[Salon] Breaking Down How the Pentagon Could Spend $200 Billion Extra | American Enterprise Institute - AEI

[Todd Pierce <todd.e.pierce@icloud.com>]

Retired US Army Maj. Gen. John G. Ferrari is a senior nonresident fellow at AEI. Ferrari previously served as a director of program analysis and evaluation for the service.

https://www.aei.org/op-eds/breaking-down-how-the-pentagon-could-spend-200-billion-extra/

Breaking Down How the Pentagon Could Spend $200 Billion Extra

Op-Ed

By John G. Ferrari

Breaking Defense

January 30, 2025

The president has recently reiterated his commitment to “peace through strength,” and the Congress is hard at work to make that happen. Initial press reports indicate that Congress could increase defense spending through the reconciliation process by as much as $200 billion, or $100B per year for fiscal 2025 and 2026, above the Biden-proposed defense topline request of $849.8B.

With the FY25 NDAA already passed, normally, any additional funds would be added by the appropriators. However, if these funds are added through reconciliation, then it may be that the authorizers, led by Sen. Roger Wicker, R-Miss., and Rep. Mike Rogers, R-Ala., as opposed to the appropriators, who will have greater control in deciding where these funds will be allocated.

More money for the Pentagon is an inherently good thing: The department needs not just the money it has asked for, but whatever extra Congress can churn up. But given that DoD has only one confirmed Trump appointee, the Congress will need a guide to determine where this money should go.

Fortunately, a written guide already exists in the form of Wicker’s May 2024 plan, appropriately called “Peace through Strength.” Of course, that plan was written with a different potential topline increase in mind, so a “new math” will be needed when considering how to spell the potential increase. This “new math” will have three factors to consider: Wicker’s core plan, fixes for inflation, and what we can call the DOGE transformation.

First, let’s start with Wicker’s original plan, which was for a $110 billion increase over two years, or $55 billion of additional funding per year. To start with nearly 85 percent of this $55 billion (Table 1) would go towards Defense/COCOM agencies, the Air Force and the Navy. What is striking is how little funding is allocated to the Army, Marines and the Space Force.

While Wicker’s plan is not broken out by appropriation, some careful guesses based upon the descriptions of the individual items shows that this plan allocates over 91 percent of the funding for the three investment accounts (Table 2) and only about 8 percent for operating the force. With over $14 billion allocated in the continuing resolution for nuclear submarines, money that was set after Wicker’s plan was released, the $3.2 billion allocated in the Wicker plan for the Virginia-Class submarines could be reallocated and the ground forces should be running over to the Congress to get a piece of it.

With $110 billion of the $200 billion now accounted for, let’s look at inflation.

Right now, the military is limping along under a six-month long continuing resolution that my colleague at AEI Elaine McCusker calculates wastes billions of dollars per month. Additionally, inflation has eaten away at least 3 percent of the Pentagon’s buying power, which seems small unless you actually do the math and realize that this is almost $25 billion, or $2 billion per month in decreased readiness and capabilities.

In FY24, due to the Fiscal Responsibility Act, the Pentagon’s topline was about $847 billion, so the Biden administration FY25 request of $850 billion is a “cut” when inflation is taken into account. Assuming a 3 percent inflation rate, the defense budget in FY25 would need to be about $25 billion higher just to have the same buying power as in FY24. Looking forward into FY26, the Pentagon’s topline would need to add another $30 billion to maintain its buying power.

Therefore, roughly $55 billion in spending authorized ($25 billion in FY25 and $30 billion in FY26) under reconciliation will be eaten up by simply keeping up with inflation. It’s not ideal, but it is what is realistic.

The third bucket of funding is what remains of the $200 billion, which is $35 billion. And if the Trump administration is serious about DOGE and transforming the Department of Defense, then the Congress should allocate these funds to the Deputy Secretary of Defense nominee, Stephen Feinberg.

These funds will enable the administration to immediately change the arc of defense procurement. The funds should be used to execute a 180-degree pivot away from exquisite, large, and costly platforms towards a future of mass production and mass customization. This would manifest itself as a full embrace of autonomy in the air, a massive embrace of autonomy at sea, and a new information technology backbone. If Ukraine can produce four million drones per year, certainly, with $35 billion per year, every year starting in FY26, the United States can change the arc of its defense industrial base and boost the efforts of the non-traditional defense firms.

There seems to be bipartisan agreement that more money is needed for defense. This is a once in a generation opportunity. With Wicker clearly in the driver’s seat, this $200 billion added through reconciliation will enable the nation to truly achieve “peace through strength.” It simply needs to follow the path set before it.

Read more at Breaking Defense.