The US$895 billion national security budget request, which includes funds for homeland security as well as nuclear weapons-related activities carried out by the energy department, is the result of a two-year budget deal struck in mid-2023 that limited the budget to a 1% increase.
“It is an increase over last year, is not enough of an increase to cover inflation. That, again, would presumably not have been a surprise to anybody who drafted the caps or voted for the caps,” a senior defence official told reporters during the budget rollout process.
Under the cap, the Pentagon’s share of the national defence budget is US$850 billion. The less-than-expected funding will curb purchases of the stealthy F-35 jet made by Lockheed Martin and air defences for Guam, and will delay programmes, including slowing orders for an aircraft carrier made by Huntington Ingalls Industries and Virginia-class submarines made by Huntington and General Dynamics.
The budget asks for a 4.5% pay raise for troops, but also trims costs by retiring older weaponry like ships and planes that are more expensive to operate. Under the plan, 10 Navy ships will be retired before the end of their scheduled service life, including two Littoral Combat Ships, which have underperformed expectations.
Last spring, before the cap was put in place, the Pentagon had estimated in 2025 it would need about US$880 billion, and the total national security budget would be US$929 billion. But because the budget increase is capped at 1% and smaller than expected, there is less money to spend.
The budget will spark debate on Capitol Hill that could lead to an increase in the national defence budget to over US$900 billion for fiscal 2025, budget watchers say.
Last year the Pentagon began buying missiles and munitions with multiyear contracts for the first time, something that is routine for planes and ships.
In the 2025 budget the Pentagon is prioritising purchase of a new ground attack weapon, the Precision Strike Missile (PrSM), which is to replace the Army Tactical Missile (ATACM). Last year, before the budget cap deal, the plan was to buy 190 in 2025; now the Army plans to buy 230 PrSM.
Another missile, viewed as critical to deter China’s navy, is the Long Range Anti-Ship Missiles (LRASM). Again, last year, before the budget cap deal, the plan was to buy 47 of the missiles, but now the Pentagon says it wants to buy 205.
Lockheed Martin makes both the PrSM and LRASM.
Defence spending accounts for about half of the US discretionary budget; the other half goes to transportation, education, diplomacy and other departments. Entitlements like Social Security, the national retirement fund, constitute the nondiscretionary portion of the budget.
The 2024 budget, which includes US$886 billion for national security, still has not passed Congress. The US government is working under a continuing resolution: a stop-gap measure which caps spending at 2023 levels until a 2024 budget is passed. The current continuing resolution is keeping the government open until later in March.
The Pentagon order for Lockheed Martin’s stealthy fighter will drop to 68, down from an expected order of 83, for an estimated US$1.6 billion drop in spending on the jets.