Digging in to defense spending

Summary

Marketplace Morning Report Episode Summary

Title: Digging in to Defense Spending
Date: January 26, 2026
Host: David Brancaccio
Main Theme:
A concise rundown of the day's key economic stories, with a primary focus on U.S. defense spending, global currency shifts, current hiring trends, and emerging issues in air travel—all analyzed through top-tier economic expertise.

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Key Discussion Points and Insights

1. Federal Government Spending & Pentagon Budget

[01:01–03:32]

• Appropriations Bill and Pentagon Budget

  • The Pentagon's share of pending U.S. government spending bills is huge at $839 billion for the year.
  • Maya McGinnis, President, Committee for a Responsible Federal Budget, notes that the largest budget area is operations and equipment maintenance, with personnel costs (including a 3.8% pay raise for service members) as the second largest.
  • Quote:
    “The second biggest expensive thing is people, personnel. U.S. service members are set to get a 3.8% pay increase.”
    —Nancy Marshall Genser (01:44)
  • There's significant spending on research, development, and new weapons acquisition as well.

• Hidden/Additional Military Funding

  • The appropriations bill's increase is less than 1% over last year—not keeping pace with inflation.
  • Rashmi Aggarwal, Government Accountability Office, explains there’s additional money ($156 billion) from President Trump’s 2025 legislation, the “One Big Beautiful Bill act.”
  • Combined, this brings actual Pentagon spending closer to $1 trillion, the largest in its history.
  • Quote:
    “Add that in, Aggarwal says, and total Pentagon spending for this year is way up, closer to almost a trillion dollars.”
    —Nancy Marshall Genser (02:49)

• High-Profile Defense Projects

  • Todd Harrison, American Enterprise Institute, notes that $25 billion is earmarked for Trump’s Golden Dome missile defense system.
  • Trump is eyeing a $1.5 trillion military budget for next year.

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2. Japanese Yen & U.S. Interest Rates

[03:32–05:10]

• Recent Movements & Concerns
  • The Japanese yen has strengthened by 1.2% after a prolonged decline.
  • The U.S. Treasury is reportedly investigating ways to possibly support the yen.
  • Quote:
    “The yen has been under a lot of pressure on fiscal expansion plans and pretty alarmingly so. … Japanese investors buy a lot of Treasuries.”
    —Julia Coronado (03:57)
• Why It Matters
  • Japanese investors are major buyers of U.S. Treasuries. A weaker yen makes dollar-denominated assets “more expensive,” which could reduce demand for U.S. debt and put upward pressure on U.S. interest rates.
  • The U.S. government is concerned about keeping long-term rates low, especially given rising debt issuance.
  • Quote:
    “If the yen gets more weak, as it's been doing until today, it makes it more expensive to buy those Treasuries if you're a Japanese investor, … you don't want them buying less of our debt at a time that we're putting out a lot.”
    —David Brancaccio (04:23)
  • Rumors of intervention have led to currency market volatility.

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3. Weather and Air Travel Disruptions

[05:17–06:06]

• Mass Flight Cancellations
  • Severe weather across the U.S. has caused nearly 4,000 flight cancellations after an already historic high of 11,000 the prior day.
  • Extreme temperature swings: from -40°F in Minnesota to 89°F in DeSoto City, Florida.
• Energy Markets
  • Heating oil futures rose to a two-month high, up 4% to $52 a gallon, due to elevated demand from the cold snap.

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4. Business Hiring and AI Productivity

[07:07–08:01]

• Hiring Survey Results
  • The National Association of Business Economists finds businesses are optimistic for 2026, yet hiring remains sluggish.
  • About one-third anticipate hiring freezes as companies assess AI's potential for improving operations.
  • Martha Moore (survey chair) notes labor availability has increased but actual jobs growth is muted.
• AI Impact
  • 73% of survey panelists are “very optimistic” about AI’s productivity benefits.
    • Quote:
      “73% of panelists were very optimistic about the impact of AI on their company's productivity in 2026.”
      —Reema Reis (07:50)
  • Government data shows noticeable productivity acceleration in Q3 2025.

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5. Corporate Response to Immigration Tensions

[08:10–08:34]

• After recent deadly incidents involving immigration agents in Minnesota, 60 local CEOs have issued a public letter calling for de-escalation.

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Notable Quotes by Segment

• “The second biggest expensive thing is people, personnel. U.S. service members are set to get a 3.8% pay increase.”
  —Nancy Marshall Genser (01:44)
• “Add that in, Aggarwal says, and total Pentagon spending for this year is way up, closer to almost a trillion dollars.”
  —Nancy Marshall Genser (02:49)
• “That's the largest budget that they've had to date.”
  —Julia Coronado (02:57)
• “The yen has been under a lot of pressure on fiscal expansion plans and pretty alarmingly so. … Japanese investors buy a lot of Treasuries.”
  —Julia Coronado (03:57)
• “If the yen gets more weak, as it's been doing until today, it makes it more expensive to buy those Treasuries if you're a Japanese investor, … you don't want them buying less of our debt at a time that we're putting out a lot.”
  —David Brancaccio (04:23)
• “73% of panelists were very optimistic about the impact of AI on their company's productivity in 2026.”
  —Reema Reis (07:50)

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Memorable Moments & Tone

• Brancaccio’s Pragmatic Teaching: He translates global currency movements into practical, everyday consequences for listeners—“What happens to the yen can affect what we pay to use credit cards or to borrow for cars, houses, and more.” (03:32)
• Rapid pacing on major figures and stats: near $1 trillion Pentagon spend, staggering flight cancelations, and dramatic weather tales, all articulated with Marketplace’s trademark clear-headed, accessible analysis.

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Timestamps for Major Segments

• Pentagon and defense funding deep dive: 01:33–03:32
• Japanese Yen, U.S. Treasuries, and global market impact: 03:32–05:10
• U.S. weather disruptions and energy markets: 05:17–06:06
• Business hiring, AI, and productivity: 07:07–08:01
• Minnesota immigration tensions and corporate response: 08:10–08:34

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Overall Summary

A brisk, insight-packed episode centered on the year’s surging U.S. defense budget and its broader economic ripples. Global market anxieties—especially U.S.-Japan currency dynamics—are made tangible for listeners’ wallets, while the labor market reckons with AI’s double-edged promise. Throughout, Marketplace maintains a practical and human-centric tone, making macroeconomic shifts relatable for all.

Transcript

[Podcast Sponsor Announcer]

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[David Brancaccio]

Your credit cards are denominated in US Dollars, so why might the Japanese yen affect what you pay? I'm David Brancaccio in Los Angeles. First the second deadly shooting in Minnesota by immigration agents has some Democrats in Washington renewing calls for reform to the Department of Homeland Security. This could hold up a spending bill this week increasing the chances the federal government plan partially shuts down again late this week. Also in play, money for Defense Marketplace's Nancy Marshall Genser has that.

[Nancy Marshall Genser]

The appropriation for the Pentagon is one of the biggest items in the spending bills that fund the federal government. This year it comes in at $839 billion. Maya McGinnis is president in the Committee for a Responsible Federal Budget. She says the Pentagon spends the most on operations and maintenance of equipment. The second biggest expensive thing is people, personnel. U.S. service members are set to get a 3.8% pay increase. And then there's the cost of developing and acquiring new weapons, ships and planes.

[Julia Coronado]

Procurement there's research and development.

[Nancy Marshall Genser]

The total Pentagon appropriation increased by less than 1% over last year, according to the Committee for Responsible Federal Budget. Now, that doesn't even keep up with inflation. But there's a caveat here. This appropriations bill, it's not the only thing funding the Defense Department. Rashmi Aggarwal is a director at the Government Accountability Office, and she says there's money for the military and President Trump's tax and spending measure. The One Big Beautiful Bill act, where they provided it, was passed in July of 2025, but they provided about $156.

[Reema Reis]

Billion in additional funding for the department.

[Nancy Marshall Genser]

Add that in, Aggarwal says, and total Pentagon spending for this year is way up, closer to almost a trillion dollars.

[Julia Coronado]

That's the largest budget that they've had to date.

[Nancy Marshall Genser]

Aggarwal says the one big beautiful Bill act includes money for shipbuilding and weapons. Todd Harrison at the American Enterprise Institute says There's also about $25 billion for President Trump's proposed Golden Dome missile defense system.

[Marketplace Sponsor Announcer]

That was considered, you know, a down.

[David Brancaccio]

Payment on getting started on this signature.

[Marketplace Sponsor Announcer]

Effort of the Trump administration.

[Nancy Marshall Genser]

President Trump is already looking ahead to next year when he wants to spend one and a half trillion dollars on the military. I'm Nancy Marshall Genser for Marketplace.

[David Brancaccio]

Now, after a long drop versus the US dollar, the Japanese currency is up 1.2% today. The US treasury has reportedly been asking for info that may be a hint they might try to prop up the yen. Now, this is a teachable moment for us. What happens to the yen can affect what we pay to use credit cards or to borrow for cars, houses, and more. Economist Julia Coronado is founder of Macro Policy Perspectives.

[Julia Coronado]

The yen has been under a lot of pressure on fiscal expansion plans and pretty alarmingly so. And the reason we care about this is because Japanese investors buy a lot of Treasuries. So there is some notion that the US And Japan might be coordinating to stabilize the yen because that would help prevent upward pressure on U.S. interest rates.

[David Brancaccio]

Right. Let's talk about this. Right. Because if the yen gets more weak, as it's been doing until today, it makes it more expensive to buy those Treasuries if you're a Japanese investor. Right. And so you don't want them buying less of our debt at a time that we're putting out a lot of.

[Julia Coronado]

It, that we're issuing more. That's exactly right. And of course, the administration's been very frustrated that long term interest rates haven't come down and this would only, you know, go in the wrong direction. So there's a lot of movement. There was a lot of movement at the end of the week. And markets are opening up again with a lot of response to these rumors of intervention. So the yen is strengthening, the dollar's weakening. See how this goes.

[David Brancaccio]

Julia Coronado is also a professor at the University of Texas, Austin. Thank you very much.

[Julia Coronado]

My pleasure.

[David Brancaccio]

With the weather mess across so much of the country, the readout from the airlines does not bode well for air travel today. Already nearly 4,000 flights have been canceled in or to the US after more than 11,000 were canceled yesterday. This using data from the site FlightAware with the bitter cold, heating oil futures hit a two month high, up 4% now to 52 a gallon. The low temperature of the last day was recorded in Gunflint Lake, Minnesota minus 40 degrees. I suppose I shouldn't tell you it was 89 in DeSoto City, Florida.

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[David Brancaccio]

Economists is seeing more optimism about the rest of the year. There's less worry about recession and expectations are a bit higher that businesses will do generally well. But that's still not translating into much hiring. Marketplace's Nova SAFO has that the economy.

[Nova Safo]

Has been stuck in a low fire, low hire mode, and the latest survey from the national association of Business Economists indicates that's not about to change anytime soon.

[Reema Reis]

We're in a situation where there's kind of steady employment picture but greater labor availability for firms that are looking to hire.

[Nova Safo]

That's survey chair Martha Moore. A third of respondents said their companies will likely freeze hiring to see how artificial intelligence tools can help improve their operations.

[Reema Reis]

So there's a lot of uncertainty about how this is going to play out. Of course, 73% of panelists were very optimistic about the impact of AI on their company's productivity in 2026.

[Nova Safo]

The latest government data shows productivity gains did accelerate in the third quarter of last year. I'm Novosafo for Marketplace.

[David Brancaccio]

After remaining generally mum on the immigration tensions and killings by immigration agents in Minnesota, 60 CEOs of Minnesota based companies have now signed a letter calling for de escalation. Our coverage is in the Marketplace morning podcast if you miss it on the air. In Los Angeles, I'm David Brancaccio, and we're from APM American Public Media.

[Reema Reis]

I'm Reema Reis. And this week on this Is Uncomfortable, fellow podcaster and host of Scamfluencers, Sarah Haggie joins me to sort out your work drama. We answer your questions about scammy bosses, managing workplace friendships, and co workers who push the boundaries a little too far. I'm gonna stay at your place for a bit while I'm breaking up, and obviously I'll need a key. And that is how you get a squatter. Listen to this Is Uncomfortable on your favorite podcast, Applied.