Rep. Adam Smith, the top Democrat on the House Armed Services Committee, argued in a letter to colleagues that the Defense Department’s proposed $1.5 trillion budget for 2027, a more than 40% increase, was too high and would come at the expense of services to the American people.

He called for a smaller military budget as well as a probe into the Pentagon’s dealings with defense contractors.

“We must thoroughly review our national defense strategy and develop a more realistic and sustainable approach that does not require a defense budget in excess of $1 trillion or paid for through draconian cuts to critical domestic programs,” Smith wrote. 

Economists and public policy experts say a growing interest in cybersecurity and rearmament amid ongoing geopolitical conflicts has accelerated a cycle of defense spending that slowed after the Cold War and ramped up again after 9/11.

According to asset management firm Carlyle, defense spending has increased to 2.0% of the GDP across the G7 countries of Canada, France, Germany, Italy, Japan, the UK, and U.S. That’s the highest share in more than three decades. At the current rate of spending, it could reach 3.8%, or roughly $8 trillion in defense commitments.

The U.S. accounts for about one-third of the world’s defense spending, surging past the $1 trillion mark in fiscal 2026. While it’s by far the biggest spender—providing aid and arms to allies in Europe as well as its own military—other wealthy nations are accounting for a growing share of the world’s defense outlays. 

As war continues in the Middle East and Ukraine, countries are shifting how they think about risk. Rather than responding to or preparing for a particular conflict, countries are building up their resources as part of a structural shift, leading to a worldwide rearmament push, particularly in Europe, according to retired Admiral James Stavridis, vice chairman of global affairs at Carlyle and former NATO commander.

“None of this is unique to the United States,” he wrote in a research note published in September. “Europe and Japan are both increasing defense budgets meaningfully, and the underlying logic is the same everywhere: if you cannot count on someone else to defend you, secure your energy, or protect your infrastructure, you build the capability yourself, and you build it now.”

Europe’s rearmament race

Indeed, European Union defense spending hit €418 billion ($461 billion) in 2025, or about 2.2% of its GDP, and is projected to increase to €454 billion ($500 billion), or 2.4% of GDP) this year, according to data from the Council of the European Union.

Huw van Steenis, former securities analyst and partner at Apollo Global Management, observed that European budgets aren’t just showing up in defense companies, but also in increased investments in infrastructure, spurred by disruptions to subsea cables, as well as the recent outages of hundreds of supermarket fridges as a result of cybersecurity attacks.

These disruptions could contribute to additional spending on security from NATO, on top of a commitment to spend 3.5% of GDP on core defense, van Steenis wrote in a blog post on Friday.

“The bottom line is that some of the next beneficiaries of Europe’s defense buildout may sit in infrastructure, energy and industrial technology rather than in the defense sector itself,” he said.

The drive behind the global defense boom

More broadly, Europe may also be bolstering its defenses as a result of ongoing wars and the pulling away of American military support, according to Linda Bilmes, a Harvard Kennedy School public policy lecturer and author of The Ghost Budget: U.S. War Spending and Fiscal Transparency.

“What is driving this whole enormous bill?” she told Fortune. “In Europe, it’s the combination of the war for four years in Ukraine and Russia, and the unreliability of the United States to support NATO.”

EU member states have sent nearly $83 billion in military support to Ukraine since the beginning of its war with Russia in 2022. That total is likely to increase as the Pentagon reportedly winds down its leadership of the NATO-based Security Assistance Group in Germany, which coordinates military training and supplies to Ukraine, in July.

The divestment is part of a larger strategy from the Trump administration to withdraw global military support as part of its “America First” ethos and protectionist ideology.

At the Shangri-La Dialogue in Singapore on May 30, Secretary of Defense Pete Hegseth encouraged Asian allies to shift their defense models away from reliance on U.S. aid.

“Our approach asks Pacific nations to do what many are already eager to do: invest seriously in their own defense, contribute more to collective security,” he said.

But Rebecca Patterson, a senior fellow at the Council on Foreign Relations, warned in a post earlier this year that the global rearmament boom could worsen budget deficits, inflation, and interest rates.

“For the private sector, higher interest rates on government debt translate into higher borrowing costs for companies and households, the latter importantly including mortgages and auto loans,” she said. “All else equal, these costs weigh on economic growth.”

Defense spending changes in the U.S.

While Europe ramps up its spending, the U.S.’s military budget is about to come under increased review. With Democrats taking the majority in both the House of Representatives and Senate, they will want to make significant changes to the Republicans’ defense spending legislation. 

Bilmes believes Democrats will try to shift spending away from the Pentagon and toward the State Department and United Nations dues as a means to enhance its soft power.

“There are a lot more people who are not interested in purely pushing some of the Trump agenda for bigness,” Bilmes said. “I think that there will probably be a significant change in terms of pushing to restore some of the soft power that has been cut.”