappling with where to set a key interest rate at a time of conflicting signals, with inflation running above its 2% target and hiring nearly ground to a halt, driving the unemployment rate higher in August.

With inputs from agencies