President Donald Trump’s executive order to reduce government spending has already resulted in layoffs for nearly 30,000 federal workers. However, the impact of this reduction is still uncertain, with thousands of workers being reinstated and placed on leave.
While the direct effect of reduced government spending may seem limited to a small group of people, it can have far-reaching consequences. Here are four ways that reduced government spending could affect your wallet:
1. Higher Consumer Costs
Reduced government spending can slow down industries such as healthcare and tourism. This can lead to supply chain delays, causing prices for medical devices and travel to increase.
2. Job Cuts and Financial Instability
Federal layoffs can create financial instability among those who are still working for the federal government. Severance payment delays can exacerbate this issue, leading to increased uncertainty about job security.
3. Shrinking Safety Net
Reduced government spending could affect benefits for millions of Americans, including those who receive Medicare, Medicaid, food stamps, and unemployment assistance. This could make it difficult for people to afford their basic needs and become stable in their finances.
4. Increased Borrowing Costs
Poorly planned spending cuts can lead to market instability, making borrowing more expensive and causing higher interest rates on mortgages, credit cards, and personal loans.
As economist Wayne Winegarden noted, “It’s essential to prepare financially for the uncertainty caused by these cuts.” Experts recommend creating a budget, building an emergency fund, paying off high-interest debts, and diversifying income streams to protect financial security.
Source: https://finance.yahoo.com/news/trump-signs-executive-order-decrease-120111716.html