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Projected Defense Spending Cuts in Context

The U.S. will continue to spend large sums of money even with projected cuts.

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Department of Defense Budget History
The United States government has materially increased spending on defense during the last 20 years, with the bulk driven by conflicts in the Middle East that started in 2003. The 2000s decade was a golden age for defense contractors, as the total budget increased by an average 8.8% per year, and the portion spent on line items that we believe are heavily tied to the defense industry increased at a faster 9.5%.

We expect to see a slowdown in spending during the current decade that could average minus 1% for the overall budget and minus 3% for line items heavily tied to the defense industry. However, spending remains at a high level in total dollars. The chart below shows a historical view of the total defense budget, including our base estimate through 2022.

Neal Dihora does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.