Trump's Federal Budget Proposal for 2026: $163 Billion in Cuts Reshape Government Priorities

Key Takeaways

• The White House budget proposes $163 billion in cuts to non-defense programs, a 22.6% reduction from 2025 levels
• Defense spending would increase by 13% to over $1 trillion, while Homeland Security funding jumps 65%
• The EPA faces the steepest percentage cut at 55%, reducing its budget to its lowest level since 1986
• NASA's science programs would see funding cut nearly in half, with astrophysics losing 68% of its budget
• Housing programs face more than $26 billion in cuts, including new time limits on rental assistance
• Republican control of Congress improves chances of implementation, but several GOP senators have already expressed concerns

The White House Budget Plan: An Overview

On May 2, 2025, the White House released what budget experts are calling one of the most consequential federal budget proposals in decades. The fiscal year 2026 plan, presented as a "skinny budget" with topline numbers rather than comprehensive details, seeks to fundamentally restructure federal spending priorities with $163 billion in cuts to non-defense discretionary programs.

The cuts represent a 22.6% reduction in domestic spending compared to fiscal year 2025 levels. At the same time, the budget proposes significant increases for defense and homeland security, reflecting the administration's emphasis on traditional security concerns and immigration enforcement.

"This federal budget plan represents the most dramatic attempted restructuring of government priorities we've seen in modern history," explained Bobby Kogan, an analyst at the Center for American Progress. "It would bring non-defense discretionary spending to the lowest level on record."

The scale of these cuts goes beyond typical budget adjustments to represent a philosophical reorientation of the government's role – shrinking environmental protection, scientific research, housing assistance, and social programs while expanding military and security operations.

Many of the proposed reductions would codify cuts already implemented this year through executive actions and the Department of Government Efficiency (DOGE), though courts have ordered the administration to resume much of this spending. The budget proposal represents an attempt to secure more permanent changes through congressional approval.

Department-by-Department Impact

The budget plan impacts federal departments and agencies with varying severity. Here's a breakdown of proposed changes across major departments:

Several independent agencies face complete defunding, including the National Endowment for the Arts, the National Endowment for the Humanities, the Corporation for Public Broadcasting, and AmeriCorps.

The proposed cuts to HHS would include a 44% reduction in the Centers for Disease Control and Prevention (CDC) budget, from $9.2 billion to about $5.2 billion, eliminated funding for climate research at the National Oceanic and Atmospheric Administration (NOAA), and a 40% cut to the National Institutes of Health.

Defense and Border Security: The Big Winners

In stark contrast to the domestic program cuts, the budget plan calls for substantial increases in defense and homeland security funding. The Department of Defense would see its budget increase by 13% to $1 trillion – the first time defense spending would exceed that symbolic threshold.

However, this figure comes with a significant caveat: $119.3 billion of the defense increase would be funded through a separate budget reconciliation bill that Republican lawmakers are developing. If that legislation fails to pass, the full defense increase would not materialize.

Immigration enforcement receives particular emphasis, with a 65% increase in Department of Homeland Security funding. Specific allocations include:

• $500 million for expedited removal operations supporting 50,000 detention beds
• $766 million for border security technology
• Funding to maintain 22,000 Border Patrol agents
• Support for hiring additional Customs and Border Protection officers to reach a total of 26,383

The budget justifies these increases as necessary to implement the administration's "mass removal campaign" and secure the border, describing the funding as support for "our Nation's veterans and law enforcement" while eliminating programs that are "weaponized against the American people."

Housing Programs Face Deep Cuts

The Department of Housing and Urban Development (HUD) faces some of the most consequential cuts in the proposed budget, with more than $26 billion in reductions targeted at rental assistance programs. These cuts would significantly impact housing availability for low-income Americans at a time when many communities already face affordable housing shortages.

Among the most controversial policy changes is a proposed two-year cap on rental assistance for able-bodied adults. Housing advocates warn this time limit could increase homelessness and housing instability. The budget also proposes cutting the Community Development Block Grant, a bipartisan program supporting various economic development initiatives.

HUD has already experienced workforce reductions under the current administration, with reports indicating plans to cut up to 50% of staff. Additionally, the agency has ended the Emergency Housing Voucher Program four years early – a program that has helped nearly 60,000 people and families secure stable housing.

"The proposed changes would be particularly damaging because they come at a time when housing costs have risen dramatically across the country," explained Diane Yentel, president of the National Low Income Housing Coalition. "The historical evidence shows these cuts could worsen existing housing challenges in communities that already face massive shortages of affordable homes."

During President Trump's first term, his administration repeatedly proposed significant cuts to HUD, including reductions that would have eliminated housing assistance for approximately 200,000 households relying on Housing Choice Vouchers. Those proposals were ultimately rejected by Congress.

EPA and Environmental Programs: Historic Reductions

The Environmental Protection Agency faces the most severe percentage reduction of any major agency, with its budget slashed from $9.1 billion to $4.2 billion – a nearly 55% cut that would bring EPA funding to its lowest level since 1986, adjusted for inflation.

This reduction would significantly impact the agency's ability to monitor and address environmental concerns at a time when many communities face increasing climate-related challenges. The cuts would affect a wide range of programs, including:

• Water quality monitoring
• Enforcement of pollution standards
• Climate research initiatives
• Environmental justice programs
• Chemical safety reviews

The National Oceanic and Atmospheric Administration would see its 2026 budget reduced by 27% to $4.5 billion, hampering its ability to conduct climate research and provide weather forecasting services.

The budget characterizes many of these environmental programs as part of a "Green New Scam" and argues they divert resources from higher-priority areas. However, environmental experts warn the cuts could lead to increased pollution, reduced disaster preparedness, and diminished ability to address emerging environmental threats.

"These reductions may save money in the short term, but potentially increase costs over the longer horizon through disaster recovery, health impacts, and reduced agricultural productivity," said Michael Gerrard, director of the Sabin Center for Climate Change Law at Columbia University.

NASA's Budget: Science Slashed, Mars Prioritized

The National Aeronautics and Space Administration (NASA) faces a significant restructuring under the proposed budget. While the agency's overall funding would be reduced by approximately 20%, the cuts would disproportionately affect its science missions.

The Science Mission Directorate would see a nearly 50% reduction from $7.3 billion to $3.9 billion. Within this framework, specific divisions face even steeper cuts:

• Astrophysics: 68% cut (from $1.5 billion to $487 million)
• Earth Science: 53% cut (from $2.2 billion to $1.033 billion)
• Heliophysics: 43% cut (from $805 million to $455 million)
• Planetary Science: 30% cut (from $2.7 billion to $1.9 billion)

The budget would maintain funding for the Hubble and James Webb space telescopes but eliminate support for the Nancy Grace Roman Space Telescope, despite the fact that its hardware is already being integrated and tested for a planned 2026 launch. The Mars Sample Return mission and the DAVINCI mission to Venus would also lose funding.

At the same time, the budget proposes a significant shift in NASA's priorities toward human space exploration, particularly focused on Mars. It allocates over $7 billion for lunar exploration and introduces $1 billion in new investments for Mars-focused programs.

The proposal would also make major changes to NASA's Artemis moon program, eliminating the Space Launch System rocket and Orion spacecraft after two more missions, as well as canceling the planned Gateway lunar space station. Instead, the administration indicates a preference for using commercial spacecraft for future missions.

Casey Dreier, chief of space policy for the Planetary Society, described the proposed NASA science cuts as an "extinction-level event" that would waste billions in existing investments while abandoning valuable scientific missions.

DOGE's Role in Federal Budget Implementation

A unique aspect of this budget proposal is how it intersects with the Department of Government Efficiency (DOGE), headed by billionaire entrepreneur Elon Musk. The budget would codify for next year many of the spending cuts already unilaterally implemented this year by the White House or DOGE.

According to administration officials, "We're joined at the hip with DOGE. We have a very close partnership with them." This relationship has generated controversy, raising questions about the role of unelected officials in determining federal spending priorities.

DOGE has directed agencies to terminate various programs deemed as promoting "diversity, equity, and inclusion" or "critical race theory," characterizing them as "weaponized against the American people." The budget proposal reflects this focus, specifically targeting what it describes as "radical diversity, equity, and inclusion (DEI) and critical race theory programs."

However, the courts have ordered the White House to resume much of the spending previously cut through executive action. In March 2025, federal judges ruled that certain probationary employees at CFPB and HUD must retain their jobs, at least temporarily. In April, another judge ordered the administration to reinstate federal employees who had been terminated.

The legal challenges highlight the constitutional tensions in this approach to governance. The Constitution grants Congress, not the executive branch, the power of the purse. While presidents can propose budgets and exercise some discretion in implementation, they cannot unilaterally refuse to spend appropriated funds without congressional approval.

If the budget is approved by Congress, it would provide a more solid legal foundation for these cuts. Without congressional approval, the administration has indicated it might consider using impoundment – the controversial practice of refusing to spend appropriated funds – though this approach would likely face significant legal challenges.

The Budget Process: What Happens Next

The release of the president's budget proposal marks just the beginning of a complex process that will unfold over the coming months. Here's a timeline of key steps in the federal budget cycle:

This "skinny budget" provides topline numbers rather than comprehensive details, with more specific proposals expected in the coming weeks. The administration will submit a more detailed budget proposal that outlines specific program funding levels and policy changes.

Congress will then develop its own budget resolutions and appropriations bills, which may incorporate some but not all of the administration's proposals. The House and Senate will need to pass 12 separate appropriations bills that fund different parts of the government, or alternatively, an omnibus spending package that combines multiple appropriations into a single bill.

If Congress fails to pass appropriations legislation by the October 1 deadline, it would need to pass a continuing resolution to prevent a government shutdown, or the government would need to operate under the anti-deficiency act, which severely constrains operations.

The administration has also indicated that much of its defense and border security funding would come through a separate budget reconciliation bill, which could pass with a simple majority in the Senate rather than requiring the usual 60-vote threshold for ending debate.

Congressional Reaction and Political Realities

While presidential budget requests represent important statements of priorities, Congress ultimately holds the power of the purse. Early reactions suggest a complicated path forward for the proposal, even with Republican majorities in both chambers.

At least three Senate Republicans have already criticized aspects of the budget. Susan Collins, chair of the Senate Appropriations Committee, expressed "serious objections to the proposed freeze in our defense funding" and opposed cuts to programs like the Low Income Home Energy Assistance Program (LIHEAP).

Senator Roger Wicker, chairman of the Senate Armed Services Committee, argued the military budget is insufficient, stating, "OMB is not requesting a trillion-dollar budget. It is requesting a budget of $892.6 billion, which is a cut in real terms."

Democrats have been more uniformly critical, with some promising to "fight tooth and nail" against the proposed cuts, particularly those affecting science funding and housing assistance.

The budget reconciliation process could provide a path for passing some elements with only a simple majority in the Senate, but internal Republican divisions on spending priorities may complicate this approach. The historical evidence from previous administrations suggests that most presidential budgets undergo significant modifications before final passage.

"Ultimately, it is Congress that holds the power of the purse," Collins noted in her statement, signaling that lawmakers will assert their constitutional role in the budget process.

Economic Impacts: Jobs, Communities, and Markets

From a macroeconomic perspective, the proposed budget represents a significant fiscal contraction in domestic spending, offset by expansions in defense and security areas. The net effect would likely be contractionary, potentially reducing aggregate demand at a time when the economy is already navigating uncertainties around inflation, interest rates, and global trade tensions.

The cuts would have varied regional impacts, with areas heavily dependent on federal facilities experiencing the most severe effects. For example:

• The NASA Goddard Space Flight Center in Maryland, with its 10,000 employees, faces potential closure or massive downsizing
• Research universities that depend on NIH and NSF grants could see significant funding reductions
• Communities with large EPA operations would face job losses as the agency reduces staff to 1980s levels
• Rural communities would lose housing and energy assistance programs like LIHEAP

The expanded defense and border security funding would create offsetting job growth in communities with large military installations and along the southern border. Defense contractors, security technology firms, and communities with detention facilities would likely see economic benefits.

The corporate tax environment could see significant changes that indirectly impact the budget. If President Trump succeeds in lowering the corporate tax rate from 21% to 15%, as he has indicated, this could reduce incentives for certain investments, including affordable housing. The California Housing Partnership has estimated that such a tax cut would reduce affordable housing investment in California alone by approximately $250 million due to changes in tax credit valuations.

Historical Context: How This Budget Compares

This budget proposal stands as one of the most ambitious attempts to reshape federal spending priorities in recent decades. The proposed 22.6% reduction in non-defense discretionary spending exceeds the scale of cuts proposed during President Reagan's first term and would bring such spending to "the lowest level on record, by far," according to analysis from the Center for American Progress.

During President Trump's first term (2017-2021), his administration regularly proposed significant cuts to domestic programs, including reductions of nearly 20% to HUD and elimination of the Public Housing Capital Fund. Congress ultimately rejected these proposals on a bipartisan basis.

The current proposal's chance of implementation is enhanced by Republican control of both houses of Congress, though the narrow margins and internal party divisions on spending priorities create significant uncertainty. The administration has also indicated it may consider using impoundment – the controversial practice of refusing to spend appropriated funds – to implement cuts even without congressional approval.

This approach to budgeting reflects a fundamental philosophical shift in how the administration views the role of government in addressing social, environmental, and economic challenges. The historical evidence suggests that such dramatic pendulum swings in policy often create disruption and uncertainty for affected sectors while testing the resilience of institutional frameworks.

Conclusion: The Road Ahead

The White House's 2026 budget proposal represents a bold attempt to reshape federal priorities, slashing domestic programs while boosting defense and border security. Whether this vision will be fully realized depends on congressional action, judicial review of executive implementations, and the administration's ability to sustain political support for such significant changes.

As the budget process unfolds in the coming months, we can expect intense debate over these priorities and their implications for different communities and sectors. Economic stakeholders across industries will need to closely monitor developments and prepare for potential scenarios ranging from full implementation to significant modifications of the proposal.

The historical evidence suggests a more moderate outcome is likely, with Congress tempering some of the most dramatic cuts while accommodating some of the administration's priorities. However, the unique political dynamics of the current environment and the administration's demonstrated willingness to pursue policy changes through executive action introduce additional uncertainty.

What remains clear is that the coming fiscal year will be defined by fundamental questions about government's role, responsibilities, and priorities – questions that extend beyond simple budgetary calculations to the very nature of American governance in the modern era.

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