Government Shutdown Day 2: Mass Layoffs Threatened, Funding Cut to Blue States, and the Financial Crisis Deepens
- Joeziel Vazquez
- 6 days ago
- 14 min read
By Joeziel Joey Vazquez-Davila, CEO of CredlocityOctober 2, 2025 | Reading Time: 12 minutes
It's been 38 hours since the government shut down, and things are getting worse—much worse than I expected.
When I wrote my first article about this shutdown on Tuesday night, I thought we'd seen the worst of the political gamesmanship. I was wrong. What's happening right now isn't just a typical Washington standoff. This is something different, something more dangerous.
Yesterday morning, I watched Vice President JD Vance stand at the White House podium and announce that the administration would begin permanent layoffs of federal workers within 24-48 hours. Not furloughs. Not temporary suspensions. Permanent firings.
Then, within hours, the White House moved to cancel $18 billion in infrastructure projects in New York and $8 billion in climate projects across 16 states—every single one of them a state that voted for Kamala Harris in 2024.
Let that sink in. The administration is using a government shutdown—a crisis they helped create—to punish states based on how they voted.
As someone who's spent his career helping people rebuild their financial lives, I've seen a lot of hardship. I've worked with families who lost everything in the 2008 crisis. I've helped clients recover from medical bankruptcies. But what I'm watching unfold right now is different. This isn't an economic disaster or a natural crisis. This is weaponized government dysfunction, and real families are about to pay the price.
Let me walk you through what happened in the last 38 hours, what it means for you, and how to protect yourself.
Day One: The Shutdown Becomes Reality
At exactly 12:01 AM on Wednesday, October 1st, the United States government officially shut down.
I stayed up past midnight watching the news feeds. The Senate had just finished two failed votes—the exact same votes they'd held Tuesday evening, with the exact same results. The Republican bill to fund the government through November 21st failed. The Democratic bill with healthcare provisions failed. Both fell short of the 60 votes needed.
The Morning After
Wednesday morning started with dueling press conferences outside the Capitol. I watched both, and honestly, it felt like watching two different realities.
Speaker Mike Johnson stood with Republican leaders, the National Mall behind him, and said: "As we speak here this morning, there are hundreds of thousands of federal workers who are getting their furlough notices, nearly half of our civilian workforce is being sent home. The longer this goes on, the more pain will be inflicted."
He blamed Democrats for refusing to pass a "clean" funding bill. "There isn't anything we can do to make this bill any better," Johnson insisted.
Literally minutes later, Democrats held their own press conference. House Democratic Caucus Vice Chair Pete Aguilar fired back: "Republicans control the Senate, the House and the White House. They need Democratic votes to fund the government, so it's on them to talk with us."
Both sides claiming they're the reasonable ones. Both sides refusing to budge. And in the middle of this political theater, 750,000 federal workers are opening furlough notices.
What Actually Shut Down on Day One
By mid-morning Wednesday, the effects were visible:
National Parks: "CLOSED DUE TO GOVERNMENT SHUTDOWN" signs went up at the Washington Monument, Lincoln Memorial, and national parks across the country. I saw photos of disappointed tourists from around the world who'd planned their trips months ago.
Federal Offices: IRS offices, Social Security field offices, and dozens of other agencies operating with skeleton crews or closed entirely.
Data Blackout: The Bureau of Labor Statistics confirmed they would NOT release the September jobs report on Friday. This is a big deal—the Federal Reserve uses this data to make interest rate decisions that affect your mortgage, car loans, and credit cards.
Military Pay: The Defense Department confirmed that while service members received their October 1st paycheck (covering work done before the shutdown), the next payday on October 15th is now at risk if this continues.
But the real story of Day One wasn't what shut down. It was what the White House threatened to do next.
The Threat That Changes Everything: Mass Firings
Around midday Wednesday, Office of Management and Budget Director Russell Vought held a closed-door meeting with House Republicans. What he told them leaked within hours, and it's terrifying.
According to multiple sources who were in that meeting, Vought said the administration would begin Reduction in Force (RIF) procedures—permanent layoffs—within "one to two days."
This isn't a furlough. Furloughed workers get back pay when the shutdown ends. RIF means you're fired. Your job is eliminated. You don't come back.
Why This Has Never Happened Before
I need to be clear about something: in the entire history of government shutdowns, no administration has ever used a funding lapse to conduct mass permanent layoffs. Ever.
Here's why: the Office of Personnel Management has long-standing rules that distinguish between two types of furloughs:
Shutdown furloughs (temporary, caused by funding gaps)
Administrative furloughs (permanent reductions in force)
You can't do a RIF during a shutdown furlough. It's against the rules. It's been against the rules for decades.
But the Trump administration doesn't seem to care about precedent. They issued guidance on September 28th claiming they could do exactly this—use a shutdown to permanently fire federal workers.
The Real Target
When I look at which agencies are being threatened, a pattern emerges. These aren't random job cuts. The administration is targeting:
Environmental agencies (EPA, climate programs)
Education Department employees
Health and Human Services workers
Justice Department staff (except law enforcement)
Regulatory agencies that oversee business
In other words, they're using the shutdown as cover to remake the federal government. And they're using federal workers as hostages to pressure Democrats.
Senator Chris Van Hollen called it exactly what it is: "This is nothing less than mafia-style blackmail."
Punishing Blue States: $26 Billion in Canceled Projects
If the mass firing threat wasn't shocking enough, what happened Wednesday afternoon was even worse.
The White House quietly moved to pause or cancel:
$18 billion in infrastructure projects in New York
$8 billion in climate-related projects across 16 states
Every single one of those 16 states voted for Kamala Harris in 2024.
Let me repeat that: The administration is using a government shutdown to cancel federally approved, Congressionally appropriated funding to states based on how they voted in the last election.
What This Means
These aren't just numbers. These are:
Bridge repairs that keep people safe
Water system upgrades in aging cities
Public transit improvements
Clean energy projects that create jobs
Infrastructure that communities have planned around for years
Companies have signed contracts. Workers were hired. Communities made plans. And overnight, billions of dollars are frozen or canceled because of political retribution.
As someone who works in finance, I can tell you exactly what happens next: those construction companies will lay off workers. Those workers will miss mortgage payments. Credit scores will tank. And the local economies in those communities will take a hit.
This isn't just political hardball. This is using federal power to punish American citizens for how their state voted.
The One Thing That's NOT Affected: Social Security
Amid all this chaos, I want to give you one piece of genuinely good news. The Social Security Administration sent out an official letter yesterday to advocates and organizations. I read it carefully.
Bottom line: Social Security and SSI payments continue with no change.
If you or your loved ones receive Social Security benefits, those checks will arrive on time. Period. The October 1st letter from Nick Perrine, Chief Communications Officer at SSA, was crystal clear:
"During the federal government shutdown, payments to all people who currently receive Social Security benefits and Supplemental Security Income (SSI) will continue with no change in payment dates. Your clients will still receive their payments on time."
What IS Affected at Social Security
While payments continue, SSA field offices are operating with reduced services. You can still:
Apply for benefits
Request an appeal
Change address or direct deposit
Report a death
Get a replacement Social Security card
But you CANNOT:
Get proof of benefits letters in person
Update or correct earnings records
Access full services at field offices
These services will resume when the government reopens.
Military Families: Day Two Reality Check
I've had several active duty families reach out to me since Tuesday night. They're scared, and they have every right to be.
Here's the situation for military families as of Day Two:
The Good News
✅ Service members got paid on October 1st - That paycheck covered work done before the shutdown✅ DoDEA schools remain open - Military kids can still go to school✅ Commissaries stay open for 60 days - Defense Commissary Agency has funds to operate✅ Military members are working - All active duty continue to report
The Bad News
❌ Next payday (October 15) is at risk - If the shutdown continues, no paycheck arrives❌ Some extracurricular activities canceled - School programs being cut❌ CDC and medical facilities uncertain - Decisions being made locally, base by base❌ No guarantee of back pay for missed paychecks - Unlike civilian workers, military needs special legislation
The Pay Our Troops Act
There's a bill sitting in Congress right now—H.R. 5401, the Pay Our Troops Act—that would ensure service members get paid even during shutdowns. It has bipartisan support.
But guess what? It hasn't passed. Because Congress can't even agree to pay the men and women defending our country while they play political games.
Think about that for a second. We're asking military families to serve and sacrifice while we can't even guarantee them a paycheck.
Is Anyone Actually Negotiating?
Here's where things get slightly more hopeful—or at least less completely hopeless.
Behind the Scenes Talks
By late Wednesday afternoon, small groups of bipartisan senators were spotted huddling in Capitol corridors. Senator Mike Rounds (R-SD) confirmed to reporters that Republicans are trying to convince Democrats to reopen the government first, then negotiate healthcare.
"We're trying to convince them this is the right thing to do: find the path forward, get the 10 votes or more to move forward with this, and then let's go right to work on fixing the issues that they were concerned about," Rounds said.
Senator Richard Blumenthal (D-CT) said there's "a lot of bipartisan hope" that the shutdown would be "short and costless as possible" with ongoing negotiations.
What They're Discussing
According to sources, one idea being floated is a very short-term continuing resolution—maybe 7-10 days—that would reopen the government while they hammer out healthcare details.
But here's the problem: House Minority Leader Hakeem Jeffries already said no to that approach. "We are a no when it comes to kicking the can down the road," he told CNN. "This issue needs to be dealt with immediately."
The Senate Schedule
The Senate adjourned Wednesday afternoon and won't return until Friday at 12:30 PM. Why? Because Thursday is Yom Kippur, and Senate Majority Leader John Thune committed to observing the Jewish holiday.
So at minimum, this shutdown lasts three days. The earliest we could see progress is Friday afternoon.
The Blame Game Continues
Both parties are going all-in on messaging, and honestly, it's exhausting.
Republicans' Argument
The GOP message is simple: "We passed a clean bill. Democrats are holding the government hostage over healthcare that doesn't expire until December 31st."
House Speaker Johnson keeps calling the Democratic healthcare push a "red herring"—an irrelevant distraction from the real issue of funding the government.
Democrats' Argument
Democrats counter: "Republicans control everything—the White House, Senate, and House. They need our votes because of Senate rules. If they want our votes, they need to negotiate."
Senate Minority Leader Chuck Schumer put it bluntly: "Donald Trump and Republicans have barreled us into a shutdown because they refuse to protect Americans' health care."
The Truth Nobody Wants to Say
Here's what I see from outside the political bubble: Both sides have valid points, and both sides are being stubborn.
Republicans are right that healthcare subsidies don't expire until year-end. Democrats are right that if they don't fight now, Republicans will never address it.
Republicans are right that clean CRs are normal. Democrats are right that the "One Big Beautiful Bill" cut healthcare for millions of Americans, and someone needs to fix that.
But while they argue about who's technically right, 750,000 workers aren't getting paid. Service members are wondering about their next paycheck. And the U.S. economy is losing $7 billion per week.
What This Means for Your Finances: A Credlocity Perspective
Let me get real with you about the financial implications of what we're watching unfold.
If You're a Federal Employee
Day 2 Action Items:
File for unemployment TODAY - Don't wait. Every day matters. Most states allow furloughed federal workers to collect benefits.
Call every creditor - Mortgage company, car loan, credit cards. Do this before you miss a payment. Many have hardship programs specifically for federal shutdowns.
Document everything - Save your furlough notice, unemployment paperwork, and every creditor communication. You'll need this if credit issues arise.
Check your emergency fund - If you have savings, that's your lifeline. If you don't, look into:
Federal employee credit unions (many offer emergency loans)
Military relief societies (if you're service-connected)
Community assistance programs
Prepare for potential RIF - I hate saying this, but if Vought's threat is real, you need to understand your rights. A Reduction in Force requires proper notice and procedures. Document any communications about permanent layoffs.
If You're NOT a Federal Employee
You're still affected:
Interest Rates: The Fed won't have the jobs data they need for their October meeting. That creates uncertainty that could affect rates.
Economic Confidence: $7 billion per week in losses affects everyone. Businesses get nervous. Hiring slows. Consumer spending drops.
Credit Markets: Lenders tighten standards during uncertainty. If you're planning to apply for a mortgage or car loan, expect tougher approval processes.
Local Economies: Those canceled infrastructure projects? Those were jobs in local communities. Construction workers, suppliers, service providers—all affected.
Credit Score Protection Strategies
Here's what I'm telling my Credlocity clients:
BEFORE you miss a payment:
Contact creditors and explain your federal employment status
Request hardship accommodations (deferred payments, reduced minimums)
Get everything in writing
If you miss a payment:
A 30-day late mark can drop your score 100+ points
Once reported, it stays on your credit for 7 years
Priority order: Mortgage → Car → Credit Cards
Document your situation:
Furlough notices
Unemployment claims
All creditor communications
News articles about the shutdown
After the shutdown ends:
If late payments were reported, dispute them with evidence of furlough
Many creditors will remove shutdown-related late marks if you ask
We can help with credit repair if damage occurred
What Happens Next: Three Possible Scenarios
Based on everything I'm seeing and hearing, here are the likely outcomes:
Scenario 1: Quick Resolution (Friday-Monday)
Likelihood: 30%
Bipartisan senators reach a short-term deal. Maybe a 10-14 day CR that reopens the government while healthcare negotiations continue. Democrats get something—maybe a commitment to negotiate, maybe a small concession. Republicans get the government reopened.
What triggers this: Public pressure, vulnerable Republicans getting nervous, or Trump deciding the blame is shifting toward him.
Scenario 2: Medium Shutdown (1-2 Weeks)
Likelihood: 50%
The shutdown drags into next week. By October 10th, the economic pain becomes undeniable. The missing jobs report creates market volatility. Federal contractors start having real financial problems. Eventually, someone blinks.
What triggers this: The October 15th military pay deadline. Historically, when military families are about to miss paychecks, Congress acts.
Scenario 3: Extended Crisis (2+ Weeks)
Likelihood: 20%
Nobody backs down. Trump follows through on mass layoffs. Democrats dig in harder. We end up in a 2018-2019 situation that lasts into November.
What triggers this: Pride. Miscalculation. Both sides believing they can outlast the other and win the PR battle.
The Questions I'm Getting
My phone has been ringing off the hook. Here are the most common questions:
Q: "Should I stop paying my bills to save money during the shutdown?"
A: NO. If you can still pay, pay. Missing payments damages your credit for seven years. That's not worth it unless you have absolutely no choice.
Q: "Can my landlord evict me if I'm furloughed?"
A: Unfortunately, yes—being furloughed doesn't automatically protect you. Talk to your landlord immediately. Most would rather work out a payment plan than go through eviction.
Q: "Will this affect my ability to get a mortgage?"
A: If you're a federal employee, yes. Lenders can't verify your employment or income during a shutdown. If you're in process, expect delays.
Q: "Can I pull from my 401(k) without penalty?"
A: Generally, no—shutdown furloughs don't qualify for hardship withdrawals. Check with your plan administrator, but expect to pay penalties and taxes.
Q: "How do I explain late payments to future lenders?"
A: Keep all shutdown-related documentation. Write a detailed letter of explanation. Most lenders are understanding about government shutdowns if you have proper documentation.
A Message to Federal Workers and Military Families
I want to say something directly to those of you wearing the uniform or working in federal service:
You didn't create this crisis. You didn't ask for this. And you sure as hell don't deserve to be used as pawns in a political game.
Whether you work at the EPA, the VA, the National Park Service, or you're serving in uniform overseas—you show up every day to serve this country. And right now, your country is failing you.
At Credlocity, we've helped hundreds of federal workers through past shutdowns. We know what you're going through. We know the stress, the fear, the uncertainty.
Here's what we're doing:
Extended consultations for federal employees at no charge
Emergency credit counseling for families facing immediate hardship
Credit repair services at reduced rates for shutdown-affected workers
Financial planning help for extended shutdowns
Call us. Email us. Reach out through our website. We're here.
You served this country. Now let us serve you.
The Bigger Picture: What This Means for America
I'm going to step back from the financial advice for a moment and speak as an American citizen.
What's happening right now should alarm everyone, regardless of your political affiliation.
The Trump administration is threatening to:
Permanently fire federal workers during a funding crisis
Cancel billions in infrastructure based on how states voted
Use government shutdown as leverage for ideological goals
Meanwhile, Democrats are:
Refusing to reopen the government without healthcare concessions
Holding firm even as workers lose pay
Prioritizing policy wins over immediate crisis resolution
And in the middle? Real people suffering real consequences.
Federal workers wondering how to feed their families. Military families worried about missing mortgage payments. Contractors who'll never get back pay. Communities losing critical infrastructure funding. Small businesses that depend on federal contracts going under.
This isn't governance. This is hostage-taking by both sides.
We Deserve Better
Congress hasn't passed a complete, on-time budget since 1997. That's 28 years of failure. Twenty-eight years of continuing resolutions, last-minute deals, and government shutdowns used as political weapons.
Both parties share blame for this broken system. Republicans and Democrats alike have learned they can use funding crises to extract concessions. And every time they do it, they normalize dysfunction.
We need to demand better. Not just from one party, but from all of them.
What You Can Do Right Now
For Federal Employees:
✅ File for unemployment immediately
✅ Contact all creditors before missing payments
✅ Check federal employee assistance programs
✅ Document everything related to furlough/RIF threats
✅ Reach out to Credlocity if you need help: Schedule Consultation
For Military Families:
✅ Check your emergency savings
✅ Contact military relief societies:
Army Emergency Relief
Navy-Marine Corps Relief Society
Air Force Aid Society
Coast Guard Mutual Assistance
✅ Talk to your base financial counselor
✅ Monitor updates on Pay Our Troops Act
For Everyone:
✅ Call Congress: (202) 224-3121
✅ Contact your specific representatives
✅ Share accurate information, not political spin
✅ Support federal workers in your community
✅ Stay informed with reliable sources
Tomorrow: Day Three
As I'm writing this Wednesday evening, the government has been shut down for nearly 40 hours. The Senate won't even vote again until Friday afternoon. That means at minimum, this is a 3-day shutdown.
But I have a bad feeling it's going to be longer than that.
I'll be monitoring the situation closely and providing updates as things develop. If you're affected by this shutdown, keep checking back at www.credlocity.com/blog for the latest information.
Where to Get Reliable Information
Social Security: www.ssa.gov/agency/shutdown
Military families: www.militaryfamily.org
Federal employees: Your agency's contingency plan website
General shutdown info: www.usa.gov
Final Thoughts
It's been a long 38 hours. Federal workers are scared. Military families are worried. And the economic damage is mounting by the day.
But here's what I know from working with families through financial crises: you're stronger than you think. You can get through this. And on the other side, we'll help you rebuild whatever credit damage occurred.
The politicians in Washington will eventually figure this out—they always do. The question is how much damage they'll do before they get there.
In the meantime, stay strong. Stay informed. And take care of each other.
We're all in this together.
About the Author:
Joeziel Joey Vazquez-Davila is the CEO of Credlocity, a credit repair and financial wellness company dedicated to helping individuals and families achieve financial freedom. With years of experience helping federal workers navigate financial crises, Joey has become a trusted voice for consumer financial rights during government shutdowns. Connect with Joey and the Credlocity team at www.credlocity.com.
Resources for Federal Workers & Military Families:
Related Reading:
The 2025 Government Shutdown: Complete Facts & Myths Debunked ← Our Day 1 comprehensive guide
How to Protect Your Credit Score During a Federal Furlough
Federal Employee Rights: What You Need to Know
Understanding Unemployment Benefits for Government Workers
Last Updated: October 2, 2025 Government shutdown: 38 hours and counting
Disclaimer: This article represents the opinions and analysis of the author based on publicly available information as of October 2, 2025. It is intended for informational purposes only and should not be considered legal, financial, or political advice. Situations are rapidly evolving; please verify all information with official government sources. For personalized guidance regarding your specific situation, please consult with appropriate professionals.
Stay updated: This is a developing story. Check back for Day 3 updates as negotiations continue.