The president has released his fiscal year 2027 budget request — and buried inside the rhetoric about “historic paradigm shifts” and the end of “fiscal futility” is a $1.5 trillion Pentagon spending request. A 44% increase in a single year. And that’s before the Iran War supplemental reportedly in the pipeline.

TCS President Steve Ellis brings in national security analyst Gabe Murphy and Director of Research and Policy Josh Sewell to cut through the numbers: what the administration is actually proposing, what it would cost, and what it would mean for the programs that everyday Americans depend on. The budget calls it discipline. Budget Watchdog AF is going to show you the math.

Transcript

Announcer:

Welcome to Budget Watchdog All Federal, the podcast dedicated to making sense of the budget spending and tax issues facing the nation. Cut through the partisan rhetoric and talking points for the facts about what’s being talked about, bandied about and pushed to Washington, brought to you by taxpayers for common sense. And now the host of Budget Watchdog AF TCS President Steve Ellis.

Steve Ellis (00:40):

Welcome to all American taxpayers seeking common sense. You’ve made it to the right place. For 30 years, TCS, that’s taxpayers for common sense, has served as an independent nonpartisan budget watchdog group based in Washington, DC. We believe in fiscal policy for America that is based on facts. We believe in transparency and accountability because no matter where you are on the political spectrum, no one wants to see their tax dollars wasted. It’s April 2026. Despite the recent two-week ceasefire, American troops are in harm’s way in an unauthorized war with Iran, a conflict with no clear strategy, no defined mission, and no end in sight. And in the middle of all that, the president has released his budget request for fiscal year 2027. Budget Watchdog AF Faithful? Those two things are not separate stories. They are the same story. Because buried inside the budget, alongside the rhetoric about a historic paradigm shift and the end of what they call fiscal futility is a one and a half trillion dollar Pentagon spending request.

(01:41):

A 44% increase in a single year. And that’s before an Iran Ward supplemental that’s reportedly in the pipeline. If Congress goes along with all of it, taxpayers could be on the hook for effectively doubling the Pentagon budget in two years, in part to pay for award that was never authorized, is still ongoing, and for which there is no clear strategy or end game. We believe the men and women serving in uniform deserve better than that, and so do the taxpayers being asked to fund it. The national debt has grown by $2.8 trillion since the president was inaugurated in January 20th of last year. We’re now paying nearly a trillion dollars a year in interest. The budget does nothing to change that trajectory. It actually makes it worse. The administration calls it discipline. We’re going to show you the numbers. To do that, I’ve got two of TCS’s sharpest analysts with me today.

(02:35):

Gabe Murphy covers national security spending, and given what’s happening right now with Iran, his portfolio has never been more relevant. And Josh Shul, TCS’s director of research and policy, is going to walk us through the budget gimmicks, the rosy economic assumptions, and what this request actually means for programs that everyday Americans depend on. Gabe, Josh, welcome back to Budget Watchdog AF.

Josh Sewell (02:57):

Glad to be here, Steve.

Gabe Murphy (02:58):

Yeah, thanks, Steve.

Steve Ellis (02:59):

So Josh, let’s start with the big picture. How much money is the president looking to spend in his budget?

Josh Sewell (03:05):

Well, it depends what your definition of is, is.

Steve Ellis (03:07):

Always with the straight unambiguous answers. What do you mean by is, is?

Josh Sewell (03:13):

So budgets are an exercise in number games and assumptions. But the gist, the request contains more than $1.8 trillion in base discretionary funding. That’s annual funds for each agency, both defense and non-defense. All

Steve Ellis (03:26):

Right. So $1.8 trillion.

Josh Sewell (03:28):

But they also assume $350 billion in new mandatory, that’s not discretionary, funding for the Pentagon. Throw in, was it $29 billion in anticipated disaster aid, a $10 billion in rescissions to unspend IIJ spending. A few other cats and dogs and voila $1.83 trillion in discretionary spending authority, but that’s 2.18 trillion in new taxpayers spending commitments.

Steve Ellis (03:54):

So a lot of money. And what does this budget tell us about the Trump administration’s fiscal and policy priorities?

Josh Sewell (04:01):

Defense good. Domestic bat.

Steve Ellis (04:04):

Appreciate the brevity, Josh. Not what you’re known for. Can you expand on that a little bit for us?

Josh Sewell (04:10):

Sure. So the administration seeks a 10% reduction in non-defense discretionary spending. It was a 19% reduction at USDA. It was a 30% at the State Department, various amounts at other agencies, but there is, however, an increase at the Department of Justice, more spending on border and immigration enforcements and let’s see, a massive increase in defense that you already mentioned. So they’re basically doubling down on the priorities they’ve shown over the last year and change.

Steve Ellis (04:40):

So Josh, the numbers in the budget aren’t just the spending proposal. They also have to take into account some assumptions about the economy, right?

Josh Sewell (04:48):

Yeah. And this is where this budget’s not that dissimilar from previous budgets. They all have their own assumptions. And I think I saw on here that the administration assumes unemployment will stay low or even get lower than it is now, which is actually a little lower than what a non-administration economists are predicting. And they’re predicting inflation doesn’t really increase beyond its 3.3% that it is right now. And so in reality, inflation’s going to fluctuate a lot more. Basically, they have some very rosy assumptions. And to be fair, that’s what every administration does, but this one is a little bit rosier than some of the past administrations.

Steve Ellis (05:26):

Yeah. If I recall, they also expect economic growth that has not been projected by anybody else like the Fed or CBO. All right. Turning to the 1.5 trillion pound gorilla in the budget, let’s talk about the Pentagon. Also known as Department of War, also known as the only federal agencies never passed the audit. Gabe, let’s start with the numbers. How does this increase compare to recent trends in US military spending?

Gabe Murphy (05:52):

Well, Steve, if this was enacted, which we certainly hope it’s not, this would surpass military spending at the height of World War II, even after adjusting for inflation. It would be a 45% increase in a single year. To put that into perspective, US military spending grew by about 50% over the first 25 years of this century. It also comes on the tail of an 18% increase enacted this past year, which brought us the first ever trillion dollar Pentagon budget.

Steve Ellis (06:20):

And what is the administration’s rationale for seeking this historic boost in military spending?

Gabe Murphy (06:26):

Well, at least until recently, you may have heard the administration and some folks in Congress talking a big game about peace through strength. This dates back to the Romans really, but more commonly it’s associated with Reagan’s foreign policy. And basically the phrase suggests that the stronger we are, the more peaceful things will be. And in the budget context, it’s often used to suggest that spending more on our military will help prevent wars by deterring our adversaries from attacking us. And there’s some logic to that, but it kind of goes out the window once you launch an unauthorized war of choice in the name of, well, a lot of things, depending on which administration officials you ask on which day of the week. But messaging aside, the notion that more spending equals more safety is, I think, the primary rationale that proponents of this increase have put forward.

Steve Ellis (07:15):

Yeah. They’ve also talked about rebuilding the military and it’s a bunch of other things. And even though we’ve been spending a lot of money and setting records on Pentagon spending, it seems like each year leading up to this, I guess there’s also, you mentioned the Romans, but I also think of Teddy Roosevelt and speak softly and carry a big stick. But going back to their rationale, does that hold water in your opinion, Gabe?

Gabe Murphy (07:36):

No, not really. No. I mean, it obviously takes money to have a military. No one’s arguing that, and we should have one. But as I mentioned, Congress enacted an 18% increase for this fiscal year, and that didn’t stop us from getting into a war. But even setting aside the war, the notion that more spending automatically leads to better national security outcomes just hasn’t borne out. Steady increases over the first two decades of this century spawned some of the least effective weapon systems ever built. I mean, the F-35, this is a $100 million plane with an anticipated $2 trillion price tag over the program’s lifecycle, and it’s only fully operational like 30% of the time.

Steve Ellis (08:18):

Right. And I can think of a few others. The literal combat ship, which some have taken the calling little crappy ship, was plagued by performance issues and has all been canceled. While its successor, the Constellation class frigate was formerly canceled. These programs suffered in part from trying to do too much, not unlike the F-35.

Gabe Murphy (08:38):

Right. And yet the approach under this budget is to take the money from the Constellation Class frigate and build an even more overtasked battleship, which they’ve dubbed the Trump class. They want to pack this thing with everything from hypersonic missiles to lasers to nuclear-tipped cruise missiles. So it’s I think more of the same. Dan Grazer, a colleague over at the Stimson Center and a former Marine Corps captain recently predicted that this program, the Trump class frigate, will spend tens of billions of dollars and produce maybe three underperforming ships before it’s canceled. Pretty bold prediction, but plausible based on what we’ve seen historically. So this budget doesn’t just fail to learn from past mistakes. It really doubles down on them. And what we really need is smarter spending, not just more spending. Yeah,

Steve Ellis (09:25):

It’ll be hard to have a stealthy ship if it’s painted all in gold. All right. Less we forget, the administration is also expected to seek supplemental funding for the Iran War. We haven’t seen that request yet, but the most recent reporting is saying $98 billion and that it could include disaster and aviation modernization funding. We’ve said Congress should review the request, but ultimately oppose any supplemental funding for an unauthorized war. That said, obviously the war has had an impact on our stockpiles and munitions. Is the administration planning to address that in the supplemental or in the annual budget?

Gabe Murphy (10:06):

The simple answer is yes. While we haven’t seen the supplemental, like you mentioned, if the White House formally requests one, it’s certainly going to include some munitions funding, and we’ll likely go above and beyond that to include investments in the industrial base. According to today’s notice story, that’s news of the United States, a relatively new publication out. The supplemental will include quote 24 billion to expand production for expensive munitions. But the annual budget also does that. We looked into the Pentagon’s primary munitions accounts and found that overall this budget seeks a 150% boost in munition spending. That’s an extra $47 billion on top of what we spent last year. But then we looked closer and we found that among the munitions, at least that we know have been used during the Iran war, the budget is seeking a 387% increase. So basically, if a supplemental is formally requested, the administration will be asking taxpayers to pay for this war not once, but twice.

Steve Ellis (11:10):

I’ve never been a fan of double dipping. I prefer my dips and my budget’s clean. All right, let’s stay on the subject of the Pentagon, but I want to turn to process. Josh, the Pentagon is seeking some $350 billion of its roughly $500 billion increase through budget reconciliation, the same process that gave us the One Big Beautiful Bill Act last year. What are some of the pitfalls in general of pursuing major spending initiatives through reconciliation? Remind our listeners.

Josh Sewell (11:39):

So reconciliation is partisan, just full stop. You only need a majority in the Senate, so you can end run the filibuster. That inherently all leads to less compromise. It also, it being reconciliation has strayed far from its intended purpose. So reconciliation as a process was designed as a deficit reduction tool. It comes with special procedures that make it quicker in the Senate especially, but also in the House and easier for lawmakers to reconcile policy to the budget in reality. And so in practice, it has turned into a tool to increase spending on partisan priorities while actually increasing the deficit. It’s the inverse of what it was intended to be. That was true of OBA. It was also true of the IRA, and it’s potentially true for some defense focused reconciliation package that you mentioned the administration wants to have this year.

Steve Ellis (12:36):

It’s certainly one reason we’ve talked about reforms for reconciliation and even creating a rule where reconciliation can’t add to the deficit would be something that would make sense and try to bring it back to what it was originally intended when it was created in the 1970s. All right. Turning back to you, Gabe, what did we learn about from OBA and the specific issue with budgeting for the Pentagon through reconciliation?

Gabe Murphy (13:04):

Well, a lot of the issues Josh just mentions apply to the Pentagon, but two of them stand out to me. The first is oversight. OBA, that’s the One Big Beautiful Bill Act, included over $150 billion for the Pentagon, but was pretty short on details. After it was already enacted, Congress sent the Pentagon some guidance on how they’d like the money spent, but the guidance was a lot more vague than the traditional funding tables that accompany normal appropriations bills. And it asked the Pentagon to send Congress a more detailed spending plan. The Pentagon finally submitted that plan about six months late, earlier this year, but that plan also lacked the detail that normal spending plans have. And I also think that since the Iran war, there’s a good chance they use some of the flexibility inherent in these funds to help cover some of those upfront costs.

(13:57):

So really, they may actually be triple dipping us on the war budget here.

Steve Ellis (14:00):

I’m sure that’s right. What about the longer term implications of this, Gabe? What does the budget say about whether this $1.5 trillion spending spree will become a new baseline for Pentagon spending?

Gabe Murphy (14:14):

The budget suggests a major boost this year, followed by a return to smaller but still heightened top lines. It doesn’t anticipate more reconciliation spending. I mean, as we said, that’s partisan, and we don’t know if there’s still going to be Republican control of Congress after the midterms, but it would boost discretionary military spending to over $1.2 trillion next year. And steady increases for a few more years before holding steady at 1.3 trillion through 2036. So to put this into perspective a little, in the FY25 budget, the Biden administration, which to be clear was no bastion of fiscally responsible Pentagon spending either, planned to spend 8.1 trillion on national security from FY27 through FY34. That’s an average of just over a trillion dollars per year. The president’s budget would spend 11.5 trillion over that same period for an average of about 1.4 trillion per year, so nearly three and a half trillion dollars more over eight years.

Josh Sewell (15:16):

Yeah, and paired with all that fantastical thinking in the rest of the budget, I think this is just a recipe for ballooning deficits, higher interest payments, and probably more cuts to domestic programs, and that’s assuming we don’t have major economic crisis or some other Black Swan event over the next few years.

Steve Ellis (15:32):

Thanks, Josh and Gabe. Well, there you have at Budget Washtag AF Faithful. We started today by talking about the troops in harm’s way in the Middle East, and I want to end there too, because that’s what makes all of this more than a budget document. Every dollar committed to an unauthorized war with no defined objective is a dollar that Congress never voted to spend. Every billion added to the Pentagon baseline without accountability is a dollar that can’t go to disaster resilience, to infrastructure, to actually getting the debt under control. And if an Iran war supplemental lands on Congress’s desk, lawmakers will face a choice, use the power of the purse to demand answers or write another blank check. TCS’s position is clear. Congress must reassert its war authority. It must reject another Pentagon spending spree, and it must stop letting budget gimmicks and empty rhetoric substitute for actual fiscal discipline.

(16:23):

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