Elon Musk’s Department of Government Efficiency (DOGE) layoffs could have a much greater impact on the economy and financial markets than previously expected, according to economist Torsten Slok. He warns that while initial estimates suggested 300,000 layoffs, the total number could reach 1 million when factoring in contract workers, who make up 66.5% of the federal workforce. These cuts are historically significant, mirroring reductions under Bill Clinton, and come as agencies like the IRS and Forest Service have already laid off up to 220,000 probationary workers. Despite a relatively strong economy, with 4% unemployment and 2.3% GDP growth, billionaire investor Steve Cohen cautions that reduced federal spending could negatively impact markets and growth. President Trump, who has long tied stock market performance to his success, has seen the S&P 500 decline since taking office, despite an initial post-election rally. However, some analysts, like Morgan Stanley’s Michael Wilson, argue that while DOGE’s cost-cutting measures may slow growth in the short term, they could ultimately strengthen the economy by promoting private sector expansion and improving long-term fiscal sustainability.
Article: https://www.forbes.com/sites/dereksaul/2025/02/24/doge-layoffs-pose-growing-risk-to-us-economy-and-markets-says-apollo-economist/
1 comment:
The cut of private contracts is something I have wanted to look into in relation to the DOGE lay offs. My brother and dad work for the government and they are constantly complaining about private contractors "taking advantage" of the future the contracts buy and in some cases have led to glaring inefficiencies because the safety the contract gives leaves room for less incentive. From my understanding, some of these cuts could potentially be good for competition for contractors if they develop through the market and not just get slipped to firms close to the President.
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