The 2026 Budget Blueprint: Rebuilding America’s strength, redefining its reach
Francisco Rodríguez-Castro outlines the House-approved 2026 budget’s shift toward defense and spending cuts.
We have evaluated President Trump’s fiscal year 2026 discretionary budget request, which represents a bold and unapologetic recalibration of federal priorities, reflecting a return to key areas: national defense, domestic security and fiscal restraint. With a clear strategic objective of “Restoring American Strength,” the administration proposes a sweeping overhaul of discretionary spending, reallocating vast sums away from long-standing domestic and international programs and channeling them into defense modernization, border protection and geostrategic initiatives.
At $1.66 trillion in total discretionary outlays, the budget proposes a 13% increase in defense spending, lifting it to $1.01 trillion — the highest in U.S. history. Simultaneously, non-defense discretionary programs are slashed by 22.6%, a reduction of $163 billion, returning to fiscal levels not seen in over a decade. The proposal is not merely an accounting exercise but a statement of purpose — a shift from expansive government toward concentrated strength.
A government refocused
The most prominent feature of this budget is its emphasis on security, sovereignty and space:
Newly funded or expanded programs
The budget proposal introduces or expands funding in several areas:
Defense and Homeland Security:
- Department of Defense: $113.3 billion increase, bringing total to over $1 trillion
- Department of Homeland Security: $42.3 billion increase, totaling $175 billion
- “Golden Dome” Missile Defense Initiative: $25 billion initial investment; projected $542 billion over 20 years
International development:
- America First Opportunity Fund (A1OF): $2.9 billion allocated to support strategic partners and counter near-peer rivals
- U.S. International Development Finance Corp. (DFC): $2.82 billion increase, including $3 billion for a new revolving fund
Space Exploration:
- NASA Lunar Exploration: Over $7 billion allocated
- Mars-focused programs: $1 billion in new investments
Total Increase: $194.3 billion
The era of discretionary expansion ends
In exchange for this muscular posture, the administration proposes one of modern history’s most aggressive paring-downs of domestic discretionary programs. Entire institutions and programs face elimination or deep cuts, justified by duplication, inefficiency or ideological misalignment with federal priorities.
Eliminated or defunded programs
The budget proposal outlines significant reductions and eliminations across various departments:
Health and Human Services (HHS):
- National Institutes of Health (NIH): $17.97 billion cut
- Centers for Disease Control and Prevention (CDC): $3.59 billion cut
- National Center for Chronic Disease Prevention and Health Promotion: Eliminated
- National Center for Environmental Health: Eliminated
- National Center for Injury Prevention and Control: Eliminated
- Global Health Center: Eliminated
- Public Health Preparedness and Response: Eliminated
- Preventive Health and Human Services Block Grant: Eliminated
Education:
- Federal Supplemental Educational Opportunity Grant (FSEOG): $910 million cut; program eliminated
- Federal Work-Study (FWS): $980 million cut
Housing and Urban Development (HUD):
- Community Development Block Grant (CDBG): $3.3 billion cut; program eliminated
- HOME Investment Partnerships Program: Funding eliminated
Justice Department:
- Approximately 40 DOJ grant programs: Proposed for elimination due to perceived duplication or misalignment with administration priorities
Cultural agencies:
- Corporation for Public Broadcasting: Funding eliminated
- National Endowment for the Arts: Funding eliminated
- National Endowment for the Humanities: Funding eliminated
- Institute of Museum and Library Services: Funding eliminated
Foreign aid and environmental programs:
- USAID: Proposed for elimination
- U.S. Institute of Peace: Proposed for elimination
- Global Environment Facility and Climate Investment Funds: $275 million cut; funding eliminated
- Atmospheric Protection Program: $100 million cut
Total eliminations/cuts: $195 billion
These eliminations reinforce the administration’s message that culture, media and development are better managed by states, private capital or philanthropic actors than the federal government.
Strategic implications
This budget is not without its controversies. Critics argue that the cuts threaten public health, education equity and American soft power abroad. For supporters, however, it is a long-overdue correction for supporters, refocusing the federal role in American life.
What is clear is that the Trump administration’s fiscal year 2026 request is not just about numbers — it is about projecting strength, redefining international engagement through economic leverage and reversing decades of discretionary expansion that, in their view, diluted the federal government’s core mission.
It signals to allies and adversaries alike: America is rearming, refocusing and realigning its vast financial machinery toward security, deterrence and sovereign decision-making. A streamlined state is replacing the age of omnidirectional federalism with a sharpened edge.
Approval by the U.S. House and Senate
On May 22, 2025, the House of Representatives narrowly passed President Trump’s comprehensive tax and spending legislation, dubbed the “One Big Beautiful Bill,” with a 215–214 vote. The bill, which includes significant tax cuts and spending reforms, now advances to the Senate for further consideration. The Senate, with a composition of 52 Republicans and 48 Democrats, will deliberate on the bill, which requires a simple majority of 51 votes to pass under the budget reconciliation process. This process allows the Senate to approve the bill without the possibility of a filibuster, provided it adheres to the guidelines of the Congressional Budget Act.
Areas of impact for Puerto Rico
The 2026 budget proposal presents a mixed outlook for Puerto Rico. On one hand, it opens the door to economic development and investment opportunities; on the other, cuts to health care, education, renewable energy and disaster preparedness present serious challenges. Given the island’s heavy reliance on federal funding, these changes demand close attention, thorough analysis and active advocacy for Puerto Rico’s interests in Congress. Here are our key observations:
Energy: From renewables to gas and diesel plants
The federal government has redirected $365 million — allocated initially by the Biden administration for solar projects and rooftop battery systems in Puerto Rico — toward maintaining fossil fuel power plants. While the stated goal is to improve grid stability before the hurricane season, the move has been heavily criticized for removing clean and sustainable energy alternatives.
Health care: Medicaid cuts and reduced Medicare Advantage payments
Although President Trump has opposed deeper Medicaid cuts, his budget proposal includes significant reductions. This is particularly concerning for Puerto Rico, where half of the population relies on Medicaid and the program already operates under a federal funding cap. Additionally, Medicare Advantage payments in Puerto Rico will be reduced by 1.11% in 2026, while in the mainland U.S., they are expected to increase by an average of 5.06%. This disparity stems from changes in the risk adjustment model and could negatively impact health care services for the island’s elderly population.
Education: Elimination of TRIO programs
The budget proposes eliminating all federal TRIO programs, including Upward Bound and Talent Search, which support low-income and first-generation college students. In Puerto Rico, these programs have enabled many young people to access higher education. Their elimination would further limit educational opportunities in vulnerable communities.
Economic development: Opportunities and obstacles
Puerto Rico seeks to capitalize on U.S. tariff policies to attract international manufacturing, especially in pharmaceuticals and medical devices. Thanks to certain exemptions and tax incentives, the island holds appeal. However, persistent power outages and high logistical costs — including the burdens imposed by the Jones Act — could dampen investor interest.
Federal Funds: Concerning Reductions
The proposed budget includes over $163 billion in cuts to non-defense programs, which could affect essential services in Puerto Rico. Currently, over 50% of Puerto Rico’s public budget comes from federal funds, meaning housing, education or public health cuts could disproportionately impact the island.
Disaster Preparedness: Risk from budget cuts
Expected budget reductions for agencies like the National Oceanic and Atmospheric Administration (NOAA) and the National Weather Service could impair the island’s ability to forecast hurricanes and respond effectively to emergencies. This is particularly troubling for Puerto Rico, which has faced the devastating consequences of hurricanes such as María and Fiona.
The Final Word: Time is the only impartial judge
As I often reflect whenever I witness dramatic shifts in public policy, I’m reminded of this belief:
Time is the only impartial judge; sooner or later, it will reveal who was right.
Global Market Square© is a publication prepared by Birling Capital LLC and is a summary of certain recent geopolitical, economic, market and other developments that may be of interest to clients of Birling Capital LLC. This report is intended for general information purposes only, is not a complete summary of the matters referred to, and does not represent investment, legal, regulatory or tax advice. Recipients of this report are cautioned to seek appropriate professional advice regarding any of the matters discussed in this report considering the recipients’ own situation. Birling Capital does not undertake to keep the recipients of this report advised of future developments or of changes in any of the matters discussed in this report. Birling Capital, the man and log symbol, and Birling Capital are among the registered trademarks of Birling Capital. All rights reserved.
Francisco Rodríguez-Castro, CEO of Birling Capital Advisors
Let’s dispense with the euphemisms. The proposed federal budget—paired with Trump’s push to make tax cuts for the rich permanent—will devastate Puerto Rico. Not could. Will.
We’re talking about real consequences: the gutting of federally supported housing programs, mass disenrollment from Puerto Rico’s Vital health insurance, slashed Medicare benefits, and cuts across essential services that tens of thousands rely on to survive.
But of course, from the perspective of Birling Capital Advisors and similar outfits, this is just the price of doing business. In Trump’s war on the poor and working class, the people of Puerto Rico are simply collateral damage—as long as the markets rise and the wealthy cash in.
Hard to believe we live on the same Island.