Is the economy already tanking?

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I think we should probably include that in the category of DOGE carnage.

I'm not sure just how big an effect this will have. I've been trying to get my head around it a little bit, but obviously the lack of any transparency makes that really hard.

On one hand, it sure seems like a lot of people. On the other hand, the economy is really big. Facebook laid off 15K workers not long ago, IIRC. How much a ripple effect did that have? And is the scale of research cuts much higher than that? Chevron is laying off 20K. Now, facebook workers are unlikely to face a serious cash crunch, so they probably didn't have to adjust their consumption patterns as much as a lab tech or post-doc. So there's that. Still, take Vanderbilt, for instance (since it was one of the schools publicly announcing how it would be struggling). What % of the Nashville population works at Vanderbilt? Layoffs and freezes at Vanderbilt -- what % of the population is that?

It could hurt smaller communities that are more dependent on a university. Back in the day, something like this would pulverize the Chapel Hill economy. That might still be true, although I don't really know how much RTP buffers for that. But schools like Bucknell (Lewisburg, PA), RPI (Troy NY), VPI (Blacksburg WVa) are the main industries in their localities and cutback could definitely ripple. On the other hand, those communities are small and their rise or fall doesn't do much to the local economy.

In terms of state schools, U of M is in Ann Arbor and it really supports the local community. Missouri is in Columbia, which isn't very big. You'd know places like OK, Kansas, Nebraska better than me. Wherever Penn State is, it's most of the economy. Michigan State is in East Lansing, which is small and from what I understand not all that connected to Lansing (which itself is not all that big).

But again, it remains to be seen just how many people are getting laid off. 1,000 people at U of M sounds like a lot, but what % of the U of M workforce is that? I don't know.
Cuts to research have much further reaching impact than a Facebook employee. Lab personnel have more tentacles branching to various support staff. Fewer lab people = fewer support staff jobs. Equipment maintenance, training, and repair. Core support staff for specialized equipment/tasks. Labs also = continuous procurement of consumables to run the experiments. A post doc at a university is probably $100k+ impact per. An established scientist could easily be $500k+. Shut down entire labs and that could balloon from there downstream. Research isn’t cheap and that’s a large reason that the government has been so involved. Industry only focuses on things with higher probability to drive higher profits.

China has already passed us in some areas. They are trying to lure our researchers already and willing to pay.

It’s also not just universities that could take the hit. There are companies in RTP that also would be impacted. North Carolina ranks in the top 3 states for the amount of NIH funding. Over $1 billion. RTP has already taken multiple hits over the years with some of the big pharmaceutical companies moving out. It remains to be seen what impact there will be on the EPA, NIEHS, the CDC, and a few other federal organizations currently operating in RTP. This would further destabilize the economy.
 
I think owing to the principle of wealth compounding, each year the Trump tax curs are extended for wealthy and lerge corps exacerbates inflation since they have more and more available to spend:
1) wealthy have more money to buy additional homes/real estate and further drive up housing prices. Same for hedge funds and private equity buying real estate be it houses or apartments. On the latter, I think a good chunk of rent increases over the past few years can be attri buted to private equity buying apt complexes and dramatcially increasing rents.
Have seen that her in NoVa even 60-75 miles outside DC where Fairfax private equity firms have bought apt betweenDC and Charlottesville.,
I know of one person who has been in the same apt since 2007 in small town, rather remoted VA The rent was $895 in 2007 and had only increease to $1150 by 2021. A PE firm purchase it in 2022, has inreased rents significantly each year and for the nextt 12 months the rent will be over $1,650 per month.
 
I think owing to the principle of wealth compounding, each year the Trump tax curs are extended for wealthy and lerge corps exacerbates inflation since they have more and more available to spend:
1) wealthy have more money to buy additional homes/real estate and further drive up housing prices. Same for hedge funds and private equity buying real estate be it houses or apartments. On the latter, I think a good chunk of rent increases over the past few years can be attri buted to private equity buying apt complexes and dramatcially increasing rents.
Have seen that her in NoVa even 60-75 miles outside DC where Fairfax private equity firms have bought apt betweenDC and Charlottesville.,
I know of one person who has been in the same apt since 2007 in small town, rather remoted VA The rent was $895 in 2007 and had only increease to $1150 by 2021. A PE firm purchase it in 2022, has inreased rents significantly each year and for the nextt 12 months the rent will be over $1,650 per month.
There's going to be a point where the greed reaches a max and there won't be enough people left that can afford the price of rent or housing.
 
I think owing to the principle of wealth compounding, each year the Trump tax curs are extended for wealthy and lerge corps exacerbates inflation since they have more and more available to spend:
1) wealthy have more money to buy additional homes/real estate and further drive up housing prices. Same for hedge funds and private equity buying real estate be it houses or apartments. On the latter, I think a good chunk of rent increases over the past few years can be attri buted to private equity buying apt complexes and dramatcially increasing rents.
Have seen that her in NoVa even 60-75 miles outside DC where Fairfax private equity firms have bought apt betweenDC and Charlottesville.,
I know of one person who has been in the same apt since 2007 in small town, rather remoted VA The rent was $895 in 2007 and had only increease to $1150 by 2021. A PE firm purchase it in 2022, has inreased rents significantly each year and for the nextt 12 months the rent will be over $1,650 per month.
It is true that repealing the cuts would have a potentially deflationary impact on the economy but leaving the cuts in place will not cause inflation because, again, inflation measures change. And leaving the status quo in place is not change.
 
I don't think maintaining tax cuts that are set to expire would be inflationary because inflation is a rate of change metric -- and nothing would be changing.
But forecasts are based on the tax cuts and they treat them as having expired. So if you see a 7.0% forecast for 2025 inflation, that would be more like 7.5% if the tax cuts are renewed.
 
But forecasts are based on the tax cuts and they treat them as having expired. So if you see a 7.0% forecast for 2025 inflation, that would be more like 7.5% if the tax cuts are renewed.
Link?

I can't believe any reputable forecaster would make inflation projections based on the assumption the tax cuts would be allowed to expire.

In any event, keeping the cuts in place wouldn't cause inflation; it simply wouldn't cause a potential deflationary event to offset other inflationary causes.
 
There's going to be a point where the greed reaches a max and there won't be enough people left that can afford the price of rent or housing.
Is it greed driving rent increases? Interest rates are up, insurance premiums are up, and maintenance costs are up. Owning a home has become expensive. Renters don’t get a free pass.
 
Is it greed driving rent increases? Interest rates are up, insurance premiums are up, and maintenance costs are up. Owning a home has become expensive. Renters don’t get a free pass.
The biggest driver of increased rents has been increased market prices for real estate itself. The other items are factors, no doubt. There is a very valid argument that much of the drive-up in real estate market prices is market manipulation by large investment conglomerates who then foist higher rents onto an entire market area.
 
The biggest driver of increased rents has been increased market prices for real estate itself. The other items are factors, no doubt. There is a very valid argument that much of the drive-up in real estate market prices is market manipulation by large investment conglomerates who then foist higher rents onto an entire market area.
I'm not sure that tracks. Market prices have largely been driven by a lack of supply and healthy demand. I do agree that higher prices are helping to drive rents higher. It's always been the case that rent is correlated to the cost of owning a home. All in, if you got 100% financing on a $350,000 home, you'd be looking at roughly 3k a month. Renting is not going to be significantly cheaper than that. It doesn't present as greed being a primary driver. Owning a home is expensive in 2025.
 
I'm not sure that tracks. Market prices have largely been driven by a lack of supply and healthy demand. I do agree that higher prices are helping to drive rents higher. It's always been the case that rent is correlated to the cost of owning a home. All in, if you got 100% financing on a $350,000 home, you'd be looking at roughly 3k a month. Renting is not going to be significantly cheaper than that. It doesn't present as greed being a primary driver. Owning a home is expensive in 2025.
What is driving the cost of rent for apartments? Most houses that are rented have been bought by corporations who buy the house outright. And if you have a fixed mortgage rate you're paying the same amount for your house every month, so that's not going to cost to go up for renting your house.
 
There's going to be a point where the greed reaches a max and there won't be enough people left that can afford the price of rent or housing.
And that is the point at which America becomes a third-world country. Two classes: Royalty and Poverty. This is by design. And we're just letting it happen.
 
What is driving the cost of rent for apartments? Most houses that are rented have been bought by corporations who buy the house outright. And if you have a fixed mortgage rate you're paying the same amount for your house every month, so that's not going to cost to go up for renting your house.

There may not be lien on an individual asset in the portfolio, but most of the PE deals are leveraged. Interest costs certainly do impact each house's individual cashflow to the corporation (but, perversely, not EBITDA which is normally a large portion what the operating managers are compensated on).
 
What is driving the cost of rent for apartments? Most houses that are rented have been bought by corporations who buy the house outright. And if you have a fixed mortgage rate you're paying the same amount for your house every month, so that's not going to cost to go up for renting your house.
That’s not true. Most rentals are owned by small investors. Commercial real estate loans generally have a five year balloon to protect the lender.
 
Link?

I can't believe any reputable forecaster would make inflation projections based on the assumption the tax cuts would be allowed to expire.

In any event, keeping the cuts in place wouldn't cause inflation; it simply wouldn't cause a potential deflationary event to offset other inflationary causes.
I was referring to official forecasts, which I believe are required to use the default baseline of current law -- whether by policy, reg or statute (I don't know which). I think that includes the Fed.

In private, of course forecasters will model many scenarios, including "tax cuts lapse" and "tax cuts are extended." I don't know if those get published, though, because there would be a disparity with official forecasts and the private ones might lose credibility among the people for whom it's published (i.e. not sophisticated actors).

Anyway, I don't know very much here, only that I'm 90% confident official forecasts are required to use current law as the default baseline.
 
I was referring to official forecasts, which I believe are required to use the default baseline of current law -- whether by policy, reg or statute (I don't know which). I think that includes the Fed.

In private, of course forecasters will model many scenarios, including "tax cuts lapse" and "tax cuts are extended." I don't know if those get published, though, because there would be a disparity with official forecasts and the private ones might lose credibility among the people for whom it's published (i.e. not sophisticated actors).

Anyway, I don't know very much here, only that I'm 90% confident official forecasts are required to use current law as the default baseline.
I can't say with a 100% certainty, but I would be highly, HIGHLY surprised if the fed modeled tax increases into their inflation forecasts. Here is a link to their December 2024 projections, and there is no indication that any of the forecasters are assuming tax increases in their projections (but it does not specify exactly how they make their projections). Historically, sunset tax cuts are usually retained by Congress, and it would make no sense for a policy making board to assume that a Republican President and Congress would increase taxes. There is no historical precedent for that.

 
Cuts to research have much further reaching impact than a Facebook employee. Lab personnel have more tentacles branching to various support staff. Fewer lab people = fewer support staff jobs. Equipment maintenance, training, and repair. Core support staff for specialized equipment/tasks. Labs also = continuous procurement of consumables to run the experiments. A post doc at a university is probably $100k+ impact per. An established scientist could easily be $500k+. Shut down entire labs and that could balloon from there downstream. Research isn’t cheap and that’s a large reason that the government has been so involved. Industry only focuses on things with higher probability to drive higher profits.

China has already passed us in some areas. They are trying to lure our researchers already and willing to pay.

It’s also not just universities that could take the hit. There are companies in RTP that also would be impacted. North Carolina ranks in the top 3 states for the amount of NIH funding. Over $1 billion. RTP has already taken multiple hits over the years with some of the big pharmaceutical companies moving out. It remains to be seen what impact there will be on the EPA, NIEHS, the CDC, and a few other federal organizations currently operating in RTP. This would further destabilize the economy.
I don't know if "cuts to research have much further reach" than Facebook employees. Maybe. That's an empirical question I don't know the answer to.

But let's say you're right. Each scientist takes out one other employee (this is likely an over estimate but sure). How many scientists are going to get the axe? 20K? 30K? Are there even that many scientists? I don't know. Let's say 30K. Total unemployment caused = 60K. That would increase unemployment by 0.1%. It's not exactly moving the needle a lot.

The point isn't that the cuts won't be harmful. They will be. The point is that the economy is so big that even what looks to be a calamitous impact might not make that much difference in the aggregate. It can be really hard to get one's head around the actual scope of the economy and our giant population. In fairness, it's hard for me as well, and maybe I'm overestimating its size (and underestimating the impact here).

The more important economic impact will not be short-term but medium-to-long term. Post-docs don't have really any other ways to use their degrees (at least in general). So if they can't work as post-docs, expect them to show up at Home Depot (law grads had to do this in 2010-2012 -- I saw former students waiting tables or working checkout and it was embarrassing for both of us). Congratulations, Trump! You've taken high producing employees and turned them into menial labor. Eventually the post-docs will find other things to do, but the value of that degree that was largely publicly funded? Wiped out.

And since these research labs create big benefits for the economy, over time the conversion of post-docs (who will become scientists) into coders or tinkerers or whatever will impede economic progress. The effect will compound, so in the long-term, it will be a painful loss. I'm just not sure the cuts will make a huge difference in present economic statistics.

To put the point somewhat differently, economists often look at policies from the perspective of a) short-term effects and b) effects on long-run growth potential of the economy. Because our politics is so insanely focused on the NOW NOW NOW, the system increasingly values policies that score well on a) and poorly on b). For instance, those Trump tax cuts: by giving preference to passive income and offshoring employment, they create a short-term flood of money that might have the potential to juice growth in the short term (might and potential being the key words), but the long-term effects are pernicious. Subsidizing self-storage businesses while penalizing medical practice is a road to poverty. The Trump tax cuts made it much harder for companies to route revenue through Ireland to gain tax advantage; but they incentivize moving the actual production to Ireland. This is a road to poverty.
 
I can't say with a 100% certainty, but I would be highly, HIGHLY surprised if the fed modeled tax increases into their inflation forecasts. Here is a link to their December 2024 projections, and there is no indication that any of the forecasters are assuming tax increases in their projections (but it does not specify exactly how they make their projections). Historically, sunset tax cuts are usually retained by Congress, and it would make no sense for a policy making board to assume that a Republican President and Congress would increase taxes. There is no historical precedent for that.

This statement seems relevant (and supports your contention).

Each participant’s projections were based on information available at the time of the meeting, together with her or his assessment of appropriate monetary policy—including a path for the federal funds rate and its longer-run value—and assumptions about other factors likely to affect economic outcomes.

I mean, we agree about what forecasters should be doing. I was discussing some legal requirement that would interrupt that. Maybe the policy I'm thinking of only applies to GAO or CRS reports.
 
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