Short Answer

The model assigns meaningfully higher odds than the market for Trump cutting at least 750 billion in government spending before his term ends, seeing it as the most likely outcome at 64.9% compared to the market's 20.0%.

1. Executive Verdict

  • Post-2026 divided government likely, hindering non-defense spending cuts.
  • One Big Beautiful Bill Act increased federal deficit; Medicaid cuts included.
  • IRS funding cuts increase the federal deficit, reducing federal revenue.
  • Department of Government Efficiency (DOGE) could reduce federal workforce.
  • Further reconciliation packages could enact broad government spending reductions.

Who Wins and Why

Outcome Market Model Why
At least 250 billion 30.0% 75.0% Model higher by 45.0pp
At least 1 trillion 12.0% 50.0% Model higher by 38.0pp
At least 2 trillion 12.0% 23.2% The successful passage of deep Medicaid cuts provides Grade A evidence that large-scale reductions are politically feasible, significantly increasing the probability from the market's low baseline; however, this is tempered by the bilateral conflict wherein Congress also demonstrated resistance by protecting other senior programs, preventing a more aggressive update and reflecting the remaining structural barriers to achieving the full $2 trillion target.
At least 500 billion 25.0% 70.0% The initial market probability was revised downward as the powerful, positive logit-shift from major Medicaid cuts was neutralized by an equally powerful negative shift from Congressional rejection of other cuts, with indirect fiscal pressures on states providing the decisive, albeit smaller, negative influence on the final outcome.
At least 750 billion 21.0% 64.9% The market's 20% baseline, likely anchored on the political difficulty of cutting multiple smaller senior programs, is outweighed by Grade-A evidence of deep, congressionally-approved Medicaid cuts, a single action substantial enough to make the $750 billion threshold highly probable.

Current Context

Congressional actions temper deep spending cuts despite Trump administration proposals. As of February 2026, the fiscal year 2026 (FY26) spending bill approved by Congress largely preserved federal funding for most senior service programs, rejecting many deep cuts proposed by the Trump administration and often maintaining 2025 funding levels for programs such as rental assistance for low-income seniors, energy assistance, and an older adult jobs program, with the USDA commodity food program even seeing an increase [^]. In contrast, Congress deeply cut Medicaid in a separate budget package during the summer of 2025, impacting medical and long-term care for older adults and younger people with disabilities [^]. State lawmakers are simultaneously grappling with deteriorating fiscal outlooks due to waning federal tax enforcement, following a 25% cut to the IRS workforce under the Trump administration, and a rewritten federal tax code, prompting states like Idaho to propose additional budget cuts for 2026 and 2027 [^]. The International Monetary Fund (IMF) will release its annual review of U.S. economic policies on February 25, 2026, assessing fiscal, trade, and current account deficits, and the dollar's value [^]. Affordability, particularly housing and healthcare costs, is an expected focus of the February 2026 State of the Union, with administration proposals including banning large institutional investors from home purchases, creating a federal drug price website (TrumpRx), and suggesting new Marketplace regulations that could reduce health insurance premiums by increasing deductibles [^].
Trump's proposed budget outlines massive cuts and significant spending shifts. The administration's initial FY26 discretionary funding budget proposes a $1.7 trillion budget, including staggering cuts of 22% ($163 billion) to non-defense agencies [^]. Significant proposed departmental reductions include 83.7% for the Department of State and international programs, 51% for the Department of Housing and Urban Development (HUD), including a $26.7 billion cut from federal rental assistance and elimination of the Community Development Block Grant program, and approximately 26% for the Department of Health and Human Services (HHS), with National Institutes of Health (NIH) programs dropping 39% and the Centers for Disease Control and Prevention (CDC) budget dropping $3.6 billion [^]. The Department of Education faces a 15% cut, with efforts to "responsibly wind down" and potentially close the department, while the Environmental Protection Agency (EPA) and National Science Foundation (NSF) both face reductions of at least 30%, with cuts exceeding half their budgets [^]. The Internal Revenue Service (IRS) is proposed for a $2.5 billion budget cut, aiming to reduce 19,000 roles [^]. Conversely, the budget proposal shifts $119.3 billion from non-defense to defense programs, with the Pentagon's budget potentially increasing by 13% to over $1 trillion, and the Department of Homeland Security seeing a 65% increase [^]. At least 46 programs and agencies are proposed for elimination, including the Low-Income Home Energy Assistance Program (LIHEAP), Job Corps, AmeriCorps, and the Administration for Community Living [^]. Extending the 2017 Tax Cuts and Jobs Act (TCJA) is an administration priority but is estimated to cost around $5 trillion over the next decade, potentially increasing the national debt if not offset [^]. U.S. deficits have remained high since January 2025, partly due to recent tax cuts, with the Congressional Budget Office (CBO) estimating in February 2026 that these tax cuts would keep annual deficits at an average of 6.1% of GDP over the next decade, projecting public debt to reach 120% of U.S. GDP by 2036; the "One Big Beautiful Bill Act" signed in July 2025 is projected to increase deficits by $3.4 trillion over the coming decade [^].
Experts express skepticism, raising concerns about economic and social impacts. Experts from the Stanford Institute for Economic Policy Research (SIEPR) highlight the difficulty of achieving spending cuts, noting that non-defense discretionary (NDD) spending actually increased each year during Trump's first administration despite proposed cuts, and emphasize the uncertain economic outlook at the start of a second term, where campaign pledges often loosely correlate with actual policy decisions [^]. The Budget Lab at Yale University estimates that a broad 10% tariff on goods imports, coupled with a 60% tariff on Chinese imports, could cause consumer prices to rise by 1.4% to 5.1%, equivalent to $1,900 to $7,600 per household [^]. The Brookings Institution advises against drastic cuts, suggesting a "scalpel, not an axe," as deep reductions could lead to intolerable disruption for Americans given the non-optional nature of many government functions [^]. While the Heritage Foundation previously praised a Trump budget for aiming to balance the budget through reforms, they noted its reliance on uncertain economic feedback effects and the necessity of reforming large entitlement programs like Medicare and Social Security [^]. The Center for American Progress indicates that policies in a second Trump term have significantly worsened the fiscal outlook, leading to a less sustainable trajectory for national debt [^]. Common concerns include the impact of cuts on vulnerable populations reliant on housing, healthcare, public health, and food aid [^], reductions in the federal workforce leading to layoffs and staffing cuts at agencies like the IRS and National Park Service [^], potential consequences for national security and disaster preparedness despite increased defense funding [^], the rising national debt exceeding $30 trillion and high deficits, especially with tax cut extension costs [^], constitutional questions regarding impoundment [^], and skepticism about the realism of the administration's optimistic economic growth projections [^]. Upcoming events include the IMF report release on February 25, 2026 [^], the expiration of most 2017 Tax Cuts and Jobs Act provisions on January 1, 2026, making their extension a major legislative focus, and Idaho's Joint Finance-Appropriations Committee's target of March 12, 2026, to finalize agency budgets [^].

2. Market Behavior & Price Dynamics

Historical Price (Probability)

Outcome probability
Date
This prediction market exhibits a slight long-term upward trend, with the probability of at least $250 billion in government spending cuts rising from 23% to its current level of 28%. However, the dominant characteristic of this market is high volatility rather than a steady trend, as evidenced by its wide trading range between 16% and 47%. The most significant price action occurred in early February 2026, when the price experienced a dramatic 19 percentage point spike to 47% on February 5th. This surge was a direct reaction to a Centers for Medicare and Medicaid Services (CMS) announcement regarding drug price negotiations, which traders interpreted as a substantial move towards the $250 billion threshold. This optimism was short-lived, as the price fully reversed just three days later on February 8th, plummeting 19 points back to 28% amid news of emerging legal and political challenges to the administration's broader budget proposals.
The price action suggests several key technical levels. The peak of 47% now stands as a significant resistance level, representing the highest point of market confidence. Conversely, the 28% level has emerged as a key pivot point or area of consolidation, being the launch point for the February spike and the level to which the price immediately returned. The total traded volume of 724 contracts is moderate, suggesting that trading is likely concentrated around major news events, as seen in the February volatility, rather than consistent daily activity. This pattern indicates that market conviction is event-driven and can shift rapidly based on new information.
Overall, the chart suggests a market sentiment of cautious skepticism. While traders have shown they will react strongly to news indicating major cuts are possible, the baseline probability remains below 30%. The rapid reversal in February implies that the market is acutely aware of the significant hurdles the Trump administration faces, such as congressional opposition, which has tempered previous cuts as noted in the FY26 spending bill. The current 28% price reflects the market's belief that while achieving over $250 billion in cuts is possible, it is more likely to be hindered by political and legal obstacles before the end of the term.

3. Significant Price Movements

Notable price changes detected in the chart, along with research into what caused each movement.

Outcome: At least 250 billion

📉 February 08, 2026: 19.0pp drop

Price decreased from 47.0% to 28.0%

What happened: The 19.0 percentage point drop in the "At least 250 billion" outcome on February 8, 2026, in the prediction market on "How much government spending will Trump cut before his term ends?" was primarily driven by emerging legal and political challenges to the Trump administration's proposed budget cuts [^]. News circulating around this date indicated significant opposition and potential setbacks to the administration's spending reduction efforts [^]. Specifically, multiple states initiated lawsuits challenging federal funding cuts, including public health grants for HIV programs, with reports emerging on February 10-11, 2026, that states were suing over these cuts [^]. While a federal judge's temporary block on $600 million in public health grants occurred on February 13, 2026, the anticipation or early reports of these imminent legal obstacles likely led the market to perceive that achieving substantial spending cuts would be less probable [^]. Social media was not identified as a primary driver or significant accelerant in this particular market movement [^].

📈 February 05, 2026: 19.0pp spike

Price increased from 28.0% to 47.0%

What happened: The primary driver of the 19.0 percentage point spike in the prediction market "How much government spending will Trump cut before his term ends?" for the outcome "At least 250 billion" on February 05, 2026, was the Centers for Medicare and Medicaid Services (CMS) announcing its third round of drug price negotiations [^]. Specifically, an analytical article released on February 4, 2026, titled "CMS' Third IRA Negotiation List: Selections, Signals, and Potential Savings," detailed this round of negotiations under the Inflation Reduction Act (IRA), which included high-spend drugs in both Medicare Part D and, for the first time, Part B, representing approximately $27 billion in Medicare spending [^]. This analysis, immediately preceding the market movement, likely clarified and amplified the perceived impact of the drug price negotiations on future government spending cuts [^]. White House Press Secretary Karoline Leavitt's briefing on February 5, 2026, which occurred "ahead of President Trump's unveiling of a new discount drug website, TrumpRx," further reinforced the administration's focus on reducing healthcare costs [^]. Social media was a contributing accelerant, as the detailed analysis of the CMS announcement likely spread through financial and political commentary channels, making the implications of these significant drug cost savings more broadly understood among market participants [^]. The timing of the analytical report (February 4, 2026) directly leading into the market spike (February 5, 2026) strongly suggests a causal link where news and expert analysis provided the primary impetus [^].

Outcome: At least 1 trillion

📉 January 26, 2026: 8.0pp drop

Price decreased from 20.0% to 12.0%

What happened: The primary driver of the 8.0 percentage point drop in the prediction market on January 26, 2026, for the outcome "At least 1 trillion" in government spending cuts by Trump, was likely traditional news and announcements regarding congressional actions on the federal budget. Specifically, reports from around January 6, 2026, indicated that Congress passed appropriation bills with "far less severe" cuts than President Trump had proposed, actively rejecting many of his deeper spending reduction efforts [^]. This legislative pushback, which demonstrated that Congress, not Trump, was asserting control over spending decisions, directly preceded and signaled a reduced likelihood of the administration achieving a massive $1 trillion cut [^]. Social media activity was not identified as the primary driver for this specific market movement [^].

4. Market Data

View on Kalshi →

Contract Snapshot

This Kalshi market, titled "Government Budget Cuts," asks "How much government spending will Trump cut before his term ends?". The provided text does not specify the exact conditions for a YES or NO resolution. The market is expected to resolve by the end of a potential Trump term in 2028, but no special settlement conditions are detailed.

Available Contracts

Market options and current pricing

Outcome bucket Yes (price) No (price) Implied probability
At least 250 billion $0.30 $0.72 30%
At least 500 billion $0.25 $0.80 25%
At least 750 billion $0.21 $0.81 21%
At least 1 trillion $0.12 $0.92 12%
At least 2 trillion $0.12 $0.92 12%

Market Discussion

Discussions surrounding former President Trump's potential government spending cuts reveal a contrast between his ambitious proposals and a widespread skepticism regarding their full implementation and impact [^]. Trump has outlined plans for significant reductions across non-defense agencies, foreign aid, and "green" programs, while proposing increased defense spending and forming a "Department of Government Efficiency" to achieve trillions in savings [^]. However, experts and social media users express doubt about the feasibility of substantial overall cuts without addressing major entitlement programs or significantly increasing the national debt due to concurrent tax cut proposals, with prediction markets showing low odds for large-scale reductions [^].

5. How Will Post-2026 Congress Affect Non-Defense Discretionary Spending Cuts?

Probability of Democratic HouseApproximately 79% [^]
Probability of Republican SenateApproximately 60% [^]
Proposed NDD Spending Cut22.6% ($163 billion)
The 2026 midterm elections are projected to result in a divided government. Analysis indicates a high probability of Democrats regaining control of the House of Representatives, with electoral models and generic ballot polling showing approximately a 79% chance for Democratic control, projecting a range of 215-225 seats [^]. Concurrently, Republicans are expected to maintain their majority in the Senate, with a favorable electoral map and expert ratings suggesting roughly a 60% chance of retention and a consensus forecast of a net Republican majority of 51 seats [^]. This anticipated congressional composition provides the foundational framework for assessing future legislative feasibility.
The administration’s proposed non-defense discretionary cuts are legislatively unviable under this projected scenario. The Trump administration's proposed 22.6% ($163 billion) reduction to base non-defense discretionary (NDD) funding faces significant legislative hurdles. In a Democratic-controlled House, the Appropriations Committee would likely advocate for NDD increases rather than the administration's proposed cuts, effectively blocking any legislative path for these reductions within the House [^]. In the Senate, despite Republican control of the Appropriations Committee, the legislative filibuster mandates a 60-vote supermajority for appropriations bills to pass, a threshold Republicans would fall short of with a projected 51-53 seats. Additionally, the budget reconciliation process is not a viable mechanism for altering discretionary spending.
Legislative gridlock will likely prevent significant NDD spending cuts. The pathway for substantial NDD spending cuts is effectively blocked, which is expected to lead to predictable gridlock. The inherent conflict between a Democratic House pushing for NDD increases and a Republican Senate, facing pressure from the White House to enact cuts, will likely result in government shutdowns, the passage of continuing resolutions, or a year-end omnibus bill born from bipartisan compromise. This outcome fundamentally precludes the dramatic fiscal realignment proposed by the administration, meaning any enacted "cuts" are far more probable to be near zero or even slight increases.

6. What are the prospects for mandatory spending cuts and Medicare sequestration?

OBBBA EnactmentPublic Law 119-21, July 2025 [^]
OBBBA Gross Spending Cuts$1.5 trillion - $2.0 trillion over 10 years [^]
Medicare Sequestration Risk$500 billion starting 2026 [^]
The "One Big Beautiful Bill Act" increased the federal deficit significantly. The "One Big Beautiful Bill Act" (OBBBA), enacted in July 2025, initiated gross mandatory spending cuts of $1.5 trillion to $2.0 trillion over the next decade, primarily targeting Medicaid, SNAP, and Federal Student Aid [^]. Despite these significant reductions, the OBBBA's net effect was a projected increase in the federal deficit by $3.3 trillion to $4.7 trillion over ten years, with the Congressional Budget Office (CBO) projecting the FY2026 deficit alone at $1.9 trillion [^].
A large Medicare sequestration looms without new, specific proposals. This dramatic increase in the projected deficit triggered a potential $500 billion automatic sequestration of Medicare funding under the Statutory Pay-As-You-Go (PAYGO) Act, slated to begin in 2026 [^]. As of February 2026, there are no specific, publicly detailed legislative proposals from the White House Office of Management and Budget (OMB) or the Senate Republican Conference for a second round of mandatory cuts targeting programs like farm subsidies or the Affordable Care Act (ACA) for FY2026 [^].
Addressing Medicare sequestration will drive future mandatory spending legislation. The central strategic driver for any future mandatory spending legislation in the near term will likely be the need to address the impending Medicare PAYGO sequestration [^]. This creates a legislative imperative that could serve as a vehicle for further, albeit potentially more targeted, reforms to other mandatory programs, with feasibility dependent on the narrow Republican majority in the Senate coalescing around specific cuts.

7. How Do Institutional Economic Forecasts Diverge From Administration's Projections?

Trump Admin 2026 Real GDP Growth3.2% (OMB Assumption) [^]
CBO 2026 Real GDP Growth2.2% [^]
Average Annual GDP Growth Divergence (2027-2028)~1.3 percentage points (Admin vs [^]. CBO) [^]
Official economic forecasts significantly diverge from administration's growth assumptions. There is a substantial gap between the economic growth projections from the Congressional Budget Office (CBO) and the Federal Reserve, and the more optimistic assumptions underpinning the Trump administration's budgetary frameworks [^], [^], [^]. This divergence, particularly in real GDP growth forecasts for the 2026-2028 period, carries multi-trillion-dollar implications for projected revenues and deficits over the medium term [^]. For instance, the CBO projects 2.2% real GDP growth for 2026 [^], and the Federal Reserve forecasts 2.3% [^]. In contrast, the administration has historically assumed a significantly higher 3.2%, with informal statements even suggesting growth could exceed 5% [^], [^], [^].
Divergent economic models underpin these contrasting growth outlooks. The CBO and Federal Reserve rely on mainstream economic frameworks, which project that long-term growth is primarily constrained by supply-side factors such as labor force growth and productivity. These frameworks also suggest that certain policies, like tariffs or reduced immigration, could actively limit these factors [^], [^]. Conversely, the Trump administration's assumptions are rooted in a supply-side framework, premised on the belief that deregulation, expansion of domestic energy production, and tax cuts will unleash sustained growth exceeding 3% [^]. This persistent disparity means that if the institutional forecasts prove accurate, the administration's budget, based on higher growth figures, could systematically overestimate revenues, thereby invalidating the rationale for proposed spending cuts and potentially leading to larger-than-expected deficits [^].
Upcoming institutional projections will establish a critical policy baseline. The post-midterm release of the CBO and Federal Reserve economic projections will serve as a crucial inflection point, establishing the official baseline against which all subsequent policy proposals are scored [^]. Should these institutional forecasts confirm an environment of sub-2.5% growth coupled with persistent structural headwinds, it would significantly constrain the administration's capacity to enact its preferred fiscal policy. This scenario would force a direct confrontation between the administration's optimistic economic vision and the more cautious reality presented by mainstream economic scorekeepers.

8. Do IRS Workforce Cuts Increase the Federal Deficit and Trigger Sequestration?

CBO Deficit Increase$120 billion over a decade
Projected IRS Workforce Decrease20% from FY2025 to FY2026
Freedom Caucus Stated StrategyDirect spending cuts and legally binding caps
IRS funding cuts increase the deficit, reducing federal revenue significantly. The Congressional Budget Office (CBO) estimates that rescinding $80 billion in IRS funding would paradoxically increase the federal deficit by $120 billion over the next decade. This counterintuitive outcome indicates a net negative return on the spending cut, where each dollar of IRS enforcement funding rescinded results in more than a dollar of lost federal revenue. This is due to the significant return on investment from tax enforcement activities, as reduced capability directly impacts the 'tax gap' between taxes owed and taxes paid. Proposed funding cuts could also lead to a 20% decrease in IRS employees between FY2025 and FY2026, severely disrupting operations and further eroding compliance,.
Freedom Caucus strategy intentionally expands deficits to force spending cuts. The House Freedom Caucus, while explicitly advocating for direct spending cuts and legally binding caps on future discretionary spending growth as their primary fiscal strategy, employs a complex tactical approach through IRS funding reductions. By knowingly pursuing a policy that expands the deficit via reduced revenue, they create intense pressure for deeper spending cuts, which makes adherence to their proposed caps more challenging. This action could be seen as strategically degrading the government's revenue-generating capacity, thereby making the case for dramatic spending reductions more compelling in future debt ceiling or budget negotiations.
Deliberate revenue undermining aims to trigger automatic sequestration or austerity. This strategy seeks to create a fiscal environment where future sequestration triggers, if incorporated into debt ceiling agreements, are far more likely to be activated. Although the caucus does not explicitly propose linking sequestration to IRS performance, their actions foster a win-win scenario for their objectives: either legislated austerity is achieved via spending caps, or automatic austerity through sequestration is triggered. The deliberate undermining of revenue collection serves as a powerful lever to force fiscal consolidation heavily weighted towards spending reduction, rather than revenue enhancement.

9. When Is the Next U.S. Debt Ceiling Crisis Projected?

Projected X-DateEarly-to-mid 2027 [^]
Current Debt Limit$41.1 trillion [^]
RSC Rescissions Proposal$9.4 billion (June 2025) [^]
The next U.S. debt ceiling crisis is projected for early-to-mid 2027. This follows the July 4, 2025 "One Big Beautiful Bill Act," which increased the debt limit by $5 trillion to $41.1 trillion [^]. As of February 2026, the total debt subject to the limit is approximately $38-$39 trillion [^]. Fiscal policy analysts, including the Congressional Budget Office (CBO) and the Committee for a Responsible Federal Budget (CRFB), project that annual deficits of roughly $1.9-$2.0 trillion will exhaust this borrowing authority by 2027 [^]. The Bipartisan Policy Center (BPC) typically issues specific "X-date" projections closer to a potential impasse [^].
The Republican Study Committee prepares specific spending cut riders. Their primary proposals, identified by their "Rescissions Working Group," include the rescission of $9.4 billion in unobligated COVID-19 funds [^]. Additionally, the RSC aims to expand work requirements for able-bodied adults without dependents in major federal welfare programs such as SNAP, Medicaid, and TANF. For SNAP, this involves raising the applicable age limit from 49 to 55 to require work or training for benefits [^].
The 2027 X-date holds significant political implications. The timing sets the stage for a major fiscal showdown approximately two years into the new congressional term. The RSC's proposals represent concrete legislative options to be attached to a debt ceiling increase, directly impacting any commitment to spending reduction. However, these proposals face significant hurdles, including unified Democratic opposition and the Senate filibuster, making their enactment challenging without bipartisan compromise [^].

10. What Could Change the Odds

Key Catalysts

A potential second Trump administration's efforts to cut government spending will be heavily influenced by several factors. Aggressive implementation of efficiency initiatives, such as the Department of Government Efficiency (DOGE) led by Elon Musk, could significantly reduce the federal workforce and agency operations [^]. Legislative action, including further reconciliation packages like the 'One Big Beautiful Bill Act' that already included Medicaid cuts, could enact broad spending reductions [^]. Furthermore, sustained robust economic growth and increasing public demand for fiscal conservatism could create a favorable environment for fiscal restraint [^].
Conversely, several factors could impede significant spending cuts or even lead to increased spending. Congressional gridlock, particularly strong opposition to cuts in popular entitlement programs like Social Security and Medicare, would hinder legislative efforts [^]. Economic downturns, recessions, or unforeseen major domestic or international crises would likely necessitate increased government spending on social safety nets and stimulus packages [^]. Unoffset tax cuts, such as extending the 2017 tax cuts or new reductions without corresponding spending cuts, would exacerbate deficits [^]. Finally, the inherent growth of mandatory programs and the potential failure of efficiency measures to yield substantial savings could diminish overall spending reductions [^].

Key Dates & Catalysts

  • Expiration: March 31, 2029
  • Closes: March 31, 2029

11. Decision-Flipping Events

  • Trigger: A potential second Trump administration's efforts to cut government spending will be heavily influenced by several factors.
  • Trigger: Aggressive implementation of efficiency initiatives, such as the Department of Government Efficiency (DOGE) led by Elon Musk, could significantly reduce the federal workforce and agency operations [^] .
  • Trigger: Legislative action, including further reconciliation packages like the 'One Big Beautiful Bill Act' that already included Medicaid cuts, could enact broad spending reductions [^] .
  • Trigger: Furthermore, sustained robust economic growth and increasing public demand for fiscal conservatism could create a favorable environment for fiscal restraint [^] .

13. Historical Resolutions

No historical resolution data available for this series.