Thayer Consultancy Background Briefing:

ABN # 65 648 097 123

U.S. Defence Budget: Put Your
Money Where Your Mouth Is
Carlyle A. Thayer
February 10, 2018

We request your assessment of the U.S. budget bill just passed by Congress, with a
particular focus on defence spending.
ASSESSMENT: The decision by the U.S. Congress to pass a two-year budget that
includes a major hike in defence spending will be welcome news to the Pentagon
and to U.S. allies and security partners around the world and in the Into-Pacific
region in particular.
China has the largest defence budget in the Indo-Pacific. It officially spent $193
billion on defence in 2017 or nearly half the total of all defence budgets in the Into-
Pacific region. This is forecast to grow larger than the combined total of defence
budgets in the Indo-Pacific by 2030. But now and in the foreseeable future China's
defence budget will continued to be dwarfed by the U.S. budget that is 3.6 times
larger.
The U.S. Defense Department has been hobbled by Budget Control Act caps on
spending since 2011 and short-term continuing resolutions by Congress authorising
funding. Under the Budget Control Act discretionary funding for FY 2018 was capped
at $549 billion and capped at $562 billion for FY 2019.
This funding increase validates an expression by a U.S. Senator in 1913 to “put your
money where you mouth is.” Congress actually gave the Pentagon more than it
asked for. And Congress approved funding slightly larger than that authorised by the
2018 National Defense Authorization Act approved in late 2017.
This is the highest U.S. defence budget in history; $700 billion has been allocated for
discretionary funding for FY 2018 and $716 billion has been allocated for FY 2019.
Analysts say these figures appear to be approximate totals for base funding and
funding on overseas contingency operations.
The new defence budget totals $700 billion for FY 2018 of which $629 is for basic or
core operations and $71 billion is for overseas contingency operations. President
Trump requested $603 billion for base functions and $65 billion for overseas
contingency operations last year.
Secretary Mattis asked for and received a two-year budget. The new budget will see
an increase of $80 billion for base spending over the FY 2018 cap of $549 billion and
$85 billion more for base funding over the FY 2019 cap of $562 billion. The new
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defence budget also includes an increase of $140 billion for overseas contingency
operations (or war funding) to be split between the two years. The FY 2018 defence
budget represents 15.5 per cent increase, the largest in over fifteen years.
The defense budget will permit Secretary Mattis to start addressing issues such as
expanding the armed forces, stepping up training and readiness and acquisition of
new weapons and platforms, such as ships and aircraft. Priority is likely to be given
to boosting ballistic missile defence by the acquisition of up to twenty-eight anti-
ballistic missile systems.
It will be up to appropriations committees in the House and Senate to approve
defence budget allocations.
The two-year defence budget will make it easier for Pentagon planners, raise troop
morale (they got a 2.4% pay hike as part of the package) and reassure countries
dependent on the United States to maintain a stable rules-based order.
There is a downside. The newly passed budget does not address where funding will
come from, either in cuts to present government programs or new revenue. The
likely result will be to raise U.S. debt.
According to a budget specialist at the Centre for Security and International Studies,
defence budgets "have been stretched by rising personnel costs, more expensive
technology investments and other factors, compounded by the cumulative effects of
more than a decade of combat in Afghanistan, Iraq and elsewhere in the Middle
East."

Suggested citation: Carlyle A. Thayer, “U.S. Defence Budget: Put Your Money Where
Your Mouth Is,” Thayer Consultancy Background Brief, February 10, 2018. All
background briefs are posted on Scribd.com (search for Thayer). To remove yourself
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Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.