How Much Would Trump's New Defense Plan Cost?
Republican presidential nominee Donald Trump introduced a proposal today to increase defense spending and rebuild the military. Specifically, his proposal would repeal the defense “sequester” cuts in order to strengthen the U.S. armed forces in several areas while developing a strategy for long-term defense. Trump would ask Congress to fully offset the cost of these changes, largely by reducing improper payments and cutting non-defense discretionary spending; however, we estimate these offsets are likely to cover less than two-thirds of the total cost.
Trump’s proposal, which appears to rely heavily on the recommendations of the Heritage Foundation’s 2016 Index of U.S. Military Strength, calls for:
- Increasing the number of troops in the active Army from 475,000 to 540,000
- Increasing the number of Marine battalions from 24 to 36
- Increasing the number of navy ships from a planned 280 to 350
- Increasing the number of Air Force fighter aircraft to at least 1,200
- Instructing his generals to present a plan to defeat ISIS
- Modernizing missile defense and cyber security
In order to help make room for this new spending, Trump called for other countries (including Japan, Germany, South Korea, Saudi Arabia, and members of NATO) to take more responsibility for their own defense needs or reimburse the United States for some of what we provide. Perhaps more significantly, he also calls for repealing the defense sequester, which is scheduled to return in full in Fiscal Year (FY) 2018. The sequester cuts reduce the budget caps originally agreed upon in the Budget Control Act of 2011 by roughly $55 billion per year, and repealing them will cost roughly $450 billion through 2026 before interest.^
Donald Trump specifically calls for offsetting these new costs, stating that “[a]s part of removing the defense sequester, [he] will ask Congress to fully offset the costs of increased military spending. In the process, we will make government leaner and more responsive to the public." He also outlines three major areas where he would generate savings to pay for his offsets – cutting unauthorized appropriations, reducing improper payments and underpaid taxes, and shrinking the federal workforce through attrition – though even generous estimates of these policies suggest they would only save about $300 billion over a decade. On net, this defense plan would cost $150 billion if additional offsets were not identified.
| Proposal | Cost / Savings (-) |
|---|---|
| Repeal the defense sequester cuts | $450 billion |
| Cut unauthorized appropriations by 5 percent | -$150 billion |
| Reduce improper payments and the tax gap | -$100 billion1 |
| Shrink the federal workforce through attrition | -$50 billion2 |
| Additional revenues from energy exploration | * |
| Net Cost of Trump Defense Plan, As Outlined | $150 billion |
Sources: CBO, CRFB calculations. All numbers are rough and rounded.
1This represents a very generous estimate; actual savings would likely be lower.
2Assumes CBO's budget option for reducing the size of the federal workforce at a 3:1 replacement rate with allowance for exemptions.
*Likely to save significantly less than $50 billion over a decade.
The most significant offset Donald Trump proposes is reducing unauthorized appropriations by 5 percent. Unauthorized appropriations are funds that go towards programs that have not been formally re-authorized by legislative committees. According to the Congressional Budget Office (CBO), over $300 billion of appropriations in FY 2016 were unauthorized, including appropriations for NASA, the Office of the U.S. Trade Representative, the International Trade Commission, the Energy Star program, and the National Institutes of Health, along with many other federal programs. Reducing this spending by 5 percent – either across the board or through larger reductions for individual programs – would save about $150 billion over a decade.
A second element of Trump’s plan to offset increased defense spending is a proposal to reduce the tax gap and improper payments. From 2008 to 2010, an average of $406 billion of taxes were owed but went unpaid annually. Similarly, in 2015 the federal government made about $137 billion of improper payments – most significantly from the Medicare and Medicaid programs. Importantly, while the gap between what the government taxes and spends and what it intends to tax and spend is large, the government’s ability to close that gap is relatively limited. Better reporting, stronger enforcement, and new laws can all help – but no change can eliminate the tax gap or improper payments, and policies to significantly reduce them may result in substantial costs to the government or the private sector. In our PREP plan released last year, we proposed a number of measures to reduce the tax gap that would raise a combined $40 billion – mainly from increased funding to the IRS. Existing proposals to reduce improper payments generally save less than $1 billion per year. Based on generous assumptions of an extraordinarily aggressive effort to close the tax gap and reduce improper payments, a high end estimate of possible savings would likely be about $100 billion over a decade.
In addition to these two measures, Trump called for reducing the size of the federal workforce by attrition. CBO has estimated that hiring only one worker for every three that leave while allowing the president certain exemptions would save about $50 billion over a decade. Without further details, we assume Trump's policy is similar to this.
Trump also says "we will have at our disposal additional revenues from unleashing American energy," however he has previously earmarked this revenue for infrastructure spending.
The policies Trump outlined to pay for his defense plan would therefore likely offset less than two-thirds of the cost of Trump’s defense sequester repeal, leaving a net cost of $150 billion before interest. Given the $11.5 trillion we previously estimated Trump would add to the debt (albeit based on his old tax plan), any further increase in the deficit is a move in the wrong direction. Ultimately, much more will need to be done to pay for his plan and begin putting the debt on a more sustainable long-term path.
^ This estimate assumes defense spending is restored to pre-sequester levels for FY 2018 through FY 2021, and then grows with inflation per CBO conventions.
This policy explainer is a part of our Fiscal FactCheck series on the 2016 presidential election. Read more policy explainers and factchecks:
