US military spending may drop to lowest level since Cold War era – WSJ

Inflation will wipe out the effect of a recent increase in the defense budget in real terms, the newspaper claims

The share of US spending on defense may drop below 3% for the first time since the Cold War era, the Wall Street Journal reports, citing the latest debt ceiling agreement as a major reason for the decline.

The deal reached by the White House and Republicans last week boosts defense spending to around $885 billion next year, an 11% increase on the $800 billion allocated in the current budget. In 2025, the country’s military spending is expected to see a further increase to $895 billion.

However, the number represents a reduction in the defense budget in real terms after inflation, according to an editorial piece published by the WSJ shortly after President Joe Biden signed the bill into law on Friday.

The bipartisan debt bill passed the Senate on Thursday after moving through the House of Representatives the day before.

The legislation lifted the debt ceiling through January 1, 2025 and helped the nation to avert what would have been a first-ever default, just days before the deadline that had previously been extended to June 5.

READ MORE: US avoids debt default

The US was on the verge of defaulting on its massive sovereign debt of $31.4 trillion. A default would considerably narrow the government’s options for borrowing more or paying state bills. It could also cause financial chaos overseas, creating a negative impact on prices and mortgage rates in other countries.

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