Amid the War Department leadership’s emphasis on speed, efficiency, and the warrior ethos and White House Office of Management and Budget‘s creative financing to claim a $1 trillion defense budget in 2026, the true cost of our security remains unclear.
If the defense budget was actually $1 trillion as touted, and if all those resources were going toward its core function, deterring and, if necessary, fighting and winning America’s wars, that would be an accomplishment worthy of recognition and pride. Such fiscal commitment would acknowledge providing for the common defense as the only constitutionally directed, mandatory, and exclusive job of the federal government. It would also set spending on a trajectory toward sufficiency in a world where the threats facing the United States are greater than at any time since 1945.
Unfortunately, the budget for defense is not $1 trillion, and it misses the mark in providing transparency about the costs of our security. Whether there is another yearlong continuing resolution that just extends current funding into the next year, which seems increasingly likely, or an actual appropriation, the true number for Pentagon spending in 2026 will likely fall well short of $1 trillion. Yet that still is not the full story. The budget for building and modernizing the military is only about 42% of the total top-line number under consideration.
The defense budget is misleading because it includes many programs and activities that distract the Pentagon from its core function. It also contains annual must-pay bills that are essentially entitlement spending and mask what is being spent to form the military we need.
Following methodology similar to previous reports to simplify the complexities of funding such a large enterprise, the Pentagon budget can be put into three categories: (1) military modernization and capability, (2) must-pay bills, and (3) nondefense programs and activities. Investments in modernizing and building the military make up only about $400 billion, or 42%, of what is truly annual discretionary spending for defense.
The second category pays and sustains the military, so it is essentially mandatory spending unless major force or basing structures are changed. It includes government-provided military family housing, healthcare, basic pay, and base operations.
The third category, totaling over $17 billion, consists of hundreds of lines buried throughout the budget for programs and activities that are unrelated to the military core mission and, in many cases, are the direct responsibility of other federal departments and agencies.
Most of these budget add-ons can be found in the defense-wide operations and revolving fund accounts, which refer to programs managed at the department, not military service, level. This fourth estate, otherwise known as Defense Agencies and Field Activities, accounts for most non-core spending that is not central to the Pentagon’s mission.
The primary organizations within the War Department, President Donald Trump’s new name for the Defense Department, responsible for the third category of nondefense spending, are the Defense Health Agency, Department of Defense Education Activity, Defense Security Cooperation Activity, and the Defense Commissary Agency. While many of the programs these organizations manage may be worthy, they should be aligned to the federal agency with the primary authority and responsibility to carry them out.
For example, the Defense Health Agency conducts research in autism, cancer, Alzheimer’s, and epilepsy that duplicates work sponsored by the National Institutes of Health. The Pentagon also runs an entire school system, provides tuition assistance, and sponsors scholarship programs to build the workforce it needs. The Education Department should be budgeting and executing these programs for the nation. The Defense Commissary Agency runs grocery stores that provide an important benefit to veterans, service members, and their families, but it does so in an inefficient manner that requires annual taxpayer subsidies of over $1.5 billion while it also struggles to compete with more modern and effective commercial grocers.
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These nondefense programs and activities, combined with must-pay bills, create the illusion of a defense budget that is larger and more flexible than it is and contribute to the lack of transparency and accountability to the taxpayer. Impacts of the diverted attention and resources are not hard to find — from the Gulf of Aden, where a rebel band of Houthis shut down global shipping, to Washington, where an Army UH-60 Black Hawk collided with an American Airlines flight.
The misleading nature of defense spending, combined with the assumption of domestic health, education, environmental, and other missions by the Pentagon, inhibits transparent discussions about the cost of security and muddy the political waters in an already difficult federal budget environment. The nondefense dollars in the defense budget can and should be better spent on core military missions, while must-pay bills should be moved to mandatory accounts to simplify the annual appropriations process. Making such changes will enhance accountability to the taxpayer and better train and equip the warfighter to deter and, if necessary, win our nation’s wars.
Elaine McCusker is a senior fellow at the American Enterprise Institute, where she focuses on defense strategy, budget, and innovation; the US military; and national security.
Richard Sims is a research assistant at the American Enterprise Institute.