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White House comes out with sharp spending cuts in Trump’s 2026 budget plan

President Trump’s 2026 budget plan would slash non-defense domestic spending by $163 billion while increasing expenditures on national security, according to White House statements Friday.

The plan shows a desire to crack down on diversity programs and initiatives to address climate change. But it doesn’t include details about what Trump wants on income taxes, tariffs, entitlement programs or the budget deficit — a sign of the challenge confronting the president when he’s promising to cut taxes and repay the federal debt without doing major damage to economic growth.

Budgets do not become law but serve as a touchstone for the upcoming fiscal year debates. Often considered a statement of values, this first budget since Trump’s return to the White House carries the added weight of defining the Republican president’s second-term pursuits, alongside his party in Congress.

House Speaker Mike Johnson (R-La.) said the plan showed fiscal discipline given the problems of persistently high budget deficits. The budget released on Friday did not, in fact, include a forecast on government borrowing.

“President Trump’s plan ensures every federal taxpayer dollar spent is used to serve the American people, not a bloated bureaucracy or partisan pet projects,” Johnson said.

Head Start appears to have been spared a major cut, at least for the time being. An earlier version of the budget proposal leaked last month called for a complete termination of the 60-year-old program, sending shock waves through California’s Head Start centers. The program provides child care, medical screenings and nutritious food to about 800,000 low-income children nationwide, including 80,000 in California.

The $12-billion program, which employs 26,000 workers in California, has been plagued with layoffs and funding problems since Trump took office.

Sen. Patty Murray (D-Wash.) said the cuts could ultimately be more extreme than what the administration has proposed, noting that the budget doesn’t provide funding levels for programs such as Head Start.

“President Trump has made his priorities clear as day: He wants to outright defund programs that help working Americans while he shovels massive tax breaks at billionaires like himself and raises taxes on middle-class Americans with his reckless tariffs,” Murray said.

The budget seeks to cut discretionary spending by a total of 7.6% next year, but includes a 13% increase in national security spending.

The State Department and international programs would lose 84% of their money and receive $9.6 billion, a cut that reflects the existing efforts by advisor Elon Musk’s Department of Government Efficiency.

The Housing and Urban Development Department would get a $33.6-billion cut, while the Health and Human Services Department would receive $33.3 billion less and the Education Department’s spending would be reduced by $12 billion.

The Defense Department would get an additional $113.3 billion and Homeland Security would receive $42.3 billion more.

The IRS and FBI would lose money, while the Low Income Home Energy Assistance Program would be ended. There would be $980 million less for college students in work-study programs, as well as similarly sized cuts for adult education and instruction for learning English.

The Centers for Disease Control and Prevention would lose nearly $3.6 billion under the plan, while the National Institutes of Health would face a steep cut of almost $18 billion. The budget would eliminate more than $15 billion for infrastructure-related programs tied to climate change and $1.3 billion from the National Oceanic and Atmospheric Administration.

The White House budget plan arrives as Trump has unilaterally imposed what could be hundreds of billions of dollars in tax increases in the form of tariffs, setting off a trade war that has consumers, chief executives and foreign leaders worried about a possible economic downturn.

The White House’s Office of Management and Budget, headed by Russell Vought, a chief architect of Project 2025, provided contours of a so-called skinny version of top-line numbers only, regarding discretionary spending. Project 2025 was a sweeping blueprint from the 2024 campaign season from the Heritage Foundation, a conservative think tank, to slash the federal workforce and dismantle federal agencies.

Administration officials said a fuller budget will come soon with plans to address the drivers of the annual deficit.

The nation’s estimated $7-trillion-plus federal budget has been growing steadily, with annual deficits fast approaching $2 trillion and the annual interest payments on the debt almost $1 trillion. That’s thanks mostly to the spike in emergency COVID-19 pandemic spending, changes in the tax code that reduced revenues and the climbing costs of Medicare, Medicaid and other programs, largely to cover the nation’s health needs as people age. The nation’s debt load, at $36 trillion, is ballooning.

Democrats are prepared to assail Trump’s budget as further evidence that the Republican administration is intent on gutting government programs that Americans depend on.

Congress is already deep into the slog of drafting Trump’s big bill of tax breaks, spending cuts and bolstered funds for the administration’s mass deportation effort — a package that, unlike the budget plan, would carry the force of law.

But deep differences remain among the Republicans, who are trying to pass that big bill over the objections of Democrats.

“We are awaiting some final calculations on a few of the tax components, and we expect to be able to complete that work on a very aggressive schedule,” Johnson said.

It’s Congress, under its constitutional powers, that decides the spending plans, approves the bills that authorize federal programs and funds them through the appropriations process. Often, that system breaks down, forcing lawmakers to pass stopgap spending bills to keep the government funded and avoid federal shutdowns.

Vought is also expected on Capitol Hill in the weeks ahead as the Trump administration presses its case to Congress for funds.

Among the more skilled conservative budget hands in Washington, Vought has charted a career toward this moment. He served during the first Trump administration in the same role and, for Project 2025, wrote an extensive chapter about the remaking of the federal government.

Vought has separately been preparing a $9-billion package that would gut current 2025 funding for the U.S. Agency for International Development and the Corporation for Public Broadcasting, which involves the Public Broadcasting Service and National Public Radio. Trump signed an executive order late Thursday that instructs the Corporation for Public Broadcasting and federal agencies to cease funding for PBS and NPR.

Mascaro and Boak write for the Associated Press. Times staff writer Jenny Gold contributed to this report.

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Microsoft and Meta beat estimates as AI outpaces Trump’s tariff woes

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Microsoft and Meta Platforms reported March quarter earnings that beat market expectations, suggesting that strong demand for artificial intelligence (AI) is helping both companies navigate economic uncertainty driven by tariffs. The highlights from the two US tech giants include Microsoft’s Azure cloud business and Meta’s advertising revenue, both significantly bolstered by their AI developments.

Shares of Microsoft and Meta jumped 7% and 5.4%, respectively, in after-hours trading, lifting US stock futures. Microsoft’s shares are poised to recover all losses for the year, while Meta’s shares remain down 3.7% year-to-date.

Microsoft’s Azure growth accelerates

Microsoft’s core cloud business—Azure and other related services—posted a 33% year-on-year growth in the third quarter of its 2025 fiscal year, accelerating from 31% in the previous quarter. Wall Street had anticipated annual growth of 29%.

The company attributed 16% of Azure’s quarterly growth to AI services, up from 13% in the preceding quarter. CEO Satya Nadella stated: “Cloud and AI are the essential inputs for every business to expand output, reduce costs, and accelerate growth,” adding, “From AI infrastructure and platforms to apps, we are innovating across the stack to deliver for our customers.”

Microsoft kickstarted its AI leadership with a tens-of-billions-of-dollars investment in ChatGPT’s owner OpenAI in late 2023. It has also integrated AI tools into its Office 365 suite and introduced chatbot-style Copilot assistants. More than 15 million people are now using its GitHub Copilot assistant, quadrupling the figure from a year ago, according to Nadella on the earnings call.

“We delivered a strong quarter with Microsoft Cloud revenue of $42.4 billion, up 20% (up 22% in constant currency) year-over-year, driven by continued demand for our differentiated offerings,” said Amy Hood, Microsoft’s executive vice president and chief financial officer.

Total revenue reached $70.1 billion (€62 billion), a 13% increase from the previous year. Diluted earnings per share (EPS) stood at $3.46 (€3.06), up 18% and comfortably exceeding the consensus forecast of $3.22 (€2.85). All major segments—Microsoft 365 commercial and consumer products, LinkedIn, and Dynamics products and cloud services—posted double-digit growth.

“This result once again shows that Microsoft is not just riding the AI wave; it’s driving it,” said Josh Gilabert, market analyst at eToro Australia.

However, Trump’s sweeping tariffs, introduced in April, may still have a lagging effect on Microsoft’s operations, though most were cut to 10% for countries other than China.

Earlier in April, Microsoft scaled back some of its global data centre projects. “As AI demand continues to grow, and our data centre presence continues to expand, the changes we have made demonstrate the flexibility of our strategy,” a company spokesman said at the time. Nadella previously announced that Microsoft aims to invest $80 billion (€70.7 billion) in data centre infrastructure in fiscal 2025, ending in June.

Quarterly capital expenditure, including finance leases, amounted to $21.4 billion (€19 billion), a sequential decline for the first time in two years.

Meta’s advertising revenue posts solid growth, driven by AI

Meta Platforms also posted strong results, with total revenue up 16% year-on-year to $42.31 billion (€37.41 billion), exceeding the expected $41.4 billion (€36.6 billion). Earnings per share rose 35% to $6.43 (€5.69), also well ahead of forecasts for $5.28 (€4.67). Advertising revenue—accounting for 98% of Meta’s total sales—came in at $41.39 billion (€36.6 billion), again beating analyst expectations.

“We’ve had a strong start to an important year—our community continues to grow, and our business is performing very well,” said CEO Mark Zuckerberg. “We’re making good progress on AI glasses and Meta AI, which now has almost one billion monthly actives.” Meta AI is the firm’s standalone generative AI product, developed in competition with OpenAI’s ChatGPT.

Zuckerberg added during the earnings call: “Our business is also performing very well, and I think we’re well-positioned to navigate the macroeconomic uncertainty.”

The company plans to ramp up spending on AI infrastructure, with capital expenditure expected to range from $64 billion (€56.6 billion) to $72 billion (€63.7 billion), up from a prior forecast of $60 billion to $65 billion. “This updated outlook reflects additional data centre investments to support our artificial intelligence efforts, as well as an increase in the expected cost of infrastructure hardware. The majority of our capital expenditures in 2025 will continue to be directed to our core business,” Meta noted in its earnings report.

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However, the company warned that the European Commission’s recent regulatory decision may hurt user experience and impact its European revenue as early as the third quarter.

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