Aug 2, 2021

The United States spent $725 billion on national defense during fiscal year (FY) 2020 according to the Office of Management and Budget, which amounts to 11 percent of federal spending. That level of spending indicates that lawmakers have prioritized national defense as a key part of our budget; indeed, the United States spends more on defense, relative to the size of its economy, than any other member of the G-7 (a group of the world’s largest advanced economies, the members of which are shown in the chart below). This explainer looks at the components of the U.S. defense budget.

The U.S. has historically devoted a larger share of its economy to defense than other members of the G-7

How is the defense budget allocated?

The majority of the overall defense budget, $690 billion in FY2020, was spent by the Department of Defense (DoD) on military activities. The remaining $34 billion was spent on defense-related activities carried out by other agencies, such as the Department of Energy and the Federal Bureau of Investigation.

Breaking down the $690 billion, we find that it supported a broad range of activities. The largest category, operation and maintenance, cost $279 billion in 2020. It covers the cost of military operations such as training and planning, maintenance of equipment, and most of the military healthcare system (separate from outlays made by the Department of Veterans Affairs). The second largest category, military personnel, supports the pay and retirement benefits for service members and cost $161 billion in 2020.

Several smaller categories accounted for the rest of DoD spending. Procurement of weapons and systems cost $139 billion in 2020 and nearly $100 billion was spent on research and development of weapons and equipment. The military also spent over $10 billion on the construction and management of military facilities, such as barracks and family housing, and $1 billion on a number of miscellaneous activities.

The Department of Defense spent $654 billion in 2019 on a brad range of military activities

How has national defense spending changed over time?

The composition of DoD spending has varied over time. Operation and maintenance accounted for about 40 percent of military spending in 2020, which is up from roughly one-quarter of all military spending in 1970. Although the United States was at the peak of its involvement in the Vietnam War 50 years ago and operational costs were significant, a much larger share of military spending was devoted to military personnel and procuring weapons and systems at that time.

The composition of defense spending has changed over time

Two large categories of spending have a close relationship with the defense budget, though they technically fall outside of it. The first is veterans’ benefits and services, on which the federal government spent $219 billion in 2020. Those commitments arise in part from past military decisions. The second is international affairs, to which the federal government devoted $68 billion in 2020 for activities like humanitarian assistance and international development. That spending influences the political and economic developments in other countries and can therefore affect future decisions on military involvement and defense spending. Those categories, and their relationship to national defense, highlight the federal government’s significant budgetary commitment in this overall area.

National defense spending remains a top priority of the federal government

The national defense budget funds a wide range of activities and represents a significant share of overall federal spending. Indeed, the United States spends more than any other advanced economy in this area, not only in raw dollars, but also as a share of the economy. While the appropriate level of defense funding is part of an ongoing debate, one thing is clear — national defense spending is currently one of the top priorities of the U.S. federal government.

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