The Department of Defense's (DoD's) base budget grew from $384 billion to $502 billion between fiscal years 2000 and 2014 in inflation-adjusted (real) terms—an increase of 31 percent and an annual average growth rate of 1.9 percent (see figure below). Several factors contributed to that growth. The largest rate of growth was in the costs for military personnel, which increased by 46 percent over the period. The costs for operation and maintenance (O&M) increased by 34 percent, and the costs for acquisition increased by 25 percent. About two-thirds of the $117 billion real increase in the budget went for the following activities: procurement; O&M costs for the Defense Health Program; research, development, test, and evaluation; the basic allowance for housing; fuel; and basic pay for active-duty military personnel (see table below).

For this analysis, CBO examined DoD's base budget, which excludes supplemental and emergency funding for overseas contingency operations (those conducted in Afghanistan and Iraq and other countries). DoD's base budget includes both discretionary funding (controlled by annual appropriation acts) and mandatory funding (generally determined by eligibility rules, benefit formulas, and other parameters that are set in current law). All costs are expressed in 2014 dollars of budget authority, adjusted for the effects of inflation over the 15-year period using the gross domestic product price index; unless otherwise noted, all growth rates are measured in those real terms. CBO's analysis is based on data from DoD. In addition, CBO relied on analyses described in several of its publications.