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Trader mode: Actionable analysis for identifying opportunities and edge
Before 2029 If government spending decreases by at least X during Q4 2024 to Q4 2028, then the market resolves to Yes. Early close condition: This market will close early if the event occurs. This market will close early if the event occurs.
Prediction markets currently assign a very low probability to significant federal spending cuts under a potential Trump administration in 2025. The leading contract on Kalshi, "Will government spending decrease by $1 trillion before 2025?", is trading at approximately 3%. This price indicates the market sees a 97% chance that federal outlays will not fall by that massive threshold. Across a spectrum of nine markets targeting cuts from $100 billion to $1 trillion, all show "No" outcomes heavily favored, reflecting a strong consensus that dramatic fiscal contraction is highly unlikely in the coming year.
Three structural and political realities are anchoring these low probabilities. First, discretionary spending levels for fiscal year 2025 will largely be set by the current Congress before a potential Trump term begins, limiting immediate executive authority. Second, the largest drivers of federal spending, mandatory programs like Social Security and Medicare, are politically untouchable for cuts and were not targeted in Trump's previous term. Third, historical precedent is decisive. Despite rhetoric, the federal deficit expanded during Trump's first administration due to the 2017 tax cuts and increased military spending. Markets are pricing based on this track record of higher deficits, not lower spending.
The odds could shift if clear, actionable policy plans emerge that credibly target major discretionary programs. An early signal would be a detailed Trump budget proposal in early 2025 that outlines specific, deep cuts capable of passing a potentially divided Congress. A unified Republican government, with control of both the House and Senate, would be a necessary but not sufficient condition for a major spending reduction. Conversely, any escalation in geopolitical tensions or an economic downturn in 2025 would likely increase spending on defense or stimulus, further depressing the probability of net cuts. The quarterly spending comparisons, starting with Q4 2024 as the baseline, mean that any sustained downturn would need to begin manifesting in federal data by mid-2025 to trigger these contracts.
AI-generated analysis based on market data. Not financial advice.
This prediction market topic focuses on whether government spending will decrease by at least a specified amount during the period from Q4 2024 to Q4 2025 under a potential second Trump administration. The market specifically measures whether quarterly spending during this timeframe falls below the baseline established in Q4 2024, with early resolution if the spending reduction threshold is met. The question emerges from former President Donald Trump's campaign promises to significantly reduce federal expenditures, coupled with his administration's historical record of increasing deficits despite similar rhetoric. The topic gains relevance from the 2024 presidential election outcome, potential Republican control of Congress, and ongoing debates about fiscal responsibility amid record national debt. Interest stems from investors, policy analysts, and political observers seeking to gauge the feasibility and implementation of proposed spending cuts, which would require navigating congressional appropriations processes, existing mandatory spending programs, and potential economic headwinds.
The debate over federal spending reductions has been a recurring theme in U.S. politics, particularly during Republican administrations. President Ronald Reagan campaigned on reducing government size in 1980 but ultimately increased military spending while cutting some domestic programs, resulting in larger deficits. The 1990s saw bipartisan efforts under President Bill Clinton and a Republican Congress that produced budget surpluses through spending restraint and tax increases, though these were reversed in subsequent administrations. During Trump's first term from 2017 to 2021, his administration proposed significant non-defense spending cuts each year, but Congress largely rejected these proposals. Instead, the 2017 Tax Cuts and Jobs Act reduced revenue while bipartisan spending deals increased expenditures, contributing to trillion-dollar deficits even before COVID-19 emergency spending. The Congressional Budget Office reported that federal spending grew from 3.98 trillion dollars in FY2017 to 4.45 trillion dollars in FY2019 under Trump, despite his administration's proposed cuts. This historical pattern suggests that campaign promises of spending reduction often confront political and practical obstacles in implementation.
The scale of government spending reductions has significant implications for economic growth, public services, and fiscal sustainability. Substantial cuts could affect millions of Americans who rely on federal programs, from healthcare and education to transportation and scientific research. Economists debate whether spending reductions during periods of economic uncertainty might slow growth or whether they could help control inflation by reducing aggregate demand. The federal budget deficit exceeded 1.7 trillion dollars in fiscal year 2023, with interest payments on the national debt surpassing defense spending for the first time. Successful spending reductions could alter the trajectory of the national debt, which exceeded 34 trillion dollars in early 2024, potentially affecting interest rates, investment, and long-term economic stability. The political ramifications extend to the 2026 midterm elections, as voters assess the consequences of spending decisions on their communities and personal finances.
As of late 2024, the federal government continues operating under spending levels established by the Fiscal Responsibility Act of 2023, which set caps through 2025. The 2024 presidential election outcome will determine whether Trump returns to office with an opportunity to implement spending reductions. Congressional appropriations for fiscal year 2025 remain incomplete, with continuing resolutions likely extending into 2025. The Congressional Budget Office's latest projections show rising deficits despite economic growth, increasing pressure for fiscal restraint. Key factors influencing near-term spending include potential economic conditions, geopolitical developments requiring emergency expenditures, and the composition of Congress following the 2024 elections.
Based on Trump's first-term budget proposals and campaign statements, non-defense discretionary programs would face the largest reductions. These potentially include environmental regulations enforcement, foreign aid, education grants, and certain social services. Defense spending and veterans benefits have historically been protected in Republican proposals.
Federal spending increased from 3.98 trillion dollars in fiscal year 2017 to 6.55 trillion dollars in fiscal year 2020, though the latter figure includes substantial COVID-19 emergency spending. Excluding pandemic response, spending grew by approximately 12% during his first three years, demonstrating the challenge of reducing expenditures in practice.
The president has limited authority to reduce spending without congressional approval. Executive actions can affect the rate of spending implementation and regulatory enforcement, but significant reductions require changes to appropriations laws. The Impoundment Control Act of 1974 restricts presidential authority to withhold congressionally appropriated funds.
Discretionary spending is determined annually through appropriations bills and includes defense, education, and infrastructure. Mandatory spending is required by existing laws for programs like Social Security, Medicare, and interest on debt. Discretionary spending represents about 27% of the budget and is more easily targeted for reductions.
Economic impacts depend on the scale, timing, and composition of cuts. Moderate reductions might help control inflation but could slow economic growth if implemented during weak periods. Large cuts could reduce public sector employment and contract opportunities while potentially lowering interest rates through reduced borrowing needs.
Significant spending reductions occurred during the 1990s through bipartisan agreements that combined spending caps with revenue increases. The Budget Control Act of 2011 implemented spending caps that reduced deficits but was partially reversed by subsequent agreements. These precedents suggest successful reductions typically require congressional cooperation.
Educational content is AI-generated and sourced from Wikipedia. It should not be considered financial advice.
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5 markets tracked
No data available
| Market | Platform | Price |
|---|---|---|
Will government spending decrease by 250 before 2028? | Kalshi | 31% |
Will government spending decrease by 500 before 2028? | Kalshi | 26% |
Will government spending decrease by 750 before 2028? | Kalshi | 19% |
Will government spending decrease by 1000 before 2028? | Kalshi | 13% |
Will government spending decrease by 2000 before 2028? | Kalshi | 10% |
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