The President’s Budget Doesn’t Address National Debt, and Calls for Highest Defense Spending in History
As lawmakers prepare the fiscal year 2027 (FY2027) appropriation bills, the Administration’s budget submission sets out its funding requests for executive agencies. The Administration would increase total discretionary spending from the $1.7 trillion enacted in fiscal year 2026 to $1.8 trillion in fiscal year 2027. However, the submission does not substantively address major mandatory spending programs, and most critically, it excludes deficit and debt projections, rendering the submission incomplete. Because the Administration’s proposal is incomplete, it is incapable of presenting a full picture of the budgetary challenges facing the United States or allowing for full analysis of the Administration’s plans to address them.
Significant Spending Increase For Defense
The Administration requested a historically high increase for defense spending, and more moderate increases for 4 other agencies.
- Funding for the Department of Defense would increase by 44 percent year-over-year, from $1.0 trillion to $1.45 trillion. Combined with select defense-related funding for other federal agencies, total funding for national defense for FY2027 would total $1.5 trillion under this budget submission – by far the highest defense spending in history. However, it is important to note that $350 billion of that increase is assumed to be provided through new, mandatory funding enacted through the budget reconciliation process.
- Spending for the Departments of Justice, Veterans Affairs, Transportation and Energy would increase more modestly – by 13 percent ($4.7 billion), 8.7 percent ($11.5 billion), 6.2 percent ($1.6 billion), and 1.8 percent ($0.9 billion), respectively.
- All other departments would face reduced appropriations. Funding for the Department of State and international programs would fall from $51 billion in 2026 to $36 billion in 2027, a drop of 30 percent. Other large reductions were proposed for the Departments of Labor ($4 billion in program cuts, or 26 percent) and Agriculture ($5 billion, or 19 percent).
Some Agencies Would See Cuts of More than 50 Percent
The President’s Budget also includes appropriations requests for major independent federal agencies. Almost all major agencies receive a significant funding cut under this budget request. Notably, the Small Business Administration (SBA), National Science Foundation (NSF), and Environmental Protection Agency (EPA) see reductions of more than 50 percent.
Other appropriations outside of the base amounts would be reduced substantially, from $99 billion in 2026 to $15 billion in 2027. Most of that $84 billion in non-base funding stems from the expiration in remaining funding from the Infrastructure Investment and Jobs Act (offset by small increases for disaster relief and other, smaller categories).
More Optimistic Economic Assumptions Than Other Forecasters
The Administration’s budget forecasts significantly higher real GDP growth, lower unemployment, and lower interest rates compared to independent forecasts from the Congressional Budget Office (CBO), the Federal Reserve, and Blue Chip.
- The Administration forecasts that economic growth will average approximately 3 percent in real terms over the decade, averaging more than 1 percentage point higher over the decade than the other leading forecasts.
- The Administration also forecasts lower interest rates compared to CBO and Blue Chip. Specifically, OMB forecasts the 10-year interest rate will average 50 and 67 basis points lower than those forecasts, respectively.
- The Administration is also comparatively optimistic with respect to unemployment, assuming more than half a percentage point lower joblessness on average compared to the other major forecasts.
These assumptions generally lead to higher baseline revenues and reduced interest costs than would be achieved under the economic forecasts conducted by independent forecasters.
Conclusion
For the second year in a row, the Trump Administration has submitted a budget that excludes key fiscal variables such as debt and deficit projections. While the submission does include the Administration’s economic assumptions and more detailed analytical commentary than its FY2026 submission, nevertheless, the budget largely excludes projections for mandatory spending programs and net interest, which comprise over more than 70 percent of federal outlays, and are at the crux of our nation’s fiscal challenge. Critically, the budget submission excludes the Administration’s deficit and debt projections — meaning the public and policymakers cannot meaningfully evaluate the Administration’s outlook for U.S. fiscal policy. Given our already dangerously unsustainable fiscal outlook, lawmakers should use the annual appropriations process to improve our debt outlook — or at the very least, do no fiscal harm.
Photo by Pool/Getty Images
Further Reading
Tax Reform Alone May Not Be Enough to Stabilize the National Debt
A new report from the Tax Foundation breaks down the drivers of the fiscal imbalance and concludes that tax increases alone cannot solve the problem.
A Gas Tax Holiday Costs Billions, But Consumers See Only Marginal Savings
If the full savings from the gas tax holiday were passed on to consumers, the average licensed driver would only save approximately $8.90 per month.
How Does the Capital Gains Tax Work, and What Are Some Proposed Reforms?
While the capital gains tax affects anyone selling a capital asset, higher-income individuals are typically subject to the tax more so than average Americans.