Buckle Your Seatbelts: The Aviation Industry Says The Trump Administration’s Plans For Sweeping Federal Jobs Cuts Will Be “Bad For Everyone”
- In a nutshell: The International Air Transportation Association (IATA) calculates that sweeping federal job cuts could end up costing the US economy $87 billion - a result that it argues would "be bad for everyone."
Some US airlines might be fawning over the Trump administration and publicly praising plans to bolster the numbers of air traffic controllers, but the trade body that represents more than 340 airlines around the world is less enthusiastic about the President’s plans for sweeping federal job cuts.
While it remains difficult to work out how many jobs might be targeted by Elon Musk and his team at DOGE, the International Air Transportation Association (IATA) has crunched some of the numbers, and they don’t make for happy reading.
In fact, the results could be so disastrous that the analysts at IATA conclude that the Trump administration’s plans to slash the federal wage bill could result in an outcome that is “bad for everybody.”
IATA is working off the widely reported figures that 26,500 federal employees have so far been fired from various agencies and administrations, while a further 75,000 federal employees have accepted a deferred resignation deal.
In addition, probationary staff firings could affect as many as 200,000 employees. That brings the total number of job losses to around 300,000.
On the face of it, benefits sound enticing. IATA explains: “Firing hypothetically 300,000 of the 2.3 million in the sector would represent 13% of total federal workers. In that case, the savings on the wage bill would be USD 35 billion (13% of USD 271 billion), not including any severance pay or litigation costs.”
But what DOGE won’t tell you is that 300,000 job losses would potentially lift the unemployment rate by 0.2 percentage points.
With unemployment benefits lasting a maximum of 26 weeks in most states, IATA estimates that American taxpayers would be left with a $3+ billion bill for unemployment benefits for all those ex-federal workers.
The news, however, only gets worse from here: “In economics, Okun’s law is an empirically observed relationship between unemployment and GDP whereby a 1% increase in the former would cut the latter by 2%. Hence, adding 0.2% to unemployment would reduce GDP by USD 119 billion (0.4%).”
Saving $35 billion in wages could, therefore, end up costing the US economy $87 billion, and that doesn’t even include “second-round effects stemming from reduced government services.”
IATA isn’t really interested in the politics of slashing federal worker numbers but rather how political decisions could affect the economy and, in turn, the amount of money that Americans have in their pockets to spend on air travel.
The aviation industry is particularly susceptible to even small changes in the economy, and while airline chiefs aren’t yet publicly sounding the alarm over looming trade wars and the economic damage they could cause, it’s likely to be a different story behind closed doors.
Minor point: Unemployment benefits are funded through a combination of federal and state payroll taxes paid by employers, forming a joint federal-state program. These taxes are pooled into a trust fund, from which benefits are paid to eligible workers.
Your last two paragraphs are really the crux of it. They are trying to forestall revenue loss, but “showing their work” using a bunch of scary made-up numbers.
GDP is not the same as government revenue. So while iata members may be sensitive to GDP diminution due to increased unemployment rate, there budgetary relief ( or cost) too the government doesn’t include GDP n calculation.
There is so much wrong with this “prediction”. For example, not everyone “fired” by DOGE is eligible for unemployment. Probationary, those who accept a deferred resignation etc they all most likely won’t get a penny from the state UE programs…
Also, while talking about GDP why IATA conveniently forgets about Phillips curve? Inflation savings could very well surpass that of GDP drop.
You say it’s not political…But fail to do your research and just regurgitate the BS you’re fed by a left wing propaganda.