An Overview of the Administration’s FY2027 Budget Priorities

On Friday, President Trump released his budget request for fiscal year (FY) 2027. While the request contains some laudable cuts and reforms, proposed spending hikes are reckless and would add to the nation’s astounding $39 trillion debt. Overall, the FY 2027 budget will do little to tackle structural deficit growth.

The proposal could have laid the groundwork for responsible budgeting, had the administration not eclipsed its budget savings with ill-considered spending hikes. The White House proposes a 10 percent reduction in non-defense discretionary programs totaling $73 billion. However, when the White House’s requested increase in defense spending is considered, the proposed budget exceeds last fiscal year’s discretionary levels by $178 billion.

To give the administration its due, a few praiseworthy proposals merit note:

Internal Revenue Service (IRS) Workforce Right-Sizing ($1.4 billion decrease)

Few Americans would spare a kind word for the Internal Revenue Service (IRS), one of the federal government’s least-liked agencies. The IRS is notorious for poor customer service and for resisting modernization, all while expanding its workforce to conduct more fruitless audits and error-prone manual processing of paper returns. Between 2018 and 2024, the IRS’s workforce grew by more than 23 percent, reaching 90,516 full-time equivalent employees. Yet the agency’s own measure of tax compliance—the voluntary compliance rate—has remained stable for years, at about 85 percent.

Expanding the IRS is not the answer to greater efficiency in tax collection; the answer lies instead in technological and structural reforms needed to improve IRS administration. The budget “proposes to streamline IRS operations utilizing technology improvements to help focus the IRS on providing high-quality customer service while ensuring the tax laws are fairly administered.” The proposal builds on a 27 percent reduction in IRS staffing already achieved last year and would redirect the agency toward technology-driven service delivery.

Eliminating the Community Development Block Grant (CDBG) ($3.3 billion decrease)

The administration proposes to eliminate the Community Development Block Grant (CDBG) for the sixth time. The CDBG is a prime example of a federal program through which local political priorities are subsidized with federal taxpayer money, with little regard for whether any need for federal aid exists. Abuse of federal funds in such programs is endemic, and the conditions are conducive to it: the program is administered through annual statutory formula grants and occasional earmarks that reward local special interests. Beyond the scant justification for federal funding of local political priorities, ample evidence exists that the grant money is misused, including instances in which municipalities such as San Francisco receive more CDBG money than communities with low tax revenue. The administration cites “Equity Officers” in Chicago as among those funded through the CDBG.

Cutting International Organizations and United Nations (UN) Contributions ($2.7 billion decrease)

The U.S. funds a disproportionately large share of several major International Governmental Organizations (IGOs). For example, U.S. funding accounts for roughly 22 percent of the UN regular budget and reportedly contributed roughly 15.6 percent of the World Health Organization’s (WHO’s) total revenue in the 2022–2023 biennium, from which the U.S. withdrew in 2026. U.S. taxpayer dollars flow to many IGOs that have long suffered from accountability failures much like those found in domestic spending programs. The United Nations has become a bloated taxpayer-funded international bureaucracy that well serves neither U.S. interests nor its original mission. The administration proposes “to fund only those IOs that act in accordance with America’s interests” while preserving flexibility to “support specific IOs or peacekeeping missions.”

Sundry Spending Cuts

A proposal to eliminate the Job Corps program, which costs up to $400,000 per graduate and whose participants (according to the administration) earn an average of $16,695 in annual wages, is a welcome move by the administration that would yield $1.6 billion in savings. Another smaller but still noteworthy initiative would begin the privatization of Transportation Security Administration (TSA) airport screeners. Amid a protracted partial government shutdown that disrupted federally funded TSA operations and subjected travelers to lengthy security lines, a step toward decoupling services such as TSA from an increasingly dysfunctional government is as needed as ever.

Alongside these laudable proposals, the budget contains a series of requests that warrant criticism:

Critical Minerals Financing ($13 billion increase)

The administration requests nearly $13 billion more to secure supply chains “ceded to America’s adversaries.” This is large-scale government industrial policy—even if it ostensibly rests on national-security grounds—which shows that the administration is interested not in rescinding government financing of industry, but in steering it toward the sectors it prefers. Regardless of the industry, the incentives the federal government brings with its financing distort market forces where it is involved. Moreover, a flourishing critical minerals sector requires the dynamism of markets and diversified supply chains, which the heavy hand of government and uncertainty of American politics would almost certainly destroy. When Washington undertakes to steer capital, its direction depends on a political landscape wholly disconnected from the business and economic realities on the ground.

Presidential Capital Stewardship Program ($10 billion increase) and Transportation in D.C. ($403 million increase)

The administration proposes $10 billion more in mandatory funding for landscaping, building rehabilitation, and beautification of the capital because, “[a]s the capital of the greatest Nation in the history of the world, Washington, D.C. should showcase beautiful, clean, and safe public spaces.” This amount, proposed as mandatory spending to avoid annual appropriations review, dwarfs funding for the Community Development Block Grants that the administration opposes. The D.C. government has its own local revenue stream and, like any other jurisdiction, should pay for its own internal improvements.

Akin to the D.C. beautification request is the President’s proposal to “provide funds at the [Secretary of Transportation’s] discretion to support a number of D.C.-related priorities,” such as Metro cameras, station lighting, and Union Station modernization, totaling $403 million more.

Shipbuilding & Maritime Industrial Policy ($65.8 billion increase)

Among the defense-related requests, $65.8 billion in shipbuilding funding to procure 34 ships should provoke strong taxpayer skepticism. “The 2027 Budget establishes President Trump’s Golden Fleet, including initial funding for the Trump-class battleship and next-generation frigates,” according to the administration. Colin Grabow at the Cato Institute contends that, “[q]uestions should be asked about the cost-effectiveness of such outlays.” U.S. commercial shipbuilding does not distinguish itself by vigorous competition. Over the last decade, only two active U.S. shipyards predominantly built ships that met the government’s standards. Procurement costs predictably soared. For the John Lewis–class oiler in particular, General Dynamics NASSCO is the sole builder, and procurement costs increased from $543 million per vessel to more than $900 million in the past eight years. Grabow argues, “A more effective approach would allow noncombatant vessels…to be built in the shipyards of treaty allies. Japan and South Korea alone account for approximately 40 percent of global shipbuilding output and can deliver comparable vessels at significantly lower cost.” In addition, past experience with building ships loaded with high-end gadgets and the latest technologies suggests that the odds of a new Trump-class of “battleships” being a sound investment are bad. Dan Grazier, a senior fellow and program director at the Stimson Center, explains: “This will be the fourth time this century that the national security establishment has attempted to build a new surface combatant ship for the Navy…the previous three attempts have been horrendous failures.”

Vought’s assertion that “[f]iscal futility is ending” is arguably no more grounded than the assumption that real GDP would grow 3 percent annually, on average, over the next decade—the estimate the administration used to calculate the President’s budget proposal’s long-term fiscal effect. Congress should reject the President’s wasteful proposed spending hikes and instead undertake urgent spending cuts and fiscal reforms.