How the Pentagon Spends Your Money: A Guide to Defense Dollars

Last updated 4 months ago. Our resources are updated regularly but please keep in mind that links, programs, policies, and contact information do change.

The Pentagon manages one of the largest budgets on the planet. Each year, hundreds of billions of tax dollars flow through the Department of Defense (DoD) to fund America’s military. Ever wonder where all that money actually goes?

This article breaks down how defense dollars move from Congress to combat units, revealing the machinery behind military spending in clear, straightforward terms.

The Big Picture: How Defense Fits in the Federal Budget

The federal government divides its spending into two main buckets:

• Mandatory spending covers programs like Social Security and Medicare that are automatically funded by law.
• Discretionary spending requires Congress to approve funding each year.

The entire defense budget falls under discretionary spending, meaning Congress reviews and approves it annually. This makes military funding directly responsive to evolving threats, technological advances, and shifting national priorities in ways that mandatory programs aren’t.

From White House to War Fighter: How the Money Flows

The journey of defense dollars spans over a year before the military can spend a single cent. The process involves multiple stages:

Budget Planning Begins

More than a year before the fiscal year starts (October 1st to September 30th), the DoD begins crafting its funding request. Two key documents guide this process:

• The National Security Strategy (NSS) outlines the President’s vision for protecting America.
• The National Defense Strategy (NDS) translates that vision into military requirements.

Using these frameworks, military leaders develop funding requests for their branches and programs.

The President’s Budget Proposal

The Pentagon submits its request to the White House Office of Management and Budget (OMB), which reviews it alongside requests from other federal agencies. The OMB evaluates these requests against projected government revenue and economic conditions.

By the first Monday in February, the President submits a comprehensive budget proposal to Congress. This document outlines the administration’s spending priorities across all federal programs, including defense.

Congress Takes the Wheel

Once Congress receives the President’s budget, the real scrutiny begins. Several key committees take charge:

• The House and Senate Armed Services Committees (HASC and SASC) review defense programs and authorize activities.
• The House and Senate Appropriations Committees determine actual funding levels.

These committees hold hearings where they question military leaders and experts about funding requests. The process involves two crucial steps:

1. Authorization: The National Defense Authorization Act (NDAA) provides the legal framework for defense programs and recommends maximum funding levels.
2. Appropriation: Separate appropriations bills provide the actual budget authority that allows the Pentagon to spend money.

Both the House and Senate develop budget resolutions that set broad spending limits. These often differ between chambers and must be reconciled. Once both chambers pass identical versions of each appropriations bill, they go to the President for signature or veto.

Money in Motion

After the budget becomes law, funds begin moving through the system:

1. The OMB officially releases funds from the Treasury to the DoD.
2. The Office of the Under Secretary of Defense (Comptroller) distributes these funds to the military departments (Army, Navy, Air Force) and defense agencies.
3. The comptrollers within each service then allocate funds to major commands and program offices.
4. Finally, those commands distribute resources to the units and programs that carry out the military’s diverse missions.

Who Gets What: Breaking Down the Defense Dollar

The defense budget is divided among the military branches and various program categories. Here’s how the money was split in fiscal year 2024:

By Military Branch

• Air Force: $216.1 billion
• Navy: $202.6 billion
• Army: $165.6 billion
• Defense-Wide: $78.3 billion
• Marine Corps: $53.2 billion
• Space Force: $30.1 billion

For fiscal year 2025, the total DoD budget request reached $849.8 billion, including $850 billion in discretionary spending and $22 billion in mandatory spending.

The following table shows a comparison between fiscal years:

Note: Some FY2025 requested data was not available in the source material.

Why Some Branches Get More

The Air Force typically receives the largest share primarily due to:

• The enormous costs of developing and maintaining advanced aircraft
• The diversity of its missions (air superiority, bombing, transport)
• Its expanding role in space operations

The creation of the Space Force as a separate branch also reflects the growing importance of space for national security, requiring dedicated funding for space-based infrastructure and specialized personnel.

Defense-Wide agencies provide critical support functions across all military branches, including intelligence gathering, logistics, healthcare through the Defense Health Agency, and cutting-edge research through agencies like DARPA.

What the Money Buys: Major Spending Categories

Beyond military branches, the budget is organized into functional categories:

Personnel Costs

A significant portion funds Military Personnel, covering:

• Salaries for active duty, reserve, and National Guard members
• Healthcare benefits
• Training expenses
• Housing allowances

These costs reflect the commitment to maintaining an all-volunteer force.

Daily Operations

The largest category is typically Operation and Maintenance (O&M), which covers:

• Day-to-day military operations
• Training exercises
• Equipment maintenance
• Fuel for vehicles and aircraft
• Civilian employee salaries
• Military healthcare system operations

New Equipment

The Procurement category purchases:

• New weapons systems
• Vehicles and aircraft
• Ships
• Advanced munitions
• Upgrades to existing equipment

These decisions often involve multi-year financial commitments and shape military capabilities for decades.

Tomorrow’s Technology

Research, Development, Test & Evaluation (RDT&E) funding supports:

• Exploration of emerging technologies
• Development of future military capabilities
• Testing of new systems before deployment

This investment maintains America’s technological edge over potential adversaries.

Current major programs include Columbia-class ballistic-missile submarines, B-21 bombers, and research in advanced cyber systems and missile defense technologies.

What Drives Defense Spending Decisions

Several key factors influence how defense dollars are allocated:

Strategic Priorities

The National Security Strategy and National Defense Strategy set the framework for military priorities. Recent strategies have identified China as a “pacing challenge” and Russia as an “acute threat,” leading to specific initiatives like the Pacific Deterrence Initiative and European Deterrence Initiative.

Threat Environment

Current and anticipated threats directly shape funding decisions. As global competition with China and Russia intensifies, resources shift toward capabilities for great power competition.

Technological Edge

Maintaining technological superiority requires substantial investment in research, development, and modernization of existing systems to counter advances by potential adversaries.

Political Factors

Changes in presidential administrations, congressional leadership, and public opinion all influence defense priorities. Budget negotiations often reflect competing visions for national security and domestic needs.

Economic Constraints

Legislative caps on spending, the overall state of the economy, and competing budget priorities create constraints that force difficult choices in resource allocation.

Defense Spending Through Time

Defense spending has ebbed and flowed throughout American history, reflecting changing security challenges:

• During the Cold War, defense claimed a significant percentage of GDP
• The “peace dividend” after the Soviet collapse led to reduced spending in the 1990s
• The September 11, 2001 attacks and subsequent Global War on Terror drove sharp increases
• Inflation-adjusted defense spending peaked in 2010

Within the budget, priorities have shifted:

• Since the 1970s, Operation and Maintenance has generally grown as a percentage of the budget
• Recent years have seen increased emphasis on Research, Development, Test & Evaluation to address emerging technological challenges

The Future of Defense Spending

The Congressional Budget Office (CBO) projects an upward trend in defense spending:

• Military spending is expected to increase by 10% by 2038, after accounting for inflation
• The CBO estimates an 11% rise in overall DoD costs between 2029 and 2039, reaching approximately $965 billion (in 2025 dollars) by 2039

Several factors drive these projections:

• Rising personnel costs, especially healthcare for active duty members and retirees
• Increasing complexity and cost of modern weapons systems
• The need to counter advances by strategic competitors like China and Russia

However, budget constraints imposed by legislation like the Fiscal Responsibility Act of 2023 may force difficult trade-offs. The growing national debt and increasing interest payments also put pressure on defense spending – some projections suggest interest payments may soon exceed total defense spending.

Keeping the Pentagon Accountable

Given the enormous sums involved, oversight mechanisms are essential:

• The Government Accountability Office (GAO) conducts independent audits and reviews of DoD programs, consistently listing DoD financial management on its High-Risk List due to ongoing management challenges
• The DoD Inspector General conducts internal audits and investigations to detect waste, fraud, and abuse
• Public transparency tools like USAspending.gov and the DoD Comptroller’s website allow citizens to track how defense dollars are spent

These oversight mechanisms help ensure taxpayer dollars fulfill their intended purpose: maintaining a military capable of defending America’s security interests in an increasingly complex world.

Our articles make government information more accessible. Please consult a qualified professional for financial, legal, or health advice specific to your circumstances.