Displaced when housing is already strained

Summary

Marketplace Podcast Summary: "Displaced when Housing is Already Strained"

Release Date: January 11, 2025

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Overview

In this episode of Marketplace, host Amy Scott delves into the intricate interplay between a robust job market and the ongoing housing crisis exacerbated by natural disasters. The discussion spans the resilience of the economy, implications for interest rates, the strained housing market due to the Los Angeles wildfires, the resurgence of business travel, political maneuvers on federal budget cuts, and alarming climate data. Through insightful conversations with experts from the Washington Post, Politico, and economic research institutes, the episode paints a comprehensive picture of the current economic landscape.

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The Strong Job Market and Its Implications

Key Highlights:

• The December jobs report showed employers adding over 250,000 jobs, surpassing analysts' expectations by approximately 100,000.
• Unemployment rate decreased to 4.1%, signaling a robust labor market.

Insights & Quotes:

• Sudee Reddy (Politico) elaborates on the job growth, stating, “two-thirds of those jobs were in health care and government... that's why you still see people in the tech sector or manufacturing sector who talk about how hard it is to get hired right now.” (01:53)

• Heather Long (Washington Post) emphasizes the market's resilience: “We are obviously on the cusp of another bout of uncertainty over the labor market, over wages, over inflation...” (03:07)

Implications:

• The strong job market contributes to increased wages, aiding individuals in keeping up with inflation.
• However, this strength limits the Federal Reserve's ability to cut interest rates, as highlighted by the negative market reaction despite good economic news.

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Market Reaction and Interest Rates

Key Highlights:

• Positive jobs data led to market concerns about the Fed needing to maintain or even raise interest rates to combat inflation.
• Bond yields have risen globally, reflecting investor apprehension about sustained economic growth and inflation.

Insights & Quotes:

• Heather Long notes, “When interest rates go up, it's going to dent the housing market, it's going to dent construction hiring...” (05:10)

• Sudee Reddy explains the lack of anticipated rate cuts: “Good news can sometimes be bad news in a market context because that doesn't look like any rate cuts are coming.” (04:13)

Implications:

• Higher interest rates are expected to slow down sectors sensitive to borrowing costs, such as housing and construction.
• Investors are adapting to higher inflation expectations, leading to increased bond yields.

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Housing Market Strain: Impact of LA Wildfires

Key Highlights:

• Recent wildfires in Los Angeles County have destroyed approximately 10,000 buildings, displacing over 150,000 residents.
• The destruction intensifies the existing housing shortage in LA, a metro area already grappling with low multifamily vacancy rates.

Insights & Quotes:

• Sudee Reddy underscores the urgency: “We pretty much totally need to reimagine housing in America right now.” (13:05)

• Jay Liebik (CoStar) raises concerns about rental markets: “The big question now is what's going to happen to rents?” (13:20)

• Daniel Cabrera of Fire Damage House Buyer remarks, “We've bought... every single one” of the properties, indicating strong demand despite the disasters. (13:58)

Implications:

• The housing market is under immense pressure to rebuild quickly, but labor and construction constraints are causing delays, potentially pushing rents higher by 6-7%.
• There's a growing need for innovative housing solutions to address both affordability and resilience against climate-related risks.

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Employment Figures and Labor Force Dynamics

Key Highlights:

• The number of individuals wanting a job but not actively seeking one has decreased by three percent year-over-year to 5.5 million.
• Experts debate whether this decline signifies improving labor market conditions or masks underlying weaknesses.

Insights & Quotes:

• Guy Berger (Burning Glass Institute) interprets the decline as a “good sign” of a warming labor market if the trend sustains. (10:29)

• Ron Hetrick (Lightcast) questions the sustained improvement: “This number's higher than it was right before the pandemic... it suggests maybe we're a little bit weaker than we think we are.” (11:12)

Implications:

• While the reduction in discouraged workers indicates labor market strength, persistent high numbers suggest ongoing challenges in fully mobilizing the workforce.

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Business Travel Recovery and Airline Strategies

Key Highlights:

• The holiday travel season saw record-breaking passenger numbers, buoyed by both leisure and increasing business travel.
• Airlines like Delta are adjusting strategies to recapture corporate travel, which had been subdued due to the pandemic.

Insights & Quotes:

• Edward Russell (Aviation Journalist) explains, “Airlines would sign big contracts with major corporations to lock up most of a company's travel business.” (19:27)

• Samuel Engel (ICF Consultancy) highlights that business travel, while improving, remains below pre-pandemic levels, prompting airlines to adapt by enhancing premium services. (20:38)

• Guy Berger observes, “Airlines are finding ways to make more money off those who are getting on board.” (20:56)

Implications:

• Airlines are pivoting towards premium offerings and flexible service contracts to maximize revenue from a recovering business travel segment.
• The gradual return to office mandates is expected to further stabilize business travel volumes.

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Political Resolutions on Government Budget Cuts

Key Highlights:

• President-elect Donald Trump proposes significant budget cuts through the newly formed Department of Government Efficiency (Doge), led by Elon Musk and Vivek Ramaswamy.
• Proposals include trimming federal spending by $500 billion annually, targeting areas like Social Security, Medicare, and federal employment.

Insights & Quotes:

• Douglas Holtz Akin criticizes the Doge’s approach: “Congress is the one that passes spending bills, not Doge.” (23:55)

• Louise Shaner (Brookings Institution) emphasizes that major budget savings require addressing the largest expenditures: “Social Security and Medicare... together, those cost the U.S. about $3 trillion a year.” (25:10)

• Guy Berger expresses skepticism: “I don't think this Congress is going to be the one that holds hands and jumps...” (26:27)

Implications:

• Effective budget reform necessitates bipartisan cooperation and politically sensitive adjustments to beloved programs.
• Proposed cuts to areas like federal employment and education may not yield the substantial savings needed, as they represent a small fraction of the total federal budget.

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Climate Data and Its Relation to Housing

Key Highlights:

• 2024 was confirmed as the hottest year on record, with global temperatures averaging nearly 1.5°C above pre-industrial levels.
• This rise in temperatures underscores the urgent need to address climate resilience in housing infrastructure.

Insights & Quotes:

• Narration connects climate data to housing vulnerabilities: “...what happens when a climate catastrophe runs headlong into a housing crisis...” (29:10)

• The episode references the Paris Climate Agreement’s goal, highlighting the impending challenges as President-elect Trump is expected to abandon the accord. (29:10)

Implications:

• The intersection of climate change and housing crises necessitates a reevaluation of construction practices, urban planning, and emergency response to natural disasters.
• Rising temperatures and increased frequency of extreme weather events will continue to strain housing markets and infrastructure resilience.

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Conclusion

The episode of Marketplace titled "Displaced when Housing is Already Strained" provides a multifaceted exploration of the current economic and environmental challenges. From a strong labor market influencing interest rates to the compounded pressures on the housing sector due to natural disasters, the discussions highlight the delicate balance policymakers and industries must navigate. Additionally, the insights into business travel resurgence and political budget cuts offer a glimpse into the evolving strategies and challenges shaping the economy. The urgent climate data serves as a stark reminder of the underlying environmental factors that exacerbate existing socio-economic issues.

Notable Quotes Recap:

• Sudee Reddy: “We pretty much totally need to reimagine housing in America right now.” (13:05)
• Heather Long: “We are obviously on the cusp of another bout of uncertainty over the labor market, over wages, over inflation...” (03:07)
• Douglas Holtz Akin: “Congress is the one that passes spending bills, not Doge.” (23:55)

For a deeper dive into these topics, listeners are encouraged to tune into the full episode of Marketplace.

Transcript

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[Amy Scott]

Sign up [e-mail] so much for lower interest rates, huh? From American Public Media, this is IS Marketplace in Baltimore. I'm Amy Scott in for Kai Rysdal. It is Friday, January 10th. Good to have you with us. The December jobs report made waves today. The Bureau of Labor Statistics says employers added more than 250,000 jobs last month, about 100,000 more than analysts had expected, while the unemployment rate ticked down to 4.1%. Great news for job seekers. Not so much though, for those pining for lower interest rates. Joining me to discuss are Heather Long with the Washington Post and Sudee Breddy at Politico. Thanks for being here.

[Heather Long]

Hi, Amy.

[Amy Scott]

So Heather, it was a pretty good jobs report. What does that tell you about the resilience of this economy?

[Sudee Reddy]

Yeah, it really felt like a bounce back month. You know, we'd had a couple of months since the summer of either weak hiring or people were out on strike or weird weather events. And so this really felt great to see a big beat with that 256,000 and then seeing unemployment rate fall a little bit to 4.1%. And for the right reasons because we had more people getting employed, fewer people unemployed, stronger labor force. So you just kind of walk through all of the different parts of this report and it felt pretty good, which is a great way to end the year, I will say. If you step back for overall into 2024, there were 2.2 million jobs added, which is a pretty darn good year, pretty similar to like a 2018 pace. But two thirds of those jobs were in health care and government. So it was a pretty highly concentrated year of job growth. And that's why you still see people like in the tech sector or manufacturing sector who talk about how hard it is to get hired right now.

[Amy Scott]

Right. Some people are still Calling it a tough job market. Sudeep, what's your takeaway? Wages also continued to increase.

[Heather Long]

Yeah. And this is an incredibly healthy labor market, especially given all the concerns we've had over the last two years. We've had extraordinarily high interest rates, obviously have come down quite a bit. We've had a lot of pressure in the labor market on, and that has been good for people who are trying to keep up with inflation. But we are obviously on the cusp of another bout of uncertainty over the labor market, over wages, over inflation, through product prices and tariffs. But right now, to be sitting in this position, for all of the doubts we've had over the last two years about the resiliency of the labor market is a remarkable, absolutely remarkable achievement.

[Amy Scott]

Okay. And yet the market reaction has been pretty negative, and that seems to be because hopes have dimmed even further for interest rate cuts. Several banks are now projecting fewer or later cuts from the Fed this year. Heather, why is the report causing such a stir?

[Sudee Reddy]

Well, because as Sudeep was saying, this is a pretty darn good economy. I think a few months ago this summer there seemed to be cracks. We were, we were worried if maybe there were starting to be a little bit of a downward spiral in the labor market. And a lot of those fears have gone away. Obviously, the Fed now is going to have to refocus on inflation. We saw those Fed minutes come out this week where they're clearly starting to worry and talk more about what could happen with the Trump tariffs or with if there's a lot more spending for these tax cuts in the Trump administration. And then there's also just the reality that inflation stuck around 2.7% and we want to see at more like 2%. So I think those realities are very much starting to hit the Fed and starting to hit the markets. Unfortunately, good news can sometimes be bad news in a market context because that doesn't look like any rate cuts are coming. Maybe not till June and maybe not until later than that.

[Amy Scott]

Right. And Sudeep, we've already been seeing the bond market expecting higher inflation. We've been seeing yields go up long term. What does that tell us about what investors are thinking?

[Heather Long]

Investors don't want to take any chances, especially bond investors don't want to take any chances when they realize that the slowdown is not around the corner. From a labor market perspective, from an economic growth perspective, that naturally forces up yields. Yields have gone up in other advanced economies as well. This is a global phenomenon in many ways, with the developed world and this is going to really put the Fed in a difficult position of deciding once again how far do they want to take this. There's a natural feedback loop. When interest rates go up, it's going to dent the housing market, it's going to dent construction hiring. Other interest rate sensitive sectors are going to get hit. But the Fed cannot be in a position to lose the inflation battle this time around. And so that's why they indicated in the Fed minutes that they're watching warily. There's a lot of debate and dissent within the Fed about how much tariffs are going to actually hit and raise overall inflation. And it's going to be an interesting first few months of the year for them.

[Amy Scott]

You mentioned the housing market this week, Heather. The average for a 30 year mortgage according to Freddie Mac was back up near 7% to a six month high. I think a lot of people, myself included, were hoping that rates would come down some in time for the spring market. Maybe not.

[Sudee Reddy]

It sure doesn't look that way. We're back near 7% and it doesn't look like a lot of relief. Soon as we've just been mentioning. I'll just say, Amy, I know you also cover housing a lot. I've been thinking about it a lot lately. I. You just look at those horrible LA wildfires this week and then you look at these 7% mortgage rates and it's just screaming to me that we pretty much totally need to reimagine housing in America right now. We need it to be safer against all of these climate related risks, whether it's the wildfires or the hurricanes or whatnot. We're going to have to build a lot differently and rebuild a lot differently going forward. And then there's the ongoing affordability challenges for Gen Z and Millennials in particular. And that's also going to take a lot of creative thinking. A lot of different types of housing, like more high rises and townhomes and duplexes and all that sorts of stuff. Homes that are closer together on smaller lots. I know you've written and spoken a lot about all of this, so I really just look at this week and see that housing is going to have to look a lot different going forward. What we think of as an ideal home.

[Amy Scott]

Yeah, and we have a story later in the show about what happens when a climate catastrophe runs headlong into a housing crisis, an ongoing housing crisis. So before I let you go sudeep, we've got retail sales and inflation numbers next week. What are you going to be looking.

[Heather Long]

For the inflation report is going to be absolutely critical. It's going to really set the tone for what comes after that. Consumers are uncertain right now. We got some consumer sentiment data this morning that has an inflation projection in it. A lot of this gets to be colored by politics. Democrats are fearing more inflation. Republicans are expecting less inflation ahead. But this is really going to be the thing that sets the direction for the inflation story, for the stock market story, for the start of a new presidency, for the impact of tariffs and reducing the pool of immigrant labor. All of that plays into this big report coming next week.

[Amy Scott]

All right. Sudeep Reddy, Politico Heather Long with the Washington Post, thank you both so much and have a good weekend.

[Heather Long]

Thanks, Amy.

[Sudee Reddy]

Thanks, Amy. Take care.

[Amy Scott]

As I mentioned, Wall street was not happy. We'll have the details when we do the numbers. If you page through that December jobs report, as we around here are want to do, you'll see a line item near the top of Table A.1 persons who currently want a job is the official wording, but are not in the labor force. These are folks who aren't working currently and haven't actively looked for a job in the past four weeks, but who say they would like to work. In December, that number stood at five and a half million, three percent lower than a year ago. Marketplace's Stephanie Hughes looks at what's going.

[Stephanie Hughes]

On there reasons why someone might want a job but not look for one. They're taking care of their kids or elderly parents. They decide to go back to school. Or they just got tired of the.

[Guy Berger]

Job search because they're discouraged. They just don't think it's worth looking.

[Stephanie Hughes]

Guy Berger is director of economic research at the Burning Glass Institute. He says generally there are fewer people in this situation when the labor market is doing well.

[Guy Berger]

Probably what's happening is that when it goes down, these people actually start actively looking and then hopefully they find a job.

[Stephanie Hughes]

You could look at this little drop as a sign of solidity in the labor market, says Harry Holzer, a professor of public policy at Georgetown.

[Guy Berger]

It indicates fewer people, not by a huge amount, but slightly fewer people are in that limbo situation.

[Stephanie Hughes]

Holzer is also a former chief economist at the US Department of Labor, and he says while some people might choose to get back into the job market, others might decide to stop looking for work and lean full time into maybe being a caregiver or a student, whichever.

[Guy Berger]

Of those paths are chosen, it kind of reflects a greater stability, I think, of where we are, less uncertainty.

[Stephanie Hughes]

However, Ron Hetrick, a senior economist at Lightcast thinks this number should be way lower than it is right now.

[Heather Long]

I'm actually a little perplexed as to.

[Stephanie Hughes]

Why this number isn't really shrinking, hetrick points out. This number's higher than it was right before the pandemic and that with a combination of job growth and baby boomers retiring since then, there should be fewer people left on the sidelines wanting to work.

[Heather Long]

I think it suggests maybe we're a little bit weaker than we think we are.

[Stephanie Hughes]

The measure ticking down over the past year is something to watch, says Guy Berger at the Burning Glass Institute.

[Guy Berger]

You know, essentially, yeah, it's improving, but it's like on the scale of squiggles, right?

[Stephanie Hughes]

So not a straight line down.

[Guy Berger]

But certainly if it's a sustained downtrend that sticks into next year, I think in general I would tend to view that as like a good sign, a.

[Stephanie Hughes]

Sign that the labor market, which had been cool ish, is getting warmer. I'm Stephanie Hughes for Marketplace.

[Amy Scott]

At last count, the fires burning in Los Angeles County Heather was talking about have forced more than 150,000 people to evacuate. As many as 10,000 buildings have been destroyed, and that means a lot of displaced people are now looking for a temporary or permanent place to live. It's happening in a metro area where there weren't enough available homes to begin with. Marketplace's Kaylee Wells has more.

[Kaylee Wells]

The people displaced in the LA fires won't get to move back to their neighborhoods anytime soon.

[Sudee Reddy]

I think the real restriction is just on labor and getting all that work done.

[Kaylee Wells]

Chief economist Darrell Fairweather says her company Redfin, analyzed other California fires and she says it takes most people at least two years to rebuild.

[Sudee Reddy]

Like you can't scale up the number of contractors, the number of builders, immediately.

[Kaylee Wells]

Most of the victims will still live nearby. Jay Liebik directs multifamily analytics at CoStar, and he says a disaster like this in any metro area would be horrible.

[Heather Long]

But given that LA is one of.

[Jay Liebik]

The most under housed metros in the.

[Amy Scott]

Country, it makes things even worse, liebik Sundays.

[Kaylee Wells]

In particular, LA has one of the lowest multifamily vacancy rates in the country.

[Jay Liebik]

The big question now is what's going to happen to rents?

[Heather Long]

This is the to me, the 800.

[Kaylee Wells]

Pound gorilla in the room. Liebig says rents could jump 6, 7% or even higher. In the longer term, these homes will get rebuilt, and Daniel Cabrera believes there will be plenty of demand for them. He founded a company called Fire Damage House Buyer. He buys damaged property as is. If owners don't want to move back.

[Guy Berger]

We've bought I can't even tell you how many fire damage properties in the past and we've sold every single one, he says.

[Kaylee Wells]

That's especially true for the Pacific Palisades, where wealthier residents can afford the higher insurance premiums that come with the fire risk.

[Guy Berger]

I don't think their property values, even with these wildfires are going to go anywhere. I think they're going to remain right where they're at and they're going to continue to rise because it's just such a sought after market and the state.

[Kaylee Wells]

Is facilitating that too. California has prohibited insurance companies from canceling policies on homes near the fire to make sure victims get payouts to move or rebuild. I'm Kayleigh Wells for Marketplace.

[Amy Scott]

Coming up.

[Guy Berger]

You know, maybe I'm just a beaten down Washington swamp dweller, but you know, I I'll believe it when I see it.

[Amy Scott]

A good policy in Washington. But first, let's do the numbers. The Dow Jones Industrial Average lost 696 points 1 and 6. 10% to close at 41,009. 38. The Nasdaq fell 317 points, also 1 in 6 6. 10% to finish at 19,161. And the S&P 500 shed 91 points, 1 1/2% to end at 58 27. For the week, the Dow lost 1 1/10%. The Nasdaq shed 6. 10%. The S&P 500 fell 7. 10%. Walgreens announced better than expected earnings today. More than $39.5 billion in revenue, up 7% year over year. Walgreens Boots alliance stepped up 27.5%. Bonds fell. The yield on the 10 year T note rose to 4.76%. You're listening to Marketplace.

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[Stephanie Hughes]

Once you run your first payroll.

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[Amy Scott]

Hi, this is Nicole from Camphill, Pennsylvania. I'm always surprised how much content Marketplace can pack into 30 minutes. Listening is part of my daily routine. I love the way they make the content digestible and relatable. For us folks who don't have a strong background in economics or business, join me by making a gift to Marketplace [e-mail] donate this is Marketplace. I'm Amy Scott. The holiday air travel season that just wrapped up was the busiest on record, says the Transportation Security Administration. That boosted profits at Delta, which posted better than expected results for its fourth quarter today. It's not just vacations and family visits driving more passengers to airlines. Delta said business travel picked up, too, and could improve further this year. Corporate travel has been slower to rebound since pandemic lockdowns first pushed more people to work from home. Marketplaces Henry Epp has more on what's bringing business travel back in the before.

[Jay Liebik]

Times, selling lots of tickets to business travelers was the way major airlines made a lot of their money because those passengers are willing to pay more, says Edward Russell, a freelance aviation journalist.

[Guy Berger]

You know, if they're not booking day of, they're booking a day or two before and they're paying top dollar to get where they need to go and get to their meetings.

[Jay Liebik]

And, he says airlines would sign big contracts with major corporations to lock up most of a company's travel business. The pandemic put a stop to all that. Once things opened back up, people flocked back to airports to go on vacations. But a lot of business meetings stayed on zoom. Now, five years later, with more return to office mandates in effect, the volume of business travel may be close to where it was in 2019, says Robert Mann, an industry analyst well, we've seen.

[Guy Berger]

It'S just a slow, steady uptick in.

[Heather Long]

Corporate travel activity, which is to say.

[Guy Berger]

Bookings through recognized corporate travel agencies.

[Jay Liebik]

And he says airlines once again are competing for those big corporate travel contracts. Companies like Delta have emphasized the recent growth in that part of their business. But says Samuel Engel with the consultancy firm icf, when you're in the dark, a small ray of sun looks especially bright, meaning while it's improved, business travel is below where it would have been without the pandemic. So to keep revenues up, airlines have had to compensate. Engel says they've adapted their network and.

[Amy Scott]

Where they fly to make sure that they're putting more capacity into leisure destinations.

[Jay Liebik]

And says Edward Russell, the aviation airlines.

[Guy Berger]

Have gotten really good at the upsell.

[Jay Liebik]

As in charging more for premium offers, even to individual business travelers whose company may have paid for their ticket.

[Guy Berger]

He says there's a big trend towards people willing to pay their own dollar for sitting in nice receipts, premium seats, whether that's extra legroom or first class on domestic flights.

[Jay Liebik]

So even if the number of business travelers isn't exactly booming, airlines are finding ways to make more money off those who are getting on board. I'm Henry AP for Marketplace.

[Amy Scott]

Did you make any New Year's resolutions this year? How's that going? A lot of us have financial goals. Maybe save more, pay down some debt. The federal government has some big resolutions, too. President elect Donald Trump, who will be sworn back into office in just over a week, has vowed to cut wasteful spending with help from a new Department of Government Efficiency, AKA Doge, headed by Elon Musk and Vivek Ramaswamy. But as we well know in our personal lives, resolutions can be tricky. As Stacey Vanek Smith reports, personally, I've.

[Odoo Representative]

Got a whole set of resolutions for 2025. I'm going to cook all my meals. No more ordering in, and I'm going to go to the gym at least five days a week. Doge had some pretty lofty resolutions, too, about cuts to the $6.5 trillion US budget. Here's Elon Musk.

[Guy Berger]

Well, I think we can do at least 2 trillion.

[Sponsor Representative]

Yeah.

[Amy Scott]

Yes, 2 trillion.

[Odoo Representative]

$2 trillion is like a third of the budget. But you know what? It is resolution season. Go big or go home. Of course, a few weeks later, reality seems to have set in. Here's a clip from Yahoo Finance.

[Sudee Reddy]

This week in an op ed, Elon Musk and Vivek Ramaswamy laid out their plans to target $500 billion in annual spending under their new Department of Government efficiency.

[Odoo Representative]

I mean, 500 billion is still a lot. It's not 2 trillion, but. But I get it. That initial resolution, enthusiasm, it gets tempered by real life, right? I mean, you know, like five days a week at the gym. It's just a lot of days. Not trying to be a bodybuilder.

[Guy Berger]

And then my thought was, well, good luck.

[Odoo Representative]

This is Douglas Holtz Akin, and he is not talking about my gym ambitions. He is talking about Doge. Holtz Akin served as an economic advisor for George H.W. bush and headed the Congressional Budget Office in 2003. He says Musk and Ramaswamy can make all the resolutions they want.

[Guy Berger]

They are successful, prominent people. I get all that. But DOGE itself has no authority.

[Odoo Representative]

It's Congress that passes spending bills, not Doge.

[Guy Berger]

So they get to think hard and make recommendations. They're a think tank, and I run a think tank. So I know just how ineffective think tanks can be.

[Odoo Representative]

Holtz Aiken's think tank, the American Action Forum, has looked at the federal budget a lot over the years, and he worries Doge is looking for cuts in all the wrong places. Take this clip where reporter John Stossel asks Vivek Ramaswamy about his Doge plans.

[Heather Long]

You've said you would fire over half of the government's workers. That's correct.

[Amy Scott]

Yes.

[Guy Berger]

Big cuts?

[Amy Scott]

Yes.

[Odoo Representative]

1.5 million jobs, to be exact. Is it dramatic? Yes. Does it make a statement? Yes. But even if Congress were able to do that, would it make a difference to the budget? Holz Aiken says not so much.

[Guy Berger]

That's not where the money is. The money is not in federal employment.

[Odoo Representative]

In fact, compensation for all federal workers totals about $300 billion. That's not even 5% of the federal budget. Of course, Ramaswamy proposed other cuts as well.

[Jay Liebik]

Yeah, I would shut down the US Department of Education.

[Odoo Representative]

Louise Shaner is an economist specializing in fiscal and monetary policy at the Brookings Institution.

[Amy Scott]

It doesn't really make a big difference in the long run.

[Stephanie Hughes]

Fiscal challenges.

[Amy Scott]

If you eliminate the Department of Education.

[Odoo Representative]

Shanner points out the Departments of Education, Agriculture, Transportation and Law Enforcement all put together don't even make up 15% of the budget. And she says those departments do a lot.

[Amy Scott]

You'd be decimating these programs, and that would be a huge mistake because they produce a lot of value.

[Odoo Representative]

So where should Doge cut? Well, Defense makes up about 15% of our budget. Another 10ish percent goes to paying interest on our debt. But fully half of the U.S. budget is made up of just three Social Security, Medicare and Medicaid. Together, those cost the U.S. about $3 trillion a year. Sheener says getting the budget under control, it is totally possible with a varied approach, the combination of tax increases and.

[Amy Scott]

Some modifications to Medicare, Medicaid and Social Security.

[Odoo Representative]

And the major impediment is politics. Politics. Douglas Holtz Akin says after spending years trying to reform the US Budget, the issue always comes down to this. You really want to deal with the budget. You have to look at Social Security and Medicare. But politicians do not want to look at Social Security and Medicare because those are beloved programs and the people who use them vote.

[Guy Berger]

Right now, if you go to the town hall and say I'd like to reform Social Security, you might as well just walk out and start working at the dairy clean.

[Odoo Representative]

Holz Aiken says it is absolutely possible to modify and trim down Medicare and Social Security spending, but it requires politicians to communicate with voters, ask them to come together and tighten their belts for a better future. It would also require Congress to join forces across the aisle. That is what Team Doge is really up against.

[Guy Berger]

I don't think this Congress is going to be the one that holds hands and jumps and I don't see this president as providing the leadership. Okay, so, you know, maybe I'm just a beaten down Washington swamp dweller, but you know, I'll believe it when I see it.

[Odoo Representative]

After all, resolutions can be hard. Like I was all set to go to the gym today, but it is like 21 degrees out and I'm kind of getting over this cold still. I'm feeling really good about tomorrow though. In New York, I'm Stacey Vanek Smith for Marketplace.

[Amy Scott]

This final note on the way out today, more consensus is coming in that 2024 was in fact the hottest year on record. Today. NASA and the national oceanic and Atmospheric Administration said global temperatures averaged nearly 1.5 degrees Celsius, higher last year than pre industrial levels, joining a similar find from Europe's Copernicus Climate Change Service. If that number 1.5 sounds familiar, the Paris Climate Agreement, which President Elect Donald Trump is expected to abandon again when he takes office, had set a goal of limiting warming to no more than 1 1/2 degrees to avoid even worse climate catastrophe. Our theme music was composed by BJ Lederman. We had engineering help today from Jess Berg. Marketplace's executive producer is Nancy Fargo. Donna Tam is the executive editor. Neil Scarborough is the vice president and general manager and I'm Amy Scott. We'll be back on Monday.

[Sudee Reddy]

Foreign.

[Amy Scott]

This is apn. Hi, this is Julie from Centennial Colorado I listen to Marketplace on my drive home from all my 3 to midnight ER shifts. Kai and the gang keep me awake and interested for my 30 minute drive. For someone not in the financial field, it's a fantastic synopsis of all things business and economics. I love the commitment to showcasing a.

[Sponsor Representative]

Steady stream of brilliant and articulate women.

[Amy Scott]

Who are experts in their field. Join me in supporting Marketplace with a gift today. Go to marketplace. Org Donate.