US: The Pentagon’s FY24 Defense Budget Falls $40 Billion Short

US: The Pentagon’s FY24 Defense Budget Falls $40 Billion Short
US: The Pentagon’s FY24 Defense Budget Falls $40 Billion Short

Last week the Pentagon released its fiscal 2024 defense budget request. While certainly representing a step in the right direction in some areas, such as an increased focus on munitions, the $842 billion requested [PDF] for the Pentagon falls $40 billion short in resourcing the military that our nation needs.

In the coming days and weeks, the services, combatant commands and select staff in the Office of the Secretary of Defense will submit their Unfunded Priority Lists, which last year totaled over $20 billion. Tack on another $20 billion for a more likely 5 percent inflation rate, and a more realistic actual budget comes out to about $882 billion.

As Congress awaits the delivery of that 2024 unfunded priorities, key shortfalls in the budget request can already be seen in the following areas: inflation (getting less stuff for more money), procurement (downplaying the China and Russia threat this decade), and a paltry pay increase for service members and their families (passing the inflation buck to our military families). The request falls short in each of these areas, leaving us with a military that is becoming smaller and less capable.

This week, we saw inflation remain persistently high, with the Consumer Price Index (CPI) at about 6 percent. The Pentagon stated that the Office of Management and Budget (OMB) believes that inflation will return to 2.4 percent, which is highly unlikely. Since January 2021, inflation has risen by over 15 percent, about 10 percent higher than OMB’s then-2 percent per year assumptions. The latest estimate of the Pentagon’s favored inflation rate is nearly 7 percent, meaning our military is likely to see reduced readiness as the cost of parts and fuel continues to rise.

Next, the administration has claimed that the president’s budget request contains both the largest procurement and research and development budgets in the history of the Pentagon [PDF]. While true in a nominal sense, before taking inflation into account, this isn’t necessarily a good thing. The move continues the strategy of divesting to invest and isn’t necessarily a good thing when there is a land war in Europe today and an increasingly militant China.

The 2024 budget continues to assume that the military should plow money into emerging projects and capabilities rather than purchasing the systems that can be bought today. In more specific terms, the ratio of procurement to research and development funding in this budget is 1.17 to 1.00, nearly the same as the FY23 enacted level. The fact that this ratio is nearing parity is incredibly concerning, and to truly build back capacity in the military, the Pentagon should be aiming more for a ratio of 2.25 to 1.00.

Third, the Biden administration is touting its 5.2 percent pay increase for service members and their families. This increase is less a reflection of the Biden Pentagon’s focus on service members and their families and more of a reflection of the minimum required by statute. According to the FY04 National Defense Authorization Act, service members’ pay rises at the rate of increase in private sector wages as shown in the Employment Cost Index. In other words, with its pay increase, the Biden administration is just doing what’s required by law.

A 5.2 percent pay raise may also appear significant at first glance. However, when taken in the context of recent inflation, this raise still does not keep up with the increased costs faced by our service members. Since the start of the COVID-19 pandemic, military pay has increased by a total of approximately 10.7 percent, with pay raises instituted at the start of 2021, 2022 and 2023. Over the same time period, CPI inflation has totaled over 16 percent with another 6 percent-plus expected in 2023, bringing the equivalent inflation rate to nearly 23 percent. With recruiting in crisis, this significant gap between the pay raise and inflation is intolerable.

So, what does this all mean? Shrinkflation. The Pentagon’s budget pays more money to get a smaller and less capable force. For example, the budget seeks funding to upgrade just 34 new Abrams tanks, build only nine battle force ships, and purchase 135 planes (excluding trainers and including unmanned platforms) between the Air Force and Navy. Compare these numbers to what the military’s budget bought in 1984 and the appallingly low number of FY24’s new buys comes into full view. In that year, the defense budget funded the purchase of 840 new M1 tanks [PDF], sought to build 17 new ships, and bought 323 new planes across the Air Force and Navy.

But it’s a fallacy to think that capability alone will win the wars of the future. As my colleague at AEI, Mackenzie Eaglen has stated, our military needs both capable platforms and overwhelming numbers of them to have a chance at defeating a near peer competitor like China in a high-end conflict.

Given the shortcomings of last year’s budget request, the Biden administration had a clean slate in FY24 to start anew, adding sufficient funds for procurement of platforms, increasing the budget above inflation, paying our hardworking service members and reversing the slide in military capacity. Sadly, the budget comes up short in these areas. Now it’s up to Congress to reverse the administration’s mistakes.


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