Written by: Eugene Steuerle
Author’s estimates based on OMB Historical Tables and CBO Budget and Economic Data. Note: The graph reflects current law before any new legislation in 2025.
The Trump “skinny budget” for discretionary spending, released on May 2, is not a typical or very informative budget, as the well-respected Office of Management and Budget staff would usually produce. However, it is still worthwhile to decipher how much this budget alone would affect overall spending growth based on the limited data provided.
As is already well understood, this proposal would cause a significant reduction in some vital programs. However, it would have a limited impact on overall spending and the continued rapid rise in national debt.
Among the many programs facing severe cuts are those that aim to tackle current issues such as disease prevention, foreign relations, infrastructure needs, education, and tax compliance. These programs, however, are not the ones that have contributed to the significant increase in spending over recent decades, both in real dollars and as a share of GDP.
The documents describing the skinny budget are extraordinarily unusual in that they provide no mention of the overall deficit and debt. Instead, they primarily argue that the President wants to cut programs that are “woke,” “weaponized,” “extremist,” and “Marxist.” For instance, did you know that decades-long funding for preschool, the National Science Foundation, and foreign assistance was largely about DEI (diversity, equity, and inclusion) long before the term was even invented? You probably thought that the goal of Head Start for lower-income families is to teach 4-year-olds to read, write, draw, count, color, and get along with others. Don Moynihan argues that a budget document making extraordinary use of these labels and adjectives should be viewed primarily as propaganda.
The President supports an increase in defense spending, which makes up about one-eighth of expenditures, based on reconciliation instructions already agreed upon by Congress but not yet enacted. Assuming the passage of the type of Republican tax bill that the President supports, interest costs would also rise significantly. So, those two efforts raise the national debt and total spending. The cuts in international affairs—foreign assistance and the State Department—have been well-publicized since they were the first to be substantially reduced by DOGE. Yet, they only represent a small portion of the overall budget despite embodying the nation’s soft power.
That leaves all the remaining proposals within the very large category of what I refer to as “domestic spending,” i.e., total spending less defense, interest, and international affairs.
Under the laws already in the books, domestic spending as a share of GDP has been increasing for a long time and will continue to do so under the laws on the books at the beginning of this year (see the top line in the chart above).
Why? For several decades, Social Security and healthcare have been the primary drivers of federal spending growth, accounting for well over 100 percent of the overall increase as a share of GDP in both domestic and total spending. Today, much of that growth is built-in, featuring automatic increases in annual and lifetime benefits, extended years of retirement and Medicare support as life expectancy rises, a decline in the birth rate that also contributes to population aging, and the automatic inclusion of new health goods and services, often priced by health providers such as drug companies.
The Trump skinny budget would have little effect on the Social Security and health budget. It includes an approximate cut of over $25 billion in discretionary healthcare spending. While small relative to the nearly $2 trillion in federal healthcare spending expected in 2026, the proposal’s long-term impact on healthcare could be substantial, as it primarily targets programs focused on preventative care, such as the National Institute of Health, the Centers for Disease Control and Prevention (CDC), and many research programs.
To reduce the amount of chronic and acute care needed in the future, healthcare providers and analysts have long advocated for allocating a significantly larger share of the total health budget to preventative care. However, the President’s skinny budget favors chronic and acute care even more in relative terms. Additionally, health research drives productivity in an otherwise very costly healthcare industry.
This budget proposal addresses only discretionary spending subject to appropriations, not mandatory spending, which is more than twice as large. However, the President has promised not to alter Social Security and Medicare, which together comprise 64 percent of mandatory spending. When considering healthcare dollars that might face cuts later, that primarily leaves Medicaid. Certainly, health costs need to be better controlled, but starting with the most vulnerable populations is a highly questionable approach to health reform, and state governments have increasingly relied on federal grants for Medicaid.
In effect, all the major fights and controversies so far, as well as the brunt of proposed cuts, mainly center on the category of domestic spending other than for Social Security and healthcare. As again can be seen in the chart, with the exception of occasional bursts often associated with economic downturns, this broad category of “other domestic spending” has long failed to contribute to growth in spending relative to GDP. Excluding the Great Recession and years related to COVID-19, its share of GDP peaked for an extended period in the mid-to-late 1970s at about 1½ times its level in 2024. Assuming the enactment of the skinny budget proposals, its share of GDP would fall yet further.
Accordingly, even if all the proposed cuts are enacted, total spending would continue to rise inexorably as a share of GDP. Yes, the President has yet to propose changes in the non-discretionary, mandatory programs. However, as indicated, he has already exempted Social Security and Medicare and supported revenue cuts that will likely raise interest costs more than any interest saving from the discretionary spending cuts. Accordingly, I see almost no way that the remainder of the President’s budget, even if fully enacted, would halt the ongoing rapid increases in our debt relative to our income.
The bottom line: when budgets are organized around sound bites, while cost-benefit analysis means applying adjectives like “woke” to justify attacks on various programs, you end up with something like the budget documents just released.
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