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

Here's the $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 $824.6 billion. That's the budget for Fiscal Year 2018 which covers the period October 1, 2017 through September 30, 2018. Military spending is the second largest federal government expenditure after Social Security at $1 trillion.  U.S. military spending is larger than the next nine countries combined

There are four components. First is the $574.5 billion base budget for the Department of Defense.

Second is the Overseas Contingency Operations for DoD to fight the Islamic State group ($64.6 billion).

Third is the total of other agencies that protect our nation. These expenses are $173.5 billion. They include the Department of Veterans Affairs ($78.9 billion), the State Department ($27.1 billion), Homeland Security ($44.1 billion), FBI and Cybersecurity in the Department of Justice ($9.5 billion) and the National Nuclear Security Administration in the Department of Energy ($13.9 billion).

The last component is $12 billion in OCO funds for the State Department and Homeland Security to fight ISIS. (Source: "FY 2018 Budget," OMB, May 23, 2017. "2018 Budget, Table 2," OMB, March 16, 2017. "Mid-Session Review Fiscal Year 2017, Table S-10." OMB, July 15, 2016.)

Defense Department Base Budget

DoD requested $574.5 billion. It seeks to:

  1. Increase manning levels for all four branches.
  2. A 2.1 percent pay raise for military personnel and a 1.9 percent pay raise for civilian personnel. 
  1. Add to Navy shipyard capacity and aviation depot maintenance.
  2. Increase Army unit and flight training.
  3. Increase Air Force weapons and pilots.
  4. Beef up cyber security forces. That include strengthening space control and investing advanced munitions systems.
  5. Reduce spending on headquarters by 25 percent. Improve audits, acquisition practices, and commissary spending. Eliminate excess infrastructure.
  1. Save $2 billion a year by closing military bases.
  2. Continue retirement and 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. 

The Air Force requested $10.3 billion for 70 F-35 Joint Strike Fighter aircraft. Overall, the program will cost $400 billion for 2,457 planes. Most of the cost has been for development and testing.  (Source: "Watchdog: Delayed Testing Adds $1 Billion to F-35 Program," The Hill, April 24, 2017.)

Lockheed Martin built 45 planes in 2015, costing $100 million each. That's expected to rise to 160 annually by 2025. By then the jet should cost $85 million each, adjusted for inflation. The Air Force cut five F-35s in the FY 2017 budget. (Source: "FY 2018 Budget," OMB, March 16, 2017. "FY 2017 Budget Fact Sheet," U.S. Department of Defense.  "F-35 Plan Stays on Track," The Wall Street Journal, February 11, 2016.)

The Defense Department will also purchase the following equipment:

  • KC-46 Tanker, 15 aircraft, $3.1 billion.
  • B-21 Bomber, $2.0 billion.
  • Virginia Class Submarine, 2 ships, $5.5 billion.
  • DDG-51 Destroyers, 2 ships, $4.0 billion.
  • CVN-78 Class Aircraft Carrier, 1 ship, $4.6 billion.
  • Joint Light Tactical Vehicle, 2,647 vehicles, $1.1 billion.
  • Science and Technology, $13.2 billion

Overseas Contingency Operations

Ironically, the DoD base budget does not include the cost of wars. That falls under Overseas Contingency Operations. It's budgeted at $64.6 billion for DoD and $12 billion for the State Department.  For OCO spending back to 2001, see War on Terror Facts.  (Source: "2018 Budget, Table 2," OMB, March 16, 2017.)

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   $496.1    $64.2  $165.6 $10.5  $736.4
2016 Actual  $521.7    $58.6  $171.9 $15.1  $767.3 
2017 Enacted  $516.1    $82.4  $175.8 $19.4  $793.7
2018 Budget  $574.5    $64.6  $173.5 $12.0  $824.6


Factors Influencing the Budget

  • 2003: Iraq War launched March 19.
  • 2004: U.S. torture at Abu Ghraib prison increased resistance to the war, but not enough to lower 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 began falling.
  • 2013: Sequestration cut spending.
  • 2014: Wind-down of Afghanistan War.
  • 2015: Sequestration cut spending. Still higher than in 2007.
  • 2016: Resurgence of ISIS.
  • 2017: Increase in VA and FBI funding. Trump asked Congress for $30 billion more in military spending.
  • 2018: Trump asked Congress to repeal sequestration for the defense budget. Requested a spending increase to fight ISIS.

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 percent 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 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 percent excess capacity in all its facilities. If nothing is done, that will increase to 22 percent by 2019. (Source: "Trump Wants to Rebuild the Military, But Budget Would Close Bases, CNN Politics, May 30, 2017.)

Unfortunately, Congress won't allow DoD to close bases. 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. Instead, the Pentagon will need to reduce the number of soldiers so it can afford the benefits of bases. (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 percent pay increase, but cut the cost-of-living-adjustment by 1 percent for veterans who retire before age 62. Fortunately, 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 cut defense spending by $487 billion over ten years. But many in Congress say the cuts jeopardize national security. They are concerned about a cutback of about 100,000 troops, closure of domestic military bases and termination of some weapons systems.  All of those cuts cost jobs and revenue in their districts. That's why defense spending is usually an area that doesn’t get cut. (Source: "Lawmakers Skeptical of Cuts in 2013 Defense Budget," Reuters,  February 15, 2012.)  

At the same time, U.S. military spending is its largest expenditure after Social Security benefits. It's greater than those of the next 10 largest government expenditures combined. It's four times more than China's military budget of $216 billion. It's almost 10 times bigger than Russia's budget of just $84.5 billion. It's difficult to reduce the budget deficit, and the almost $20 trillion debt, without cutting defense spending.

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