U.S. Military Budget: Components, Challenges, Growth

There's $250 Billion in Hidden Military Spending

Air Force Jet
1991: An American airforce jet returning to base in Saudi Arabia after a raid on Iraqi ground forces during the Gulf War. Photo by MPI/Getty Images

The U.S. military budget is $773.5 billion. That's the budget for Fiscal Year 2017 (October 1, 2016 through September 30, 2017).  There are four components. First is the Department of Defense (DoD) base budget ($523.9 billion). Second is the Overseas Contingency Operations (OCO) for DoD to fight ISIS ($58.8 billion).

But there's more to military spending than the Department of Defense. Many other agencies are involved with protecting our nation.

These expenses total $175.9 billion. They include the Department of Veterans Affairs ($75.1 billion), the State Department ($37.8 billion), Homeland Security ($40.6 billion), FBI and Cybersecurity in the Department of Justice ($9.5 billion), and the National Nuclear Security Administration in the Department of Energy ($12.9 billion). There is also $14.9 billion in OCO funds for the State Department and Homeland Security to fight ISIS. (Source: "Mid-Session Review Fiscal Year 2017, Table S-10." "2017 Budget, Summary Tables, Table S-11," Office of Management and Budget.)

Defense Department Base Budget

DoD requested $523.9 billion, slightly higher than last year's $521.7 billion appropriation. It seeks to:

  1. Continue retirement and healthare (TRICARE) reforms. If you include subsidized housing, free healthcare, and the other benefits military personnel receive, the average compensation works out to $59,000 for enlisted personnel and more than $108,000 for officers. 
  1. Focus on national and regional ballistic missile defense.
  2. Train local security forces in Iraq, Syria, and Afghanistan to combat ISIS.
  3. Strengthen maritime security in Asia. 
  4. Increase presence in NATO to respond to Russia's aggression in Europe.
  5. Beef up cyber security forces. That include strengthening space control and investing advanced munitions systems.
  1. Reduce spending on headquarters by 25%. Improve audits, acquisition practices, and commissary spending. Eliminate excess infrastructure.
  2. The Air Force is moving forward with the F-35 Joint Strike Fighter program. Lockheed Martin built 45 in 2015, costing $100 million each. That's expected to rise to 53 in 2016, and 160 annually by 2025. By then the jet should cost $85 million, adjusted for inflation. The Air Force cut five F-35s in the FY 2017 budget.(Source: "FY 2017 Budget Fact Sheet," U.S. Department of Defense.  "F-35 Plan Stays on Track," The Wall Street Journal, February 11, 2016.)

Overseas Contingency Operations

The DoD base budget does not include, ironically, the cost of wars. That's separated out in Overseas Contingency Operations. That's budgeted at $58.8 billion for DoD, and $14.9 billion for the State Department.  For OCO spending back to 2001, see War on Terror Facts.  (Source: "Mid-Session Review Fiscal Year 2017, Table S-10." "2017 Budget, Summary Tables, Table S-11," Office of Management and Budget.)

Military Spending History

Here's a summary of military spending in billions of dollars since 2003: 

FY DoD Base  BudgetDoD OCO Support BaseSupport OCOTotal Spending  
2003 $364.9   $72.5    $437.4
2004 $376.5   $91.1    $467.6
2005 $400.1   $78.8    $478.9
2006  $410.6  $124.0  $109.7   $644.3  
2007  $431.5  $169.4  $120.6   $721.5
2008  $479.0  $186.9  $127.0   $792.9
2009  $513.2  $153.1  $149.4   $815.7
2010  $527.2  $163.1  $160.3   $0.3  $851.6
2011  $528.2  $158.8  $167.4   $0.7  $855.1
2012  $530.4  $115.1  $159.3 $11.5  $816.3
2013   $495.5    $82.1  $157.8 $11.0  $746.4
2014  $496.3    $85.2  $165.4   $6.7  $753.6
2015 Actual  $496.1    $64.2  $165.6 $10.5  $736.4
2016 Enacted  $521.7    $58.6  $171.9 $15.1  $767.3 
2017 Budget  $523.9    $58.8  $175.9 $14.9  $773.5

 

Factors Influencing Budget: 

  • 2003: Iraq War launched March 19.
  • 2004: U.S. torture at Abu Ghraib prison increased resistance, and costs.
  • 2005: Afghanistan War costs rose to protect free elections.
  • 2006: Costs rose in Iraq.
  • 2007: Surge in Iraq to counter violence.
  • 2008: Violence rose in Middle East due to recession.
  • 2009: Surge in Afghanistan.
  • 2010: Obama funds Iraq drawdown.
  • 2011: Iraq War ended but costs reached all-time high.
  • 2012: Troop withdrawal in Afghanistan War. Costs begin falling.
  • 2013: Sequestration cut spending.
  • 2014: Wind-down of Afghanistan War.
  • 2015: Sequestration cut spending. Still higher than in 2007.
  • 2016: Resurgence of ISIS drives spending higher.
  • 2017: Increase in VA and FBI funding.

DoD Tries to Save Money, But Congress Won't Let It

The Defense Department knows it needs to become more efficient. It now spends a third of its budget on personnel and maintenance. That will rise to 100% by 2024, thanks to retirement and medical costs. That leaves no funds for procurement, research and development, construction, or housing. These necessary support programs now take up more than a third of DoD's budget. (Source: "Pay Will Swallow DoD Budget by 2024," Center for Strategy and Budgetary Assessments, April 8, 2013.)

How could the DoD become more efficient? First, it needs to rationally reduce its civilian workforce, which grew by 100,000 in the last decade, instead of resorting to hiring freezes and unpaid furloughs. Second, it must reduce pay and benefits costs for each soldier. Instead, it plans to raise both.

Third, and most important, it should close unneeded military bases. By its own estimates, the DoD is operating with 21% excess capacity in all its facilities. However, Congress won't allow it. The Bi-Partisan Budget Act of 2013 blocked future military base closings. Few elected officials are willing to risk losing local jobs caused by base closures in their states. The Pentagon will be forced to reduce the number of actual soldiers so it can afford these benefits. (Source: "Pentagon Lays Out Way to Slash Spending," The Wall Street Journal, August 1, 2013.)

Congress is also reluctant to allow DoD to cut other costs, like military health benefits and the growth of military pay. It recently gave service-members a 1% pay increase, but cut the cost-of-living-adjustment by 1% for veterans who retire before age 62.  However, disabled veterans and surviving families had the cut re-instated.  (Source: "House Quickly OKs Bipartisan Budget Deal," Stars and Stripes, December 12, 2013. "Disabled Veterans Get Back Pension Raises," CNN, January 14, 2014.)

Sequestration would have cut defense spending by $487 billion in ten years if it had continued. However, many Congressmen said the cuts would jeopardize national security. They were particularly concerned about a cutback of about 100,000 troops, closure of domestic military bases, and termination of some weapons systems -- all of which would have cost jobs and revenue in their districts. That's why defense spending is the only budget area that rarely gets focused on as an area to cut. (Source: "Lawmakers Skeptical of Cuts in 2013 Defense Budget," Reuters,  February 15, 2012.)  

Military spending is the second largest Federal government expenditure, after Social Security ($967 billion). If all military spending were returned to 2003 levels ($437.4 billion), the budget deficit would only be $105 billion instead of $441 billion.

Federal Budget Overview

Budget In Depth

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