The $895 billion national security budget request, which includes funds for homeland security as well as nuclear weapons-related activities carried out by the Department of Energy, is the result of a two-year budget deal struck in mid-2023 that limited the budget to a 1% increase.
Under the cap, the Pentagon's share of the national defense budget was expected to be $850 billion. The $30 billion reduction to the Pentagon's funding will curb purchases of the stealthy F-35 jet made by Lockheed Martin (LMT.N) and air defenses for Guam, and will delay programs, including slowing orders for an aircraft carrier made by Huntington Ingalls Industries (HII.N) and Virginia-class submarines made by Huntington and General Dynamics (GD.N).
The Pentagon was expected to also trim costs by retiring older weaponry like ships and planes that are more expensive to operate.
Last spring, before the cap was put in place, the Pentagon had estimated in 2025 it would need about $880 billion, and the total national security budget would be $929 billion. But because the budget increase is capped at 1% and smaller than expected, there will be less money to spend.
The cuts are not final given they will likely spark debate on Capitol Hill that could lead to an increase in the national defense budget to over $900 billion for fiscal 2025, budget watchers say.
Defense spending accounts for about half of the U.S. discretionary budget; the other half goes to transportation, education, diplomacy and other departments. Entitlements like Social Security, the national retirement fund, constitute the nondiscretionary portion of the budget.
The 2024 budget, which includes $886 billion for national security, still has not passed Congress. The U.S. government is working under a continuing resolution: a stop-gap measure which caps spending at 2023 levels until a 2024 budget is passed. The current continuing resolution is keeping the government open until later in March.
The Pentagon order for Lockheed Martin's stealthy fighter will drop to below 70, down from an expected order of 83, for an estimated $1.6 billion drop in spending on the jets.
