Aug 23, 2019

The United States spent $631 billion on national defense during fiscal year (FY) 2018 according to the Office of Management and Budget, which amounts to 15 percent of the federal budget. This high 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 examines defense spending as part of our budget and looks at the components of such spending.

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

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The majority of the overall defense budget, $601 billion, was spent by the Department of Defense (DoD) on military activities. The remaining $30 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 $601 billion, we find that it supported a broad range of activities. The largest category, operation and maintenance, cost $257 billion in 2018. It covers the cost of military operations, maintenance of equipment, and most of the military healthcare system. The second largest category, military personnel, supports the pay and retirement benefits for service members and cost $146 billion in 2018.

Several smaller categories accounted for the rest of DoD spending. Procurement of weapons and systems cost $113 billion last year and $77 billion was spent on research and development of weapons and equipment. The military also spent about $8 billion on the construction and management of military facilities, such as barracks and family housing.

The Department of Defense spent $601 billion in 2018 on a brad range of military activities

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The composition of DoD spending has varied over time according to data from DoD. Operation and maintenance accounted for 42 percent of military spending in 2018, which is up from 27 percent in 1968. 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 procuring weapons and systems at that time.

The limit on earnings subject to the Social Security payroll tax has risen over time

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Two non-defense budget categories have a close relationship with the defense budget. The first is veterans’ benefits and services, on which the federal government spent $179 billion in 2018. Those commitments arise in part from past military decisions. The second is international affairs, to which the federal government devoted $49 billion last year, 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.

The national defense budget represents a significant share of the overall federal budget and covers a wide range of activities. After including other related spending, such as international affairs and veterans’ benefits, a large portion of the federal budget is influenced by foreign policy decisions. 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 federal government.

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