When the 'department of government efficiency' was raging unchecked through the federal government in February 2025, US Defense Secretary Pete Hegseth ordered his subordinates to find cuts of 8% a year for the next five years, theoretically trimming a total of $340m from the Pentagon budget. The disclosure briefly sent Palantir and defense stocks tanking – though soon the plan evaporated, as if it never existed.
Instead, Hegseth is now demanding a $454bn increase for 2027 military spending, to a total of almost $1.5tn, in what he describes as a 'generational investment'. Adjusted for inflation, that would for the first time match – and even exceed – US military spending at the height of the second world war during national mobilization, according to a chart prepared by the Center for Strategic and International Studies.
Two-pronged campaign on Capitol Hill
The US defense budget is in what may be one of its messiest phases in recent memory. That's because at the same time Donald Trump and Hegseth are making the push for the unprecedented increase in the defense budget – a 44% jump – they are also insisting on extracting emergency funding for the unpopular and disastrous war under way in Iran. The war needs to be funded separately from the main Pentagon budget, which is why Hegseth is running in essence a two-pronged campaign on Capitol Hill: on the one hand, to cajole and bully Republicans to fund, for the relatively short term, the Iran war, and, on the other hand, to pour a historic amount of financing into the already vast military enterprise he presides over with his deputy, the private equity tycoon Stephen Feinberg.
$75bn in spare change
Hegseth and chair of the joint chiefs of staff, Dan Caine, faced a skeptical Senate appropriations committee on Tuesday in a hearing that was intended to focus on the Iran war part of the military budget push. Hegseth is asking for $67bn in emergency defense funds for his department for 2026. The ranking Democrat on the committee, Patty Murray, pointed out how much of the spending the Trump administration is asking for as an emergency seems uncorrelated to the flailing operations in Iran. '$800m for the national guard to patrol DC even longer,' she listed. 'Over $1bn for the army to patrol the southern border, which is [the Department of Homeland Security's] job. $900m to support the administration's illegal boat strikes in the Caribbean.'
Hegseth answered by blaming his predecessors: 'Why this kind of spending is needed is because of the gross negligence and neglect of the Biden administration.' It's widely known inside and outside the Pentagon that because of the way the Iran war has been run, the US is running desperately short of what it needs in case of a new military crisis. But with extraordinary obstinacy, Hegseth appears to insist any shortages at all can be blamed solely on Joe Biden and past military leaders. The missiles fired and depleted during Iran, in this construct, are not his fault.
Unobligated funds and Iran war costs
There's yet another kink that is making some senators wary: last year the Hegseth Department of Defense already received a $156bn bump under the One Big Beautiful Bill Act. And half of that, about $75bn, is still unobligated – with no detailed plans for how it's to be spent. By Pentagon standards, it's spare change, but that's nearly the value of the entire US Department of Education budget. Questioned about it in the hearing, Hegseth didn't have any details about that $75bn, though he claimed there was actually a blueprint for where the money will go. 'I'd have to get you the exact numbers,' he testified.
Hegseth disclosed a new estimate about the cost of the Iran war – $37.5bn. But he was vague. He said that that would include expenditures up to the present 'for certain aspects', but hedged that the estimate included military pay, operations and maintenance, and other costs 'through September 30'. Becca Wasser, a defense expert at the Center for New American Security, said Hegseth's comments appear to be 'a little bit of a signal that the war is still probably going to be going on by September 30'.
Unique funding mechanism
Messy efforts to fund wars are not new: back during combat operations in Iraq and Afghanistan, the two Bush administrations, the two Obama administrations and the first Trump administration tagged the combat costs on to the defense budget under what were called 'overseas contingency operations' (OCO) funds. Biden, Wasser said, shifted Ukraine spending to emergency supplemental requests rather than OCO funding, and Trump in his second term seems to be following that route on Iran. One huge break from the past: Trump defense department spending is being steered to so-called reconciliation – a legislative mechanism outside normal appropriations which strips the senators of the chance to filibuster a measure. Wasser of the Center for New American Security said: 'That's what makes it incredibly unique.'
Late on Wednesday, the House passed a $1.15tn bill for a section of the White House request – which may move it forward, but experts say it's still nowhere close to something that will clear the Senate. The real money, that $1.5tn, dwarfs the costs of the Iran war. While much of it is for the usual tanks and planes and hardware and training, there's a good chunk for the pet projects of the tech bros and private equity financiers now running the department.
AI and strategic capital
The military's head of research and engineering is the former Uber executive Emil Michael, who oversees artificial intelligence. As the Guardian reported earlier this year, Michael, while in his first months in office, made millions in profits, between 400% and 4,800%, just on his investment in Elon Musk's xAI company. The Trump budget plans to steer $58.5bn to AI. About $20bn is targeted for the office of strategic capital, a defense department agency that functions as a private equity arm of the Pentagon. The powerful deputy secretary of defense, Stephen Feinberg, former head of Cerberus Capital, has a former employee of Cerberus presiding over the office. It's the same agency that committed $620m last year to a mining company backed by a fund tied to Trump's son Donald Jr.
The Trump administration did nod in only one apparent way to fiscal constraints. Without apparent irony, the administration said it had identified $1.6bn in defense reductions related to DEI. 'The budget,' the White House said earlier this year, 'continues to eliminate millions of dollars in wasteful and egregious spending related to diversity, equity and inclusion and other “woke” programs.'
