Pentagon Running Out of Cash Despite Nearly $1 Trillion Budget

The Defense Department, funded with a budget of nearly a trillion dollars, is reportedly running low on cash. Officials are pressing Congress for a supplemental infusion as war costs pile up faster than lawmakers can approve new money.

The shortfall

The Defense Department was funded with a budget of nearly a trillion dollars, but it is running out of cash, according to three U.S. officials, a former defense official, outside experts and two congressional staff members.

Defense officials asked Congress for an infusion of more than $67 billion in supplemental funding to ease the shortfall until the new budget in October, but Congress is wary of approving the funding even as the cost of the war with Iran swells.

Where the money went

After initially claiming that the war with Iran would cost roughly $25 billion, the total estimated cost of the war has ballooned to over an estimated $132 billion. That is the primary driver of the cash crunch.

ABC News reported that major drivers behind the shortfall included costs associated with the Iran war and the Trump administration’s mission to secure the southern U.S. border. Large National Guard deployments are also contributing to the strain, including the ongoing Washington, D.C., deployment, which the Congressional Budget Office projected would cost roughly $1.1 billion this year.

Operational impact

That means there is little money to purchase new munitions or repair bases in the Middle East that were severely damaged by Iranian retaliatory attacks. Some training has been canceled, and some military base repairs are delayed, the officials said.

The former defense official, who has discussed the funding problems with Pentagon officials, said the military is “parking jets and turning off exercises” because of money shortages.

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The political fight over more money

Trump is demanding another 44-percent increase in annual Pentagon funds from Congress, on top of the $150 billion already authorized by the “Big Beautiful Bill” in July of last year. The move would balloon the budget of America’s military apparatus to over $1.5 trillion in annual spending.

The demands have gridlocked Congressional Republicans, who are facing tough reelection bids in the upcoming midterms, and are wary of dumping billions more into the Iran conflict.

Options market and stocks to watch

Defense primes are the obvious tape to watch as the funding fight plays out. Supplemental approval, or a full $1.5 trillion topline, would be a tailwind. A drawn-out standoff or program delays could pressure names near-term.

• LMT: Watch for flow around F-35 and munitions restock exposure if a supplemental clears.
• RTX: Watch for missile and munitions reorder chatter tied to Middle East replenishment.
• NOC: Watch for reaction on strategic programs tied to the reconciliation topline.
• GD: Watch for shipbuilding and combat systems flow if Congress moves.
• BA: Watch defense segment sentiment; delays could hit near-term deliveries.

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