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In February, Secretary of Defense Pete Hegseth directed the military services and defense agencies to identify 8 percent, or about $50 billion, in annual cuts that could be reinvested in higher-priority activities. Who would be the winners and losers? CSIS experts Mark Cancian and Melissa Dalton took distinctly different approaches to this task in an exercise organized by the American Enterprise Institute (AEI) in partnership with CSIS. Because their approaches represented not just different program priorities but also different national security strategies, they help illuminate the major choices and trade-offs the Trump administration faces.
The Exercise
The exercise required eight defense experts to identify the programs they would cut and then determine where to allocate the resulting savings using the Defense Futures Simulator, an interactive online tool developed by AEI and CSIS.
Following the Department of Defense (DOD) guidance, cuts would total about $50 billion a year.1 Off-limits for cuts were seventeen areas, ranging from program-specific (Virginia-class submarines) to broad (“munitions”).2 By making large parts of DOD off-limits, these restrictions channeled cuts into a few areas, such as Army force structure.
The experts then had to reinvest the savings into areas that they had not previously cut. Both cuts and additions were done by groups of programs (such as bombers, special operations forces, or large surface combatants) or types of activities (service operational readiness, science and technology, or basing). In all, there were 68 choices, reflecting the range of tasks DOD needs to execute.
Strategic Priorities
These choices reflect the high-level challenges that DOD needs to focus on. Four were regional challenges: China, Russia, Iran and its proxies, and North Korea. Three were capability areas not aligned with a specific adversary: nuclear modernization, irregular warfare/counterterrorism, and homeland/hemispheric defense.
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Mark Cancian
Not surprisingly, my views on strategy drove my choices here and through the entire exercise. Those views are today considered mildly heterodox: Focus on China, but do not ignore the rest of the world. Thus, I made only minor reductions to programs aimed at Russia, Iran, and North Korea, and added money for programs to deter and counter China (but relatively less than others). Of all the participants, I cut irregular warfare and terrorism the least. This may reflect my experiences. I lived through the Vietnam era and heard many voices at the time saying that the United States would never do anything like that again. Then, in 2001 and 2003, we did. Being unready to fight certain kinds of conflicts does not mean that the country will forgo them. It just means the military will fight them badly.
Many strategists, particularly Elbridge Colby, the undersecretary of defense for policy, would sacrifice global capabilities for an increased focus on China. Indeed, both the first Trump administration and the Biden administration wanted to reduce day-to-day global deployments in order to free resources for the Pacific. It was a reasonable concept, but recent history has not been kind to it. Russia’s invasion of Ukraine dragged the United States back into Europe, and Hamas’s attack on Israel dragged the United States back into the Middle East.
The Trump administration has not been sympathetic to Europe and might make that part of a global withdrawal stick. As one illustration, Vice President Vance expressed his contempt for the Europeans in the recently revealed Signal discussions, saying, “I just hate bailing Europe out again.” However, President Trump has stated his willingness to back Israel and confront Iran to a greater degree than the Biden administration.
Maintaining global commitments means maintaining global capabilities. Not all of it needs to be of the highest capability because most regional threats lack the forces to counter the United States, even in their backyard. However, the United States must maintain sufficient forces to keep units on station.
It is not enough to have units in the continental United States that could move forward in a crisis. That takes time and explicit decisions, which crises often do not afford. Distant forces also do not deter well. As critics have often stated, virtual presence is actual absence.
Melissa Dalton
I used Secretary Hegseth’s priorities (not my own) to inform my budget choices with an emphasis on sharpening lethality for Indo-Pacific and homeland defense missions, while assuming risk in other areas. Both the 2018 and 2022 National Defense Strategies recognized that the People’s Republic of China (PRC) poses the most consequential challenge to the United States politically, economically, technologically, and militarily. For defense, this requires substantial investments in shipbuilding, nuclear modernization, missile defense and defeat, cyber, space, next generation fighters and tankers, collaborative combat aircraft, drones, c-UAS systems, munitions and missiles, and the combined joint all-domain command and control system that underpins it all.
The 2018 and 2022 National Defense Strategies also emphasized that threats to the U.S. homeland have fundamentally changed. Post-9/11 ways of defending the homeland are increasingly obsolete, such as on-alert fourth-generation fighters and maintaining substantial ground forces, in light of the threats from the PRC and other competitors that range from cyberattacks to undersea, nuclear, air, and space threats. The Trump administration’s announcement on the need for an Iron Dome for America (now called Golden Dome) recognizes this shift, in part. However, it also raises affordability concerns given other significant modernization and readiness bills.
The emerging Trump administration defense strategy carries significant risk, even to its own stated priorities. European allies may not develop the capacity and capability to assume roles and missions that the United States may step back or divest from at the time, scale, and pace necessary to curb Russia’s aggressive ambitions. Loss of trust with U.S. allies and partners in response to U.S. diplomatic and economic pressures may erode willingness to allow U.S. forces access key locations globally; train, exercise, and operate with U.S. forces; or to purchase U.S. equipment—thereby undermining the administration’s ability to address threats as they emerge abroad or in the homeland. Consolidating U.S. regional combatant commands, reportedly under consideration in DOD, would also constrain the U.S. ability to defend the homeland before threats reach our shores. Using DOD forces at the U.S. southern border rather than resourcing the Department of Homeland Security to fully perform its statutory mission for border security undermines warfighting lethality, as the U.S. military does not train for the border security, and DOD does not plan, program, or resource for Defense Support of Civil Authorities (DSCA) activities requested from other U.S. departments and agencies.
DOD needs additional budget topline to afford the Trump administration’s stated aims and to buy down risk in areas that it deprioritizes.
The “Iron Triangle” of Budget Trade-Offs
The “iron triangle” refers to trade-offs among the three major elements of budgets: force structure (the size and composition of the forces), operational readiness (the ability of the forces to perform their intended functions), and modernization (investing in new capabilities).
Cancian
- Most experts cut force structure deeply, particularly Army force structure, to increase modernization. I did not, because of the more global focus I described earlier. A superpower with global activities and expectations needs forces to protect those activities and meet those expectations. Thus, my cuts to force structure were the smallest of all eight experts, and I added very little to modernization. I did add some funds for operational readiness, but there were two big constraints here. First, readiness is very expensive, so any increment requires painful cuts elsewhere. Second, readiness is perishable because the training, maintenance, and supply supporting it are constantly deteriorating and thus need continuous funding for renewal.
Dalton
I prioritized modernization, followed by operational readiness, and assumed risk in force structure that does not provide lethality or survivability in an Indo-Pacific warfight or contribute to homeland defense versus a state-based competitor. DOD has made progress on modernizing the joint force in the last several years but is still behind the pacing threat of the PRC. This will require substantial investment in modernization across all the military services. I avoided salami slicing programs to find savings, such that they are not viable or at scale to be effective.
I added investment to operational readiness. After over 20 years of continuous operations, operational readiness has often been the bill-payer, with risks to hollowing out the force through under-investment in sustainment, maintenance, and restoration of weapons systems and facilities, and training.
Given the administration’s stated priorities, first, I cut force structure that is not lethal or survivable in an Indo-Pacific warfight or effective in homeland defense. Next, I assumed risk for deprioritized missions in Europe, North Korea, the Middle East, and counterterrorism, and cut force structure most suited for those missions. As a result, the exercise priorities and constraints forced cuts in Army force structure.
With the current budget topline, and within the administration’s priorities and protected areas, this approach carries high risk. But it is the least risky course compared to underinvesting in modernization, followed by readiness. If the security environment shifts and DOD needs to change its strategy, it cannot grow force structure overnight. In cutting platforms ill-suited to an Indo-Pacific warfight or for modern homeland defense (e.g., fourth-generation fighters), DOD also will lose force structure when it needs to grow it in other mission areas—such as air defense for Indo-Pacific bases and c-UAS in the homeland. Even if allies and partners step up to do more in Europe and the Middle East, it takes time and political will to build capacity and capability.
The administration can alter the geometry of the iron triangle and alleviate risk in three ways, as Dr. Kathleen Hicks has written. First, it can change the goalposts of national ambition. It seems that the administration is pursuing such a change but already faces countervailing pressures. It has stepped up operations in the Middle East and the Western Hemisphere, which will tax operational readiness. It is eroding alliances that will enable forward power projection to defend the U.S. homeland if crises or contingencies arise. And it is undermining other foreign policy tools, which may put additional pressure on defense to do more to secure U.S. interests globally.
Second, the administration can change the iron triangle geometry by finding efficiencies. The 8 percent cut exercise and Department of Government Efficiency’s (DOGE) efforts could yield savings. However, the second and third order effects of rapid cuts, and change without transparency on underlying cost analysis or rationale for driving the cuts, raise questions about how much savings DOD will find.
Third, the administration could leverage asymmetries, including innovation, reform, and working with allies and partners. While still too early to tell, incoming administration officials have stated their intent to pursue acquisition reform and harness disruptive technologies, which could result in savings. The administration significantly discounts the value of allies and partners and could thus lose opportunities to leverage this comparative advantage versus the PRC.
Service Splits
Although strategists think about defense in terms of functions and missions, DOD is still governed organizationally. Therefore, how the individual military services come out is important politically and culturally.
Cancian
Across the board, I added to munitions (which are in high demand in prolonged conflicts) and cut science and technology (too many science projects unconnected to warfighting programs). I added less to munitions than others only because the baseline already includes large increases. In general, my organizational changes were like everyone else’s, but less pronounced.
Army: I cut much less of the Army because of continuing global challenges.
Navy: With fewer force structure cuts elsewhere, I could add a bit less to the Navy. Like others, I added to Navy munitions and submarines. I also added to aerial refueling to help naval aviation stay outside the Chinese defensive bubble.
Marine Corps: I maintained the Marine Corps because of its global capabilities. I did cut Marine Corps special operations forces, which I see as a drain on the regular infantry. (Full disclosure: I served as a Marine infantry officer in line units.)
Air Force: My major cut was Next Generation Air Dominance (NGAD)/F-47, because I am skeptical about spending $30 billion on development and $200 million per copy for a next-generation, high-tech, exquisite aircraft.
Space Force: I do not understand space capabilities well, so I made a few changes there. I do believe that space is a supporting capability, not an end in itself.
Defense wide: Like others, I added to missile defense and munitions. I took the base closure option and added a little money for base operations since they are often bill payers. I also took some options for overhead and infrastructure reduction, like slowing environmental restoration, eliminating medical research unconnected to military missions, limiting DOD Schools to overseas locations, and increasing Tricare fees for retirees. I would have taken more, and Todd Harrison, the organizer of the exercise, was responsive in adding new ideas, but time ran out. However, overhead and infrastructure cuts need to be tied to reductions in specific programs, rather than driven by top-down reductions in headcount (Are you listening, DOGE?).
Dalton
Within DOD’s protected areas, the Navy received many exemptions. DOD needs a balanced joint force to meet mission demands in both the Indo-Pacific and the U.S. homeland.
Across the Services, I increased investments in missiles and munitions on top of the protected categories. Applying lessons learned from Ukraine for the industrial base, DOD needs to send the demand signal now to build the inventory.
DOD has deferred its nuclear modernization bills for too long, particularly in light of the PRC’s nuclear modernization. The Air Force and the Navy must sustain planned and protected investments in the triad and nuclear command, control, and communications, including against cyber threats, even as the Air Force continues to scrub requirements and costs for the Sentinel program. Given the success thus far of the B-21 program and its nuclear and conventional importance, I accelerated it by one year.
I deferred F-35 buys to fix Block 4 problems and then increased investment in FY 2027 and beyond. I divested from fourth-generation fighters that are not suited for the Indo-Pacific warfight or a modernized approach to homeland defense. I prioritized homeland and theater air and missile defense programs and invested in Science and Technology accounts to ensure DOD continues to modernize to keep pace with the PRC.
For all services, I protected and/or increased investment in operational readiness.
Due to stated priorities and constraints, I cut Army force structure significantly. I underscore here the substantial risk to Europe and North Korea that the Trump administration seems willing to assume. The Army has an important role to play in base defense and logistics in the Indo-Pacific, UAS and c-UAS missions, and homeland and theater missile defense.
On top of the many protected areas for the Navy, including necessary focus on shipbuilding overall, I increased investment in the submarine industrial base to maintain U.S. undersea dominance and in support of the trilateral security partnership between Australia, the United Kingdom, and the United States. I added to the Navy F/A-XX next-generation fighter program development, as well.
The Marine Corps has led the services in terms of vision, strategy, and force development to modernize for the Indo-Pacific warfight and is thus already on a sure path. I sought to be judicious in my cuts to force structure to find savings, retiring the AV-8B a year earlier than planned, slightly decreasing the size of the infantry, deferring the CH-53K by two years, and cancelling the amphibious combat vehicle.
The Air Force has a new force design that requires substantial investments in modernization and political will in the administration and Congress to divest from capabilities that are not lethal or survivable in an Indo-Pacific warfight. I increased investment in command, control, and communications, as well as the Advanced Battle Management System, as the program continues to prove its value with U.S. Indo-Pacific Command and could contribute substantially to the network underlying Golden Dome. I also increased investment in the E7 program.
Following the exercise, the Trump administration announced its intent to move forward with the NGAD/F-47. I had already accelerated NGAD by one year, though I assessed the Air Force will need additional topline to afford the F-47 overall. I matched the NGAD investment with an acceleration of the collaborative combat aircraft and enhancement of tanker survivability—all essential capabilities that the Air Force intends to work together to strengthen air superiority in an Indo-Pacific warfight. I also bought more F-15EXs, intended to replace the F-15Cs/Ds for defensive and offensive counter-air missions, to provide additional capacity and flexibility. I divested from the MQ-9A, RQ-4B, U-2S, and C-5M programs.
I reinvested most of the 8 percent cut in the Space Force to reflect the joint force’s growing demand signal for Space Force warfighting capabilities. Whether it is countering the PRC’s long-range kill chains or closing long-range kill chains for the United States and its allies, the Space Force provides the capabilities for the entire joint force to be able to operate in a contested environment. Investing more in space capabilities will enable the joint force to be more lethal, survivable, and resilient. Right now, the joint force has significant requirement gaps for counter space, domain awareness, missile warning and missile track, and space launch. The administration’s focus on the Golden Dome will compound these gaps. As a result, I invested more in proliferated space-based interceptors; satellite communications; proliferated low Earth orbit (pLEO) data transport, custody, and missile tracking layers; the Next-Generation Overhead Persistent Infrared (OPIR) polar-orbiting satellite; resilient missile warning and tracking for medium Earth orbit; and M-Code GPS receiver development for positioning, navigation, and timing (PNT).
For Defense-wide accounts, I preserved pay and benefits, decreased funds for U.S. Central Command given other priorities, invested in the restoration and modernization of U.S. bases and facilities, and supported targeted base closures and reductions. I invested more in uncrewed systems to support Indo-Pacific Command’s Hellscape concept.
Cancian and Dalton
- Although our plans differ on strategy and specific programs, we do agree on one major point: Even after the 8 percent cut drill, the Trump administration will find it needs more resources to meet even its narrower defense strategy focused on the Indo-Pacific and the U.S. homeland. It has already noted its intent to submit a $1 trillion defense budget Moreover, its strategy assumes high risk, and the security environment continues to prove unpredictable. As a result, DOD needs more topline to prioritize modernization, restore readiness, and to buy down risk arising from reductions to force structure and withdrawal from key theaters, even as it seeks efficiencies.
Mark F. Cancian (Colonel, U.S. Marine Corps Reserve, ret.) is a senior adviser with the Defense and Security Department at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Melissa Dalton (former undersecretary of the Air Force) is a senior adviser (non-resident) with the Defense Budget Analysis Program and the Aerospace Security Project at CSIS.
This report is made possible by general support to CSIS. No direct sponsorship contributed to this report.
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