Short Answer
Both the model and the market expect Trump to cut At least 750 billion in government spending before 2027, with no compelling evidence of mispricing.
1. Executive Verdict
- FY 2027 budget resolutions are not yet released by Congress.
- Administration highly likely to attempt rescission of funds before 2027.
- Project 2025 details aggressive cuts targeting agencies and Medicaid.
- Strong Republican congressional support would significantly aid spending cuts.
- Federal deficit pressure, projected to rise, will drive calls for cuts.
- Experts largely predict a full-year Continuing Resolution for FY 2027.
Who Wins and Why
| Outcome | Market | Model | Why |
|---|---|---|---|
| At least 250 billion | 11% | 0% | The posterior probability reflects a significant -2.0 logit-shift against the outcome, driven by high-confidence evidence from the recently passed FY 2026 spending bill which demonstrated strong congressional resistance to the President's proposed deep fiscal cuts. |
| At least 500 billion | 9% | 0% | The recently enacted FY2026 spending bill, which overwhelmingly rejected the administration's proposed deep cuts, provides Grade A evidence that significantly lowers the probability of achieving a $500 billion reduction, shifting the log-odds downward from an already pessimistic market baseline. |
| At least 750 billion | 5% | 4% | Market higher by 1.0pp |
| At least 2 trillion | 7% | 0% | The recently enacted FY 2026 spending bill, which overwhelmingly rejected deep cuts and increased funding in key areas, provides Grade A evidence against a $2 trillion cut, shifting the log-odds downward; this is countered by the bilateral critic argument that the market's 4% probability correctly prices in a low-probability, high-impact fiscal crisis or a radical shift in political power that could force such unprecedented austerity. |
| At least 1 trillion | 4% | 3% | Market higher by 1.0pp |
Current Context
Recent spending package rejected deep cuts despite administration proposals. On February 3, 2026, President Trump signed a $1.2 trillion government funding bill, ending a partial federal shutdown and funding most federal agencies through September 30, 2026. This recently enacted spending package notably rejected many of the deep cuts proposed by the Trump administration for federal research agencies and student aid. For example, the Education Department received $79 billion in funding, approximately $217 million above Fiscal Year (FY) 2025 levels, contrary to earlier proposals for significant reductions. However, the Department of Homeland Security (DHS) received only a short-term funding extension through February 13, 2026, setting the stage for an intense debate in Congress over new restrictions on immigration enforcement operations. Earlier, in May 2025, President Trump's initial FY 2026 discretionary funding budget, referred to as a "skinny budget," had proposed substantial cuts of 22% ($163 billion) to non-defense agencies, aiming for the lowest non-defense spending level since 2017. Conversely, this budget had proposed a 13% increase for the Defense Department and nearly 65% for the Department of Homeland Security, indicating a focus on eliminating programs related to diversity, equity, and inclusion (DEI), critical race theory, and "Green New Scam" funding.
Proposed cuts and fiscal concerns highlight ongoing budget priorities and debate. Specific cuts proposed in the initial FY 2026 budget included an 83.7% reduction for the State Department and international programs (from $58.7 billion to $9.6 billion), a 38% cut (approximately $18 billion) for the National Institutes of Health (NIH), a 43.6% decrease ($33.6 billion) for the Department of Housing and Urban Development (HUD), and $33.3 billion less for the Department of Health and Human Services (HHS). The Department of Energy Efficiency and Renewable Energy office faced a nearly 75% budget decimation, alongside the proposed elimination of $15 billion in Infrastructure Investment and Jobs Act (IIJA) funding for clean energy and climate efforts. The federal budget deficit for the first three months of FY 2026 stood at $601-$602 billion. The Congressional Budget Office (CBO) projected a $1.7 trillion deficit (5.5% of GDP) for FY 2026 and federal debt reaching 122% of GDP by 2034. House Speaker Mike Johnson (R-La.) voiced support for President Trump's budget plan, citing its fiscal discipline, while Senate Democrats, like Sen. Patty Murray (D-Wash.), criticized the proposals for potentially "setting our country back decades" by harming investments while favoring tax breaks for the wealthy. While senior Trump administration officials optimistically forecast a U.S. economic boom in 2026, with Commerce Secretary Howard Lutnick predicting over 5% growth by year-end due to Federal Reserve interest rate cuts and large tax refunds, external economists generally forecast more modest growth of 2% to 2.5%. Experts from the Stanford Institute for Economic Policy Research (SIEPR) warned that the U.S. "budget math" has become more dangerous, with interest rates now much closer to growth rates, complicating debt service and potentially crowding out public spending and private investment.
Upcoming deadlines and contentious issues complicate future spending decisions. The current funding for the Department of Homeland Security is set to expire on February 13, 2026. Additionally, the President is legally required to submit his budget for FY 2027 on the first Monday in February, meaning the FY 2027 budget is currently overdue. The federal fiscal year 2026 concludes on September 30, 2026. Significant concerns persist regarding the potential impact of proposed cuts on various programs, including federal rental assistance (which the administration proposed shifting to states), global health, climate-related initiatives, and research funding. The administration's rhetoric frequently references "gutting a weaponized deep state" and defunding "radical diversity, equity, and inclusion (DEI) and critical race theory programs," fueling debates over government roles and priorities. White House officials have indicated that "impoundment," the unilateral withholding of appropriated funds, remains an option. This practice, generally prohibited by the 1974 Impoundment Control Act for policy reasons, is argued by the administration to be unconstitutional, raising fundamental questions about executive power and congressional authority over spending. The expiration of enhanced Affordable Care Act (ACA) subsidies at the end of 2025 has also led to concerns about rising premiums and an increasing number of uninsured individuals. Persistent large budget deficits and growing national debt continue to be a central concern among fiscal watchdog groups and some lawmakers.
2. Market Behavior & Price Dynamics
Historical Price (Probability)
Outcome probability
Date
This prediction market has demonstrated a largely sideways or range-bound trend, with the probability of significant government spending cuts staying consistently low. The price has fluctuated within a narrow band of 8.0% to 21.0% for most of its history, starting at 9.0% and currently trading at 10.0%. The most notable event was a sharp 12.0 percentage point spike on January 6, 2026, when the price jumped from 9.0% to a high of 21.0%. This surge was a direct reaction to the Trump Administration's announcement of a freeze on up to $10 billion in funding for federal childcare and family assistance programs, which traders interpreted as a concrete move towards achieving major cuts.
However, the market was unable to sustain these higher levels, indicating that the 21.0% mark has acted as a strong resistance point. The optimism from the January spending freeze was effectively erased following the news on February 3, 2026, that President Trump signed a major funding bill which rejected many of the administration's proposed deep cuts. This development caused the price to fall back towards its long-term baseline, which appears to be a support level around 8.0-9.0%. The total volume of 3,194 contracts is moderate, suggesting that while the January spike likely saw a brief increase in activity, overall market conviction remains low. The chart's price action suggests a persistent market sentiment that, despite administrative proposals, significant legislative or political barriers will prevent large-scale government spending cuts from being enacted before 2027.
3. Significant Price Movements
Notable price changes detected in the chart, along with research into what caused each movement.
📈 January 06, 2026: 12.0pp spike
Price increased from 9.0% to 21.0%
Outcome: At least 250 billion
What happened: The primary driver of the 12.0 percentage point spike in the prediction market on January 06, 2026, was the Trump Administration's freeze of up to $10 billion for three federal childcare and family assistance programs. On this date, the Department of Health and Human Services (HHS) notified several states that funding would no longer be distributed, citing claims of fraud and misuse. This immediate and substantial reduction in government outlays likely signaled a strong commitment to broader spending cuts, directly influencing the market's belief in achieving "At least 250 billion" in cuts. Social media acted as a contributing accelerant, as the Trump Administration, including Director Russell Vought, celebrated and highlighted such strategic cuts on platforms like X.
4. Market Data
Contract Snapshot
Contract details not available.
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 | $0.09 | $0.95 | 9% |
| At least 2 trillion | $0.07 | $0.99 | 7% |
| At least 750 billion | $0.05 | $0.97 | 5% |
| At least 1 trillion | $0.04 | $0.98 | 4% |
Market Discussion
Debates surrounding how much government spending Donald Trump will cut before 2027 reveal a complex picture of proposed reductions and significant increases . While there is discussion about potential major cuts in areas such as federal aid to public schools, urban transit, foreign aid, green subsidies, and social programs like Medicaid and SNAP, many of these "draconian proposed cuts" face substantial resistance from Congress . Conversely, Trump has explicitly called for a 50% increase in the military budget, targeting $1.5 trillion by fiscal year 2027.
5. What is the Current Status of FY 2027 Discretionary Spending Proposals?
| FY 2027 FRA Discretionary Target | $1.638 Trillion (Non-Binding Target) |
|---|---|
| FY 2027 CBO Discretionary Baseline | ~$1.79 Trillion (Estimated) (CBO Learnings) |
| President's Reported FY 2027 Defense Request | $1.5 Trillion (Reported) (President's Request Learnings) |
Official FY 2027 budget resolutions are not yet released. As of early February 2026, neither the House nor Senate Budget Committees have published their official FY 2027 budget resolutions or discretionary spending allocations. This aligns with the standard congressional budget timeline, where committee work typically commences after the President's budget request, an event usually scheduled for the first Monday in February but often subject to delay,. The House Budget Committee's most recent significant actions have centered on the FY 2025 budget process and oversight of ongoing FY 2026 appropriations,.
Fiscal benchmarks reveal significant potential for upcoming budgetary tension. Despite the absence of formal congressional proposals, key benchmarks highlight the challenges for the upcoming fiscal debate. The Congressional Budget Office (CBO) projects the FY 2027 total discretionary baseline at approximately $1.79 trillion, assuming current laws. In contrast, the Fiscal Responsibility Act (FRA) of 2023 sets a non-binding, but politically significant, target of $1.638 trillion for FY 2027, which is $152 billion below the CBO's projected baseline. The President's reported defense spending request of $1.5 trillion is substantially higher than current levels, creating immediate tension if total discretionary spending were to adhere to the FRA's suggested target.
Adhering to the FRA target would force significant fiscal trade-offs. The FY 2027 budget resolution, particularly under a new administration, will be a critical indicator of intended fiscal policy. Conforming to the FRA's $1.638 trillion non-binding target for FY 2027 would inherently represent a significant reduction of $152 billion compared to the CBO's projected baseline for maintaining current services. Should a high defense request, such as the reported $1.5 trillion, be pursued within the FRA's total spending framework, it would necessitate drastic reductions in non-defense discretionary functions, setting the stage for a high-stakes appropriations process and increased risk of government shutdown.
6. How Likely Are Presidential Rescission Attempts to Succeed Before 2027?
| June 2025 Rescission Proposal | $9.4 billion in budget authority |
|---|---|
| October 2025 Grant Cancellation | $7.6 billion in clean energy grants |
| Rescission Approval Deadline | 45 days of continuous session (Congress) |
The administration is highly likely to attempt rescission of funds before late 2026. The probability that the current administration will attempt to use its rescission authority to cancel previously appropriated funds before the end of calendar year 2026 is extremely high. This intent is driven by an aggressive strategy to leverage budgetary tools and advance policy objectives. This is despite the Impoundment Control Act (ICA) of 1974 requiring affirmative congressional approval within 45 days of continuous session for proposed rescissions to become permanent. The administration's proactive approach has been demonstrated through various actions throughout 2025, encompassing both formal proposals and unilateral administrative moves.
Throughout 2025, the administration employed multiple strategies for rescission. The administration's multi-pronged approach in 2025 included a formal proposal to Congress in June to rescind $9.4 billion, specifically targeting foreign assistance. More assertively, the OMB Director announced the unilateral cancellation of $7.6 billion in clean energy grants in October, an action that appeared to bypass the ICA and was notable for its political targeting. Earlier in January, an administrative pause on federal financial assistance was issued via memorandum M-25-13, which immediately faced legal challenges and was temporarily halted by a court stay, highlighting the legal risks associated with broad executive overreach .
Successful large-scale rescissions remain unlikely despite executive attempts. Despite the high likelihood of continued executive attempts to rescind funds, the probability of achieving successful large-scale rescissions through the formal ICA process is very low. This is primarily due to significant congressional procedural hurdles, such as the mandated 45-day approval window. While unilateral administrative actions can achieve temporary de facto rescissions, they are highly susceptible to immediate legal challenges and judicial scrutiny. The overall forecast before calendar year 2027 suggests substantial proposed cuts, but only a small fraction is likely to be permanently and legally canceled due to these institutional and legal constraints .
7. What are Credit Agencies' Stances on U.S. Debt amid FY27 Budget?
| Moody's Rating Action | Downgraded to Aa1 from Aaa on May 16, 2025 |
|---|---|
| S&P Current Rating | AA+ / Stable Outlook |
| Fitch Rating Action | Downgraded to AA+ from AAA in August 2023 |
As of February 5, 2026, major credit rating agencies have not issued new, specific credit watches or outlook changes for U.S. sovereign debt directly attributable to the Fiscal Year (FY) 2027 appropriations process. This indicates a "wait-and-see" approach, with existing ratings already reflecting anticipated political polarization and fiscal challenges, which are considered chronic structural risks by Moody's, S&P Global Ratings, and Fitch Ratings.
Prior downgrades by Moody's and Fitch shape current perspectives. Moody's downgraded the U.S. to Aa1 in May 2025, citing soaring federal debt and persistent structural deficits as inconsistent with a Aaa rating. Fitch similarly downgraded the U.S. to AA+ in August 2023, explicitly mentioning an erosion of governance and expected fiscal deterioration. S&P Global Ratings maintains an AA+ rating with a stable outlook, having set an earlier precedent in 2011.
Future rating changes hinge on material economic impact from shutdowns. The FY 2027 appropriations debate unfolds amidst significant political gridlock and worsening fiscal pressures, including over $1 trillion in annual interest payments on the national debt. While no immediate rating action has occurred, agencies indicate a prolonged government shutdown, particularly one that materially impacts economic activity or alters fiscal forecasts, would be the most plausible trigger for a negative outlook change, especially from Fitch, given its 2023 rationale.
8. Will OIRA Rulemaking Affect Mandatory Spending Reductions by FY2027?
| Active OIRA Eligibility Rules | None for SNAP or Medicaid as of February 2026 |
|---|---|
| Major Policy Driver | "One Big Beautiful Bill Act of 2025" (P.L. 119-21) enacted July 4, 2025 |
| Medicaid Work Requirement Effective | National effective date December 31, 2026 |
OIRA currently lacks active rules tightening major mandatory spending program eligibility. As of February 2026, the Office of Information and Regulatory Affairs (OIRA) has no active rulemaking proposals under review that aim to broadly restrict eligibility for major mandatory spending programs such as SNAP or Medicaid. Instead, significant program changes impacting eligibility and projecting future spending cuts are being driven by direct statutory mandate. Specifically, the "One Big Beautiful Bill Act of 2025" (P.L. 119-21), enacted on July 4, 2025, bypasses traditional OIRA review. This legislation introduces stricter work requirements for both SNAP and Medicaid, alongside new limitations on non-citizen eligibility for SNAP.
Outlay reductions for FY 2027 originate from legislative mandates. Consequently, any projected outlay reductions for Fiscal Year 2027 will not stem from OIRA-reviewed economic analyses. Instead, these reductions will derive from official cost estimates prepared by the Congressional Budget Office (CBO) for P.L. 119-21. The implementation of these legislative mandates, particularly the expanded Able-Bodied Adults Without Dependents (ABAWD) work requirements for SNAP and a new community engagement requirement for Medicaid, is anticipated to lead to reduced caseloads and significant outlay reductions beginning in FY2027. The Medicaid community engagement requirement is set to be effective nationally by December 31, 2026.
9. What is the Likelihood of FY 2027 Continuing Resolutions or Omnibus?
| Probability of Short-Term CRs | Greater than 70% |
|---|---|
| Probability of Omnibus Bill | Less than 20% |
| Trump's Proposed Defense Budget | $1.5 trillion |
Experts largely predict a full-year Continuing Resolution for FY 2027. The Fiscal Year 2027 federal budget outlook is dominated by political friction, making regular appropriations unlikely. Experts estimate a greater than 70% probability of short-term Continuing Resolutions (CRs) will be enacted, with a less than 20% chance of a comprehensive Omnibus Spending Bill. This forecast reflects a continuation of recent trends where temporary measures are frequently employed to avoid government shutdowns amid deep disagreements.
Fiscal policy watchdogs anticipate continued budgetary dysfunction and temporary funding. Organizations like the Committee for a Responsible Federal Budget (CRFB) and the Concord Coalition forecast ongoing budgetary challenges, favoring temporary funding mechanisms over long-term agreements. They specifically highlight concerns regarding the administration's proposed $1.5 trillion defense budget, which is projected to add trillions to the national debt, alongside proposed $163 billion non-defense cuts that Congress has largely rejected in the past. Furthermore, the delay in the President's FY 2027 budget release signals contention and compresses the legislative calendar, thereby increasing the likelihood of reliance on CRs.
Historical data and lawmaker preferences strongly indicate short-term CRs are likely. Historical prediction market data for past funding deadlines consistently showed a 90-99% probability of brief government shutdowns, with the expectation of rapid resolution via short-term Continuing Resolutions rather than comprehensive omnibus deals. This market behavior is consistent with the procedural preference for CRs among key lawmakers, who often view them as a more viable alternative to contentious omnibus negotiations.
10. What Could Change the Odds
Key Catalysts
A potential re-election of Donald Trump could lead to aggressive spending cuts, guided by campaign promises and detailed plans like Project 2025, which targets federal agencies, regulations, DEI initiatives, and significant reductions in Medicaid, potentially up to $2.2 trillion. These efforts would be substantially aided by strong Republican congressional support, building on the FY2025 House budget resolution that already calls for $2 trillion in mandatory spending cuts over a decade. Furthermore, mounting pressure from the federal deficit, projected to rise to 7.1% of GDP by 2027, could create increased political impetus for substantial reductions.
Conversely, several factors could impede significant spending cuts or even lead to increased outlays. Donald Trump has expressed intentions to boost defense spending considerably, with a proposed $500 billion increase for 2027 alone, which could offset other reductions. Resistance to cutting popular entitlement programs like Medicare and Social Security, which Trump has vowed to protect, along with strong bipartisan opposition to broad Medicaid cuts, would limit the scope of overall reductions.
Congressional gridlock or Democratic gains in the November 2026 midterm elections could further hinder the passage of spending cut legislation. Additionally, an economic downturn, unforeseen crises, or geopolitical conflicts might necessitate increased government spending for stimulus or relief efforts, counteracting planned austerity. Historically, despite intentions for cuts, various factors have led to increased government spending during past administrations.
Key Dates & Catalysts
- Expiration: March 31, 2027
- Closes: March 31, 2027
11. Decision-Flipping Events
- Trigger: A potential re-election of Donald Trump could lead to aggressive spending cuts, guided by campaign promises and detailed plans like Project 2025, which targets federal agencies, regulations, DEI initiatives, and significant reductions in Medicaid, potentially up to $2.2 trillion [^] .
- Trigger: These efforts would be substantially aided by strong Republican congressional support, building on the FY2025 House budget resolution that already calls for $2 trillion in mandatory spending cuts over a decade [^] .
- Trigger: Furthermore, mounting pressure from the federal deficit, projected to rise to 7.1% of GDP by 2027, could create increased political impetus for substantial reductions.
- Trigger: Conversely, several factors could impede significant spending cuts or even lead to increased outlays.
13. Historical Resolutions
No historical resolution data available for this series.
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