Billionaire investor Chamath Palihapitiya called the shrinking federal workforce a positive sign for future innovation and economic growth after U.S. payroll data showed federal employment fell to its lowest level since May 1966.
Palihapitiya Hails Shrinking Federal Workforce As Positive
“Innovation and economic growth are inversely correlated to federal bureaucracy. So this is a very good sign for future innovation and economic expansion,” Palihapitiya wrote in an X post on Monday.
Bureau of Labor Statistics data released last Friday showed federal payroll employment at 2.674 million in August, down 5,000 from July and about 336,000 below the 3.01 million recorded in January 2025. The historical series shows the workforce has not been this small since May 1966.
Trump Workforce Cuts Drive Federal Payroll Down
The decline reflects President Donald Trump’s push to shrink government through hiring restrictions, buyouts, early retirements and reductions in force. OPM says the workforce has fallen by more than 271,000 employees since Trump returned to office, while about 140,000 workers used the Deferred Resignation Program.
The cuts accelerated under the Department of Government Efficiency, which formally shut down in July after pursuing staffing and spending reductions. The Supreme Court cleared a path for Trump’s downsizing plans last year.
Supporters argue a leaner bureaucracy can reduce costs and make government more responsive. U.S. Office of Personnel Management (OPM) Director Scott Kupor said in a press release last November that the administration wants hiring focused on “mission need, not bureaucratic habit.”
Watchdogs Warn Cuts Could Weaken Agencies
But economists and watchdogs warn that fewer workers do not automatically mean greater efficiency. The International Monetary Fund has criticized the federal workforce cuts and said Washington should fully resource agencies responsible for revenue collection, financial oversight and economic statistics, stressing the importance of strong institutions for sound policymaking.
The Government Accountability Office found OPM’s workforce fell 35% between December 2024 and March 2026, with 57% of departing employees having at least 11 years of service, creating a loss of institutional knowledge. GAO separately warned that FEMA reductions made without adequate planning could weaken disaster-response readiness.
Federal Student Aid also lost 40% of its staff during DOGE-era reductions, raising concerns over oversight of the $1.7 trillion student-loan system.
Photo courtesy: CarlaVanWagoner / Shutterstock.com
