The president recently announced his desire for a $1.5 trillion defense budget in fiscal year 2027, which would represent a substantial increase of $600 billion over current figures. As large a sum as that is, it is money the department could realistically use to address shortfalls in modernization and readiness.
With Congress working out a budget deal, a full year defense continuing resolution looks unlikely for the remainder of 2026. But many experts predict a chance of a split Congress after the mid-term elections. If that happens, divided control of Congress creates a high probability of another full year defense continuing resolution in FY27, rendering the president’s request for $1.5 trillion as collateral damage.
But there is still a way to ensure that the warfighters get desperately needed funding. Congress should work with the White House to develop and pass another budget reconciliation bill with defense spending in 2026. And Pentagon leadership should engage now to make sure the legislation contains funding for what the military needs most.
The reconciliation process requires only majority support in each chamber, it is mandatory spending and provides more flexibility in funding accounts. And most importantly, it provides the military with the money right away, not a year or more from now.
The Congress provided us with a roadmap on how to do this through the 2025 budget reconciliation process. They allocated $150 billion into twelve broad investment categories although with an emphasis on shipbuilding. They also made these funds both “colorless” and multi-year, sending an important signal in support of much needed updates to the appropriations structure. This must be replicated, except it should be larger in scale and bolder in its outcomes.
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To support this approach, the Pentagon needs to act fast, collaborating with congress to propose what they need. The two key issues to resolve: how best to split a conceptual $1.5 trillion defense budget between the FY26 reconciliation bill and FY27 base budget request, and to provide clarity to lawmakers on exactly how they want to spend the proposed $600 billion increase.
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The first answer is straight forward. First, increase the actual defense budget request to a sustainable $1.1 trillion baseline for FY27. Then ask for $400 billion in the reconciliation bill.
As to how it should be spent? While the FY27 base budget would cover the basic needs of the department, the reconciliation funding should be targeted at long-term shortfalls that would benefit most from more flexible spending.
Below, and detailed in a recent paper, is a proposal for six categories into which the Pentagon should request that Congress allocate that $400 billion in reconciliation money.
Munitions. $100 billion for procuring more munitions and integrating AI/autonomy into existing munitions should be made available for development, testing, production, storage, operations, and maintenance, through 2030.
Ground Systems and Artificial Intelligence Integration. $50 billion for procuring more ground combat systems and integrating AI/autonomy into existing systems should be made available for development, testing, production, storage, operations, and maintenance.
Air and Sea Drones. $100 billion for procuring more air and sea drones, while also funding key initiatives for AI and autonomy should be made available for development, testing, production, storage, operations, and maintenance.
Golden Dome and Space: $40 billion for the development and fielding of the Golden Dome and associated space and ground systems, along with the development of AI/autonomy should be made available for development, testing, production, storage, operations, and maintenance.
People: $30 billion to be allocated by the Secretary of War for military and civilian personnel bonuses, recruiting and retention, special pays, quality of life, and family programs.
Readiness: $80 billion for facility repairs and modernization, military construction, training, and equipment maintenance and parts should be made available.
This administration and congress are off to a strong start in changing America’s military posture from one that is sized for one short war, to one that is sized for protracted multi-theater war. America is the wealthiest and most advanced country in the world. Consistent with recent national security and defense strategies that put America first and pursue peace through strength, it also has the resources needed to protect itself from those that want to do it harm. Now is the time to work with Congress to make that happen.
Elaine McCusker is a senior fellow at the American Enterprise Institute. She previously served as the Pentagon’s acting undersecretary of defense (comptroller). Retired U.S. Army Maj. Gen. John G. Ferrari is a senior nonresident fellow at AEI. He previously served as a director of program analysis and evaluation for the service.