The demographic and fiscal time bombs ticking inside the Pentagon

While most people are rightfully focused on the current congressional impasse surrounding the fiscal 2024 budget and the hold on the military confirmation process, there are two larger and more challenging problems that will endanger our national security in the near term: the lack of 18-year-olds to serve and our country’s towering fiscal deficits.

Over the past several years, most of the military services have at one point or another missed their recruiting numbers, with the Army taking the most dramatic hit. The lack of new recruits has shrunk the Army down to about 450,000 in the active force, roughly 33,000 lower in size than the service otherwise wants to be. However, as the services are breathing a small sigh of relief that 2023 was not as bad as 2022, they are simply ignoring the inevitable catastrophe facing them, starting in 2026: the lack of 18-year-olds.

Behind this deep and sustained decline is the 2008 financial crisis, which caused birthrates to fall. As the chart below shows, the services felt this decline in 2022 due to the number of 18-year-olds bottoming out at roughly 8.7 million nationwide in 2021. And, while they are now feeling a respite from that population’s size growing to 9.4 million in 2025, they will face a certain and swift decline to about 8 million 18-year-olds in 2029. This near 15% drop between 2025 and 2029 is likely to be felt at twice that rate by the military since it hasn’t competed well with higher education and the workforce for 18-year-old talent. By the end of this decade, it’s therefore possible that the services will miss their recruiting targets by about 30%, year-after-year.

This graph depicts the U.S. birthrate, showing a nosedive in 2008 that many attributed to the economy. (Courtesy of College and University Professional Association for Human Resources)

There’s a chance that the services may be able to lean forward and begin to address these concerns now. But, as is unfortunately routine, their attention is being drawn to the potential near-term disasters associated with the federal budget process and resulting funding levels. Just this month, the estimated deficit for 2023 was projected to be roughly $2 trillion, double the previous estimate. With a rising deficit and rising interest rates, interest payments made to federal debtholders will likely exceed $1 trillion by 2028, already a “rosy” estimate by the Congressional Budget Office as it assumes inflation will return to 2.3% over the next two years. This will continue to drive up the pressure for fiscal restraint in the discretionary budget accounts, which includes national security. The recently passed budget and debt-ceiling agreement, dubbed the Fiscal Responsibility Act, or FRA, limits national defense spending to a 1% increase in 2025. If the sequestration years of 2012-2016 are any indication, this type of funding restraint could continue for several years.

Given these twin challenges facing the Pentagon, right at the window that some predict China to be at its peak power and risk for invading Taiwan, our leadership can take several immediate steps to mitigate this risk.

In the very near-term, military leadership should move with haste to adjust its recruiting and pay for the force. First, it should endorse the House Appropriation Committee’s 30% pay raise for junior enlisted service members because the military doesn’t pay enough in base salary to effectively compete for talent. As for Congress, once it breaks through the shutdown saga, it should pass 2024 appropriations without the negative penalties baked into the FRA, avoiding a budget apocalypse.

In the medium-term, the Pentagon and the White House should take the following steps in preparation for submission of the president’s 2025 budget. First, the president should ignore the budget deal for 2025 and submit the Pentagon’s budget with sufficient funds to both match the 2024 budget and fund both pay and non-pay inflation, in effect holding the budget neutral at 2024 levels in real terms. Why hold it in neutral? Because the current law is an actual cut and given the present political environment, needed real growth is unlikely. At the end of next month, the release of the Employment Cost Index will exert pressure on the White House to back a 4.5% military pay raise in 2025. This will, at current FRA levels for 2025, cause readiness to sink to pay for the raise.

Second, military leadership should change the definition of quality for recruits. Right now, data indicates medical and other quality metrics have disqualified most young Americans from service. Imagine if we fought World War II with today’s pages upon pages of standards. Within quality, the military needs to consider qualified many of the medical maladies, such as food allergies or anxiety requiring treatment, that currently disqualify young people from service. The military has medical care around the world, medicine can manage many conditions, and what was disqualifying in the past can be managed today. Next, the Armed Services Vocational Aptitude Battery, or ASVAB, test, which recruits are required to take, should be revised to reflect the way today’s generation takes tests, as it’s no longer serving as an effective measure of recruits’ abilities. Lastly, the services should double the size of their recruiting forces because recruiting will be twice as hard going forward. This is a sizeable investment in talent, but without it, the force will be unable to sustain itself.

These are just the near and mid-term actions needed. The president, Congress, and Joint Chiefs need to come together to discuss where we are headed for the rest of this decade. With fewer potential service members, less money and an increased threat, we may be building a hollow force to match the peak power of China.

Retired Army Maj. Gen. John Ferrari is a senior nonresident fellow at the American Enterprise Institute think tank. Ferrari previously served as a director of program analysis and evaluation for the Army.

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