TRANSCRIPT
Announcer: Capitol Insider sponsored by the Oklahoma State Medical Association. Physician members who devote more than 11 years of higher education and 10,000 clinical hours in study to provide care for all Oklahomans. More at okmed.org.
Dick Pryor: This is Capitol Insider- taking you inside politics, policy and government in Oklahoma. I'm Dick Pryor with Quorum Call publisher, Shawn Ashley. Our guest is Dr. Robert Dauffenbach, professor emeritus at the Price College of Business at the University of Oklahoma. Bob, it's good to have you with us.
Dr. Robert Dauffenbach: Glad to be here.
Shawn Ashley: Dr. Dauffenbach, since we last spoke, just before the election, how is the economy doing, particularly here at home?
Dr. Robert Dauffenbach: Well, I'm particularly pleased with how the Oklahoma City area is doing. Let me elaborate somewhat. Statewide non-farm employment has risen by 5.6% since January 2020. Now, why did I pick January 2020? Well, because that was just prior to the pandemic. And so we've got a good benchmark there. The nation is up 4.7%. So, we're almost a percentage point higher in employment growth over that period. Oklahoma City metro is up 7.7%, three percentage points above the national gain. Tulsa's up 4.5%, the rest of the state up 4%. Clearly, Oklahoma City is a growth leader in the state.
In terms of income, we also have a good story to tell. Inflation adjusted personal income in the state is up 10% over that period of time versus 8.4% nationally. Our population grew by 3.5% and thus our per capita personal income adjusted for inflation, adjusted for population growth is up 6.5% since the COVID era. So, there's a lot of hand-wringing about the economy but clearly we're doing much better than just okay.
Dick Pryor: At the national level, we're hearing a lot about federal layoffs pushed by Elon Musk and the Department of Government Efficiency (DOGE). What kind of effect do you think these widespread and rapid federal job layoffs are going to have on the economy?
Dr. Robert Dauffenbach: Well, as yet, they're not extremely significant, but we have to take a look at non-military employment and the federal government's at the 3 million mark. About now, we're looking at 300,000 announced layoffs. That's 10% of the civilian federal workforce. That's a considerable number, particularly if you're one of the 300,000. This number gets really sizable, however, when we recognize that an estimated two contractors are employed for every government employee. So now you're talking about 900,000 to a million to start with, plus they're not through decimating the Department of Education and all the other defense cuts I'm talking about. So, we're looking at something that could turn out to be very sizable reductions in force at the federal level that are likely to affect the national economy, certainly.
Shawn Ashley: Are these layoffs likely to result in significant federal budgetary savings?
Dr. Robert Dauffenbach: There is no there there. Well, not much of a there there anyway. And I say that because when you're looking at roughly the $300 billion we spend on personnel, civilian personnel, how that pales in significance relative to a $7 trillion federal budget and a $1.7 trillion deficit that we're running annually. But certainly we want government to run efficiently, but when I look at the data, when you look at the real situation, since 1990 the U.S. population has grown by 36%. Federal employment has fallen by 3.5%. That looks a lot like efficiency to me.
Dick Pryor: What do you think will happen to the money that's not being spent on salaries and programs at the agencies and departments that are being cut?
Dr. Robert Dauffenbach: They'll just pocket it. They'll use it as a means for advertising. Look at all the savings that we've had and we can go ahead with the reductions in the income tax or actually they're set to expire and sort of they're talking about continuation of the tax cuts put in place before. So, it'll be used more for propaganda purposes than I think it'll have any meaningful effect on the actual federal deficit.
Shawn Ashley: We're hearing increasing talk of an impending recession. What do you see as the likelihood of a recession starting in 2025 here or around the world?
Dr. Robert Dauffenbach: Well, the Federal Reserve Board of Governors sees real growth at 1.7 percent in 2025. Now that's down from 2.8 percent last year. So, we're looking at talk of a slowing of the economy, and we're seeing other signs of slowing of the economy. But when we look at the definition of recession, that is two or more consecutive periods of declining real output. And so, we're not in the negative world as yet. Inflation has certainly been somewhat sticky, and if it were to accelerate for any particular reason then we've got some problems on our hands. But almost all the indicators I follow, and it's a significant number, including the unemployment, job growth, job openings, quit rates, initial unemployment claims, etc., none of them are really showing any signs in the hard data yet. But certainly the Michigan Sentiment Survey of Consumers consumers are expressing a lot of pessimism. So, there are signs of cooling, but I don't see a recession yet.
Dick Pryor: What about tariffs and potential trade wars - might those actions and the resulting repercussions tip us into a recession?
Dr. Robert Dauffenbach: I certainly have great concerns there. We're supposed to get an update on where we stand with tariff policy on April 2nd. That's the big promised show. Rhetoric has been all over the place. For example, March 4th, Trump imposed 25 percent tariffs on Canada and Mexico. Two days later, he rescinded them. So, we're all waiting with bated breath for what we see happening on April 2nd. Right now, it's uncertainty squared. I never heard the word uncertainty used so much. You have to say that if trade wars are a consequence of this tariff policy, then we're certainly looking at a distinct possibility of a recession.
Shawn Ashley: So then, what concerns you most about the future of the U.S. economy?
Dr. Robert Dauffenbach: Well, that's an easy question for me to answer. The remedy is not clear, but the federal debt and deficits without question are my principal concern, not only for our future, but our children's future and their children's future. Since 2016, the Trump and Biden administrations have racked up deficits spending a total of $16 trillion, nearly doubling our federal debt to $37 trillion. We now spend more on refinancing the debt each year than we do defense. And that's over a $100 billion difference there. In FY24, Social Security, Medicare, Medicaid, veterans benefits, interest expense, and defense accounted for $5 trillion out of the $6.75 trillion federal budget. That's 75%. What are those programs that we're gonna see a reduction in? 73 million people receive Social Security benefits in this country. 70 million people are enrolled in Medicare, and Sooner Care enrollments are very high in Oklahoma, too, if those get cut. Those are pretty big voting blocks, and I don't see a lot of politicians getting elected that they're going to be fighting those. So, I'm very concerned about inflation and our future as we continue to monetize the debt.
Dick Pryor: That's Dr. Robert Dauffenbach, professor emeritus at the Price College of Business at the University of Oklahoma. Bob, thanks for joining us.
Dr. Robert Dauffenbach: Glad to be here.
Dick Pryor: And until next time, with Shawn Ashley, I'm Dick Pryor.
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