The Pitch: Economic Update for January 30th, 2025
Friends,
Last week, the global wealthy elites and many world leaders gathered at the annual meeting of the World Economic Forum in Davos. Neil Irwin and Courtenay Brown wrote for Axios that the mood at this year’s summit was less self-congratulatory than usual.
“Economic orthodoxy is out,” Axios reports. “Economic mini-experiments are happening in nations big and small as government officials embrace tariffs, protectionism, anti-immigration and other policies.”
They continue, “The goal is to invigorate economic growth after tried-and-true policies have failed, despite warnings from mainstream economists that such approaches will damage the economy.”
The media raptly reported on Donald Trump’s speech to the WEF, in which he threatened to levy large tariffs on other nations and establish “the lowest tax rate on Earth” in the United States. (If you’re curious, the lowest tax rate on earth is far below America’s current 21% rate: Turkmenistan, which is hardly the seat of global commerce, is hovering at 8 percent.)
The part of the Axios story that I found most illuminating was the response of the Davos crowd to Trump’s claims: “Top executives may not love the prospect of big tariffs but say they believe the set of policy changes on the way will be good for the economy on net,” Axios writes. The story goes on to quote Bank of America CEO Brian Moynihan, who seems to have bought into Trump’s vision: “Lower regulatory burden will result in higher profit margins, will then allow us to manage the tariff burden differently.”
Axios is correct to observe that this year’s forum at Davos marks a paradigm shift and a collapse of economic orthodoxy —specifically, the trickle-down, neoliberal world order that has dominated the world for four decades. What Trump and other global far-right figures are proposing, and what the CEOs are assenting to, extends beyond trickle-down into an outright oligarchy that privileges the wealthy few who hold the reins of power. That kind of economic system historically hasn’t worked out for the majority of people, and is often accompanied by a widespread loss of democratic rights and other freedoms.
But an important fact about paradigm shifts is that they generally offer a choice between two very different paths. And here’s the thing about oligarchies which only benefit the very few at the expense of everyone else: They’re very unpopular.
A poll from the Associated Press found that only 12 percent of Americans approve of billionaires advising President Trump on economic policy. As Josh Marshall underscored in response to the poll, that’s not a 12 percent difference in approval between parties — it’s the total approval rating. Roughly nine in ten Americans don’t want billionaires to have control over their economic and political policy agenda. You never see that kind of unanimous revulsion in polling anymore, across party lines, age, gender, and race.
It’s obvious that working people are deeply frustrated with the super-rich and the systems they’ve established to enrich themselves at everyone else’s expense. The question is whether all that unrest can inspire people to coalesce around a system that benefits everyone.
Funnily enough, one of the most noteworthy viral moments signifying the early arrival of today’s paradigm shift also unfolded at the WEF at Davos back in 2019, when historian Rutger Bregman sat on a panel about wealth inequality and told an audience of wealthy elites that they were the problem.
“I hear people talking the language of participation, justice, equality and transparency but almost no one raises the real issue of tax avoidance, right? And of the rich just not paying their fair share,” Bregman said, adding, “it feels like I’m at a firefighters conference and no one’s allowed to speak about water.”
If wealthy people wanted to reverse the growing gap between the haves and the have nots, Bregman said, they had to “stop talking about philanthropy and start talking about taxes.”
“Taxes, taxes, taxes,” Bregman said. “All the rest is bullshit in my opinion.”
There’s obviously more to those economic solutions — the revenue raised from those taxes needs to be invested heavily in working people, most importantly — but Bregman basically called it, six years ahead of schedule. Maybe all the answers to the world’s problems really are at Davos.
The Latest Economic News and Updates
Pitchfork Economics Goes to School
Before we dig further into a busy news week, I wanted to share some exciting news: The University of California Berkeley is launching a new economics course whose syllabus is based around episodes of our own Pitchfork Economics podcast.
Maya Chawla and Erin Eu Lakshmanan have combined the disciplines of sociology and economics to “unpack…how, exactly, the top 1% grow richer while the middle and working classes decline — and learn about how reforms and policies (and middle-out economics) can help shape an economy that works for everyone.” If you know any students at UC Berkeley, I hope you’ll encourage them to look up “Making the Economy Better for Society,” an Econ 198 course.
This is incredibly exciting for all of us at Civic Ventures, and we can’t wait to hear how the class plays out.
Global Inequality Is Growing as Billionaires Get Richer
Now let’s return to Davos for a moment, as the good folks at Oxfam America used the annual get-together of the super-rich and powerful to update our understanding of global economic inequality in a new report titled “Takers, Not Makers.”
“In 2024, the world’s billionaires got $2 trillion richer, growing their wealth by roughly $5.7 billion a day. Their fortunes increased three times faster than in 2023, with nearly four new billionaires minted every week. At current rates, the world will see five trillionaires within the next decade,” Oxfam notes, adding, “Meanwhile, the number of people experiencing poverty remains pretty much unchanged from 1990.”
Here’s another fact from the report: “Oxfam’s past research has shown how a “war on taxation” by corporations has seen the effective corporate tax rate (the rate at which pre-tax profits are actually taxed) fall by roughly a third in recent decades, with many mega companies paying next to nothing in taxes,” Oxfam writes. “During the same period, many corporations made record profits.”
To be crystal clear, the pairings in the above two paragraphs — growing billionaire wealth and stagnating poverty, and slashed corporate tax rates and rising corporate profits — are both inextricably linked.
Think of it as a teeter-totter. When billionaires hoard their wealth, that money stops circulating through the economy and economic growth for working people sinks. But when working people have money to spend, that money circulates throughout the economy, creating prosperity for everyone.
Likewise, when tax rates drop corporations keep that money in the form of profits, which they then give away to the elite shareholder class in the form of tens of trillions of dollars of stock buybacks. But if the tax code encourages corporations to invest in their employees and to spend that money on R&D and other programs, that money circulates through the economy. It’s literally so simple that any child who’s ever set foot on a playground can understand it.
Chaos Is the Name of the Game
We try in this newsletter to only focus on real policies that affect the lives of working Americans. The past week has proven that the Trump Administration is purposefully making it hard to discern which policies are real and which are just trial balloons meant to sow confusion and mistrust for government agencies in the general public.
In the American Prospect, David Dayen makes a compelling case that Tuesday’s mass email to two million government employees offering some kind of suspicious “buyout” for workers who want to quit is in the latter category — a loud, illegal, and potentially very expensive distraction meant largely to shake up government employees and make them easier to control.
“The executive branch has no authority from Congress to offer a mass buyout to federal workers,” Dayen writes. “In fact, the OPM website clearly states that the limit for incentive packages for voluntary resignations is $25,000, far less than eight months’ pay for the average federal worker. Some employees can’t even be offered that.”
But the so-called “spending freeze,” which cut grants to and investments in an almost uncountable number of programs that benefit Americans around the country, had an immediate impact that, over the course of a single day, touched the lives of most Americans in some way. Scientists and medical professionals performing potentially lifesaving medical research had to delay their work in order to determine whether they still had funding, and nonprofits had to scramble to ascertain whether they’d still be able to pay their own utility bills if promised grants didn’t arrive as scheduled. The cuts also threatened people on Medicaid in all 50 states, threw school lunch and meals on wheels programs into doubt, and imperiled child care and special education programs that benefit millions of American families.
The freeze was almost immediately blocked by a judge and then rescinded by the Trump Administration, but in just a matter of hours it reminded Americans of the essential investments that the federal government makes in all our lives every day.
It should be noted that while the Trump Administration withdrew the Office of Management and Budget memo that caused the spending-freeze chaos in the first place, there are still a number of executive orders in place that have stopped the flow of investments in programs like the Bipartisan Infrastructure Law and other Green New Deal programs passed over the last four years, halting crucial development in rural and impoverished parts of the country that haven’t seen significant federal investments for decades. The federal hiring freeze has blown up the lives of newly hired government workers who were promised jobs, only to have the rug unexpectedly pulled out from under them. It’s hard to imagine a majority of Americans being happy about having uncertainty injected into their day-to-day lives. If anything, the intended chaos just reminded people of the many often-invisible ways the government interacts with their lives on a daily basis.
2025 Begins with Drooping Consumer Confidence
All of the chaos and confusion I’ve written about in this issue is likely to have an impact on business planning and on consumer spending habits, which were already beginning to falter even before Trump took office. The Conference Board’s monthly consumer confidence index, which gathered data for the month of January ending on Inauguration Day, now shows a downward trend.
“The Conference Board Consumer Confidence Index® declined by 5.4 points in January to 104.1,” The Board reports. “The Present Situation Index — based on consumers’ assessment of current business and labor market conditions — fell sharply in January, dropping 9.7 points to 134.3.”
Meanwhile, “The Expectations Index — based on consumers’ short-term outlook for income, business, and labor market conditions — fell 2.6 points to 83.9, but remained above the threshold of 80 that usually signals a recession ahead.”
Consumers in January demonstrated a drop in confidence for business conditions while “appraisals of the labor market plunged,” the Board reports. “33.0% of consumers said jobs were ‘plentiful,’ down from 37.1% in December. 16.8% of consumers said jobs were “hard to get,” up from 14.9%.”
There was some good news in the report, continuing a trend we’ve seen in self-reported surveys throughout the pandemic: Even though consumers think that inflation will rise this year and are losing faith in the job market and other factors, “Consumers’ views of their Family’s Current Financial Situation were more positive, and six-month expectations for family finances reached a new series high,” the Board reports, adding that “The proportion of consumers anticipating a recession over the next 12 months was stable near the series low.” So, consumers rate the economy as being in bad shape for others, but they rate their own economic circumstances as good, which is a mixed signal we have consistently seen in sentiment surveys since the pandemic began.
If investments in the American people continue to be cut off or otherwise thrown into doubt, it’s hard to imagine these numbers growing over the course of the next month. People aren’t likely to participate in the economy if concerns over the stability of their job or Medicaid coverage are looming over them every day.
This Week in Trickle-Down
- Don’t expect the federal government to talk about the skyrocketing price of eggs anytime soon: “U.S. President Donald Trump’s Federal Trade Commission chair began his stint at the helm of the key agency this week by shutting down requests for public comment on corporate surveillance pricing and other exploitative tactics that were a focus of the FTC under the leadership of Lina Khan,” reports Jake Johnson at Common Dreams.
- “ U.S. President Donald Trump has fired at least two Democratic members of the Equal Employment Opportunity Commission, which enforces federal laws banning workplace discrimination,” reports Reuters. Without those members on hand to form a quorum, the EEOC “cannot adopt rules and legal guidance, direct staff to take certain actions, and issue rulings in discrimination cases brought by federal employees.”
This Week in Middle-Out
- For the American Prospect, David Dayen has found a better way to meet the Trump Administration’s stated goal of removing $2 trillion in so-called waste from the budget. “I’ve tallied up the savings from redesigning a handful of policies to improve effectiveness, and you really could find $2 trillion in net annual federal outlays, with no direct impact on the most vulnerable. The key lies in knowing where to look: profit-hungry contractors, privatized boondoggles, systemic overpayments, and a mountain of tax avoidance,” Dayen writes.
- Along those same lines, Senator Elizabeth Warren has identified 30 ways to immediately save taxpayers hundreds of billions of dollars over the next decade, including allowing Medicare to negotiate for all drug prices, cutting excess military spending, and fully funding the Internal Revenue Service.
- We’re already seeing some evidence that President Trump’s agenda is not scoring points with the broad majority of voters. An eye-opening Reuters poll finds that a clear majority of voters oppose trickle-down policies, including ending requirements for government employees to report gifts, putting tariffs on Canadian and Mexican imports, and ending federal efforts to hire women or minorities.
This Week on the Pitchfork Economics Podcast
The Pitchfork Economics podcast is revisiting a 2021 episode this week, featuring an interview with radio host and author Thom Hartmann about how wealthy oligarchs obtain power in America, and why hoarded wealth is bad for democracy in general.
Closing Thoughts
For BIG, Basel Musharbash explains why the price of fire trucks keeps rising, and the quality and production rate of those fire trucks keep declining: A private equity firm has swept into the fire truck industry and consolidated a number of competitors under one umbrella.
“As one industry executive has observed, ‘There are now times when all vendors at a bid table, each with a “different” product, are all owned and managed by the same parent company. How is that competitive for the purchaser?’ The answer, of course, is that it isn’t,” Musharbash writes.
Because these so-called “competing” firms aren’t really in competition with each other, they don’t have an incentive to provide a quality product in a timely manner. “Indeed, it appears that the dominant manufacturers have managed to turn their delivery failures into financial advantage. Using the purported difficulty of projecting material costs over a 2–3-year lead time as an excuse, they have imposed ‘floating’ price clauses onto their customers — allowing them to increase the final price of a rig when it finally goes into production.”
As you might expect, this consolidation has caused dire effects for Los Angelenos who have been in the path of wildfires this month: “One of the reasons that the recent Los Angeles wildfires were so hard to contain, according to Los Angeles Fire Department (LAFD) Chief Kristin Crowley, is that more than half of the LAFD’s fire trucks have been out of service,” Musharbash explains.
And for the working-class LA neighborhoods like Altadena that have been ravaged by the fires, homeowners who lost everything will likely learn that the tax code has been rigged to provide the most help to the wealthiest people in the fire’s path.
For the Hill, Donald Tobin has written an excellent article that calls to rewrite the tax code in order to help regular Americans who lose everything in disasters: “The tax code provides some relief for a small number who suffered economic loss from natural disasters, but most of that relief will go to the wealthiest taxpayers, those who need the least help,” Tobin writes.
The tax code has a provision for victims of disasters, he explains, but “The provision has complicated loss thresholds, income limitations and exclusions. By the time a taxpayer climbs over all these hurdles, there is often nothing left to deduct as a loss. The ones who make it past these hurdles are usually the wealthiest taxpayers with large losses,” Tobin explains.
Tobin says Congress “should examine changing the casualty loss deduction to a refundable casualty credit designed to provide basic assistance to victims.” This is all very technical, but it basically means government would bail out working Americans who lose their homes. “If Congress provides a refundable tax credit to disaster victims, all victims will get the same amount. This would deliver tax credits directly to taxpayers and would provide benefits to those who need it the most.”
This would be a relatively simple change to the tax code, and it would create immediate positive results for working Americans who are often priced out of their homes when a disaster strikes. This is what happens when you view taxes as another tool for government to get money to the places where it’s needed most, and not just another tool for amassing the wealth of the richest Americans and corporations.
Onward and upward,
Zach
Fear and Loathing at Davos was originally published in Civic Skunk Works on Medium, where people are continuing the conversation by highlighting and responding to this story.