Short Answer

Both the model and the market expect that at least 1 billion in government spending will be cut by Trump in 2025, with no compelling evidence of mispricing.

1. Executive Verdict

  • FY2025 government spending data has already been largely released.
  • Attributing FY2025 spending changes specifically to Trump actions is crucial.
  • Partisan impasse hindered significant non-defense discretionary spending cuts in 2025.
  • The administration attempted to freeze nearly $3 trillion in federal funds.
  • House and Senate Appropriations Chairs held contrasting fiscal stances in 2025.

Who Wins and Why

Outcome Market Model Why
At least 1 billion 4% 3.5% Market higher by 0.5pp
At least 250 billion 2% 0.1% Strong Grade A evidence of administration priorities favoring targeted spending increases, exemplified by the DHS funding crisis, drives a significant negative logit-shift, reinforcing the bilateral critic's view that structural fiscal rigidity and political barriers make a $250 billion cut exceptionally improbable.
At least 25 billion 3% 2.5% Market higher by 0.5pp
At least 500 billion 2% 0.1% The Grade A evidence of structural deficit growth (CBO) and political pressure for increased spending (DHS crisis) creates overwhelming headwinds against deep net cuts, justifying a -2.0 logit-shift that significantly lowers the probability.
At least 1 trillion 1% 0.1% Market higher by 0.9pp

Current Context

Recent developments highlight significant federal spending cuts and worsening fiscal conditions. The Congressional Budget Office (CBO) projected the U.S. budget deficit to reach $1.853 trillion in fiscal year 2026, following an estimated $1.775 trillion in fiscal 2025, indicating that Trump’s economic policies are worsening the country's fiscal picture, with an average deficit-to-GDP ratio of 6.1% forecast over the next decade [^], [^]. CBO Director Phillip Swagel noted that sustained large deficits are historically unusual given projected low unemployment [^], [^]. A partial government shutdown for the Department of Homeland Security (DHS) was imminent or underway as of February 13, 2026, due to funding disagreements [^]. Immigration and Customs Enforcement (ICE) plans to spend $38.3 billion converting warehouses into detention centers, with DHS possessing approximately $150 billion in available funds for immigration enforcement through the remainder of a Trump presidency [^], [^]. A federal judge temporarily blocked $600 million in public health funding cuts by the Trump administration to Colorado, California, Illinois, and Minnesota on February 12, 2026, seen as politically motivated and halted for 14 days, with a follow-up hearing scheduled for February 18, 2026 [^], [^]. Additionally, over 317,000 federal employees have been laid off or resigned since January 2025, leading to service disruptions and agencies scrambling to rehire [^]. The administration also nominated a hospitality executive to lead the National Park Service on February 12, 2026, after widespread firings and previously blocked budget cuts [^].
Proposed cuts target various sectors, eliciting expert warnings and public concerns. Specific figures for proposed reductions include an 83.7% decrease in discretionary funding for the State Department, a 43.6% reduction for HUD, and a 15% cut for the Department of Education [^], [^]. Key areas targeted are international aid, federal rental assistance, community development grants, and federal education funding [^]. In healthcare, debates focus on potential $2.2 trillion in Medicaid cuts over a decade [^], [^] and regulatory proposals for the Affordable Care Act (ACA) marketplace that could increase out-of-pocket costs up to $27,600 for families with catastrophic plans, potentially leading to 2 million people dropping insurance [^], [^]. The administration's proposed ACA changes are expected to be finalized "this spring" [^]. Federal spending on Research and Development (R&D) faces a proposed 23% cut for fiscal 2026, including reductions of 37% at NIH and over 50% at NSF [^]. Experts like Bob Greenstein of the Brookings Institution advise reviewing first-term proposals and "Project 2025" to understand potential cuts, stating "nothing is off the table, including $2.2 trillion in Medicaid cuts" [^]. Chris Edwards from the Cato Institute argues that "if you're going to make massive tax cuts without blowing up the deficit, cuts in social spending are almost inevitable" [^]. Sudip Parikh of the American Association for the Advancement of Science warned that R&D cuts could mean the U.S. "will have lost that race" with China [^], while Wesley Tharpe of the Center on Budget and Policy Priorities predicts "almost inevitable" state-level health service cuts [^]. Common concerns revolve around the impact on vulnerable populations, economic stability, and government functionality, as well as debates regarding fiscal responsibility versus ideology, and transparency [^]. The "Department of Government Efficiency" (DOGE) report on spending cuts is expected by July 4, 2026 [^].

2. Market Behavior & Price Dynamics

Historical Price (Probability)

Outcome probability
Date
This prediction market displays a consistent and long-term bearish sentiment regarding the prospect of significant government spending cuts by Trump in 2025. The price has been range-bound in a very low-probability band, trading between $0.01 and $0.09 since its inception. The overall trend is sideways, suggesting a stable market consensus that such cuts are highly unlikely. The market started with a 5% implied probability and has recently drifted down to 4%, indicating a slight increase in skepticism over time. Key price points have formed a loose support level near $0.01-$0.02 and a resistance ceiling at $0.09, which the market has never seriously challenged.
The recent price drop to 4.0% appears directly correlated with the latest economic context provided. The Congressional Budget Office (CBO) projections, which forecast a worsening fiscal outlook and growing budget deficits under Trump's policies, run contrary to the premise of the market. This news has likely caused the recent dip in price, as traders priced in the lower likelihood of spending cuts in an environment where non-partisan analysis predicts rising deficits. This move was accompanied by a noticeable increase in trading volume, as seen in the recent sample data point. The spike in volume during the price decline suggests strong market conviction behind the move, indicating that traders are actively selling "YES" shares based on this new fiscal information.
In summary, the chart suggests a market that has never held a strong belief in significant spending cuts. The overwhelmingly low price, combined with the sideways long-term trend, reflects persistent doubt. The recent negative CBO forecast has served to reinforce this bearish sentiment, pushing the price toward its historical lows on high volume. This indicates that the market participants consider the growing deficit projections to be a credible and significant barrier to any potential spending cuts in 2025, further solidifying the view that such an outcome is improbable.

3. Market Data

View on Kalshi →

Contract Snapshot

Based on the provided page content, I cannot extract the contract rules, including what triggers a YES/NO resolution, key dates, or special settlement conditions. The provided text only contains the market title and navigation links, not the detailed market rules.

Available Contracts

Market options and current pricing

Outcome bucket Yes (price) No (price) Implied probability
At least 1 billion $0.04 $0.97 4%
At least 25 billion $0.03 $0.98 3%
At least 100 billion $0.02 $0.99 2%
At least 250 billion $0.02 $1.00 2%
At least 50 billion $0.02 $0.99 2%
At least 500 billion $0.02 $1.00 2%
At least 1 trillion $0.01 $1.00 1%
At least 2 trillion $0.01 $1.00 1%
At least 750 billion $0.01 $1.00 1%

Market Discussion

Discussions surrounding potential government spending cuts by Donald Trump in 2025 centered on proposals for significant reductions across non-defense agencies, social programs like Medicaid and SNAP, and climate initiatives, often aimed at offsetting tax cuts and addressing the federal deficit [^]. Key viewpoints included concerns about the impact of these cuts on essential services and vulnerable populations, alongside skepticism regarding the actual deficit reduction given simultaneous plans for substantial tax cuts [^]. Prediction markets, such as those on Coinbase and Kalshi, generally indicated low probabilities for achieving significant government spending cuts (e.g., at least $25 billion) by the end of 2025 [^].

4. How Did Appropriations Chairs Influence 2025 Federal Spending Cuts?

Presidential Rescission Proposal$9.4 billion in budget authority [^]
House H.R. 4 Vote214-212 [^]
Last Successful ICA Rescission1992 [^]
House and Senate Appropriations Chairs held contrasting fiscal stances in 2025. Representative Tom Cole (R-OK) chaired the House Appropriations Committee as a staunch conservative, consistently advocating for fiscal restraint and reduced government spending [^]. Conversely, Senator Susan Collins (R-ME) led the Senate Appropriations Committee as a moderate Republican, known for her bipartisan negotiation and a detailed, program-by-program evaluation approach to protect specific funding initiatives [^]. These divergent leadership styles characterized the year's fiscal debates.
Chairs diverged on President Trump's major rescission request. A key fiscal battle centered on President Trump's proposal to rescind $9.4 billion in budget authority through H.R. 4, the Rescissions Act of 2025 [^]. Chairman Cole actively championed this legislation, co-sponsoring H.R. 4 and securing its passage in the House with a narrow 214-212 vote [^]. Senator Collins, however, strongly opposed the rescission, criticizing its lack of specificity and potential impact on programs such as PEPFAR, ultimately casting a 'Nay' vote [^]. The bill successfully passed the Senate 51-48 and became law, marking the first successful presidential Impoundment Control Act rescission since 1992 [^].
Fiscal gridlock resulted in a full-year Continuing Resolution for FY2025. This resolution largely maintained prior-year spending levels and enforced statutory caps on discretionary spending. This outcome, combined with the $9.4 billion rescission package [^], provided clear data reflecting the administration's fiscal goals. Chairman Cole's actions were instrumental in enabling these objectives [^], while Chair Collins' opposition highlighted the moderating influences and inherent limitations within Congress, especially in a narrowly divided Senate [^]. This suggests that future efforts to achieve drastic spending reductions, such as the OMB's proposed 23% cut in non-defense discretionary spending for FY2026, will likely face similar congressional constraints.

5. How Legally Vulnerable Are Proposed FY2026 Discretionary Spending Cuts?

Projected Legally Vulnerable Cuts30% to 50% of aggressive non-defense discretionary cuts
Rescission Approval Period45 calendar days of continuous session
High-Confidence Vulnerable AmountAt least $30 billion (from hypothetical $100 billion cut)
A significant portion of proposed discretionary spending cuts are highly vulnerable to legal challenges. A hypothetical Trump administration's FY2026 budget proposal to cut discretionary spending faces substantial legal risks, particularly for programs with specific 'shall spend' language in their authorizing statutes. Analysis suggests that 30% to 50% of aggressive non-defense discretionary cuts would likely target such programs, making them legally untenable without congressional approval for rescission. For instance, within a hypothetical $100 billion cut, at least $30 billion is considered highly vulnerable to immediate court challenges and critical oversight from the Government Accountability Office (GAO).
The Impoundment Control Act strictly limits executive fund withholding, providing two exclusive paths for withholding funds: deferrals for temporary delays and rescissions for permanent cancellations. For rescissions, Congress has 45 calendar days to approve a cancellation; otherwise, the funds must be made available. Historically, executive attempts to circumvent the ICA, including undeclared impoundments or 'pocket rescissions,' have been deemed unlawful by the GAO, and federal courts. This legal framework originated from the Nixon administration, whose unilateral impoundments were rejected by courts, leading to the creation of the ICA.
Future impoundment attempts will face immediate legal and oversight challenges, echoing past precedents. The first Trump administration's withholding of Ukraine aid was deemed illegal by the GAO, demonstrating the significant risks of violating the Act. A future administration, even if employing refined strategies or broad claims of constitutional authority against the ICA, would provoke swift responses from the GAO, congressional oversight, and affected parties filing lawsuits to compel the release of funds. These ongoing legal battles significantly impact the realization of announced spending cuts, as funds often must be released and obligated.

6. What Are the Key Funding Changes in the FY2025 Budget Proposal?

VA Total Budget Increase$32.9 billion (9.8%)
DoD Budget Request$850 billion
Non-Defense Discretionary Cuts$10 billion reduction
The President's budget proposes varied changes across key departments. The President's Fiscal Year 2025 budget outlines distinct spending shifts, with increases for specific departments contrasting with overall non-defense discretionary (NDD) cuts. The Department of Veterans Affairs (VA) is slated for a substantial total increase of $32.9 billion, primarily due to mandatory spending. The Department of Homeland Security (DHS) is proposed for a 2.2% discretionary increase. In contrast, the Department of Defense (DoD) requests $850 billion, which represents a 1.7% real-term decrease from FY2024 despite its large nominal value. For all other non-defense discretionary agencies combined, a $10 billion reduction is proposed.
Departmental specifics highlight shifts, while NDD faces significant cuts and caps. A closer look reveals the VA's overall budget increase to $369.3 billion is largely attributed to a $41.8 billion (21.6%) surge in mandatory spending for expanded healthcare benefits and compensation for toxic-exposed veterans. Paradoxically, the VA's discretionary budget, covering operational costs, is requested to decrease by $8.9 billion (6.2%). For the DoD, the $850 billion request prioritizes a 4.5% pay increase for military personnel and a 0.7% increase for Operation and Support, while acquisition funding is proposed for a 5.2% decrease. The proposed $10 billion reduction for non-defense discretionary agencies is further complicated by the Fiscal Responsibility Act of 2023 (FRA), which set a statutory cap of $711 billion for NDD spending in FY2025. The President's NDD request of $894 billion significantly exceeds this cap by approximately $183 billion. The Congressional Budget Office (CBO) projects that adhering to the FRA caps would result in NDD outlay reductions of $31 billion relative to its baseline, suggesting potentially larger cuts than those proposed by the President if the statutory limits are enforced.

7. How Did Executive Efforts to Control Federal Funds Fare in 2025?

Proposed Funding FreezeNearly $3 trillion (January 2025) [^]
Legal Challenge Parties22 states and the District of Columbia [^]
Appeals Court DecisionUpholding injunction (March 2025) [^]
The administration in 2025 attempted to freeze nearly $3 trillion in federal funds. This action aimed to assert broad executive authority over congressionally approved funding, particularly targeting "no-year" accounts and fee-funded programs that operate outside typical annual appropriations cycles. The administration also challenged the constitutionality of the Impoundment Control Act of 1974 (ICA), with OMB Director Russell Vought publicly stating his belief that the ICA is unconstitutional and advocating for inherent presidential discretion over spending irrespective of congressional mandates.
Federal courts issued injunctions against the attempted funding freeze. This aggressive stance initiated a significant legal confrontation, leading 22 states and the District of Columbia to file a lawsuit. A federal district judge granted a temporary injunction against the funding freeze, a decision subsequently upheld by a federal appeals court in March 2025. The courts determined that the Department of Justice failed to demonstrate irreparable harm if the freeze was not reinstated, thereby reaffirming Congress's constitutional power of the purse against executive impoundment efforts.
Legal and political conflict creates spending uncertainty despite rulings. The ongoing legal and political dispute introduces significant uncertainty for federal spending predictability, despite the judicial setbacks experienced by the administration. Internal agency guidance, such as that issued by the Department of Homeland Security in September 2025 concerning appropriations lapses, reflects an adherence to existing legal frameworks like the Antideficiency Act (ADA) [^]. This approach contrasts sharply with the OMB's broader claims of executive control over funds, with the final resolution dependent on future judicial rulings or potential congressional action.

8. What Was the Final Outcome for FY2025 NDD Spending?

FY2025 NDD Statutory Cap$711 billion [^]
Projected Deficit Increase (2026-2035)$3.4 trillion [^]
Prediction Market Spending Decrease ThresholdAt least $25 billion [^]
The federal budget process for Fiscal Year 2025 was marked by an insurmountable partisan impasse concerning non-defense discretionary (NDD) spending. Despite initial statutory caps of $711 billion set by the Fiscal Responsibility Act (FRA) of 2023 [^] and informal targets closer to $780 billion, a legislative deadlock ensued. The House of Representatives proposed an average of 6% cuts to NDD spending, while the Senate approved an additional $13.5 billion in emergency NDD spending. This significant divergence prevented the passage of final, reconciled budget resolutions before the August 2025 recess and instead resulted in a full-year Continuing Resolution (CR), which effectively froze NDD spending at FY2024 levels and overrode both chambers' proposals.
The resulting Continuing Resolution set NDD spending at FY2024 levels. This outcome placed non-defense discretionary spending slightly below the official Congressional Budget Office (CBO) baseline projection from January 2025 [^]. It also positioned NDD spending significantly above the House's proposed cuts and dramatically below the Senate's spending goals. Concurrently, the "One Big Beautiful Bill Act," enacted in July 2025, while including some targeted spending reductions, was projected by the CBO to increase federal deficits by $3.4 trillion over the next decade, primarily due to large-scale tax cuts [^]. For prediction markets like Kalshi, which inquired if government spending would decrease by at least $25 billion below Q4 2024 levels [^], the combination of the full-year CR and broader deficit-increasing legislation made a "No" resolution highly probable, as total federal outlays were likely to be flat or higher.

9. What Could Change the Odds

Key Catalysts

The outcome of the prediction market hinges on interpreting actual Fiscal Year 2025 (FY2025) spending data, which has largely been released, and the extent to which any changes can be attributed to the actions of a potential Trump administration [^] . As FY2025 concluded on September 30, 2025, the primary catalysts now involve the analysis and reporting of this already-published spending data [^]. Bullish catalysts, which could suggest more significant cuts, include official statements or reports from a potential Trump administration or allied organizations that specifically highlight quantifiable spending reductions in FY2025 programs, directly attributing them to Trump's policies or legislative initiatives passed in 2025 [^]. For example, further analysis confirming that legislative actions, such as the "One Big Beautiful Bill Act" passed in July 2025, led to immediate and measurable spending reductions in late FY2025, beyond just future projections, could be a key factor [^]. Conversely, bearish catalysts, indicating less significant or no cuts, would involve further emphasis from non-partisan organizations on the Congressional Budget Office's (CBO) finding that federal outlays grew by 4 percent ($275 billion) in FY2025, with an overall unified federal budget deficit of $1.8 trillion, suggesting minimal net cuts [^]. Continued reports highlighting the growth of mandatory spending, which is challenging to cut, could overshadow any discretionary reductions [^]. Reinforcement that the federal government operated under a full-year continuing resolution in FY2025, limiting new significant spending cuts via the appropriations process, would also be a bearish catalyst [^]. Final interpretations following the CBO's February 2026 "The Budget and Economic Outlook" report, along with subsequent official statements before March 31, 2026, will be crucial [^].

Key Dates & Catalysts

  • Expiration: March 31, 2026
  • Closes: March 31, 2026

10. Decision-Flipping Events

  • Trigger: The outcome of the prediction market hinges on interpreting actual Fiscal Year 2025 (FY2025) spending data, which has largely been released, and the extent to which any changes can be attributed to the actions of a potential Trump administration [^] .
  • Trigger: As FY2025 concluded on September 30, 2025, the primary catalysts now involve the analysis and reporting of this already-published spending data [^] .
  • Trigger: Bullish catalysts, which could suggest more significant cuts, include official statements or reports from a potential Trump administration or allied organizations that specifically highlight quantifiable spending reductions in FY2025 programs, directly attributing them to Trump's policies or legislative initiatives passed in 2025 [^] .
  • Trigger: For example, further analysis confirming that legislative actions, such as the "One Big Beautiful Bill Act" passed in July 2025, led to immediate and measurable spending reductions in late FY2025, beyond just future projections, could be a key factor [^] .

12. Historical Resolutions

No historical resolution data available for this series.