How much government spending will Trump cut before 2027?
Short Answer
Both the model and the market expect at least 50 billion in government spending cuts before 2027, with no compelling evidence of mispricing.
1. Executive Verdict
- Trump's FY 2027 budget proposes increased defense spending.
- Defense spending likely outweighs planned non-defense cuts before 2027.
- Net government spending is projected to increase, not decrease.
- FY 2027 budget targets $73 billion in non-defense spending reductions.
- Inflation and tensions may affect FY 2027 defense budget negotiations.
- The market resolves if spending decreases by at least $250B (Q4 2024-Q4 2026).
Who Wins and Why
| Outcome | Market | Model | Why |
|---|---|---|---|
| At least 250 billion | 7.2% | 2.5% | Trump's FY 2027 budget proposes a net spending increase, making all specified cuts unlikely. |
| At least 500 billion | 5.2% | 2.2% | Trump's FY 2027 budget proposes a net spending increase, making all specified cuts unlikely. |
| At least 1 trillion | 5.6% | 1.9% | Trump's FY 2027 budget proposes a net spending increase, making all specified cuts unlikely. |
| At least 750 billion | 3.6% | 2.0% | Trump's FY 2027 budget proposes a net spending increase, making all specified cuts unlikely. |
| At least 2 trillion | 5.1% | 1.8% | Trump's FY 2027 budget proposes a net spending increase, making all specified cuts unlikely. |
Current Context
President Trump's FY 2027 budget proposes specific non-defense cuts and defense increases. Released in April 2026, the proposal outlines a plan to cut non-defense discretionary spending by $73 billion, representing a 10% reduction from the FY 2026 enacted levels [^][^]. Concurrently, the budget requests $1.5 trillion in base defense budget authority, marking a substantial increase of approximately 28% from the FY 2026 enacted level of $903 billion [^][^].
Economic conditions in 2026 show moderate growth amid inflationary pressures. Economic forecasts for 2026 and 2027 project moderate real GDP growth, with annual average estimates generally ranging between 2.0% and 2.2% for 2026 and 1.8% to 2.1% for 2027 [^][^][^][^]. As of June 2026, the U.S. economy is experiencing inflationary pressure, with May 2026 inflation reaching 4.2% annually, largely fueled by energy price spikes associated with the ongoing conflict in Iran [^][^][^].
2. Market Behavior & Price Dynamics
Historical Price (Probability)
Outcome probability
Date
This market has demonstrated a stable, sideways trading pattern, moving within a relatively tight range of 4.0% to 10.0%. The price started near its peak at 9.9% and briefly touched a resistance level at 10.0% before declining to its current probability of 7.6%. The low of 4.0% has acted as a clear support level. The overall price action suggests a consistent, albeit low, probability assessment from traders over the observed period.
The market's dynamics appear to be influenced by the specifics of a presidential budget proposal. The proposal, released in April 2026, is reported to include $73 billion in non-defense discretionary cuts, a development that may have initially supported the price at its high point near 10%. However, the same proposal is also reported to call for a substantial increase in defense spending. The subsequent drop to 7.6% suggests traders are weighing the possibility that the defense spending increase will offset the non-defense cuts, leading to no net decrease in total government spending. It also may reflect skepticism that Congress would pass the proposed cuts before the 2027 deadline.
With a total of 3,604 contracts traded, the market has seen moderate activity. The lack of volume in the provided sample data points during the price drop from 10.0% to 7.6% could imply that the move occurred on low conviction or as a result of market makers adjusting odds rather than a wave of active trading. Overall, the consistently low price below 10% indicates a strong market sentiment that significant, net government spending cuts are unlikely to be enacted before 2027, factoring in the full scope of the budget proposal and the legislative challenges involved.
3. Market Data
Contract Snapshot
A "Yes" resolution occurs if U.S. government spending (FGEXPND, verified via FRED) is at least $50 billion below its Q4 2024 level in any quarter from Q1 2025 through Q4 2026; otherwise, it resolves to "No." The market closes early if this condition is met, or by March 31, 2027, at the latest. Insider trading is prohibited for individuals with material non-public information or those employed by Source Agencies.
Available Contracts
Market options and current pricing
| Outcome bucket | Yes (price) | No (price) | Last trade probability |
|---|---|---|---|
| At least 50 billion | $0.09 | $0.96 | 8% |
| At least 250 billion | $0.07 | $0.94 | 7% |
| At least 1 trillion | $0.05 | $0.97 | 6% |
| At least 500 billion | $0.07 | $0.95 | 5% |
| At least 2 trillion | $0.05 | $0.99 | 5% |
| At least 750 billion | $0.07 | $0.97 | 4% |
Market Discussion
Trump’s FY2027 budget proposal calls for cutting non-defense spending by $73 billion (10%) while defense would rise, serving as a starting point for appropriations negotiations [^][^][^]. However, a related prediction market covering spending cuts before Trump’s term ends (Q4 2024 to Q4 2028) indicates low probability (mid-high single digits to low tens of percent) for cumulative net spending cuts of at least $250 billion, reflecting market participants' expectation of minimal reductions [^][^].
4. Which federal agencies and programs does Trump's FY 2027 budget target for its planned $73 billion in non-defense spending cuts?
| Proposed Non-Defense Spending Cut | $73 billion (10%) [^][^][^] |
|---|---|
| Proposed HUD Budget Cut | $10.7 billion (13%) [^][^] |
| Proposed EPA Budget | $4.2 billion (52% cut) [^][^] |
Trump's FY 2027 budget proposes significant non-defense spending reductions. The proposed budget seeks a $73 billion cut in non-defense spending, representing 10% of the base non-defense discretionary budget, while simultaneously planning an increase in defense spending [^][^][^]. This comprehensive plan specifically outlines various federal agencies and programs for substantial reductions [^][^].
The Department of Housing and Urban Development faces substantial cuts. HUD is a primary focus for these reductions, facing a proposed $10.7 billion, or 13%, cut to its FY 2027 discretionary budget authority compared to 2026 enacted levels [^][^]. Several HUD housing and community development initiatives, including HOME, CDBG, HOPWA, and FHIP, are slated for reductions or zero-funding [^][^]. Additionally, the Community Development Financial Institutions (CDFI) Fund, managed by the U.S. Treasury, is projected to see a $204.5 million (approximately 63%) cut [^][^][^]. Proposals aim to eliminate its discretionary grant programs and end its bond guarantee loan authority [^][^][^].
Further budget reductions target environmental and public health programs. The FY 2027 proposal outlines additional cuts, including a 52% reduction to the Environmental Protection Agency (EPA), which would bring its funding to $4.2 billion [^][^]. Public health programs within Health and Human Services (HHS) are also targeted, with a $5 billion cut proposed for the National Institutes of Health (NIH) and $356 million for the Administration for Strategic Preparedness and Response (ASPR) [^]. Furthermore, the refugee resettlement program is proposed to be cut by $768 million, and the Unaccompanied Alien Children program by $819 million, as part of these broader non-defense discretionary reductions [^].
5. What are the primary points of contention between the White House's FY 2027 budget and the Congressional Budget Office's baseline that could alter final spending levels?
| Projected Deficit Difference (FY26-FY36) | ~$6.3 trillion lower (President's budget vs. CBO's February 2026 baseline) [^] |
|---|---|
| White House Real GDP Growth (2026) | 3.5% [^] |
| CBO Real GDP Growth (2026) | 2.2% [^] |
The primary points of contention between the White House's FY 2027 budget and the Congressional Budget Office's (CBO) baseline stem from differing economic assumptions and the level of detail provided for policy proposals [^] . These fundamental disagreements imply varying fiscal impacts and can lead to significant alterations in final spending levels compared to either baseline [^]. For instance, the President's FY 2027 budget projects deficits approximately $6.3 trillion lower over FY 2026-2036 than CBO's February 2026 baseline, a gap largely attributable to these differing baseline and economic assumptions [^].
Differing economic forecasts create a substantial gap in budget projections. The Administration's economic assumptions are considerably more optimistic than CBO's, with the White House budget projecting real GDP growth of 3.5% in 2026 and 3.1% for 2027-2029 [^]. In contrast, CBO forecasts real GDP growth at 2.2% in 2026 and 1.8% thereafter [^]. This difference in growth forecasts, approximately 1.1 percentage points per year in favor of the Administration, implies distinct inflation and macroeconomic paths that directly influence budget baselines and the scoring of outlays and revenues [^].
Insufficient policy detail and CBO's baseline methods complicate comparisons. CBO requires adequate detail to estimate a proposal's cost; without it, CBO's analysis may treat certain proposals as having little or no fiscal effect [^]. The Committee for a Responsible Federal Budget (CRFB) notes that the FY 2027 budget heavily emphasizes discretionary spending requests and reconciliation supplemental requests, rather than a comprehensive, detailed deficit or debt reduction plan [^]. This lack of detail, combined with optimistic economic assumptions, increases the likelihood that final enacted spending will deviate from the budget's implied trajectory [^]. Furthermore, CBO's baseline projections are based on existing laws remaining unchanged and its own economic forecast, excluding appropriation acts passed after January 14, 2026 [^]. Therefore, subsequent legislative changes to discretionary funding or new policy packages can materially alter eventual spending levels compared to either baseline [^].
6. How do the spending cut proposals in Trump's FY 2027 budget compare to the enacted discretionary spending changes during his first term (FY 2018-2021)?
| FY 2027 Defense Budget Proposal | $1.5 trillion [^][^][^][^] |
|---|---|
| FY 2027 Nondefense Discretionary Spending Reduction Proposal | 10% reduction, or $73 billion [^][^][^][^] |
| Confidence in Substantial Government Spending Cuts by end of 2026 | Single-digit percentages [^] |
President Trump's proposed FY 2027 budget outlines significant spending changes contrasting his first term. The budget projects a $1.5 trillion defense budget, representing a 42% increase from FY 2026 enacted levels [^][^][^][^]. Simultaneously, it proposes a 10% or $73 billion reduction in base nondefense discretionary spending [^][^][^][^]. These proposals diverge from his first term (FY 2018-FY 2021), which saw considerable bipartisan increases in both defense and nondefense discretionary spending, largely influenced by the Bipartisan Budget Acts of 2018 and 2019 [^][^].
Prediction markets show low confidence in achieving proposed spending reductions. Despite these proposed cuts, prediction markets indicate a low probability, in single-digit percentages, of achieving substantial government spending reductions of $250 billion or more by the end of 2026 [^]. This low confidence is attributed to anticipated legislative hurdles and active legal opposition [^]. Similarly, the likelihood of reducing the federal deficit before 2027 is low, with Polymarket assigning an 18% probability as of late 2025/early 2026 [^][^]. This outlook is primarily due to persistently high structural fiscal deficits and the tendency for reconciliation-based spending increases to counterbalance targeted nondefense cuts [^][^].
7. How does the Trump administration's FY 2027 approach to non-defense discretionary spending contrast with its stated policies on mandatory spending like Social Security and Medicare?
| Proposed non-defense discretionary spending cut amount | ~$73 billion [^][^][^] |
|---|---|
| Proposed non-defense discretionary spending cut percentage | ~10% compared to 2026 levels [^][^][^] |
| Mandatory spending programs | No direct cuts or structural reforms to Social Security and Medicare proposed [^][^] |
The Trump administration's FY 2027 budget targets significant non-defense discretionary cuts. The proposed approach aims for a reduction of approximately $73 billion in non-defense discretionary spending, which constitutes about a 10% decrease compared to 2026 levels [^][^][^]. This targeted 10% cut to non-defense discretionary spending is confirmed by official White House FY 2027 budget documents [^][^][^].
The FY 2027 budget avoids direct cuts to Social Security and Medicare. In contrast to its approach on discretionary spending, the FY 2027 budget proposal explicitly refrains from proposing direct cuts or structural reforms to mandatory spending programs such as Social Security and Medicare [^][^]. Specifically, the budget does not include cuts to Social Security benefits, eligibility rules, or Cost-of-Living Adjustments (COLAs), nor does it propose reductions to Medicare benefits or eligibility [^][^]. While the budget references the continuation of previously enacted Medicare savings, analyses from budget organizations and think-tanks indicate that the FY 2027 request predominantly focuses on discretionary spending and excludes mandatory-spending changes like structural reforms to Social Security or Medicare, with any mandatory activity largely confined to supplemental defense-related funding through reconciliation [^][^][^][^].
8. How might persistent inflation and heightened Middle East tensions affect negotiations between the White House and Congress on the proposed $1.5 trillion defense budget for FY 2027?
| Proposed FY 2027 Defense Budget | $1.5 trillion [^][^][^] |
|---|---|
| Iran Conflict Costs (as of May 2026) | ~$29 billion [^][^][^][^] |
| Probability of $250B Spending Cuts by 2027 | 6-10% (as of June 2026) [^][^] |
The Trump administration's proposed FY 2027 defense budget faces challenges, particularly regarding the ongoing Iran conflict. The administration formally requested a $1.5 trillion defense budget for FY 2027, allocated as $1.15 trillion in discretionary base funding and $350 billion through legislative reconciliation [^][^][^]. Crucially, this request does not include the approximately $29 billion in costs incurred by the military conflict with Iran as of May 2026 [^][^][^][^]. This lack of transparency regarding the financial impact of the Iran conflict is significantly complicating negotiations between the White House and Congress on the proposed budget [^][^][^][^].
Congressional support for the budget and related funding is currently stalled due to concerns about the Iran conflict. Congressional Republicans are withholding support for supplemental funding for the Iran conflict, demanding clearer accounting of objectives and costs from the Pentagon [^][^]. Although the Pentagon’s 2027 budget proposes spending on munitions for the conflict, officials have reportedly been "mum on cost of war" [^]. Meanwhile, Democrats largely oppose the $1.5 trillion topline figure for the defense budget [^][^]. Furthermore, prediction markets tracking potential government spending cuts by the Trump administration before 2027 show extremely low market confidence, with probabilities for even modest cuts, such as $250 billion, trading at roughly 6-10% as of June 2026 [^][^]. The available research does not specify how persistent inflation might affect negotiations on this proposed budget.
9. What Could Change the Odds
Key Catalysts
A key catalyst centers on potential decreases in government spending. The contract resolves if government spending decreases by at least $250B during Q4 2024 to Q4 2026, with a closing date of 2027-03-31T15:00:00Z [^]. The market provides multiple bullish cut-magnitude thresholds for interpreting this, including "at least $250B", "at least $500B", "at least $1T", and "at least $2T" [^].
The extent of these spending changes is influenced by how much the government is willing to adopt a more free market philosophy and related policies [^] . This willingness to shift towards different policies represents a significant question and a catalyst for the magnitude of any potential spending reductions [^].
Key Dates & Catalysts
- Expiration: March 31, 2027
- Closes: March 31, 2027
10. Decision-Flipping Events
- Trigger: A key catalyst centers on potential decreases in government spending.
- Trigger: The contract resolves if government spending decreases by at least $250B during Q4 2024 to Q4 2026, with a closing date of 2027-03-31T15:00:00Z [^] .
- Trigger: The market provides multiple bullish cut-magnitude thresholds for interpreting this, including "at least $250B", "at least $500B", "at least $1T", and "at least $2T" [^] .
- Trigger: The extent of these spending changes is influenced by how much the government is willing to adopt a more free market philosophy and related policies [^] .
12. Historical Resolutions
No historical resolution data available for this series.
