Billionaire investor Chamath Palihapitiya is cheering on the shrinking federal workforce, calling it a win for innovation and economic growth. His comments come after U.S. payroll data showed federal employment dropped to its lowest level since May 1966.
"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.
The Bureau of Labor Statistics reported last Friday that federal payroll employment stood at 2.674 million in August, down 5,000 from July and about 336,000 below the 3.01 million recorded in January 2025. That's the smallest workforce in six decades.
Trump's Push to Shrink Government
The decline reflects President Donald Trump's aggressive efforts to cut the size of government through hiring freezes, buyouts, early retirements, and reductions in force. The Office of Personnel Management (OPM) says the workforce has shrunk by more than 271,000 employees since Trump returned to office, with about 140,000 workers taking advantage of the Deferred Resignation Program.
The cuts accelerated under the Department of Government Efficiency, which formally shut down in July after pursuing sweeping staffing and spending reductions. The Supreme Court cleared the way for Trump's downsizing plans last year.
Supporters argue that a leaner bureaucracy can cut costs and make government more nimble. OPM Director Scott Kupor said in a press release last November that the administration wants hiring focused on "mission need, not bureaucratic habit."
Watchdogs Sound the Alarm
But not everyone is convinced. Economists and government watchdogs warn that fewer workers don't automatically mean greater efficiency. The International Monetary Fund has criticized the federal workforce cuts, saying Washington should fully resource agencies responsible for revenue collection, financial oversight, and economic statistics. The IMF stressed that strong institutions are essential for sound policymaking.
The Government Accountability Office (GAO) found that OPM's workforce fell 35% between December 2024 and March 2026, with 57% of departing employees having at least 11 years of service. That's a significant loss of institutional knowledge. GAO also warned that FEMA reductions made without adequate planning could weaken disaster-response readiness.
Federal Student Aid lost 40% of its staff during the DOGE-era reductions, raising concerns about oversight of the $1.7 trillion student-loan system.
So while Palihapitiya sees a leaner government as a green light for innovation, critics worry that the cuts are going too far, too fast, and could leave agencies unable to do their jobs effectively.
