Reduce the Department of Defense's Annual Budget

Background

Each year, the Department of Defense (DoD) presents a budget request to the Congress that is designed to align military forces to the National Security Strategy (NSS) within fiscal constraints. In its 2023 budget request, DoD requested an active military force of 1.3 million by the end of fiscal year 2023 (known as end strength) and a budget of $773 billion, which represents 46 percent of all proposed discretionary funding for that year. In fiscal year 2021, budget authority for defense programs was about 10 percent of the total federal budget (mandatory and discretionary) and about 44 percent of all discretionary budget authority. The Congressional Budget Office projects that, under DoD's current plans, funding for defense programs would be $966 billion in 2032 (or $802 billion in 2023 dollars).

National security priorities change over time, and when an Administration issues an NSS, it describes policy choices for how the United States will defend itself by inducing favorable behavior in other nations, deterring military aggression, and shaping an international community based on rules that support the interests of the United States and its allies. Those goals can be achieved in a number of ways, primarily through four elements of national power: diplomatic actions, such as building coalitions; information campaigns to influence world opinion; military actions to deter and counter aggression; and economic actions, such as opening trade or imposing sanctions.

The elements of national security that have the largest effects on the size and shape of military forces are the deterrence of military aggression by adversaries and the preparation to counter aggression should deterrence fail. In the NSS published in 2017, the strategic approach for deterring military aggression relied heavily on the threat of rapid defeat of enemy forces by U.S. combat forces. For that strategy to be successful, the U.S. military would need to demonstrate the ability to strike with sufficient speed and firepower and to maneuver forces in a way that would overwhelm an enemy's military (known as military overmatch) to reverse any territory or advantages an adversary would attempt to gain through military aggression. In 2021, an interim NSS was published. It emphasized an integrated approach to national security, placing less importance on the threat of using U.S. combat forces and more on the threat of broad-based punitive actions by the United States and its international partners against an aggressor. The full NSS published in October 2022 emphasizes the same approach.

The composition and focus of military forces have begun to change under the 2021 strategic guidance, but the military is a large, complex organization—it takes considerable time to adjust the number and types of units in the force and to acquire new capabilities necessary to support alternative military approaches. Thus, the current force is still one largely designed to meet the objectives outlined in the 2017 NSS.

Reducing DoD's budget would require some combination of cutting the size of the force, purchasing fewer or less expensive weapons, reducing the cost of operating and maintaining equipment in service, and decreasing the costs of training personnel. This option encompasses three possible strategic approaches for configuring the military within the confines of a smaller budget.

The general-purpose nature of military forces means there are many ways to accommodate changes and structure the forces to implement a fixed strategy. If, after analysis and testing, a force structure cannot be identified that meets both budgetary targets and strategic objectives, one or possibly both constraints will have to be eased.

Option

This option consists of three alternatives that would reduce DoD's funding by $1.1 trillion over 10 years ($1.0 trillion in 2023 dollars). In all three, the reduction would be achieved by decreasing the number of full-time active component forces by between 18 percent and 21 percent relative to the 2023 force. Budget cuts would be phased in over the first five years of the period, and funding would grow with the rate of inflation thereafter. In 2032, the resulting DoD budget under this option would be 9 percent smaller in real terms (after removing the effects of inflation) than the amount of DoD funding provided in 2022.

The three alternatives in this option provide broad examples of how a force structure might be reconfigured to implement different strategies that aim to deter military aggression under a smaller DoD budget and how the United States would react should deterrence fail. Those alternatives are designed to be high-level illustrations of the different strategies that could be pursued under a given budget and have not been subject to the analysis and planning that DoD puts into crafting war plans or building a Future Years Defense Program (FYDP). Strategically, the alternatives vary in the degree to which the United States would rely on the threat of using U.S. combat forces to support national security goals. Structurally, they differ in how personnel reductions would be distributed, in the speed with which combat forces could be used, and in the size and composition of the combat forces the United States would commit to support allies and coalition partners (see the figure below).

Effect on the Services of Various Alternatives for a Reduced Defense Budget

Data source: Congressional Budget Office. See www.cbo.gov/publication/58164#data.

Current program refers to CBO's projection of the costs of implementing the Department of Defense's plans outlined in the 2023 Future Years Defense Program.

In all three alternatives, only units in the active forces would be affected. Units in the reserve forces would remain unchanged. Preserving reserve forces would allow the military to retain the capacity and capabilities of a larger force at a lower cost. If international conditions changed or deterrence failed, reserve forces could be mobilized for combat operations, though more slowly than active forces could be. Under each alternative, the remaining active and reserve forces would be highly ready and units would be manned, trained, and equipped according to their intended design.

Alternative 1: Reduce Military Manpower by 18 Percent Overall and Maintain Current Composition. Under this alternative, active military manpower would be reduced by 18 percent by 2032. The number of most types of units would be reduced in proportion to their 2023 level of funding in the 2023 FYDP. As a result, the current composition of the force, which roughly reflects the 2017 NSS, would not change (see the table below). However, some units could face slightly larger or slightly smaller reductions for two reasons. First, to preserve modernization plans, units with older equipment (like F-15 fighter squadrons) might face larger reductions than units with newer equipment (like F-35 fighter squadrons). Second, because units consist of discrete elements, it might not be possible to reduce the number of items by the same percentage as the overall percentage change in the force.

Change in the Number of Units in the Total Force Under Various Alternatives
Service	Unit			Alternative 1					Alternative 2					Alternative 3
		Units in 2023		Units in 2032		Change (Percent)			Units in 2032		Change (Percent)			Units in 2032		Change (Percent)
Army	Aviation Brigades	28		22		-21			23		-18			24		-14
	Brigade Combat Teams	60		51		-15			48		-20			49		-18
	Long Range Strike Missile Battalions	0		6		n.a.			28		n.a.			9		n.a.
	Security Force Assistance Brigades	5		4		-20			10		100			10		100
	Acquisition Funding (Percent)	100		84		-16			83		-17			83		-17
Marine Corps	Air-Land-Sea Attack Missile Units	0		0		n.a.			14		n.a.			14		n.a.
	Marine Corps Aircraft Complements	24		20		-17			15		-38			15		-38
	Marine Corps Infantry Battalions	32		28		-13			29		-9			29		-9
Navy	Amphibious Ships	36		29		-19			59		64			44		22
	Aircraft Carriers and Airwings	20		17		-15			15		-25			19		-5
	Logistics Ships	59		51		-14			79		34			69		17
	Maritime Aviation Squadrons	8		7		-13			7		-13			7		-13
	Submarines	67		55		-18			55		-18			54		-19
	Surface Warfare Ships	122		100		-18			158		30			128		5
	Unmanned Naval Vessels	0		10		n.a.			25		n.a.			15		n.a.
	Acquisition Funding (Percent)	100		84		-16			83		-17			83		-17
Air Force	Bomber Aircraft Squadrons	9		9		0			9		0			9		0
	Cargo Aircraft Squadrons	40		35		-13			22		-45			30		-25
	Fighter-Attack Aircraft Squadrons	100		79		-21			59		-41			69		-31
	Tanker Aircraft Squadrons	35		25		-29			18		-49			20		-43
	Unmanned Aerial Systems Squadrons	27		25		-7			39		44			30		11
	Acquisition Funding (Percent)	100		84		-16			83		-17			83		-17

Data source: Congressional Budget Office. See www.cbo.gov/publication/58164#data.

n.a. = not applicable.

Deterrence under this alternative would rely on the United States' demonstrating the resolve and ability to conduct a rapid, large-scale combat action that would deal a crushing military defeat against any aggressor. Doing so would require U.S. combat forces to be able to overmatch an aggressor's military forces and thereby deny an aggressor its objectives outright. Allies and coalitions would be expected to provide only marginal support.

Under this alternative, if the United States found itself in conflict with another great power, it would have to rapidly mobilize considerable assets to support deployment of a U.S. combat force capable of ending the conflict and restoring peace and stability quickly. The force developed to provide deterrence would be the same force that would be deployed should deterrence fail.

Alternative 2: Reduce Military Manpower by 21 Percent Overall and Increase Support for Coalition Forces. Under this alternative, the number of active military personnel would be reduced by 21 percent overall relative to the 2023 force. The reduction would be concentrated in ground combat and tactical aviation units, including brigade combat teams, infantry battalions, and aircraft carriers and airwings. Enough units would remain in the active force to maintain proficiency in combined arms warfare (the ability to integrate and command a large military force containing a wide array of separate and distinct capabilities, such as infantry, tanks, artillery, fighter jets, and naval gunfire). DoD would maintain sufficient forces, equipment, and infrastructure to enable the mobilization of reserve combat forces and the creation of more combat units should the need arise.

The total number of ships in the Navy would increase under this alternative, as would the number of units with capabilities that enhance long-range strikes (missiles), logistics, allied training and collaboration, and command and control. The new mix of units would be able to assist in training and support of coalition combat forces.

Under this alternative, the United States would seek to deter acts of military aggression against allies, such as violations of national sovereignty, through an integrated use of national power. It would rely less on U.S. combat forces and more on the other elements of U.S. national power: threatening severe economic sanctions, influencing world opinion to make the aggressor a pariah state, and backing that message with clear diplomatic actions, much like the United States' response to Russia's invasion of Ukraine. The military elements of deterrence in this option would rely on U.S. military actions to strengthen allied combat forces, such as greater commitment to security force assistance programs (such as the actions taken to assist Ukraine before the invasion) that would work to strengthen U.S. allies' defenses and make them undesirable targets for potential aggressors.

Should deterrence fail, the United States would initially refrain from using its own combat forces and would rely on the prior collaborative training and material support provided to coalition allies in the region that enhanced their defense capability. U.S. combat forces would only be deployed if allied forces failed to halt and reverse military aggression. However, unlike in the first alternative, the United States would not be able to deploy a large ground combat force quickly—if that became necessary—because time would be needed to mobilize reserve units and build new units to create a force that would guarantee success in combat operations.

Alternative 3: Reduce Military Manpower by 19 Percent Overall and Increase U.S. Control of the Global Commons. This alternative would further deemphasize the use of U.S. combat forces, and the number of active military personnel would be reduced by 19 percent overall relative to the 2023 force; most of the reductions would occur in ground and air combat units. The United States would focus its defense resources on maintaining and enhancing the nation's primacy in freedom of navigation at sea, in the air, and in space (collectively known as the global commons). The number of Navy ships would increase and the mix would be reconfigured to better maintain U.S. control of sea lanes, with an increased number of surface combatants and combat logistic ships. The number of security force assistance brigades and missile units would also increase to enhance support to coalition allies. Enhanced support might include pre-positioning sets of combat equipment and war stocks managed by the U.S. military intended to support regional allied forces. Compared with the other alternatives, this alternative would focus more on the acquisition of intelligence, surveillance, and reconnaissance capabilities, especially for the Air Force and Space Force.

The composition of the force under this alternative would be designed to maintain control of the flow of goods and commerce in the global commons, to maintain ready access to ports and logistics hubs by U.S. forces and coalition allies, and, if necessary, to deny adversaries access to the commons. A smaller number of ground and air combat units would remain in the active force to maintain proficiency in combined arms warfare, and the nation would rely more heavily on the reserve component to preserve combat power. This alternative would place much more emphasis on maintaining minimal but sufficient forces, equipment, and infrastructure to support a national mobilization (activation of the reserve component and creation of new military units) to increase the size of active ground and air forces for large-scale combat operations.

Like the second alternative, this alternative would seek to deter military aggression by helping allies strengthen themselves against attack and by building strong regional coalitions to support unified military, economic, and diplomatic actions. Military deterrence would be achieved by the threat of locking an aggressor out of the commons. Should deterrence fail, the U.S. military would pressure an adversary by limiting its freedom of movement in the global commons—that is, restricting its flow of trade and military support. Under this alternative, the United States would only commit large ground and air forces in a regional conflict if those other approaches failed.

Effects on the Budget

This option would save $1.1 trillion in budget authority over the 2023–2032 period relative to DoD's plan in the 2023 FYDP. (The reduction in outlays would be a bit smaller, at about $1.0 trillion.) In 2032, funding under this option would be $812 billion, a 5 percent increase in nominal dollars from proposed funding for 2023 in the Administration's budget request. (Measured in 2023 dollars, funding under this option for 2032 would be $674 billion, 13 percent less than the amount proposed for 2023.)

A 13 percent reduction in real defense funding over 10 years, though substantial, would be smaller than the two largest reductions that have occurred since the Korean War. First, reductions after the Cold War resulted in a 30 percent decline, in real terms, in annual budgets between 1988 and 1997. Second, real defense funding declined by 17 percent between 2012 and 2015 after the Budget Control Act of 2011 was enacted. That law generally capped defense and nondefense discretionary funding. (Those caps, which are no longer in effect, were later raised several times: Between 2016 and 2021, real defense spending rose by 9 percent.)

CBO's estimates of savings for this option were calculated on a different basis than for nondefense options. (This approach is consistent with CBO's practice for defense options in other publications.) Because CBO's baseline projections of defense discretionary spending do not reflect programmatic details for force structure, acquisition, and maintenance of specific weapon systems, the effects of this option were calculated relative to DoD's planned spending as laid out in its 2023 FYDP, which provides details about DoD's plans for the 2023–2027 period, and CBO's projection of the costs of implementing that plan. Over the 2023–2032 period, CBO's baseline projections of funding for discretionary defense programs are about $220 billion more than funding projected on the basis of the FYDP. Therefore, if one of the alternative force structures under this option was implemented, the savings relative to CBO's baseline projections would be larger than the estimated reduction in outlays shown in this option.

CBO estimated how the reduction in defense spending would affect the composition of the military using a modified version of CBO's enhanced interactive force structure tool. Given a force that includes a mix of capabilities aligned to a specific strategic and military approach, the force structure tool automatically adjusts the number and types of key combat units until a force structure is found that will fit within resource and policy constraints. The tool mechanically creates force structure options; how well a force might perform in meeting strategic objectives is beyond the scope of the tool. To relate changes in the force to strategic approaches, CBO relied on past and current national security literature.

Uncertainty About the Budgetary Effects

Although the change in discretionary spending is fixed for this option, the estimates of the resulting force structure are uncertain for two main reasons. First, there is programmatic uncertainty; that is, it is uncertain whether a military force with the desired capability can be created on schedule using available resources. Second, there is strategic uncertainty; that is, the global security environment is inherently uncertain, and that environment informs strategy and force structure design.

Programmatic uncertainty reflects the risk that the desired force cannot be realized in time (or at all). Every year, DoD uses the planning, programing, budgeting, and execution (PPBE) process to set priorities that align programs to strategy within resource constraints, resulting in the FYDP. Despite rigorous testing during the planning and design phase, a new unit might not produce the desired capability. Delays in equipment acquisition schedules, cost overruns because of an increase in the scope of a program, failure to develop desired technologies, or issues in systems integration could result in a failure to achieve the desired capabilities. Through the PPBE system, DoD's leadership responds to failed assumptions about the performance of new units or the need for acquisition programs, adjusting plans and programs accordingly and capturing those changes in a subsequent FYDP.

The force structure alternatives presented here are simple, illustrative estimates, defined in broad strokes to change the size and composition of the force so that it meets resource and strategic constraints. CBO does not have the resources to test proposed force structure alternatives for all the possible programmatic risks that could occur in achieving the alternatives.

Strategic uncertainties are typically harder to predict than programmatic uncertainties and include changes in an adversary's military tactics and capabilities, emerging unforeseen threats, natural and manmade disasters, and economic perils. If global security conditions changed, the strategy, the program, or both would need to be adjusted. DoD addresses strategic changes by adjusting strategies and by using the PPBE system to adapt forces, programs, and budgets to new conditions.

Distributional Effects

Defense spending is focused on producing military power to support national security objectives, such as maintaining global peace and security by deterring aggression or enhancing U.S. global influence. All households benefit from the public good of peace and security generated by defense spending and many other elements of national power. In CBO's distributional analyses, spending on national security as a public good is distributed among all households. As a result, a reduction in defense spending would be distributed among households across the income distribution.

Economic Effects

This option could have effects on economic output that are not reflected in conventional budget estimates such as the ones shown above. Reducing defense spending would not have clear effects on aggregate hours worked, saving, or investment. However, eliminating military jobs could have significant short-term effects, including a reduced demand for goods and services, which would probably reduce economic output. It could also have some longer-term effects, including reduced human capital development because there would be fewer military jobs, as well as a reduction in national productivity if lower defense spending meant less was spent on the development of new technology.

A reduction in active military end strength on the order of 18 percent (or about 326,000 jobs) over five years would result in an uneven distribution of economic effects across the United States. It would probably have the greatest direct effect on communities that have a large fraction of their population serving in the military, working for DoD, or working for defense contractors. Such a change in employment would have ripple effects across the economy as those relatively high-paying jobs were eliminated and workers were displaced from military forces and defense industries. Therefore, defense spending cuts would result in lower income for certain workers, and those effects could be permanent for some people. However, the displacement of workers in defense industries and the military would provide opportunities for other industries to hire those skilled individuals. Because of those shifts, the overall economy would probably not be permanently harmed in terms of production and employment.

Military spending can enhance economic productivity through development of human capital and new technology. Some people argue that the military can offer an effective training and jobs program for young, low-skilled people and that when they leave the service, those people can enter higher-skilled occupations. According to that argument, reducing military training could reduce economic productivity. However, studies about the cost of military personnel suggest that it may not be the most efficient use of government funds to generate skilled workers.

Military research and development (R&D), such as medical advances and new safety equipment, may enhance U.S. economic productivity as well. Studies indicate that government-financed investment in R&D—including that for defense—stimulates an increase in privately funded R&D efforts. One study has shown that a 10 percent increase in government-financed R&D leads to a 5 percent increase in privately financed R&D in the targeted firm or industry (Moretti, Steinwender, and Van Reenen, 2021).

In addition to those direct effects on the economy, defense spending provides the peace and stability necessary for a strong economy. Peace and stability foster economic prosperity, but it is not immediately clear how much defense spending is needed to ensure peace and stability or how much an increase or decrease would affect it. Measuring military deterrence is difficult; therefore, it is possible that additional funds spent to ensure national security and stability might be better used to support other elements of national power or other policy goals.

Other Considerations

Each year, the United States pays to maintain a military that is ready to support a set of national security objectives. In times of relative peace, military forces coupled with the other elements of national power allow the United States to influence its competitors, deterring them from aggressive military actions against allies and coalition partners. Because the nature of deterrence lies in the minds of the United States' competitors, it is difficult to establish a direct relationship between defense budgets and deterrence.

National Security With a Smaller Military. Achieving savings by reducing the size of the active force would impose certain risks. A smaller force might lead to diminished deterrence and an increase in the chance of military aggression by a global competitor. Even if a smaller force did provide similar deterrence, if deterrence failed, a smaller active force could present several liabilities. Depending on the size and composition of the force, military leaders would need more or less time to generate a force of an appropriate size and lethality to ensure success in combat operations. Without detailed analysis and military planning, it is hard to determine the time needed to increase the size of the force, and therefore it is difficult to assess the risk that forces would not be ready in time for some military scenarios. That risk would be greater if the force became too small to practice and retain vital capabilities. As the size of budget reductions grew, so too would the risk of not being able to restore forces in a timely manner.

Some of the potential risks in having a smaller active force could be mitigated by investing more in reserve forces. Military capacity and capability could be maintained in the part-time reserve component at a lower cost than in a highly ready active force. However, those cost savings would come with the risk of reserve forces requiring more time to mobilize for combat operations unless U.S. leadership had the foresight to expand the military in response to a deterioration in the security situation well before a conflict began.

Potential Risk to the Military Industrial Base. Reduced spending would not necessarily slow weapon system development and advancement, but it would reduce the number of new weapon systems fielded. With a smaller force, smaller inventories of equipment on hand, and perhaps slowed modernization and fielding, specialized military production capacity would probably decrease. That would mean less work for defense contractors and reduced defense manufacturing capacity.

Measures could be put in place to offset risks to the industrial base. Logistics and acquisition planning could offset some risk by developing capabilities in DoD's logistics systems. Those actions, which would come at a cost, include preserving and storing unused weapon systems; retaining excess federal depot maintenance capacity to restore equipment in times of crisis; planning and practicing for the reconstitution of military units so that DoD's leadership has confidence in their capability and understanding of the timelines; and identifying and promoting U.S. commercial manufacturing production capacity that could be tapped for military production in times of crisis. DoD already has measures in place to mitigate risks to the industrial base, but a smaller military would require even more careful management, planning, and programming.

National Security With Less Emphasis on Military Solutions. Being the world's leading military power provides many benefits to the United States in terms of status and influence. The competency of U.S. military forces tends to make them a focus of national security planning. But military power is only one element of national power. The elements of national power work together to enhance one another, giving any one element the potential to accomplish more than it could alone. Other elements are necessary for supporting U.S. influence around the world and protecting citizens at home, including the nation's economic power and the dollar's role as the world's reserve currency, U.S. leadership in diplomatic efforts and coalition building, and positive messaging about the United States in media and the world marketplace. Depending on economic conditions, reducing the national debt, thereby lowering borrowing costs and decreasing the chance of a fiscal crisis, may better maintain the international geopolitical role of the United States and reduce the likelihood that policymakers may feel fiscal constraints when faced with increasing national security spending to prepare for or respond to an international crisis.

In some cases, nonmilitary elements of national power may be better suited to address a problem than military ones. Public health crises, economic crises, disaster relief, and civil unrest are problems that are not the core focus of military planning and force design, but in the past, the military has been used for such crises out of convenience. If fewer resources were available for military solutions, national leadership would probably have to consider relying more on other elements of national power. A shift in focus, enhancing the roles that other government agencies play in national preparedness for some kinds of events that affect the United States' security, could result in more balance among the elements of national power and better outcomes, even though resources for national security were reduced.