De-Militarizing the Federal Budget and Recalibrating the Labor Market

THE PROBLEM: AN OVERLY MILITARIZED FEDERAL BUDGET

Nearly half of all U.S. discretionary spending — 48 percent as of May 2026 — flows to the Department of Defense. Adding the Department of Veterans Affairs raises that share to 55 percent; including Homeland Security pushes it above 60 percent. This skewing of public resources toward the military comes at a direct and measurable cost to workers, families, and the broader domestic economy.

High military spending makes it politically difficult to spend funds on non-military purposes or requires cuts in non-military programs to prevent debt increases. Second, high military spending – and war spending in particular – creates upward pressure on debt and increases interest costs. Third, high military spending that is unmatched by other similar levels of public spending in other sectors will create decent jobs in the military sector but not decent jobs in other sectors. And fourth, high military spending coupled with a high proportion of private contracting, such as currently exists in the U.S., results in a politically and economically powerful military industry that is firmly entrenched and can continue to grow its economic and political strength. This results in militarized solutions, a militarized society, and an overly militarized budget and workforce.

A BIPARTISAN PROBLEM — NOW REACHING A CRISIS POINT

Military spending has grown under every administration for more than six decades, regardless of party.

The average annual rate of increase in DoD spending over the past sixty years has been 5.2 percent, with the budget growing from $324 billion to nearly $1 trillion over just the past quarter-century. The second Trump administration has intensified this trajectory dramatically. The current military confrontation with Iran has added billions to the military budget and debt, threatening to replicate the runaway war-finance dynamics that followed September 11. The estimated cost of the “Global War on Terror” in 2001 was $40-50 billion. The final cost will be at least $8 trillion.

THE GAME CHANGER: Cut the Pentagon Budget, Rebuild America and Make A Just Transition

This paper proposes three complementary policy interventions that together constitute a genuine rebalancing of national priorities — not merely at the margins, but in ways that would reshape both the federal budget and the labor market.

1. Reduce the Pentagon Budget by Ten Percent
A first and achievable step is to redirect ten percent of the military budget — approximately $100 billion annually — to domestic priorities. This is not a radical proposition: Representative Alexandria Ocasio-Cortez introduced House Amendment 40 in July 2025 to cut Pentagon authorization by $77 billion, and Senator Bernie Sanders introduced a comparable amendment in 2020. A ten percent cut would not require eliminating a single uniformed service member. Waste, fraud, and abuse within the DoD are routinely estimated at 30 to 40 percent of total spending; the full ten percent reduction could therefore be achieved entirely by eliminating inefficient contracting practices — particularly the non-competitive, cost-type, and monopolistic contract vehicles that currently account for nearly half of all DoD procurement dollars.

2. Invest $100 Billion in Clean Energy, Infrastructure, and Just Transition
The freed funds would be reallocated as follows: $50 billion per year toward clean energy manufacturing, $49 billion per year toward a “Rebuild America” program, and $1 billion per year in transitional assistance. The Rebuild America program would be a multi-year federal investment in roads and bridges, water infrastructure, parks, schools, healthcare, and education — structured around paid apprenticeship and training programs that guarantee employment upon completion. The clean energy investments would similarly be linked to registered apprenticeships and job-guarantee partnerships, modeled on proven programs such as the Clean Technology Training Trust (CTTT) and the UA Veterans in Piping program, which successfully transitions active-duty service members into skilled civilian careers in the pipe trades.

3. Implement A Just Transition for Military Workers and Communities
A ten percent budget reduction can be achieved with minimal loss in personnel. But in a “worst case scenario” in which reductions were applied to personnel rather than to waste and contractor profits, this would affect at most 70,226 DoD personnel — roughly 2.5 percent of the current DoD workforce of 2.8 million.[1] A Just Transition program would protect these workers and their communities through:

• Early retirement options for workers near the end of their careers
• Retraining and education programs for younger workers entering new sectors
• Relocation assistance where needed
• Community grants and targeted investments for regions most dependent on military employment

This Just Transition framework is modeled after programs developed for fossil fuel workers by Pollin, Wicks-Lim, and Garrett-Peltier, which provide detailed cost and logistics blueprints.[2] Crucially, the costs of such a program represent less than one percent of the total investment in Clean Energy and Rebuild America — a marginal price for an equitable transition.

FEASIBILITY AND ECONOMIC RATIONALE

The economic case for this rebalancing is strong and well-documented. Federal spending on education generates 13 jobs per $1 million invested; healthcare generates 9 jobs; clean energy and infrastructure generate 7 to 8 jobs. Military spending, by contrast, generates only 5 jobs per $1 million. Every billion dollars shifted from the Pentagon to clean energy creates a net gain of roughly 2,000 to 3,000 jobs; every billion shifted to education or healthcare creates 4,000 to 8,000 net new jobs. At the proposed scale of $100 billion, the aggregate employment effect would be transformative — hundreds of thousands of additional jobs in sectors that produce durable value for American households.

The proposal is fiscally grounded. The ten percent budget reduction need not touch personnel at all; it can and should come first from reforming the procurement system. Nearly half of all DoD contracts (47.3 percent in FY2025) are non-competitive. Approximately 40 percent are sole-source, granting monopoly rights and monopoly profits to contractors. Thirty percent are cost-type contracts that reimburse all costs regardless of efficiency, removing any incentive to economize. Returning even a portion of these contracts to genuine competition and shifting from cost-type to fixed-price structures would generate savings well in excess of the target reduction.

Politically, the proposal builds on bipartisan concerns about Pentagon waste (documented extensively by the DoD Inspector General and GAO), and on growing public anxiety about debt service costs that are now projected to exceed $1 trillion in FY2026 — surpassing national defense spending itself. By coupling budget reduction with guaranteed reinvestment in jobs and communities, this approach avoids the political trap of austerity while delivering a credible path toward fiscal sustainability and a federal budget that reflects the priorities of working Americans.

[1] Personnel costs account for roughly 25% of the DoD budget, therefore a 10% budget reduction, if not mitigated by reducing waste or inefficiencies, could result in a 2.5% reduction of personnel, or 70,226 out of 2.8 million.

[2] https://peri.umass.edu/wp-content/uploads/2025/01/WashingtonState_12-23-17.pdf