The link to the story in the Chronicle of Higher Education is http://chronicle.com/article/Notre-Dame-to-Dissolve/48460. The bad guy in this is the dean, who wanted to have a "highly ranked" graduate program in economics (there was already a conventional econ department in the business school, but that was under another dean). So, he took away the grad program from the famous and productive, but heterodox and book-publishing (many of them very influential and important, check out Phil Mirowski's work) department. They set up what orthodox economist Robert Solow warned would be a "third rate MIT department," which he said we did not need another of. Now the axe is falling, and the heterodox department is to be completely eliminated. Supposedly the remnant tenured faculty will be scattered among other departments where they will be allowed to teach their upper level courses, but no principles or intermediate theory ones.
The department contains a number of important economists. Mirowski is the author of Machine Dreams and More Heat than Light. David Ruccio is the editor of Rethinking Marxism. Amitava Dutt is a development economist who is the author of numerous books, and there are others. This is a sad day, especially in light of the discredit that economic orthodoxy is standing in now.