WSJ What’s News - DOGE’s Next Target: Government Office Space

Episode Date: February 25, 2025

P.M. Edition for Feb. 25. Elon Musk’s Department of Government Efficiency is looking to end or consolidate nearly 100 leases for government agency offices. WSJ reporter Peter Grant discusses the impact on the recovering office market. Plus, thousands of employees on church retirement plans have lost some or all of their pension benefits. WSJ special writer Theo Francis explains how these plans sidestep federal oversight—and employees pay the price. And how a $25 gift card is tearing apart a community in the Hamptons. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

With record levels of dry powder available for investment, find out what's in store for private markets in 2025 and beyond. Listen to Crafting Capital in partnership with UBS at partners.wsj.com slash UBS, Spotify and Apple podcasts. Why buying stuff in person is so much less enjoyable than it used to be. Plus, Doja's next target? Government buildings. And DC's entire office real estate market

could feel the impact. By and large, with a shrinking government, a shrinking workforce, things do not look good for Washington in the immediate future. And the pensions of thousands of employees on church retirement plans may be in trouble. It's Tuesday, February 25th. I'm Alex Osola for the Wall Street Journal.

This is the PM edition of What's News, the top headlines and business stories that move the world today. First up, yet another sign that consumers are not feeling too chipper. The Conference Board released its closely watched index of consumer sentiment for February. Consumer confidence fell for the third straight month, with the biggest month-on-month drop in the last three years. Also, for the first time since June 2024, consumer expectations crossed the threshold that usually signals a recession ahead.

Economic worries and tariff fears dragged on U.S. markets today, with tech stocks among the hardest hit after yesterday's selloff. The Nasdaq fell about 1.3 percent, and the S&P 500 dropped roughly half a percent, while the Dow ticked up about 0.4%. The rise of online shopping has made it easy to buy pretty much anything at any time, without ever leaving your couch. Unfortunately, it's also made the experience of shopping in person much, much worse. My colleague Pierre Bienhame spoke with Suzanne Kappner, who writes about the retail industry for the Wall Street Journal, and asked her why the in-store experience has become worse for many customers.

Retailers, they've expanded the breadth of their online offerings tremendously in recent years, you know, to compete with this endless aisle that Amazon offers. On top of that, you know, they've been opening smaller stores. So there's been like a confluence of factors that have contributed to this sense by consumers that, God, you know, shopping is not so much fun anymore. IBM conducted a survey last year that found that three quarters of consumers actually prefer shopping in physical stores, but only nine percent are satisfied with the in-store experience. And a big complaint is that the stores lack

product variety and availability. The consulting firm Alex Partners recently looked at 30 retailers and compared their online assortment to what they carry in stores. And they found on average only 9% of the online offering of women's clothing was available in physical stores. For department stores the percentage was 7%. At mass merchants it was only 2%. Specialty retailers were a bit better with about a third of their online goods available in stores. And does this have any effect on the bottom line when online purchase versus one done in store? You know it's funny because a lot of

retail CEOs will say well I don't really care where a customer shops. They can shop wherever they want online, in store, a combination of the two. But in fact, when a customer shops in store, it's much more profitable than when they shop online because the cost of packing that order and shipping that order and then online returns tend to be higher. All of that eats into profits of online orders. That was reporter Suzanne Kapner speaking with Pierre Bienamé. Coming up, why Doja's effort to cut federal leases could be a hit to the office market

from California to D.C. That's after the break. Americans love using their credit cards, the most secure and hassle-free way to pay. But DC politicians want to change that with the Durbin Marshall credit card bill. This bill lets corporate megastores pick how your credit card is processed, allowing them to use untested payment networks that jeopardize your data security and rewards. Corporate megastores will make more money, and you pay the price. Tell Congress to Guard Your Card, because Americans lose when politicians choose. Learn more at GuardYourCard.com.

In Washington, 21 federal employees who had been working with Elon Musk's Department of Government Efficiency have resigned. In a letter, the ex-employees who didn't list their names criticized the Doge process and said that they wouldn't offer their expertise to overhaul the government if it meant undermining essential services. Meanwhile, Doge is targeting nearly 100 leases at government agency offices for termination or consolidation, on top of the Trump administration's effort to sell two-thirds of federally owned office buildings,

which we've talked about before on the show. Abandoning so much office space could have a ripple effect on the office market in Washington and beyond. Peter Grant, a reporter for The Wall Street Journal, is here to tell us more. Peter, government-owned or operated space is a pretty small portion of the overall US office market. So what impact might this have? Well, it is a small amount compared with the overall office market,

but the government is one of the largest tenants in the US, and it does have operations throughout the country. Obviously, most of the operations are in the Washington, D.C. area, where the impact of a contraction would be felt the most. But the government is in many, many, many cities. And even adding one or two percent of office space to these markets could have an impact, especially considering how hard the office market has been hit in recent years. Yeah, let's talk a little bit about DC specifically.

So, DC's office market was one of the hardest hit during the pandemic. It's just starting to recover. What could this sort of new glut of office space mean for that market? DC was one of the hardest hit markets, primarily because the return to office by government workers was particularly slow. And there's just a lot of underutilized space, and there was a lot of surplus space even before the pandemic in DC. So it was never that great, but the vacancy levels soared during the pandemic and has really not come back. But by and large, D.C. is going to get hurt on a number of different levels by all this obsolete space. And it's going to hurt the government because of tax collections. It's going to hurt small businesses because

if workers aren't there, they're not going to be going out to bars and restaurants and stores. What are some other cities or markets that could feel this? Well, New York has a lot of U.S. government offices. Ohio has a lot of U.S. government offices. Denver does. They're really all over the country. And it does seem the Department of Government Efficiency

has its target on a lot of these offices, especially the ones that are underutilized as a way of saving money. Last month, the Trump administration ordered government workers back to the office full-time. That's happening at the same time, it's the government is cutting back on its office footprint. How do those things fit together? There is a little bit of push and pull here. On one hand, it would be good for the office market if the

government does require workers to come back into the office at a higher rate than they were attending the office during the Biden administration. On the other hand, the fact is that they are cutting employees and shrinking the government at a much higher rate than they're requiring people be back in the office. So it's overall negative for office space. That was WSJ reporter Peter Grant. Thank you, Peter. My pleasure. My pleasure.

House Republicans' budget plan that would pave the way for President Trump's tax border and spending cut agenda could soon be put to a vote, but its passage is far from a sure thing. As of this morning, at least four Republican lawmakers said they opposed the plan, and others were still undecided. With a slim majority, House GOP leaders can afford just one defection if all Democrats

are present and vote no. For now, the House leaders are saying that they are pressing ahead with a vote on the budget resolution as early as this evening, though that schedule could slip. What Happens to Your Pension if Your Employer Goes Broke? What happens to your pension if your employer goes broke? Typically, a federal insurance program kicks in thanks to ERISA, the Employee Retirement Income Security Act of 1974. But churches and other religious organizations can opt out of the

federal system. And that's left hundreds of thousands of workers vulnerable. Pierre Bienneme spoke to Theo Francis, who covers business news for the Wall Street Journal, and asked him about what's going on. You have a few cases around the country, several where really pension plans or other retirement plans have run into real trouble. And that's usually when the employees of these religious organizations discover that they don't have the same protections that other employees and other retirees have. So in a few cases, you've had situations where pension plans have not been funded, or the employer goes bankrupt and can't meet those obligations, and the retirees are the ones who really bear the brunt of it.

Matthew 14 How many retirees have been affected by this kind of lapse, and how much money are we talking about? David Often, people don't find out that the plans are underfunded until it's too late, or until they are at risk of losing their benefits. Nobody knows exactly how many people are covered by these kinds of plans. The IRS was able to identify almost 600,000 people who contributed to church retirement plans, and they contributed about $1.8 billion in that one year alone in 2019. Another analysis by the Government Accountability Office found that a variety of kinds of retirement plans at a relatively small number of denominations

had a total of $89 billion in assets. So it's a lot of people and a lot of money. We also don't know how many times these kinds of plans fail and really leave their retirees and employees in the lurch. We don't really have an overall picture because one of the things that these plans don't have to do is report on their financial status either to the Department of Labor or the IRS or in most cases to the participants themselves. That was WSJ reporter Teo Francis speaking to Pierre Bienamay.

And finally, what does a $25 Amazon gift card mean to you? Well, a small town in the Hamptons is convulsing over one. A missing gift card has prompted a police report, accusations of foul play and bullying, and a disciplinary trial that has generated more than 1,000 pages of testimony. The fees for the arbitrator overseeing the hearing are already close to $25,000 and are only going to go up from here. The details, honestly, are bonkers, and you're definitely going to want to sink your teeth

into the whole story. So we got you. We'll leave you a link in the show notes. And that's what's news for this Tuesday afternoon. Today's show is produced by Pierre Bieneme and Anthony Bansi with supervising producer Michael Cosmitis. I'm Alex Osolove for The Wall Street Journal. We'll be back with a new show tomorrow morning.

Thanks for listening.