Today, President Trump released his fiscal year (FY) 2027 budget blueprint, two months past the February statutory deadline. The administration proposes a 42 percent increase in defense spending while making paltry cuts to nondefense programs. The budget omits even mentioning, let alone spelling out, the needed reforms to the major entitlement programs driving the debt, such as Medicare and Social Security.
For the second year in a row, the president’s budget abdicates the fundamental responsibility of putting the debt on a sustainable path.
With deficits at nearly $2 trillion and publicly held federal debt set to exceed the nation’s entire economic output this year, Congress desperately needs fiscal responsibility. Congress ought to reject the president’s proposed spending boosts. Congress should use reconciliation to cut spending and reduce the deficit rather than to increase it. And to arrest the long-term growth of the debt and deficit, Congress needs to adopt meaningful budget targets and establish an empowered independent fiscal commission to address the growth of old-age retirement and health care programs.
Reject the Defense Surge and Embrace Nondefense Cuts
President Trump’s FY2027 budget requests $1.8 trillion in discretionary budget authority, a nearly $100 billion increase over enacted FY2026 discretionary levels. On top of this, the administration requests $350 billion in new mandatory spending via reconciliation, bringing total requested new budgetary resources for FY2027 to $2.2 trillion.
Most of that new spending is driven by a $1.5 trillion defense spending request, a more than $440 billion increase over the combined FY2026 enacted level ($903 billion) and the $155 billion in additional defense spending from the One Big Beautiful Bill Act (OBBBA). A $1.5 trillion defense budget is fiscally reckless and militarily unnecessary.
This defense surge is partially offset by cuts to nondefense programs. Year over year, the administration requests a $73 billion, or 10 percent, reduction in base nondefense discretionary resources. That is far less aggressive than last year’s FY2026 presidential request, which proposed a 23 percent cut. The FY2027 request retreats from last year’s modest spending restraint on the nondefense side.
To be fair, the budget includes a number of worthwhile program cuts and eliminations. For example, the budget proposes eliminating Community Development Block Grants (CDBG), a federal subsidy program plagued by waste and pork-barrel politics. It also takes a step towards privatizing the TSA and returning disaster responsibility to the states. Cuts like these are worth pursuing and long overdue, even if they are swamped by the scale of the defense increase.
Over the next decade, the administration envisions $13.5 trillion in defense spending and $6 trillion in nondefense spending. For context, the CBO baseline projects 10-year discretionary budget authority at $10.3 trillion for defense and $9.8 trillion for nondefense. Shifting dollars from domestic programs to the Pentagon is shuffling deck chairs on the Titanic given our mounting fiscal crisis. By 2036, net interest costs, Medicare, Medicaid, and Social Security will consume 100 percent of federal revenue. The current growth trajectory for entitlements will inevitably crowd out defense spending, whether war hawks like it or not.
The presidential budget is supposed to be the administration’s opportunity to explain to the American people how it would put our budget back on track. This budget entirely fails to do so. It includes no comprehensive 10-year fiscal plan to address mandatory spending and revenue, and thus no path to stabilizing the debt. The budget contains no proposals to address the looming automatic benefit cuts to Social Security and Medicare. And the budget continues the use of reconciliation to fund discretionary priorities, eroding the checks and balances that the appropriations process is supposed to provide.
Here are reactions to the president’s budget from fellow Cato scholars.
Trump’s Defense Budget Digs the Nation Further into a Fiscal Hole
Cato’s Justin Logan and Benjamin Giltner explained,
The White House has requested a $1.5 trillion defense budget for 2027, a historic high for the United States.
A defense budget should follow strategy. America’s military strategy and foreign policy are so expansive that they continually force the nation’s defense budget to rise. Making things even more bizarre, a Pentagon spokesman recently pushed back on the idea that America’s wars are drawing down its arsenals, protesting that the US military “has everything it needs to execute any mission at the time and place of the President’s choosing and on any timeline.” If that is true, why do we need another $500 billion in spending?
The solution is to scale back American ambitions in the world to the level required to protect American sovereignty, territory, and prosperity. This budget throws good money after bad, digging the nation even further into a fiscal hole.
Trump’s Budget Makes Meaningful Efforts to Slash Ineffective Education Programs
Cato’s Andrew Gillen said,
The Department of Education’s proposed budget is $2.3 billion less than last year, a 2.9% reduction. However, this understates the impact of the proposed budget, which cuts $12.7 billion from a host of largely ineffective legacy programs such as the Fund for the Improvement of Postsecondary Education (FIPSE), which in theory funded innovative projects to help improve the content and delivery of education, but in practice was used as a slush fund (e.g., $1.2 million was used for San Diego Community College’s LGBTQIA+ Pride Center staffing). The bulk of the proposed cuts ($10.5 billion) would then be used to fill the Pell grant shortfall, which is essentially a means-tested voucher for college enrollment. So while the topline reductions may be underwhelming, the proposed budget does make considerable progress in reducing and eliminating ineffective and unnecessary government programs while mostly using the savings to help students from low-income families have a shot at attending college.
Presidential Budget is Silent on Coming Tax Increases
Cato’s Adam Michel said,
One glaring omission in the budget is any clear explanation of the administration’s assumed revenue baseline. A presidential budget should make clear how the administration plans to deal with the expiration of major tax provisions in the One Big Beautiful Bill Act (also known as the Working Families Tax Cut). By staying silent, the budget says nothing about the automatic, roughly $250 billion annual tax increase starting three years from now. By leaving the American public guessing about how much money the government plans to take from them, this budget shows a troubling disregard for transparency and for the financial certainty families need to plan their lives.
Trump’s Budget Includes Unneeded, Deficit-Increasing Immigration Funding
Cato’s David Bier explained,
The president’s budget treats ICE and CBP as if Congress did not already appropriate sufficient funds for them in the One Big Beautiful Bill Act. Neither agency needs any additional money. Worse, this spending will indirectly increase the deficit by removing tax-paying immigrants and reducing economic growth. Congress could achieve more deficit reduction by ignoring these requests entirely.
Presidential Budget’s Shipbuilding Subsidies Are an Inefficient, Costly Approach
Cato’s Colin Grabow explained,
President Trump’s proposed budget features over $68 billion for new Navy ships alone, including auxiliary vessels to be built to commercial standards. Questions should be asked about the cost-effectiveness of such outlays. The administration has framed the use of commercial standards as a means of broadening competition, but this approach is unlikely to produce significant competition in practice. After all, there isn’t much of a commercial shipbuilding base to draw from. Only two active shipyards in the United States, Philly Shipyard and General Dynamics NASSCO, account for the overwhelming majority of ships built to such standards over the last decade. The existing John Lewis-class oiler program is already built to commercial standards and ABS classification rules, yet NASSCO remains its sole builder, with deliveries scheduled through 2035. Procurement costs for that class have increased from $543 million in FY 2018 to over $900 million per vessel today.
Injecting billions of dollars into a system with limited competition, limited capacity, and poor cost control will certainly help the administration meet its goal of spending more money, but it is a questionable way to meet US defense needs. A more effective approach would allow noncombatant vessels — replenishment oilers, sealift ships, and similar auxiliaries that lack sophisticated weapons systems — to be built in the shipyards of treaty allies. Japan and South Korea alone account for approximately 40 percent of global shipbuilding output and can deliver comparable vessels at significantly lower cost. Allies that the United States is prepared to fight beside should also be partners in equipping its military.
Trump’s Budget Takes Positive Steps Towards Cutting Aid-to-State Programs
Cato’s Chris Edwards said,
Trump’s 2027 budget proposal would cut numerous aid-to-state programs, which is one needed strategy to help get federal deficits under control. The proposed cuts to grants for education and community development are particularly well-targeted, as these are some of the most wasteful areas of spending. But much larger reforms are required, including cuts to state grants for transportation, health care, and welfare. With exploding debt, the federal government can no longer afford to fund so many properly state, local, and private activities.
Energy Dominance Will Not Come from Government Subsidies
Cato’s Travis Fisher explained,
The President’s FY 2027 budget increases spending at the Department of Energy in a variety of areas, most notably proposing to spend an additional $4.7 billion to bolster energy dominance. Although a robust energy sector is imperative to power the data centers necessary for artificial intelligence (AI), true energy dominance will not come from increasing spending to well above $50 billion per year at the Department of Energy. It will come from advancing free enterprise and unleashing the dynamic innovation that comes from America’s private sector. As Speaker Mike Johnson recently said, ‘America will win the AI race… if government resists the siren song of control.’ Unfortunately, the President’s budget is not immune to the siren song of government control.
Presidential Budget Fails to Responsibly Budget for Health Care Costs
Cato’s Michael Cannon said,
Amid a $2 trillion deficit (6 percent of GDP) and $30 trillion debt (101 percent of GDP), early reports indicate that the president’s budget would: (1) immediately increase military spending 40 percent, (2) hide the largest fiscal cost of the Iran war, i.e., the long-term cost of the additional veterans benefits, and (3) employ ‘dessert first, spinach later’ budgeting, i.e, increase spending immediately while putting austerity measures off into the future.
Congress absolutely must cut and reform federal health care spending, for the sake of taxpayers and enrollees in those programs. But if Congress repurposes the savings toward additional military spending, it will have achieved no good at all. Worst of all would be if Congress uses phony health care cuts simply to boost military spending.
If there’s enough waste and fraud in government health care spending to fund a 40 percent increase in military spending, then we should focus exclusively on those programs.
Congress Must Do What This Budget Won’t
This budget, like last year’s, does not address the programs actually driving the debt. Old-age retirement, health care, and net interest costs account for virtually all the projected spending growth over the next few decades. Failing to address these components of the budget is a failure to budget responsibly.
Congress ought to reject the administration’s mammoth defense spending increase. A responsible budget should cut both defense and nondefense programs. Ideally, Congress should target a deficit-to-GDP ratio of 3 percent or lower to achieve debt sustainability. That target, combined with an empowered fiscal commission, could guide Congress in making the entitlement reforms needed to put the budget back on the right track. And if Congress is dead set on using reconciliation to pass unwise defense or other spending increases, they should at least offset the spending to make the package fiscally responsible.
Trump has previously said he would “balance the federal budget.” That objective, abandoned almost immediately after it was uttered, is not even paid lip service in this latest presidential budget. To call this budget a disappointment is an understatement.
Note: For comparison to prior presidential budgets, see our analysis of Biden’s FY2024 budget here and Trump’s FY2026 budget here. This will be a running blog that we will update with additional information going forward.
