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The United States spent $754 billion on national defense during fiscal year (FY) 2021 according to the Office of Management and Budget, which amounted to 11 percent of federal spending; that percentage was lower than the 15 percent of the budget spent on defense in the four years before the pandemic. Such 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 G7 (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 majority of the overall defense budget, $718 billion in FY2021 was spent by the Department of Defense (DoD) on military activities. The remaining $36 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 $718 billion, we find that it supported a broad range of activities. The largest category, operation and maintenance, cost $286 billion in 2021. 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 pay and retirement benefits for service members and cost $173 billion in 2021.
Several smaller categories accounted for the rest of DoD spending. Procurement of weapons and systems cost $141 billion in 2021 and nearly $106 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 composition of DoD spending has varied over time. Operation and maintenance accounted for about 40 percent of military spending in 2021, which is up from roughly one-quarter of all military spending in 1971. 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.
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 $234 billion in 2021. Those commitments arise in part from past military decisions. The second is international affairs, to which the federal government devoted $47 billion in 2021 for activities such as humanitarian assistance and international development. That spending influences 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 area.
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.