America Must Unleash the Potential of Its Defense Industry

America Must Unleash the Potential of Its Defense Industry

What really stifles dynamism in the United States is overregulation, which Washington ought lessen if it serious about competing with China.


The United States maintains a technological edge in defensive technology and capability, but our Achilles' heel might be our industrial base.

In a recent war game run by the Center for Strategic and International Studies, the United States ran out of missiles against China within days of conflict breaking out. This has been echoed in the Ukraine-Russo War, as manufacturers struggle to fill the massive demand. On top of that, defensive firms often fragilely rely on one manufacturing plant. Attempts to revive supply have been slow. Meanwhile, the shipyards can’t build even two destroyers a year, citing supply chain issues and labor shortages. One can be all for developing cutting-edge projects like the B-21 bomber, but there’s something to be said for mass—possessing more than enough quantity of cruise missiles, rockets, and bombs. All this should serve as a warning that we may simply not have the industrial base to support a protracted conflict.


This realization comes at a critical time as China’s single-minded obsession with submerging Taiwan under its rule threatens to cause massive global disruptions. Taiwan is a doorstep to the all-important shipping lanes and is the main producer of semiconductors, which practically every industry relies on. Washington would be under immense pressure to enter the war if China decided to invade.

To prevent this, American diplomacy needs teeth. The lethality of the U.S. military should be unquestioned by our adversaries as generations ahead of their own. Making this possible means that a robust industrial and technology sector is not only an issue of jobs, but of national defense.

Lawmakers are aware of the problem, but so far, their response has been misguided. Much of it has been reactive, seemingly stemming from a panic of watching China spend massive amounts on subsidies. We try to “keep up with the Jones” and mimic their actions to an extent. Earlier this year, Biden signed the $52 billion CHIPS Act into law, providing massive subsidies for the semiconductor industry—certainly an important industry for defense, especially given that the Department of Defense uses 1.9 billion chips a year.

If only it were that simple. As Bloomberg’s editorial board notes, throwing money at the problem won’t solve it. Renowned historical economists like Henry Hazlitt, Ludwig von Mises, and Milton Friedman wrote extensively on how subsidies misallocate resources, create distortions, and stymie growth. China, often admired by some for its remarkable growth and development over the past few decades—made possible by subsidies and government policy—now faces deep economic problems. This was entirely predictable. It is not a strategy we should mimic.

What really stifles dynamism in the United States is overregulation—big government, as it were. Clean Air Act permits can take eighteen months. National Environmental Policy reviews take an average of four and a half years. As new technologies continue to quickly develop, this is time companies can’t afford. Tariffs, designed to protect the defense industry, have instead hurt it. President Joe Biden’s hostility towards low-cost, reliable energy only adds to production costs. The Jones Act, designed to protect American shipping, has instead made it incapable of meeting national defense needs. This is all without even including the maze of local “not in my backyard” laws that in 2015 were estimated to cost the U.S. economy at least $1 trillion a year. The list goes on. This overregulation has serious consequences in both time and money.  Producing semiconductors in the United States, for example, takes 25 percent longer and is 50 percent costlier than in Asia.

Then there’s the labor shortage. According to one study, 300,000 more skilled workers were needed just to fill current chip plants, much less start new ones. Addressing this will require immigration reform. This is a thorny political issue, but the simple reality is that ample labor keeps production high and costs low. Attracting the best minds in the world is one of the best and easiest ways to stay competitive. Currently, foreign STEM students receive their graduate degrees in the United States (often at taxpayer expense), but caps on green cards make it hard for them to stay. We literally pay for their education and then kick them out—often to China’s benefit. In fact, Chinese leaders in semiconductors and other technologies were all educated in the United States.  

There are, of course, security risks in expanding visas, which China will try to exploit for espionage purposes. But the upside is too great to ignore, and the downsides can be enormous; educating foreigners and kicking them out seems to be the best way Beijing can piggyback off of U.S. research. The creator of 5G technology, who was sponsored by the Chinese company Huawei, and the father of Chinese missile and space technology were both immigrants forced out of the United States. “The stupidest thing this country has ever done” is what former Secretary of the Navy, Dan Kimball said about the latter. Surely creative ways to strengthen security while tapping into the talent that accompanies visa expansion must exist.

As historian Victor Davis Hanson and others have written, the freer nations are the more powerful their military. Authoritarian regimes don’t have the dynamism to build and adapt. The challenge for Congress and the next president will be to position him or herself as a reformer that can unshackle U.S. industry from the burden of onerous regulation. A nation of liberated innovators, visionaries, and entrepreneurs would put China to shame, full stop.

Daniel Duffy is a Marine veteran of Iraq and Afghanistan that writes on foreign policy. His work is found in several publications.

Image: Official White House Photo/Flickr.