Why the Defense Budget Hides Industrial Failure
The United States spent roughly $895 billion on national defense in fiscal 2025, more than the next nine countries combined according to the Stockholm International Peace Research Institute. That figure should buy overwhelming advantage, yet it has not produced a military that can arm allies, deter China, and replace its own losses at the same time. Instead, the Navy struggles to build destroyers on schedule, the Army cannot meet artillery shell targets for Ukraine and Israel simultaneously, and the Air Force warns that it faces a fighter shortfall before the end of the decade. Money is not the missing ingredient.
Congress has treated defense spending as a jobs program spread across 435 districts for so long that efficiency became a dirty word on Capitol Hill. The Government Accountability Office reported in 2024 that major defense acquisition programs were over budget by a combined $1.9 trillion and delayed by an average of more than two years. Those delays are not abstract accounting entries. They mean fewer missiles in silos, older ships at sea, and a smaller margin of error if Beijing moves against Taiwan.
The Pentagon's own budget request for fiscal 2026 asks for more than $850 billion, yet the department admits that it cannot produce weapons fast enough to replenish stockpiles sent to allies or to arm a future force sized for great power competition. A budget without production capacity is a promise written on water. Taxpayers deserve weapons, not wish lists.
China's defense budget has grown to roughly $230 billion, and its shipbuilding capacity dwarfs the American effort by an order of magnitude that the U.S. Naval Institute has described as roughly 230 to one. Beijing does not spend more than Washington. It spends smarter, with a strategy that treats shipyards and semiconductor foundries as instruments of national power. And the United States has forgotten that lesson.
What Industrial Policy Should Mean
Industrial policy should mean building things that deter war, not distributing subsidies to politically favored firms that happen to employ voters in swing states. The CHIPS Act of 2022 began a partial correction by directing $52 billion toward domestic semiconductor manufacturing, but defense procurement reform remains unfinished business in Washington. Semiconductors are only one link in a supply chain that stretches from rare earth minerals in Wyoming to missile seekers in Arizona.
A serious industrial policy would streamline acquisition rules that add years to every program, protect defense-critical suppliers from foreign buyouts, and invest in workforce training for welders, machinists, and engineers. The average age of a defense industrial worker has climbed steadily, and retirements outpace new hires in shipbuilding and ordnance production. And without people who know how to build hard things, no amount of money will matter.
The United States also needs to end its dependence on Chinese processed rare earth elements, which Beijing controls at a rate that the U.S. Geological Survey estimates near 90 percent of global refining capacity. A nation that cannot produce its own microchips, steel, and propellants is a nation that cannot sustain a long war. Economic independence is not nostalgia. It is a precondition for national survival.
Congress should treat defense production with the same urgency it treats entitlement spending and tax policy. That means multi-year procurement contracts that give manufacturers confidence to hire and expand, liability reforms that do not punish innovation, and a willingness to close redundant facilities that exist only to please committee chairs. The current system protects incumbents. But it does not protect the country.
The Strategic Cost of Economic Complacency
Complacency in the defense industrial base invites aggression because adversaries measure resolve by capability, not rhetoric. The Center for Strategic and International Studies has run war games showing that the United States would exhaust critical munitions within the first week of a Taiwan conflict. One week. That is how thin the margin has become after three decades of assuming that technology would replace mass.
The economic consequences of losing a war in the Pacific would dwarf the cost of any industrial reform. A Chinese blockade or conquest of Taiwan would disrupt semiconductor supply chains that produce more than 90 percent of the world's most advanced chips, according to the Semiconductor Industry Association. The resulting shock to American communications, finance, transportation, and health care would make the 2020 pandemic disruptions look mild by comparison.
Deterrence is cheaper than war, but only if the deterrent is believable. A Navy that cannot build ships fast enough, an Air Force that cannot acquire missiles in quantity, and an Army that cannot replace expended shells are not credible signals to Beijing. Credibility requires production lines that hum, inventories that are deep, and allies who see American reliability in the weapons that arrive on time.
The United States should spend what it must, but it should spend it on capacity rather than bureaucracy. Taxpayers have funded the most expensive military in history. They are entitled to a military that can actually fight. Rebuilding the defense industrial base is not a partisan project. It is an economic emergency dressed in strategic clothing.
