Analysts at Moody's say that President Trump's plan to increase defense spending by 2027 will negatively impact the already large U.S. fiscal deficit, and it is unlikely to be balanced by spending cuts or increased revenue.
On Wednesday (January 7) local time, US President Trump posted on his social media platform Truth Social that after negotiations with senators, representatives, cabinet members and other political representatives, he decided that "for the good of the country," especially in this "turbulent and crisis-ridden" time, the US military budget for 2027 should not be $1 trillion, but $1.5 trillion.
Any such increase in the military budget requires authorization from Congress. In December 2025, the U.S. Congress approved $901 billion in military spending for fiscal year 2026.
The Committee for a Responsible Federal Budget, a nonpartisan think tank, estimates that the proposal is expected to cost $5 trillion by 2035 and increase U.S. debt by $5.8 trillion (including interest).
David Rogovic, senior vice president of Moody's sovereign risk group, said in a statement, "The massive increase in defense spending proposed by Trump (50%) is unlikely to be offset by other means, as there are many political and policy difficulties in finding corresponding savings or sources of revenue."
Rogovic added that large-scale and sustained growth in debt-financed spending would widen the already large U.S. fiscal deficit, increase interest burdens over time, and further restrict fiscal flexibility.
Rogovic stated, "While increased defense spending will also boost GDP, the resulting additional government revenue cannot offset the increase in spending."
