In February, AEI’s John Ferrari wrote an op-ed for Breaking Defense in which he argued that the Pentagon needed a budget of $816 billion for fiscal year 2023. The Pentagon’s actual FY23 budget? $816.7 billion, according to the latest legislative language. Now, looking ahead to FY24, Ferrari argues the administration should set its sights even higher, or risk falling dangerously behind America’s rivals.
Now that the 2023 National Defense Authorization Act (NDAA) is nearing the president’s desk and funding levels for the Pentagon appear to be set at $816 billion, the Pentagon is at work finalizing its budget for the 2024 submission, due to Congress in early February. At this time of year, most of the decisions are made, but the Pentagon is waiting for the Office of Management and Budget’s (OMB) “passback,” when the final 2024 topline is set, and other key White House decisions are made.
As such, OMB should focus its attention on three items for its upcoming passback, all of which bolster military strength amid war in Europe, instability in the Middle East and an aggressive China. With potential conflict on the horizon only one budget cycle away, the 2024 defense budget will be one of the most consequential of the past decade.
First, OMB should focus on setting an adequate topline for our armed forces. The passback should contain a funding level of at least $882 billion, a $66 billion increase over the 2023 NDAA funding level. Some will recoil at this funding increase, which is on top of a nearly 10 percent increase from 2022 to 2023, but it’s meant to both account for inflation and real program growth.
This year, OMB seriously misjudged inflation, and Congress had to add $18.9 billion to the 2023 budget [PDF] just to compensate for reduced buying power. In 2024, OMB should provide DoD with at least a 5 percent increase ($41 billion) for inflation. On top of that, an additional 3 percent ($25 billion) would provide for real growth, translating into more ships, munitions, troops, satellites and aircraft. In the recent NDAA, Congress added 3.2 percent ($25 billion) for additional procurement and investment. This 3-to-5 percent real growth spending is in line with what many defense experts have been calling for over recent years.
Second, OMB should increase the pay for our service members above the statutorily required 5.2 percent (set by the Employment Cost Index [PDF]) and instead raise the pay of the enlisted force by 8.2 percent, accounting for inflation, which exceeded last year’s pay raise by over 3 percent. In the recent NDAA, Congress expanded the Basic Needs Allowance to make more troops eligible, but more needs to be done to both fend off food insecurity and begin to address the recruiting shortfall. The State of California and the City of New York are both working on proposals to raise the wages of fast food and food delivery workers to over $22 per hour. While many debate the source of the current recruiting crisis, if minimum wages in the civilian sector start approaching $20 per hour, the military will likely face both a retention and a recruiting crisis during the time period when we expect China to be at its most dangerous.
Third, OMB needs to revoke the current Pentagon resourcing strategy of “divest to invest” and instead replace it with “be ready by 2029.” To accomplish this, OMB should move $45 billion per year from research and development into procurement over the next five years. That would mark a significant change from the president’s 2022 defense budget, which emphasized spending billions on capabilities that will not come online until the 2030s.
For instance, the Army recently announced that it will spend $7.5 billion to design a new helicopter to replace the Black Hawk. The Army will likely cut Black Hawk production to find the development money, but then wonder where the work force and parts are going to come from to start production in the 2030s. Instead, if the Army spent the $7.5 billion buying new Black Hawks, with modern autonomous and virtual augmentation systems installed, it could immediately improve its entire fleet. Forty-five billion dollars per year in additional procurement, leveraged through multi-year contracts and block buys, would inject over $200 billion of additional spending into the manufacturing sector of the United States.
The Pentagon has now been told by Congress over the past three budget cycles that the current resourcing strategy is not suitable. Each year, the Pentagon and OMB low-ball defense spending then the services provide unfunded priority lists to Congress, which then adds billions.
There’s a better way forward: OMB should provide the resources necessary upfront with a focus on being ready for war in this decade, not the next. China, Russia, Iran and North Korea are all betting on the Pentagon’s divestment strategy by accelerating their internal timetables to cause trouble now. It’s time to get our Arsenal of Democracy on a wartime footing before it’s too late.
Maj. Gen. John Ferrari, US Army (ret.), is a visiting fellow at the American Enterprise Institute (AEI) and is the former director of program analysis and evaluation for the US Army.