How much government spending will Trump cut before 2027?
Short Answer
Both the model and the market expect at least 500 billion in government spending cuts by Trump before 2027, with no compelling evidence of mispricing.
1. Executive Verdict
- Trump victory and Republican Congress are crucial for spending cuts.
- Moderate Republicans consistently oppose significant non-defense spending cuts.
- House Freedom Caucus clashes with Defense Hawks over spending priorities.
- Project 2025 aims for OMB to unilaterally control federal funds.
- Extending TCJA provisions significantly increases the federal deficit.
Who Wins and Why
| Outcome | Market | Model | Why |
|---|---|---|---|
| At least 250 billion | 11.0% | 10.0% | Targeted cuts in discretionary spending could achieve this reduction. |
| At least 500 billion | 8.0% | 6.5% | Broader budget cuts across multiple agencies are needed for this goal. |
| At least 750 billion | 6.0% | 4.5% | Achieving this level requires significant legislative action and policy adjustments. |
| At least 2 trillion | 6.0% | 2.5% | Two trillion in cuts requires tackling major entitlements or defense spending. |
| At least 1 trillion | 4.0% | 3.0% | Significant reforms across government programs are necessary for a trillion in cuts. |
Current Context
President Donald Trump's administration is actively proposing budget plans centered on significantly increased defense spending alongside deep cuts to non-defense programs before 2027. Recent legislative developments, as of February 19, 2026, include a bipartisan spending law that rejected proposed drastic cuts to the U.S. Department of Education, instead providing a slight increase and blocking reductions to Pell Grants, Federal TRIO, and GEAR UP programs [^]. Amidst these legislative actions, negotiations continue for the Fiscal Year (FY) 2026 funding for the U.S. Department of Homeland Security (DHS), which is currently in a shutdown, ahead of President Trump's State of the Union address on February 24, 2026 [^]. The administration's detailed FY 2027 budget request is anticipated shortly thereafter, likely in March [^]. A key proposal, initially announced on January 7, 2026 [^], is for a $1.5 trillion defense budget for FY 2027, representing a 66% increase from the 2026 military budget of $901 billion [^], with Navy Secretary John Phelan indicating on February 12, 2026, that this could double Navy ship procurement compared to the previous year [^]. Conversely, the FY 2026 budget proposal called for a 22% cut to non-defense agencies, amounting to $163 billion, which would be the lowest non-defense spending level since 2017 and aims to shift $119.3 billion from non-defense to defense programs [^]. Separately, a budget package signed on February 10, 2026, extended key Medicare telehealth waivers retroactively through December 31, 2027 [^].
Proposed deep agency cuts and tax policies raise significant economic concerns. The administration's budget plans for FY 2026 include substantial reductions such as an 83.7% cut for the State Department and International Programs (from $58.7 billion to $9.6 billion) [^], a $33 billion (26%) cut to the Department of Health and Human Services (HHS), with National Institutes of Health (NIH) programs facing a 39% reduction [^], and over a 51% cut for the Department of Housing and Urban Development (HUD), from $89 billion to $43.5 billion, including a $26.7 billion reduction to federal rental assistance [^]. The Internal Revenue Service (IRS) faces proposed cuts exceeding 50% for 2027 relative to 2025, specifically a 65% cut in operations support and 50% in enforcement [^]. Environmental Protection Agency (EPA) spending decreased by $15-20 billion in FY 2025 due to reduced clean energy grant outlays [^]. Regarding fiscal policy, the "One Big Beautiful Bill Act" extended and expanded Trump's 2017 tax cuts, which are projected to increase resources for the highest-income households by 4% in 2027, while lower-income households' resources are expected to decline by 4% by 2033 due to reduced benefit programs [^]. Economists estimate that a broad 10% tariff could increase consumer prices by 1.4% to 5.1%, potentially costing U.S. households $1,900 to $7,600 annually [^]. Deficit projections indicate that a FY 2025 House budget reconciliation outlined $1.7 trillion in net spending cuts and $4.5 trillion in net tax cuts, potentially increasing primary deficits by $2.8 trillion over the 2025-2034 period [^], and a reconciliation bill signed by President Trump is estimated to increase primary deficits by $3.2 trillion over 10 years [^].
Experts foresee challenges to cuts amid legislative and economic risks. Sixteen Nobel Prize-winning economists issued a warning in June 2024 that President Trump's economic policies, including a 10% tariff on all imports and mass deportations, could reignite inflation due to "fiscally irresponsible budgets" [^]. The Peterson Institute for International Economics specifically estimated that a 10% tariff would add $1,700 to the annual costs for a typical U.S. household [^]. Experts also point to the historical difficulty of achieving proposed non-defense discretionary spending cuts, noting that such spending actually increased during Trump's first administration despite proposals for massive reductions [^]. While tax cuts may potentially spur economic growth, experts caution that if not offset by spending cuts, they will lead to increased federal borrowing and could hinder long-term growth [^]. Analysis suggests that the Trump administration's fiscal policies, including recent tariffs and the "One Big Beautiful Bill Act," are regressive, with the top 1% seeing income increases while the bottom 99% experience a decrease in after-tax-and-transfer income by 2027 [^]. Upcoming events include the expected release of the detailed FY 2027 budget request, possibly in March 2026 [^], and the President's State of the Union address on February 24, 2026 [^]. Significant debate is ongoing about extending other expiring 2017 tax cuts, with potential costs of around $5 trillion over 10 years [^]. Common questions and concerns revolve around the impact of proposed cuts on essential social programs like Medicare, Medicaid, and federal housing assistance [^], the effect on the national debt and federal deficits given that previous Trump budgets did not balance [^], and whether the administration's fiscal policies will stimulate economic growth or lead to higher inflation and reduced consumer spending [^]. Skepticism persists about the administration's ability to enact the proposed deep non-defense spending cuts, particularly due to historical congressional resistance and implementation difficulties [^]. Concerns are also raised about the fairness and regressive nature of some policies [^], the impacts on the federal workforce and agency functionality [^], and the uncertainty for state and local government funding [^].
2. Market Behavior & Price Dynamics
Historical Price (Probability)
Outcome probability
Date
The price action for this market is characterized by a prolonged sideways consolidation. Since its inception, the implied probability has been confined to a narrow range between a low of $0.07 and a high of $0.16, indicating a lack of a clear directional trend or market consensus. The lower boundary around $0.07 has acted as a consistent support level, where the perceived probability was low enough to attract buyers, while the $0.16 mark has served as firm resistance, capping any significant upward momentum. The current price of $0.11 sits near the midpoint of this channel, slightly below its starting price of $0.14, suggesting a marginal decline in confidence over the market's lifetime. No dramatic, sustained breakouts have occurred, pointing to a persistent state of equilibrium between bullish and bearish outlooks.
This stable, low-probability pricing directly reflects the conflict between the administration's ambitious proposals for deep non-defense cuts and the legislative reality of bipartisan opposition. The failure of the price to rise significantly is a direct reaction to news like the recent spending law that rejected proposed cuts to the Department of Education, instead providing a slight increase. This legislative setback provided concrete evidence of Congress's ability to block the administration's budget-cutting agenda, suppressing the YES probability. Conversely, the price finds support and avoids collapsing to zero due to the administration's persistent rhetoric and active, contentious negotiations, such as the ongoing DHS shutdown, which keep the possibility of eventual cuts in play. The moderate total volume of 4,537 contracts, spread across many data points, suggests a lack of high conviction from traders, with no major volume spikes to indicate a strong reaction to any single news event.
Overall, the chart suggests a market sentiment of sustained skepticism. Traders have consistently priced large-scale spending cuts as a low-probability event, never allowing the price to climb above 16%. The tight trading range and moderate volume indicate that the market is caught in a holding pattern, weighing the administration's stated intentions against demonstrated legislative roadblocks. The current 11% probability implies the market views the successful implementation of significant spending cuts before 2027 as highly unlikely but not impossible, pending a major political shift or a breakthrough in budget negotiations, such as the upcoming FY 2027 budget proposal.
3. Market Data
Contract Snapshot
The provided page content ("How much government spending will Trump cut 2026? Odds & Predictions") describes the market topic but does not contain the specific contract rules, resolution triggers, key dates, or special settlement conditions. Therefore, it is not possible to extract this information from the given text.
Available Contracts
Market options and current pricing
| Outcome bucket | Yes (price) | No (price) | Implied probability |
|---|---|---|---|
| At least 250 billion | $0.11 | $0.91 | 11% |
| At least 500 billion | $0.08 | $0.95 | 8% |
| At least 2 trillion | $0.06 | $0.99 | 6% |
| At least 750 billion | $0.06 | $0.97 | 6% |
| At least 1 trillion | $0.04 | $0.98 | 4% |
Market Discussion
Discussions surrounding potential government spending cuts by the Trump administration before 2027 reveal a debate between proposed reductions in domestic programs and significant increases in defense spending [^]. While there are plans for steep cuts to areas like Medicaid, food stamps (SNAP), and the Department of Education, potentially totaling trillions of dollars, Trump has also called for a massive increase in the military budget to $1.5 trillion in 2027 [^]. Experts and prediction markets express skepticism that overall spending will be substantially cut, particularly given simultaneous proposals for large tax cuts and Trump's stated commitment to protecting Social Security and Medicare, which could lead to an increased national deficit [^].
4. Will Moderate Republicans Oppose FY2027 Non-Defense Spending Cuts?
| Proposed FY2026 NDD Cuts | 22-23% (Trump administration) [^] |
|---|---|
| NIH Budget Change (FY2026 Senate) | $400 million increase [^] |
| Final FY2026 NDD Spending Cut | Approximately 18% [^] |
Moderate Republican senators consistently oppose significant non-defense spending cuts. Senators Susan Collins (R-ME) and Lisa Murkowski (R-AK), alongside other moderates like Shelley Moore Capito (R-WV) and Thom Tillis (R-NC), have a consistent legislative history of resisting deep non-defense discretionary (NDD) spending cuts, making them poised to oppose such cuts for FY2027 [^]. During the FY2026 budget cycle, this group rejected the Trump administration's proposed 22-23% NDD cuts, instead advocating to maintain or increase funding for critical programs such as biomedical research and education [^].
Senate moderates leverage procedural rules to influence budget outcomes. The moderate bloc's influence stems from the Senate's 60-vote threshold for appropriations bills, which allows them to force bipartisan negotiations and prevent government shutdowns [^]. Senator Collins, a key member of the Appropriations Committee, has particularly championed parity between defense and non-defense spending and defended programs like LIHEAP and NIH [^]. Furthermore, these senators prioritize federal programs vital to their states, including infrastructure in Alaska and healthcare in Maine. Consequently, any FY2027 budget proposal containing deep NDD cuts from a potential Trump administration or conservative House will likely encounter substantial resistance from these Senate Republicans, leading to a moderated compromise [^].
5. What Fiscal Priorities Clash Between House Freedom Caucus and Defense Hawks?
| HFC Non-Defense Spending Target | ~$700 billion range [^] |
|---|---|
| Trump's Proposed FY2026 Defense Budget | $1.01 trillion [^] |
| Enacted FY2026 Defense Appropriations | $838.7 billion [^] |
Fiscal year 2027 budget discussions reveal a deep spending divide. The U.S. House faces a significant budgetary conflict, primarily between the House Freedom Caucus (HFC) and defense hawks, concerning appropriations for FY2026/FY2027. The HFC advocates for aggressive fiscal austerity, demanding drastic cuts to non-defense discretionary (NDD) spending to reach pre-COVID levels, approximately $700 billion [^]. In contrast, defense hawks on the House Armed Services Committee prioritize robust and expanding defense budgets to maintain U.S. military superiority, with the enacted FY2026 Defense Appropriations Act already set at $838.7 billion [^].
HFC supports defense increases, but demands significant offsets. While both factions support a strong military, their approaches to funding diverge. The HFC explicitly supports targeted increases for defense, aligning with Donald Trump's proposed $1.01 trillion defense budget for FY2026 [^], and a $175 billion allocation for the Department of Homeland Security [^]. However, these increases are strictly conditional on being offset by deep cuts elsewhere, which the HFC aims to achieve through procedural tactics like long-term continuing resolutions and the budget reconciliation process [^].
A potential Trump-brokered deal could bridge fiscal divides. A compromise, likely mediated by Donald Trump, could involve a "grand bargain" where the HFC secures historic cuts to the NDD budget in exchange for supporting a defense budget nearing Trump's proposed $1.01 trillion [^]. This resolution would also likely include full funding for DHS and border security, with the entire package passed via budget reconciliation to circumvent Senate filibuster rules, reflecting a strategic trade-off of deep NDD cuts for substantial defense and border increases [^].
6. What Are Project 2025's Strategies for Unilateral Federal Spending Cuts?
| ICA Enactment | 1974 [^] |
|---|---|
| Primary Strategy | Reinterpretation of OMB's apportionment power [^] |
| Personnel Overhaul | Reclassification of thousands of federal employees to Schedule F [^] |
Project 2025 proposes empowering OMB to unilaterally control federal funds. This initiative aims to enable a future Trump administration's Office of Management and Budget (OMB) to unilaterally withhold or delay congressionally appropriated funds [^]. The strategy involves a radical reinterpretation of the OMB's apportionment powers, specifically designed to bypass the procedural requirements established by the Impoundment Control Act of 1974 (ICA) [^]. The ICA was originally enacted to reassert congressional authority over spending, mandating a strict process for deferrals or rescissions that requires congressional approval [^].
Key personnel changes would facilitate Project 2025's budgetary strategy. A foundational element of this plan involves reclassifying tens of thousands of career federal employees into a new 'Schedule F' category, which would strip them of civil service protections and allow for their replacement by politically aligned appointees [^]. This personnel change is intended to remove internal resistance to aggressive budgetary tactics within the administration [^]. However, the implementation of Project 2025's budgetary framework is expected to trigger immediate and intense legal challenges under the Administrative Procedure Act (APA) [^] and likely lead to findings of illegal impoundment by the Government Accountability Office (GAO) [^]. The legal landscape for these challenges is complicated by a hypothetical September 2025 Supreme Court ruling that lifted a lower court's injunction on presidential fund withholding, potentially signaling greater judicial deference to executive authority [^].
The framework offers a mechanism for immediate federal spending reductions. For prediction markets assessing government spending cuts, the Project 2025 framework provides a plausible mechanism for unilateral reductions before 2027. An administration could utilize a reinterpreted apportionment power to effectively freeze programs by apportioning $0 or placing prohibitive conditions on funds [^]. These actions, while potentially facing legal challenges, would register as immediate 'cuts' in federal outlays. Market analysts should monitor key personnel appointments, early executive orders related to Schedule F or OMB guidance, and the judicial response to initial attempts to withhold funds, especially in light of the September 2025 Supreme Court decision [^].
7. How Will Permanent TCJA Extension Impact Federal Spending Cuts?
| Projected TCJA Extension Cost (2025-2034) | $4.6T (dynamic) - $5.4T (static) [^] |
|---|---|
| Projected Deficit-to-GDP Ratio | Over 7% by 2026 [^] |
| Projected National Debt Trajectory | Over $36 trillion [^] |
Extending TCJA provisions significantly increases the federal deficit for a decade. Making the individual and estate tax provisions of the Tax Cuts and Jobs Act (TCJA) of 2017 permanent is projected to add an estimated $4.6 trillion (dynamically scored) to $5.4 trillion (statically scored) to the federal deficit over the 2025-2034 budget window, according to estimates from the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) [^]. Extending these provisions is a high political priority for any Republican-led administration and Congress, primarily to avoid a de facto tax increase when they are scheduled to expire at the end of 2025 [^].
This revenue loss creates a structural deficit and escalates national debt. The substantial reduction in federal revenues establishes a new, lower baseline for federal income, resulting in a structural rather than a cyclical deficit. The combined effect of extended TCJA provisions and potential new tax cuts could push the deficit-to-GDP ratio to over 7% by 2026, more than double the historical average [^]. This trajectory is projected to cause the national debt to exceed $36 trillion, severely constraining future fiscal policy, leading to escalating interest expenses that crowd out other budget priorities, and limiting the government's ability to respond to future crises [^].
Significant mandatory spending cuts become politically untenable due to fiscal reality. The fiscal environment created by the permanent TCJA extension makes achieving substantial net cuts in federal spending, particularly in popular mandatory programs like Social Security and Medicare, politically untenable before 2027. Reductions in benefits for these programs are widely considered a 'third rail' issue in American politics due to their overwhelming popularity. While cuts to non-defense discretionary spending are possible, they are mathematically insufficient to offset the multi-trillion-dollar revenue loss resulting from the tax cuts. Consequently, total government outlays are more likely to continue rising, driven by the decision to permanently lower the federal government's revenue base, rather than seeing significant net spending reductions.
8. What is the Probability of a Full-Year FY2027 Continuing Resolution?
| President's Budget Due Date | February 2, 2026 (Overdue as of February 20, 2026) [^] |
|---|---|
| House Member Request Deadline | Mid-March 2026 [^] |
| Fiscal Year Start Date | October 1, 2026 [^] |
Timely FY2027 appropriations face an exceedingly low probability. The research forecasts a high likelihood that the U.S. federal government will operate under one or more Continuing Resolutions (CRs) for a significant portion of Fiscal Year 2027, with a moderate to high probability of a full-year CR. The prospect of enacting all 12 individual appropriations bills by the October 1, 2026, deadline is exceedingly low. This outlook is primarily due to a compressed legislative calendar, as the President's FY2027 budget request was overdue by February 2, 2026, creating cascading delays for congressional committees and reducing time available for negotiations before the fiscal year commences [^].
Partisan divisions and upcoming elections impede budget finalization. This outlook is further reinforced by deep partisan divides on fiscal policy, as evidenced by the difficult and protracted FY226 appropriations process [^]. Republicans are expected to advocate for significant spending cuts and conservative policy riders, while Democrats will prioritize protecting domestic investments and opposing such provisions. The approaching 2026 midterm elections will significantly influence legislative behavior, likely leading to a short-term CR through November and deferring critical funding decisions. Historically, Congress has rarely passed all 12 appropriations bills on time, and CRs have become a normalized funding mechanism, averaging four months per fiscal year.
A full-year Continuing Resolution for FY2027 is 59% probable. This estimate stems from a weighted scenario analysis, primarily driven by the high plausibility of a divided government following the 2026 midterms. This reflects the confluence of a tight timeline, budgetary pressures, entrenched partisan disagreements, and a political strategy that often uses deadlines as leverage, making legislative gridlock and a long-term CR the most probable outcome.
9. What Could Change the Odds
Key Catalysts
The likelihood of government spending cuts by Donald Trump before March 2027 heavily depends on the 2024 Presidential Election. If Trump wins the election on November 5, 2024, and Republicans gain control of both Houses of Congress by January 3, 2025, he would have the executive and legislative power to implement his stated policy of reducing expenditures. Strong signals from his administration's initial budget proposals and executive orders following his January 20, 2025 inauguration, indicating clear plans for cuts, would significantly increase the probability. A worsening national debt situation could also create public pressure, making spending cuts more politically viable.
Conversely, if Donald Trump loses the 2024 Presidential Election, the prospect of his administration cutting government spending before the settlement date becomes virtually impossible. Even with a Trump victory, a divided Congress or Democratic control would present considerable legislative barriers to enacting significant cuts. Furthermore, major unforeseen geopolitical crises or domestic emergencies (such as wars, natural disasters, or severe economic downturns) typically lead to increased government spending for relief and stimulus, making cuts less likely. Persistent political opposition and congressional gridlock could also effectively block any attempts at substantial spending reductions.
Key Dates & Catalysts
- Expiration: March 31, 2027
- Closes: March 31, 2027
10. Decision-Flipping Events
- Trigger: The likelihood of government spending cuts by Donald Trump before March 2027 heavily depends on the 2024 Presidential Election.
- Trigger: Trump wins the election on November 5, 2024, and Republicans gain control of both Houses of Congress by January 3, 2025, he would have the executive and legislative power to implement his stated policy of reducing expenditures.
- Trigger: Strong signals from his administration's initial budget proposals and executive orders following his January 20, 2025 inauguration, indicating clear plans for cuts, would significantly increase the probability.
- Trigger: A worsening national debt situation could also create public pressure, making spending cuts more politically viable.
12. Historical Resolutions
No historical resolution data available for this series.
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