Analysis – US Defense Budget, Jane’s by IHS Markit

By Guy Eastman, Senior Analyst, Jane’s by IHS Markit

Key data points about US Defense Budget:

  • Since the attack on 9/11 in 2001, the US Department of Defense budget has totaled $9.35 trillion
    • $1.6 trillion of that sum went to the Overseas Contingency Operations (OCO) accounts through FY16
    • OCO funds are intended to finance current warfighting operations and not the basic needs of the Department of Defense (DoD)
  • At $636.7 billion in FY16 (in 2017 constant USD), the US defense budget is larger than the sum of the next 12 countries combined
    • It remains the main driver of global defense expenditure, accounting for over 40% of total global defense spend
  • Increases of approximately $16 to 18 billion per year are necessary to grow the force as desired, with US Senator John McCain recommending more


It is early in the FY18 budget game and we do not yet have all the details. The Administration has used the figure $603 billion as a defense discretionary number.

If one assumes that $603 billion equals the base budget plus the OCO value, the total DoD amount could be as large as $640.5 billion. This would be about a 2.4% increase over FY17. 

Potentially (when more details are provided) the discretionary component could be about $54 billion over the current cap levels, and would require amending or repealing the 2011 Budget Control Act (BCA).

Despite Republican control of the House, Senate, and White House, repealing the BCA likely will require gaining some support from Democrats.

Jane’s preliminary forecast indicates that at the very minimum an additional $57 billion (in nominal USD) will be spent on defence over the FY 2018-22 Future Years Defense Program (FYDP) timeframe, assuming that the 2011 Budget Control Act caps are lifted.

This initial view will be modified as more data becomes available.

US military spend overview

The US military remains the world’s pre-eminent military power.

Defense is the largest part of US discretionary spending and, since 2003, has accounted for between 3.35% to 4.86% of GDP and 13-16% of the national budget.

The range of missions that future forces are expected to undertake will drive those percentages, with the military likely to retain the following focus and characteristics:

  • For nuclear security, the US will maintain a second-strike deterrent force supplemented by a missile defense system.
  • Agile and powerful expeditionary forces able to operate in any climate or location to intervene in support of friendly governments against threats to US national security.
  • Strategic and tactical mobility that can deliver forces quickly and sustain them in theatre.
    • This would include US Navy (USN) nuclear-powered aircraft carriers to provide bases and support for air power.
  • Improved weapons able to operate against moving or fixed targets located in urban and rural environments with little or no collateral damage.
    • This places a premium on linking intelligence with focused lethality (or non-lethality) and reducing the detection-response time, and would include air-delivered and indirect fire from land- and sea-based systems.
  • C4ISR that provides total situational awareness.

Every four years, the DoD conducts a congressionally mandated examination of military capabilities and programs that is meant to set a long-term course for the overall defense strategy without considering resources.

Called the Quadrennial Defense Review (QDR), the last such review was held in March 2014, and focused on the pillars of protecting the US homeland and supporting civilian authorities, building global security through various international engagements, and continuing to project power around the world.

Active duty military personnel numbers

The FY16 active duty military personnel end strength proposal was as follows:

  • US Army – 475,000
  • USN – 327,300
  • USMC – 182,000
  • USAF – 317,000
  • Approximately 106,000 full-time reserves (this does not include personnel strength of the reserve components of the US military services)
  • Total FY16 active duty personnel requested was 1,301,300

Defense budget trends

Having reached a peak in FY2010, defense spending in nominal terms has dropped between FY10 and FY15. However, current projections call for increases in both the base budget and total (050) budget, even if existing budget pressures remain.

Jane’s Defense Budgets data indicates that total defense spending in FY10 was $722 billion (nominal), falling to $605 billion (nominal) by FY15.

In real terms, this was a decrease of $186 billion over that period – a large loss of buying power.

Considering the FY10 to FY16 timeframe for defense spending in relation to total defense budget, the following trends are observed (not necessarily endpoints):

  • Procurement went from a low of 16.7% in FY13 to a high of 20.5%
  • RDT&E went from a low of 10.7% in FY14 to a high of 11.9%
  • Military Personnel went from a low of 22.3% in FY10 to a high of 26.2% in FY13, and
  • Operation & Maintenance bottomed out at 42.1% in FY16 from a high of 44.2% in FY11

The defense budget has increased steadily in nominal terms since 2015, with a $16.8 billion increase between 2015 and 2016, and an increase in the range of $21 billion to $40 billion between 2016 and 2017, depending on the level of increase asked by the President in the FY17 budget amendment.

(For comparison, hear the Author discuss the US DoD FY14 Budget Overview from Jan 6, 2014. Courtesy of Jane’s and YouTube)