Federal funding for defense

In 2025, federal funding for defense is estimated to reach $728.2 billion, representing a 4.4% increase over the previous year. This rise is largely influenced by ongoing geopolitical conflicts, primarily the continued war in Ukraine and the persistent conflict between Israel and Hamas. The United States' provision of military equipment and direct aid has contributed to heightened spending. In addition, the US government's commitments to global allies, particularly in volatile regions, necessitate higher defense expenditures. Escalated tensions and expanded operations continue to drive up the defense budget as the US maintains support for partner states and prepares for potential security threats.

Over the 2021–2025 period, federal defense spending displayed a mixture of contraction and resurgence. Spending in 2021 saw a modest decline of 0.5%, a reflection of the US military's withdrawal from Afghanistan and the absence of large-scale combat operations. In 2022, defense spending declined further by 5.1% as the US scaled down its involvement in Iraq, diminishing the operational necessity for elevated expenditure. However, this downward trend reversed in 2023, when spending increased 3.4% in response to Russia's invasion of Ukraine and the US's subsequent foreign military support. The late 2023 escalation of hostilities between Israel and Hamas contributed to further increases in required funding, as the US supplied additional arms to sustain its ally in the Middle East. These factors, combined with broader US commitments to global security, led to significant growth in defense funding through 2024, with that year posting a notable 4.0% year-on-year gain. A portion of this increase is also attributable to higher costs associated with inflation, particularly impacting personnel and maintenance outlays, which together comprise nearly half of all federal defense expenses.

Major macroeconomic trends impacting defense funding throughout this five-year period include persistent global inflation, which has necessitated larger nominal outlays to maintain operational readiness and technological superiority. Geopolitical instability in regions critical to US strategic interests, Europe, the Middle East and parts of Asia, has reinforced a posture of preparedness, especially given the continued modernization efforts by near-peer rivals such as China and Russia. The regular adjustment of congressional budget caps and accommodation of emergent missions, such as space defense, have also ensured a relatively stable upward trajectory in appropriations despite downward pressures in the immediate aftermath of large-scale engagements.

Over the five years to 2025, defense funding has generally increased at an annualized rate of 1.2%, counteracting earlier contractions after the end of protracted Middle Eastern conflicts. The confluence of new security challenges in Eastern Europe and the Middle East, persistent inflationary effects, and the integration of advanced defense technologies has contributed to a renewed upward trend in federal defense expenditure.