Defense Spending

How It Works

Defense spending is the single largest category of discretionary spending and accounts for roughly half of all federal discretionary outlays. The FY2024 defense topline enacted under the Fiscal Responsibility Act is approximately $886 billion, funding the Department of Defense ($842 billion), Department of Energy defense nuclear activities (~$32 billion for the NNSA weapons and naval reactors programs), and other defense-related activities at Commerce, DHS, FBI, and Intelligence Community components (~$12 billion). Within DoD the budget splits across five "color of money" appropriations, each with different obligation timelines: Military Personnel (MILPERS, ~$180B, 1-year funds), Operations and Maintenance (O&M, ~$330B, the largest contractor-facing account, 1-year funds), Procurement (~$170B for weapons systems buys, 3-year funds for most services, 5-year for shipbuilding), Research, Development, Test and Evaluation (RDT&E, ~$145B, 2-year funds), and Military Construction (~$20B, 5-year funds). The top five defense prime contractors consistently capture roughly a quarter of all DoD obligations: Lockheed Martin (~$65B in FY2023, dominated by the F-35 Joint Strike Fighter program, PAC-3 and THAAD missile defense, and Sikorsky helicopters), RTX/Raytheon (~$38B, missiles including Tomahawk and SM-6, radars, and Pratt & Whitney engines), General Dynamics (~$35B, Virginia- and Columbia-class submarines, Abrams tanks, and IT services through GDIT), Boeing (~$30B, KC-46 tankers, Apache and Chinook rotorcraft, and munitions), and Northrop Grumman (~$28B, B-21 Raider bomber, Sentinel ICBM, and space systems). Beyond the top five, Huntington Ingalls, L3Harris, BAE Systems, Leidos, and SAIC round out the top ten. Defense spending has grown in nominal terms for most of the past two decades but has fluctuated as a share of GDP between roughly 3.0% and 3.5% in recent years, compared to over 6% during the Cold War buildup, over 9% during the Korean War peak, and over 35% at the height of World War II.

Related Terms

• Discretionary Spending, Federal spending that Congress controls through annual appropriations, covering defense, education, transportation, and other agency budgets.
• Federal Contract, A legally binding agreement between the U.S. government and a private company to provide goods or services, from fighter jets to IT consulting.
• NAICS Code, The North American Industry Classification System code, a 6-digit number that classifies a business by the type of economic activity it performs, used to determine small business size standards.
• Appropriation, A law passed by Congress that authorizes federal agencies to spend a specific amount of money for a specific purpose during a defined period.