White House Releases FY2027 Budget Request

The White House released the President’s budget request for Fiscal Year (FY) 2027, outlining the White House’s fiscal priorities. This budget requests an increase in defense spending while proposing cuts to non-defense discretionary spending.

• The Administration requests an increase of over 40% in budgetary resources for the Department of War in FY2027 to fund critical munitions and the defense industrial base.
• The President also requests reductions in non-defense discretionary spending of $73 billion, or 10%, compared to FY2026 levels, primarily targeting health and human services, housing, and international aid programs.
• The Administration’s economic assumptions are generally more positive than outside forecasters, which the White House attributes to incorporating the positive economic effects of its FY2027 budget policies and the timing of the publication of the forecasts. The budget did not include projections of the deficit and debt for FY2027.
• Democrats have criticized the President’s budget request, with Republicans in Congress supportive yet concerned about the legislative challenges to enacting the President’s proposals, including possible use of the budget reconciliation process permitting enactment on a party-line vote, in time to avoid a possible government shutdown on October 1.

The President’s Budget FY2027 Budget Request

The White House released the President’s budget request for FY2027, asking for an increase in defense spending while proposing cuts to non-defense discretionary spending.¹ The timing of the release was later than has been typical for several decades.

Proposed Spending Increases

The Administration requests $1.5 trillion in total budgetary resources for the Department of War in FY2027, a $445 billion (42%) increase over FY2026 levels.² This comprises $1.1 trillion in base discretionary budget authority and $350 billion in additional mandatory resources through reconciliation to fund critical munitions and expand the defense industrial base. (Reconciliation bills, which can be enacted only once per fiscal year, require only a simple majority in the Senate to pass. In addition, under the Byrd Rule only certain items may be included, and the Senate Parliamentarian must rule as to whether a particular item is germane to be included in the bill.) Specific proposed investments include the Golden Dome missile defense system, pay raises for troops, shipbuilding, critical minerals, drone manufacturing, and AI initiatives.

Compared to FY2026 levels, the President proposes spending increases of $4.7 billion (13%) for the Department of Justice and $11.5 billion (9%) for the Department of Veterans Affairs. The proposed investments for the Justice Department include funding to enforce immigration laws, combat violent crime in urban areas, fight drug trafficking, build additional prisons, and expand FBI counterterrorism and violent crime programs. For Veterans Affairs, the budget requests additional funding for medical care (particularly for veterans experiencing homelessness), major construction projects, electronic health record modernization, and IT system improvements.

Requested Spending Reductions

The Administration requests reductions in non-defense discretionary spending of $73 billion, or 10%, compared to FY2026 levels. The agencies with the largest proposed cuts in FY2027 are Health and Human Services (HHS) ($15.8 billion, or 12.5% decrease), Housing and Urban Development ($10.7 billion, or 13% decrease), and State and International Programs ($15.5 billion, or 30% decrease). The Administration claims to achieve these savings “by reducing or eliminating woke, weaponized, and wasteful programs, and by returning State and local responsibilities to their respective governments.”³

For HHS, the Administration proposes the elimination of the Low Income Home Energy Assistance Program, Refugee Resettlement Program, Unaccompanied Alien Children Program, and the Community Services Block Grant. The White House also requests a $5 billion cut to the National Institutes of Health and nearly $500 million in cuts to the Agency for Healthcare Research and Quality and the Administration for Strategic Preparedness and Response. Regarding housing policy, the Administration proposes eliminating the Community Development Block Grant, HOME Investments Partnerships Program, and various housing grants for the homeless, persons with AIDS, and Native Americans and Native Hawaiians. For international affairs, the budget reduces funding for humanitarian assistance, global food programs, global health programs, various international organizations, and the United Nations.

Economic Assumptions

The Administration projects real GDP growth between 2.9% and 3.1%. These projections are more optimistic than the comparable forecast from the Economics, Strategy & Finance Center of The Conference Board, which projects real GDP growth of 1.9% over the next 10 years. The budget also assumes inflation (Consumer Price Index) at 2.5% for 2026, falling to 2.3% in 2027, and 2.2% for 2028 and subsequent years. The Administration attributes these differences to assuming positive economic effects from the implementation of all its requested FY2027 policies and the timing of the publication of its forecasts in comparison to other forecasts.⁴

The President’s budget does not include projections for the deficit or debt in FY2027 or subsequent years, though it notes the debt held by the public reached 99.5% of GDP in FY2025. To bolster its economic assumptions, the President’s budget request assumes significant revenues from customs duties. Compared to actual tariff revenues of $195 billion in FY2025 (much of which will be refunded to importers of record after the Supreme Court’s decision in Learning Resources v. Trump), the President’s budget projects receipts from customs duties to be $464 billion in FY2027 and steadily increase by $20-$30 billion annually before reaching $681 billion in FY2036.

Reaction and Next Steps

Democrats criticized the Administration’s FY2027 budget request and have vowed to oppose it because of its cuts to domestic programs and excessive proposed increases for defense spending.⁵ While Republicans are generally supportive of the President’s proposals, some GOP lawmakers have concerns about securing the party unity necessary for passing a reconciliation bill and voting for increased defense spending as constituents struggle with the cost of living and rising energy prices.⁶

As Congress takes the lead on the appropriations process, the President’s budget request signals the President’s priorities. However, given the influence of the President on Republicans in Congress, and the likelihood of a reconciliation bill, business and voters should expect political pressure to adopt at least some of the Administration’s proposals as Congress considers the FY2027 Federal budget.