Digging in to defense spending
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Your credit cards are denominated in U.S. dollars, so why might the Japanese yen affect what you pay? I'm David Brancaccio in Los Angeles. First, the second deadly shooting in Minnesota by immigration agents has some Democrats in Washington renewing calls for reform to the Department of Homeland Security. This could hold up a spending bill this week, increasing the chances the federal government partially shuts down again late this week. Also in play, money for defense. Marketplace's Nancy Marshall-Genzer has that.
The appropriation for the Pentagon is one of the biggest items in the spending bills that fund the federal government. This year, it comes in at $839 billion. Maya McGinnis is president of the Committee for a Responsible Federal Budget.
What recent events are prompting calls for reform in the Department of Homeland Security?
She says the Pentagon spends the most on operations and maintenance of equipment. The second biggest expensive thing is people, personnel. U.S. service members are set to get a 3.8% pay increase. And then there's the cost of developing and acquiring new weapons, ships, and planes. Procurement. There's research and development. The total Pentagon appropriation increased by less than 1 percent over last year, according to the Committee for Responsible Federal Budget. Now, that doesn't even keep up with inflation. But there's a caveat here. This appropriations bill, it's not the only thing funding the Defense Department. Rashmi Agarwal is a director at the Government Accountability Office, and she says there's money for the military and President Trump's tax and spending measure, the One Big Beautiful Bill Act.
It was passed in July of 2025, but they provided about $156 billion in in additional funding for the department. Add that in, Agarwal says, and total Pentagon spending for this year is way up, closer to almost a trillion dollars. That's the largest budget that they've had to date. Agarwal says the One Big Beautiful Bill Act includes money for shipbuilding and weapons. Todd Harrison at the American Enterprise Institute says there's also about $25 billion for President Trump's proposed Golden Dome missile defense system.
That was considered, you know, a down payment on getting started on this signature effort of the Trump administration.
President Trump is already looking ahead to next year when he wants to spend $1.5 trillion on the military. I'm Nancy Marshall-Genzer for Marketplace.
Now, after a long drop versus the U.S. dollar, the Japanese currency is up 1.2 percent today.
How much is the Pentagon budget for this year and what does it cover?
The U.S. Treasury has reportedly been asking for info that may be a hint they might try to prop up the yen. Now, this is a teachable moment for us. What happens to the yen can affect what we pay to use credit cards or to borrow for cars, houses and more. Economist Julia Coronado is founder of Macro Policy Perspectives.
The yen has been under a lot of pressure on fiscal expansion plans, and pretty alarmingly so. And the reason we care about this is because Japanese investors buy a lot of treasuries. So there is some notion that the U.S. and Japan might be coordinating to stabilize the yen because that would help prevent upward pressure on U.S. interest rates.
Right. Let's talk about this, right? Because if the yen gets more weak, as it's been doing until today, it makes it more expensive to buy those treasuries if you're a Japanese investor. Right. And so you don't want them buying less of our debt at a time that we're putting out a lot of it.
That we're issuing more, that's exactly right. And of course, the administration's been very frustrated that long-term interest rates haven't come down, and this would only go in the wrong direction. So there's a lot of movement. There was a lot of movement at the end of the week, and markets are opening up again with a lot of response to these rumors of intervention. So the yen is strengthening, the dollar is weakening. We'll see how this goes.
Julia Coronado is also a professor at the University of Texas, Austin. Thank you very much. My pleasure. With the weather mess across so much of the country, the readout from the airlines does not bode well for air travel today.
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