For better defense spending, split the Pentagon’s budget into two

In the pursuit of “life, liberty and happiness,” safety precedes the others. Therefore it makes sense that the federal government’s mandatory, exclusive and primary job is to provide for the common defense. What is curious, however, is that funding for this core responsibility is considered discretionary. 

Many states in America have two separate budgets: one for capital expenses and another for operating activities. Part of the reason for this is that capital improvement projects can take years to plan and execute (think highway construction, land acquisition and large renovation of real property). In other cases, there are two state budgets because the method of financing major, multi-year projects may vary. Some capital projects are financed by general purpose taxes while others may be paid for by federal grants, borrowing, or dedicated revenue such as a gasoline tax. 

By separating investments from the costs of annual operations, long-term capital improvement projects are not seen as deficit drivers. They’re seen as what they are: necessary — if expensive — upkeep to continue providing robust services to voters.

It is time for the federal government to pay for the U.S. military’s two budgets similarly and separate the Defense Department’s capital and operating budgets. By moving important and necessary funds for pay and benefits, for example, into direct (mandatory) spending, policymakers will have a more clear understanding of where defense dollars go and how much of the defense budget actually buys direct military capability. 

In undertaking this shift, Congress would also need to consider what defense priorities and spending should move to other federal agencies or be eliminated altogether. As my colleague, American Enterprise Institute’s Elaine McCusker has documented, over $100 billion of the $773 billion requested by the administration for its fiscal year 2023 defense budget went to “programs and activities that do not directly contribute to military capability.”  

This is money allocated not for weapons systems, munitions or training but rather for a slew of other programs — including environmental restoration, health care, foreign security assistance and dependent education. These non-defense costs in the defense budget are largely concentrated within the operation and maintenance appropriations account, where nearly half of the $109 billion is spent. 

In the military’s operations and maintenance account, however, tens of billions of dollars are dedicated to programs and activities that would be logically at home in another agency’s budget. Take dependent education as an example. For the current year, the Defense Department asked for $3.3 billion to fund the education of military members’ children both in the United States and abroad. While providing schooling to these kids is incredibly important, it may be worth considering whether the Department of Education should take up the mantle and oversee this priority and receive these funds instead.

Base operations support offers another example. In this year’s budget request, the Defense Department asked for $1.7 billion in such funding for the Army to spend on environmental programs, climate change mitigation and community services. That is in addition to the Army’s request of $169.7 million specifically for environmental conservation. Again, while important, it also begs the question of why any service is conducting environmental conservation when there are federal agencies (read: the Environmental Protection Agency and the Department of the Interior) that are dedicated to this very task. 

A persistent challenge for policymakers is understanding why defense budgets are so high and buy so little tangible combat power. One reason is all the non-defense spending being included in the defense budget, which artificially inflates the topline with priorities that do not directly advance warfighting capability.  

The coming release of the Biden administration’s 2024 defense budget presents a ripe opportunity for lawmakers to evaluate whether it is time to move some defense spending into mandatory accounts and shift other funds to more appropriate agencies. When lawmakers identify programs that are not directly linked to military capability, they should either move them or cut them out completely, freeing up resources for much-needed capital reinvestment across the armed forces.  

As important, lawmakers themselves should resist the urge to include their own non-military projects within the defense budget. It is understandable that the defense bills are attractive targets for parochial projects given their size and that they actually become law each year. But the lack of opportunities to legislate elsewhere should not make the defense budget everyone’s Christmas tree upon which they hang every policy and spending ornament — related or not. 

While messy and complicated, this shift in how defense budgets are scrutinized and paid is a necessary effort in order to get a much deeper understanding of how much Congress is truly spending on core military capability versus critical supporting programs and efforts. Separating defense dollars into capital and operating budgets, shifting mandatory spending in defense from discretionary and into mandatory spending accounts and taking non-defense investments off the Pentagon’s books (or stopping certain activities altogether) will go a long way towards ensuring that the military receives what it genuinely needs to execute its central mission to defend the nation.

Mackenzie Eaglen is a senior fellow at the American Enterprise Institute.