Trump Proposes $1.5 Trillion Budget and Bans Defense Stock Buybacks

President Donald Trump proposed increasing the U.S. military budget to $1.5 trillion for fiscal year 2027, a more than 50% increase over the 2026 budget of $901 billion. Citing "troubled and dangerous times," Trump stated the surge is intended to build a "Dream Military," with funding sourced from global tariff revenues. The proposal follows aggressive geopolitical actions, including the capture of Venezuelan leader Nicolás Maduro and expressed interests in Greenland and Colombia.

Parallel to the spending increase, Trump signed an executive order titled "Prioritizing the Warfighter in Defense Contracting." The order prohibits underperforming defense contractors from issuing dividends or conducting stock buybacks and proposes capping executive compensation at $5 million annually. Trump specifically singled out RTX Corporation, formerly Raytheon, as the least responsive to military needs, threatening to terminate its government contracts unless the company prioritizes investment in plants and equipment over shareholder returns. Secretary of Defense Pete Hegseth is tasked with identifying underperforming firms and enforcing remediation plans.

Market reactions were volatile. Defense stocks, including Lockheed Martin and Northrop Grumman, initially tumbled following the restrictions on payouts but subsequently rallied on the prospect of massive new government contracts. Fiscal watchdogs, such as the Committee for a Responsible Federal Budget, warned the plan could add $5.8 trillion to the national debt through 2035. Additionally, Trump announced a withdrawal from 66 international organizations and immediate steps to ban large institutional investors from purchasing single-family homes.