In February, Defense Secretary Pete Hegseth directed the Pentagon to reexamine the 2026 budget request, which has not yet gone to Congress, to ensure that it reflected the Trump administration’s priorities. He tasked organizations with preparing lists of lower-priority activities totaling 8% of their 2026–2030 projected budgets, a target equaling $365 billion over five years. This pool of money will become available for potential reallocation. Additionally, he identified 17 high-priority areas that were to be protected from funding reductions.
The 8% relook will let senior officials imprint their preferences on the Defense Department budget. Although the relook could unfold in many ways, officials likely will use it to improve the U.S. military position relative to China. The question is, what specific adds and cuts would advance that goal, and what can leaders do to make those choices stick?
In January, the Center for Strategic and Budgetary Assessments conducted an exercise to assess how the new administration should adjust defense spending to meet the China challenge. Participants joined from across the U.S. government, defense industry and think tank community. They wrestled with what to fund based on different strategies for stopping a Chinese invasion of Taiwan and different trajectories for defense budgets.
In a forthcoming report on the exercise, we argue that defense investments currently fall into four categories. Each category requires different moves by Defense Department civilian leaders. If they make those moves effectively, then the relook can succeed at breaking through bureaucratic barriers and reinforcing the U.S. military’s ability to deter or, if necessary, defeat China.
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First are top priority investments. Exercise participants added money for these capabilities regardless of military strategy or budget size. These programs deserve the first claim on available resources. They included munitions, the B-21 bomber, space systems, collaborative combat aircraft, Virginia-class submarines, counter-small unmanned aircraft system initiatives, aerial refueling tankers, air and sea autonomous systems, Indo-Pacific military construction and the defense industrial base. Many of these capabilities also appeared on the secretary’s list. The relook thus appears to be largely on the right track in terms of identifying key items.
Top priority investments require Pentagon leaders to be protectors. Several of these capabilities, most notably munitions, are orphans. Historically, they have lacked the organizational, political and industry support needed to thrive in the Pentagon’s heartless bureaucracy. If leaders do not adopt them, they will not get the funding they deserve.
Second are strategy-dependent investments. Participants boosted funding for these capabilities only under one military strategy. Our exercise considered two: Prompt denial would aim to rapidly defeat Chinese invasion forces en route to Taiwan, whereas protracted defeat would aim to deny China control of Taiwan over a longer period. Strategy-dependent investments included homeland missile defense, cybersecurity and support ships, which were all viewed as more essential for protracted defeat.
Strategy-dependent investments require Pentagon leaders to be technicians. They must reach into arcane military plans and compel organizations to prepare to fight (and budget) in ways consistent with political leaders’ objectives. If they do not, then they may find the cupboard to be unexpectedly bare when conflict erupts.
Third are resource-dependent investments. Participants cut these capabilities under tight budgets but maintained or increased them when given at least 2% real growth in annual spending. Resource-dependent investments included nuclear modernization, amphibious vessels, aircraft carriers, surface combatants, readiness and sixth-generation fighters.
Resource-dependent investments require Pentagon leaders to be pragmatists. Not everything will fit in the budget. However, items of great importance can be squeezed in if the overall budget is larger. Leaders must draw these two lines (what is in or out, and at what size budget) sharply to survive scrutiny from the White House and Congress.
Fourth are bottom priority investments. Participants cut funds for these capabilities across all strategy and spending scenarios. These programs deserve the last claim on available resources. Bottom priority investments included fourth-generation fighters, ground forces, Defense Department civilians and contractors, the Littoral Combat Ship and the A-10.
Bottom priority investments require Pentagon leaders to be disciplinarians. Cutting spending on them will not be easy. For instance, Congress has increased aircraft and ship procurement funding more than any other Defense Department budget area since 2016. It often blocks proposals to retire older platforms. To win Capitol Hill acceptance of cuts, leaders will need the kind of grit that Robert Gates exhibited when he forced through major weapons reductions 15 years ago.
The 8% relook offers an opportunity to break the defense budgeting routine, but that outcome is far from preordained. Incrementalism largely prevailed during the first Trump administration, despite exaggerated claims to the contrary. The defense policy status quo remains highly resistant to change. We will see if the second Trump administration can make a dent.
Travis Sharp is a senior fellow and director of the defense budget studies program at the Center for Strategic and Budgetary Assessments. Casey Nicastro is an analyst at the Center for Strategic and Budgetary Assessments. Evan Braden Montgomery is the director of research and studies at the Center for Strategic and Budgetary Assessments.
