As the 2026 midterm elections approach, Congress is bracing for potential upheaval, with implications for the Trump administration’s agenda. The current political landscape suggests that Democrats, who recently found success in some state elections, could gain momentum against the ruling party in the upcoming midterms. A recent poll conducted by Marist on November 19 revealed that 55 percent of respondents indicated they would support Democratic candidates.
The stakes are high, as the midterm elections often result in losses for the party holding the White House. Should Democrats gain control, particularly in the House of Representatives, the administration’s ability to pass legislation may be severely restricted. Commenting on the potential fallout, Delaware Senator Chris Coons, the leading Democrat on the Senate Appropriations Defense Subcommittee, warned that Republicans may struggle to secure necessary compromises after the elections.
Budget Reconciliation and Defense Spending
Amid these challenges, Russ Vought, the Director of the Office of Management and Budget, is strategizing on how to advance the administration’s budget priorities. During a keynote address at the Reagan National Defense Forum in December, Vought praised a recent budget reconciliation process as a “paradigm shift.” This maneuver allowed Republicans to secure an additional $150 billion for defense spending without engaging in the typical compromises that could benefit Democratic priorities.
While Vought stated that no decisions have been made regarding a second reconciliation bill, the pressure is mounting on Congress to finalize a defense appropriations bill for Fiscal Year 2026 (FY26). The current continuing resolution is set to expire on January 30, 2026, leaving unresolved questions about the future of government funding. Lawmakers face tough decisions, as they must choose between maintaining a flat discretionary defense budget or adopting a Senate proposal that increases spending by an additional $22 billion.
The uncertainty surrounding the budget raises larger questions about defense spending moving forward. Analysts predict that the Fiscal Year 2027 (FY27) budget could see slight growth from FY26, but the exact figures remain unclear. According to Byron Callan of Capital Alpha Partners, Wall Street’s consensus suggests only $37 billion remains available from the current reconciliation bill for defense purposes. This amount, if added to a flat $848 billion topline, would result in an approximate 4 percent increase compared to Fiscal Year 2025.
Industry Reactions and Future Outlook
Despite these challenges, defense executives are expressing cautious optimism. Earlier this month, Evan Scott, Chief Financial Officer of Lockheed Martin, acknowledged the fluidity of the situation but highlighted a strong domestic demand for defense products. He noted the alignment between Congress and defense priorities, emphasizing the importance of ensuring that military personnel have the resources they need.
As Congress approaches critical budget deadlines, the potential for a government shutdown looms large. The ability of lawmakers to negotiate an omnibus spending agreement remains uncertain, and the outcome will significantly impact future defense appropriations and overall government stability. With the 2026 midterms on the horizon, how Congress navigates these challenges could fundamentally shape the political landscape and the administration’s ability to enact its agenda.