The President’s 2027 Budget is refreshingly succinct and well-structured, like a budget written for a business. I was encouraged by this because the last time I reported on the President’s proposed Budget (2023), I wrote a fairly scathing review of its format and style. Quoting myself:
- “The [2023] U.S. Federal Budget is not written in a matter-of-fact manner as most budgets are, as I expected it would be. It’s written with an intent to convince the reader of a certain viewpoint.”
- “…[with 47 introductory] pages of grandstanding, a monologue of incredible proportions dedicated to extolling the greatness of the Budget itself.”
- “Personally, I found the style off-putting and patronizing.”
The additional propaganda explains why the President’s Budget for 2023 totaled 2,199 pages.1
The President’s 2027 Budget only contains three traditional documents.
- Budget – 92 pages (high level Budget allocations)
- Analytical Perspectives – 158 pages (outlines the assumptions used in the Budget)
- Appendix – 1,340 pages (line-by-line Budget accounting for individual programs)2
Total page count = 1,590 (with 547 contributors, compared to the 863 contributors for the 2023 budget)
Key Takeaway #1 – the President’s Budget for 2027 is notably well-structured and efficient to digest.
It contains a short introductory letter from the Director Office of Management and Budget, which is barely longer than one page.
There is no preamble. No introduction. No grandstanding. No summary. It jumps straight into the individual budgets for each governmental department, listed alphabetical (as is the tradition), starting with the Department of Agriculture, then the major agencies.
Further, each department and agency budget is broken into two main sections:
Investments – Across nearly every agency, the investment dollars flow toward three things: national security and defense-adjacent technology, a small set of explicitly protected domestic programs (special education, Pell Grants, disaster response), and organizational restructuring intended to move people and functions closer to what the Administration defines as core government work with an aim to “reduce the Federal footprint”.
Program Cuts and Eliminations – The cuts follow an equally consistent pattern in the other direction, purporting to remove bureaucracy, reduce red tape, streamline programs, and cut wasteful spending. If a program has a component of international assistance, climate or environmental research, grant programs to states and localities for broad community purposes, or diversity & equity initiatives, the odds are good it is on the reduction list. Further, any program that appears in more than one agency’s budget is considered duplicative and also on the funding reduction list.
Under each of these two sub-sections are bulleted text describing the dollar amount of funding changes (plus or minus) for sub-agencies and the rationale for each.3
Key Takeaway #2 – the President’s Budget for 2027 is optimistic in its assumptions.
This is where I’d like to take a closer look at the details.
Preamble
The President’s 2027 Budget depends on assumptions that land outside the range projected by independent forecasters. If followed it to its conclusion, it feels a bit strained under scrutiny.
With several decades of experience in engineering, finance and data analytics, I know when a model looks like someone has worked backward from a desired answer. This Budget has some of that quality in ways that are worth examining further.
To be precise, I am not arguing whether the Administration’s policy priorities are right or wrong. That would be a separate opinion piece. What I am arguing here is narrower: that several of the Budget’s fiscal claims rest on foundations that the Budget’s own documents, read carefully, reveal to be fragile. The Budget is quite transparent about this if you delve into the depths of the Analytical Perspectives volume. Specifically,
The 2027 President’s Budget’s claim of fiscal discipline is built on:
- an economic growth forecast that is more optimistic than other major independent forecasts,
- an interest rate projection that its own sensitivity tables suggest could add trillions to the deficit if wrong, and
- a defense spending increase so large that it dwarfs the domestic cuts.
Let us go through each of these carefully.
1 – The Growth Assumption Is Doing the Heavy Lifting
The Administration projects real GDP growth of ~3.0% annually over the 11-year budget window with a 2.9% terminal growth value.
Meanwhile, other forecasters project substantially lower:
- the Congressional Budget Office (CBO) projects ~1.8% over the long run.
- the Blue Chip panel of private-sector forecasters says ~1.9% over the long run.
- the Federal Reserve’s median projection is 1.8%.
The challenge is that the Administration’s growth assumption is approximately 1.1% above the other major forecasts.4
That gap might sound academic. It is not.5
Federal tax receipts are essentially a function of nominal GDP, and every percentage point of additional growth generates hundreds of billions in additional tax revenue that does not exist in the lower-growth scenarios projected by the other forecasters. The fiscal claims in this budget, (deficit reduction and the assertion that tax cuts can coexist with spending discipline), are all downstream of that aggressive growth assumption.
To be fair to the Administration: they acknowledge this. Chapter 1 of Analytical Perspectives (page 9) shows the divergence clearly, and notes that “past Administration forecasts have 2-year real GDP growth… that were higher than realized, on average, by 1.0 percentage point.” They explain, “This is partly due to the assumption that Administration policy proposals contained in the Budget will be enacted, which may not come to pass.”
That is an honest disclosure. But it is also an acknowledgment that the model has historically overstated growth by approximately the same margin that this forecast exceeds the growth consensus. Noteworthy.
The projections are not fraudulent. They are simply optimistic in a structured and documented way. However, if they prove wrong by even half the historical margin of error, the downstream fiscal picture is materially different from the one this Budget presents.
2 – The Interest Rate Projection
The Budget projects the 10-year Treasury yield settling at 3.5% in 2027 and declining to 3.3% as a terminal rate.
By contrast, Blue Chip projects 4.0%. CBO projects 3.8%.
That spread sounds small. But against $37 trillion in gross federal debt, it is not.6 Higher interest rates require more funds allocated to pay the interest expense on the nation’s debt.
The Budget’s own Analytical Perspectives sensitivity table calculates that a sustained 1% higher interest rate would add $3.8 trillion to the cumulative deficit over 11 years.7 Applied to the actual consensus gap, that is somewhere between $1.9 and $2.7 trillion in additional deficit exposure, using the Administration’s own math, if the outside forecasters’ assumptions are correct.
There is also an internal tension worth noting. The interest rate assumption (point #2) and the growth assumption (point #1) are not independent. Higher growth typically produces higher rates, as the Federal Reserve responds to a stronger economy by maintaining or tightening monetary conditions. The Administration’s model projects stronger growth than consensus and lower rates than consensus simultaneously. That combination can occur, but it represents the best-case scenario possible, not just the best case presented.
3 – The Defense Increase Eclipses the Domestic Cuts
The Budget proposes a 10% cut to non-defense discretionary spending, which translates to roughly $90-100 billion in annual savings. Simultaneously, defense spending is proposed at $1.5 trillion, a ~$500 billion increase from 2026. The ratio of additional spending to savings is approximately 5-to-1.
That is, for every dollar saved in domestic programs, the Budget proposes to spend five more on defense. The net effect from the spending side is therefore a deficit expansion. Consequently, fiscal discipline in this Budget depends entirely on the growth story on the revenue side, which depends entirely on the rather optimistic growth projections discussed above.
To be clear, I am not making a claim about the optimal Defense budget. But it is worth stating clearly that a budget should not simultaneously claim the virtues of austerity and propose spending increases of this magnitude.
In addition to these three main points, a few additional nuisances are worth mentioning.
The Word “Savings” Requires a Footnote
In the opening message, the Director, Office of Management and Budget describes the Working Families Tax Cut Act (WFTC) as “achieving nearly $2 trillion in savings” while also cutting taxes for working Americans and funding a historic defense buildup.
That is a remarkable combination, and these can all be true: you can cut some taxes while also reducing mandatory spending on programs like Medicaid, student loan forgiveness, and SNAP in ways that produce net savings in the Federal Budget’s ten-year accounting window.8 It’s not that the math is wrong.
But there is a presentation choice embedded here that deserves attention. When a budget scores “savings,” those savings are typically measured against a baseline projection of what spending would have been without the legislation change.
Some portion of what the Administration calls savings in the WFTC reflects changes to mandatory program parameters, things like Medicaid work requirements and new student loan repayment structures, that reduce projected outlays relative to the prior-law baseline. These are real policy changes with real fiscal effects. But they are not savings in the intuitive sense of the word. Although the federal government is spending less than it would have spent under a different set of rules, it is still an increase in spending over the prior year.
The footnote is this: “savings” in budget accounting means spending less than a baseline projection, not spending less than last year.
Doubtful Recurring Eliminations
Several programs proposed for elimination are not new. The Low Income Home Energy Assistance Program (-$4 billion) and the Community Services Block Grant (-$775 million) have each appeared on elimination lists in prior budget requests, under multiple administrations, and Congress has declined to act each time… six times in a row.
A budget counting on savings from prior proposals that have previously been rejected by Congress repeatedly is not a conservative forecast. It is optimistic. These proposals may eventually be enacted by Congress. But until then, these seem more like aspirational savings.
The Defense Industrial Base May Have an Absorption Problem
The 44% increase in defense spending in a single year is not just a budget question. It is a capacity question.
Defense contractors, shipyards, weapons manufacturers, and specialized labor markets do not easily scale by 44% in a year. These are industries with large capital expenditures built into their business models… not software companies. When procurement dollars increase faster than the industrial base can absorb them, the result can be cost overruns, schedule delays, and sector-specific inflation. The relationship between defense dollars and defense capability is not one-to-one.
While it is not the role of the budget to address the question of whether the industrial base can efficiently deploy $1.5 trillion in a single year, it’s worth a callout for the additional complexity involved with a budget shift of this magnitude.
What the Budget Gets Right
The Administration’s 2027 Budget prose is very straight forward, business-like, and seemingly without much sleight of hand. That part is refreshing.
Further, the Analytical Perspectives volume is genuinely more transparent than most political documents about the uncertainty of its own projections. It publishes both the historical forecast error table and the sensitivity analysis. That is worth acknowledging.
The Bottom Line
The President’s 2027 Budget projects a fiscal trajectory that improves materially under its own assumptions. Those assumptions are notably optimistic relative to other major forecasters.
- The growth assumption creates the revenue projection.
- The interest rate assumption manages the debt service.
None of this makes the budget dishonest. It makes it optimistic, in a specific and quantifiable way with full disclosure of the assumptions. The question is more about the robustness of the underlying assumptions that drive the forecasted financials of the nation.9
While I hope the optimistic projections are correct, (that we collectively achieve substantial productivity gains through technology and AI, and that there is sufficient continued buyer demand for U.S. Treasuries such that interest rates can remain low without undo inflation), the Budget’s own historical error table suggests some skepticism is warranted on these points.
Sources:
Budget of the United States Government, Fiscal Year 2027; Analytical Perspectives, Budget of the United States Government, Fiscal Year 2027; Appendix, Budget of the United States Government, Fiscal Year 2027. All published by the Office of Management and Budget, April 2026.
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FOOTNOTES:
- 1,888 pages if we omit the various supplemental documents like the “Climate Risk Analysis”.
- The Appendix details the resources and outlays for the various programs, from the largest like Social Security to the smallest with only $1 or $2 million of funding. There are funded programs that you have never heard of nor imagined would exist.
- I would be remiss if I did not mention that the tone of the “Cuts and Eliminations” sections is rather abrupt and curt in style with an unusually blunt editorial voice for a government document, echoes of the President himself. By contrast, the Analytical Perspectives volume is the most conventionally professional of the three. It reads like a technical document written by economists, because it is. The comparison tables and sensitivity analyses are presented without editorial spin. It is the most credible-sounding section of the package, and also the one almost nobody reads.
- Source: Table 01-2, “Comparison of Economic Assumptions,” Chapter 1 of the Analytical Perspectives volume (page 6).
- The more tangible way to think about this is… suppose you think you owe $180,000 on your mortgage but the bank says, “Actually, you still owe $290,000.” That’s a substantial difference. Same percentage difference as the projected growth rates in the Budget assumptions. Same implications.
- Source: Table 11–1. Gross Federal Debt Outstanding, End of Year, 2025 (page 121)
- Source: Table 01–3. Sensitivity of the Budget to Economic Assumptions (page 7)
- SNAP – Supplemental Nutrition Assistance Program (food stamps).
- As stated in the Analytical Perspectives volume (page 46), “The decision-makers must consider the effects of economic and technical assumptions on the budget estimates. Interest rates, economic growth, the rate of inflation, the unemployment rate, and the number of people eligible for various benefit programs, among other factors, affect Government spending and receipts. Small changes in these assumptions can alter budget estimates by many billions of dollars.”
