Since at least the onset of Russia’s invasion of Ukraine in 2022, accelerated by the resurgence of Iran-backed proxies in the Middle East and shadowed by the prospect of conflict with China over Taiwan, Washington has been consumed by debates over the relative strategic importance of these three theaters—and how to resource U.S. defense posture accordingly.
What all positions have in common, however, is that the U.S. defense industrial base is ill-equipped to produce adequate materiel to satisfy mission objectives in any one theater, let alone all three. For example, Ukraine self-reports requiring roughly 360,000 155 mm artillery shells per month to remain operational; even though the United States has doubled ammunition production since December 2022, it could produce only 30,000 rounds per month as of March 2024. The U.S. Army intends to increase this number to 60,000 per month by September 2024 and 100,000 per month by 2025—still falling well short of what’s needed on just the European front. In the event of a conflict in the Taiwan Strait, a report by the Center for Strategic and International Studies found that the United States would run out of key munitions in less than a week.
Given these perilous scenarios, substantial investment in defense production ranks as perhaps the most pressing national security priority for the United States. However, despite the increased attention that this issue has recently received in Washington, D.C.—enjoying rare bipartisan focus from legislators, the White House, and the media—Congress has been slow to advance major legislation addressing production deficiencies.
The best way to understand this lack of progress is as a form of collective action problem. Given the U.S. federal system’s grounding in a separation of powers, it has historically been very difficult to accomplish significant legislative reforms without a broad coalition that is both geographically distributed and capable of coupling private sector interests with political ones. Unlike software production—a capital-light, high-margin process—designing durable legislative regimes is more like industrial production: capital-intensive, low-margin processes that require symbiotic, long-term partnerships between the federal government and corporate America.
Marginal reforms can be achieved without such a coalition, but the same can’t be said of the solutions required to meet the conflicts at hand, nor the relatively minimalist objectives of Washington’s 2018 or 2022 National Defense Strategy documents. Given the depth of the weapons deficits, partial reforms are inadequate at this point. Therefore, identifying a public-private coalition, then constructing a policy architecture to sustain those interests, should be policymakers’ primary objective. If successfully implemented, these kinds of reforms result in what has been described as “quiet politics”—a strong, durable marriage of interests between market forces and bipartisan government imperatives.
Policymakers continue to underrate the need to design policy prescriptions that link a critical mass of interests to a reform agenda, undermining their odds of success on Capitol Hill. Such a coalition does not presently exist for several reasons, but one looms largest. As of fiscal year 2022, the latest for which there is public data, just three states—Virginia, Texas, and California—received nearly a third of defense contract awards. The top 10 states received nearly 60 percent. The bottom 25? Just 10 percent.
Put in political terms: A full half of the U.S. Senate receives just a 10th of contracts. Acknowledging this makes it less surprising that defense industrial base reform hasn’t been pushed to the top of the congressional agenda.
This concentration of political interests is a relatively recent phenomenon. Following the Soviet Union’s collapse in 1989, the United States could handle emergent military threats both at a fraction of the relative cost (as a percentage of GDP) and the force level of the Cold War period. That geopolitical reality enabled the so-called “peace dividend” (wherein military spending could go instead to tax cuts or social spending), resulting in defense budget cuts and the famed 1993 “Last Supper,” the dinner meeting at which then-Deputy Defense Secretary William Perry set a course toward a significant consolidation of the Pentagon’s network of prime defense contractors—those that work directly with the government—from 50 primes in the early 1990s down to roughly five at present.
Before this point, the defense industrial base represented just one among many business lines for the United States’ powerful, vertically integrated manufacturing sector. Only afterward did the defense sector—companies whose primary revenue source is defense contracts—emerge as a specialized, standalone entity. This had significant implications for what might be called that sector’s “political base.” Where there was once a wide coalition of constituents and their representatives with interest in continued investment, only a fraction remained across an increasingly small number of states.
For three decades, these political dynamics could be ignored. During the unipolar moment, interest in defense industrial base policy was a curiosity confined to relatively niche circles within the military and foreign-policy elite. To the degree that consolidation had any noticeable impact on U.S. military readiness, it could be compensated for through ad hoc infusions of defense expenditure and further mitigated by the absence of any great-power threats. Defense spending increased after 9/11, which—combined with the relatively small scale and sequencing of the wars in Iraq and Afghanistan—did not place acute strain on production.
Further minimizing the impact of any supply chain inefficiencies and disruptions, defense planners could rely on strategies of “iron mountains,” the use of massive, gradual logistics and munitions stockpiling behind forward-deployed forces to overwhelm opponents, accommodating longer lead times for suppliers.
Beginning in the 2010s, however, these factors inverted: The great-power threats reemerged at the same time that the defense budget flatlined. Anxiety about the U.S. fiscal deficit following the 2008 Great Recession resulted in the 2011 Budget Control Act and its successors, which placed procedural controls around increasing defense spending—resulting in a static budget (even declining, in real terms). This is the situation in which Congress finds itself today: with conflicts on three fronts and with the notional will to act, but without a clear blueprint for how to generate an effective coalition to support overdue investments.
The optimal way to generate such a coalition is not by focusing primarily, as many proposals do, on increasing appropriations and procurement efficiencies that affect the production of full weapon systems. Nor should the focus be confined to relatively high-value added commodities, such as semiconductors, which was the underlying rationale of the CHIPS and Science Act passed in 2022. These solutions, while perhaps helpful at margin, do little to alter the underlying political obstacles to systemic reform.
Rather, the best way to generate the necessary coalition is to first focus on reforming the defense industrial “sub-base,” or the domestic commodities market for the basic building blocks of weapons production. These include energy, minerals, alloys, plastics, and chemicals. There are numerous, fiscally responsible policy combinations to decrease the prices of these inputs by increasing domestic supply, including tax credits, loan guarantees, and judicious use of executive branch powers—such as the Defense Production Act, which was used during Operation Warp Speed to fast-track vaccine production in 2020, and the Exchange Stabilization Fund, which was also used during the COVID-19 pandemic to support emergency loans to small businesses.
The geography of these industries is also key. While lobbies for higher value-added inputs tend to be highly clustered both in terms of market share and distribution among the states (thus limiting their utility in attracting congressional support), it is by comparison much easier to generate an inputs lobby spanning the necessary majorities, if not supermajorities, of legislators by focusing on the sub-base.
This pragmatic approach, if successful, would become an enabling mechanism for two key further reforms: one immediate, and one in the longer term. More immediately, it would engineer an immediate increase in the real purchasing power of the current defense budget, allowing for a rapid ramp-up of U.S. weapons production without waiting for further appropriations. In the longer term, this approach would create a sturdy coalitional platform for necessary further reforms.
Properly executed, this broadening of the defense industrial base would trigger mandatory, parallel adjustments to the budgeting statistics of the Congressional Budget Office and Defense Department. Lower input prices would increase, in real terms, the purchasing power of the current defense budget. This would grant Congress and Pentagon force planners the immediate leverage to be more ambitious and aggressive in awarding new contracts, which in turn might allow defense contractors to justify new investments to expand production lines.
Just as crucially, this kind of reform would generate a strong, enduring coalition with interest-based incentives to pursue a suite of other needed proposals for systemic reform, including new nominal defense spending increases, efficient co-production arrangements with allies, enhanced competition between both new and incumbent defense contractors, better federal support for workforce training, and the more effective use of executive branch powers, such as through providing broader congressional support for funding loan guarantees for defense-related companies.
In addressing the increasingly dangerous security situation for the United States, too many approaches presume that abstract political will is a substitute for material interest. Bringing the “arsenal of democracy” roaring back requires first expanding its political base.
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