Welp. Looks like DOGE has indeed made it to the DoD. Elon Musk’s efficiency czars arrived at the Pentagon on Tuesday and asked for lists of all of the military’s probationary employees. (The services were given until EOD Tuesday to provide them.) While it was previously unclear whether military employees would be part of the cuts, it’s now widely expected that firings will start soon. Thousands could be dismissed in the coming weeks.
Let the waiting game begin.
Slash and burn: Meanwhile, on Tuesday, SecDef Pete Hegseth ordered Pentagon leaders to draw up plans to cut the DoD budget by 8% every year for the next five years. If math isn’t your strong suit, that means around $50B in cuts annually.
“Through our budgets, the Department of Defense will once again resource warfighting and cease unnecessary spending that set our military back under the previous administration, including through so-called ‘climate change’ and other woke programs, as well as excessive bureaucracy,” acting Deputy Secretary of Defense Robert G. Salesses wrote in a statement explaining the order Wednesday night.
According to a memo obtained by the Washington Post, 17 categories will be exempt from the cuts, including:
- Operations at the southern US border
- Modernization of nuclear weapons and missile defense (hello, Iron Dome)
- Acquisition of submarines, one-way attack drones, and other munitions
- The Collaborative Combat Aircraft program
Most likely to be on the chopping block? What Hegseth called “low-impact items,” including climate change and DEI programs. Trump’s advisors, including Elon Musk, have also expressed skepticism about legacy manned weapons programs, including the F-35, and bemoaned lengthy acquisition processes.
The memo also emphasized the importance of INDOPACOM and the threat from China, while downplaying tensions in Europe and the Middle East.
Behemoth: The DoD is the government’s largest bureaucracy, employing about 3M people:
- 1.3M active-duty troops
- 900,000+ civilians
- 800,000 reservists
- A roughly $850B budget
The Wall Street Journal reported that the military had already begun preparing cuts for DOGE and the Trump administration last week.
Mixed messaging: Here’s the tricky part: Republican leaders in the House and Senate have actually called for increases in defense spending. The House budget plan pushed through last week calls for an additional $100B in defense spending, while a competing Senate proposal includes a $150B increase. Trump yesterday backed the House plan ushered through by Speaker Mike Johnson.
Downfall: Defense tech stocks tumbled at news of the proposed cuts: Palantir ($PLTR) plunged by over 10%. All major prime stocks, including Lockheed Martin, Northrop Grumman, and RTX, dropped before regaining some value pre-market close.