Thanks for returning to this. Ok, so this is more in line with what you were talking about yesterday (where I was mostly confused about the age and labor thing you hinted at).
This sounds like a pain for your wife and her department and I'm glad that I'm not and hopefully will never be in a position to have to make decisions like this.
Having to fight after a retirement to keep a tenure line is almost a universal problem at this point, and no department anywhere is safe. "Reduction in faculty" and "losing spots" are trickier things to measure though (based on what you've told me) because tenure lines only come up a couple times in a generation. I obviously can't respond to your particular story, but if a popular major would lose a line that's definitely bad news. But I don't think you can be upset that another major isn't *losing* lines. A liberal arts school especially may have longstanding commitments to offering particular subjects. What's to say that those dwindling humanities majors won't have a similar five-year surge in the future? You'd advocate reducing faculty even knowing that it could take a decade to get a new line?
To put it in awful, administrative terms, do you grant a new line to a major with five-year growth over a dwindling major with "falling numbers over a decade"? Just depends on what they think about trends, I guess. Even though you say you don't want to treat higher education as a business, the way you describe it kinda sounds like one. I agree it doesn't seem to make much sense.