We've gotten through the One Big Beautiful Bill, which is essentially a spending bill on top of tax and budget policy. This law raises the debt ceiling by $5 trillion, makes the 2017 tax cuts permanent and issues $150 billion in new spending for defense and $170 million in new spending for Homeland Security.
It reduces revenues while throwing out at least $320 billion in new spending – almost a third of a trillion dollars – in a very short time. And we have the fiscal year 2026 budget to look forward to.
Called The Skinny Budget, the White House FY26 budget keeps discretionary spending level from the previous year. The proposed budget sent to Congress moves more funds to Defense and Homeland Security from other Cabinet departments and agencies and moves funds from non-base to base funds.
Base funds are defined as planned programs, non-base funds are contingency or emergency funds (think of things like FEMA or disaster response funds).
I'm not at all unhappy about a level budget. Were it to pass on time, which could happen in today's 2025 "Yes, Mr. President" caucus, I'd also be pleased. It's this budget reconciliation package that just was signed into law in advance of the annual budget that gives me pause. Because, with the Big Beautiful Bill, the total spending level isn't actually level. And we should not give anyone credit for fiscal prudence over some "skinny" branding.
Based on what we have seen in the last five months or so, there are few surprises. DOD and DHS will see increases of $113.3 billion and $65.1 billion, respectively. This will bring the plus-up for DOD to more than $260 billion through September 2027, and $230 billion for DHS.
Within DHS, significant cuts are planned for FEMA (-$646 million), cybersecurity (-$491 million) and TSA (-$247 million).
The Department of Veterans Affairs will see an increase to its budget of $3.3 billion. Recently, the previously announced personnel cuts – more than 80,000 VA support personnel – were reversed.
To cover these increases, The State Department is taking the biggest cuts with an 83.7% cut to base discretionary funding, largely in the form of international aid funding. The State Department will see its funding slide from $58.7 billion to $9.6 billion.
Next comes a 43.6% cut to the Department of Housing and Urban Development, largely in the form of a $27.6 billion cut to rental assistance programs as that responsibility shifts back to the states. The HUD budget will decrease from $77 billion to $43.5 billion.
The Department of Health and Human Services budget is proposed to be cut by 26.2%, from $127 billion to $93.8 billion. Most of the cuts are coming from the National Institutes of Health, to the tune of $18 billion.
The FY26 budget, if presented against a context of reducing the federal debt and increasing revenues, could make a lot of sense. Unfortunately, it is hard to ignore the precedent set by the Big Beautiful Bill.
First, it paves the way for more extra spending outside of the regular budget process by raising the debt ceiling by a healthy $5 trillion. Second, if doesn't actually cut spending but it does cut revenues, thereby keeping the country's balance sheet in the red. So a "skinny" budget is a nice idea but not when you have previously passed the framework for less income and even more spending outside of the regular budget process.
Anyone with a bank account knows when it's overdrawn. Millions of households who balance their checkbooks also vote.
There is nothing in the Big Beautiful Bill or the FY26 budget that addresses the present threats to Medicare and Social Security funds for which the doomsday deadlines come ever closer. Medicare's Hospital Insurance (HI) trust fund which funds hospital stays, is due to run out of money in 2033.
The Social Security Old-Age and Survivors Insurance (OASI) trust fund is due to run out of funds in 2033, and the Disability Insurance (DI) trust fund is due to run out funds in 2034. The depletion of these funds will not end benefit payments but will cut the level of payments if nothing is done.
So far, nothing has been done. This could mean an 11% reduction in Medicare payments and a 23% reduction in Social Security payments. Every indicator from this Congress implies that nothing will be done.
The place where this becomes scary for me is the bond market, where the U.S. Treasury borrows to finance its operations. As our federal debt has exploded in the last decade and especially the last five years, with nearly one out of every five dollars spent by the government being applied to debt interest, brinkmanship over the debt ceiling and volatile American economic policy in the current era place confidence in U.S. Treasurys at risk.
Federal debt as a percentage of GDP is expected to grow; at the end of FY24 it was 123%. Our debt is larger than the largest economy in the world. The Congressional Budget Office has calculated that a one-percentage-point increase in debt-to-GDP ratio increases long-run interest rates by 2 basis points. Higher yields in government borrowing could overwhelm private demand for capital and slow the economy, widening the interest-to-GDP gap.
In other words, investment capital will flow to the bond market and not to other private investment where it is needed to fund start-ups and business growth.
All of this could erode the dollar's position in the global economy, while random tariff policy creates new trading blocs without the United States at their core.
Voters know that unchecked debt is bad for their own households; for the nation, it portends a global catastrophe.
Merritt Hamilton Allen is a PR executive and former Navy officer. She appeared regularly as a panelist on NM PBS and is a frequent guest on News Radio KKOB. A Republican for 36 years, she became an independent upon reading the 2024 Republican platform. She lives amicably with her Democratic husband north of I-40 where they run one head of dog, and one of cat. She can be reached at
