The Trump administration is trying to rectify a “generation of government underinvestment” in the defense industrial base, according to the president’s new economic report, as the war in Iran provides a stark example of what a high-intensity conflict against a near-peer adversary could entail.
The White House has requested a $1.5 trillion defense budget for fiscal 2027, including a base budget request of $1.15 trillion and an additional $350 billion from reconciliation, which would mark a historic high and a 44% increase compared to last year.
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A readout from the Office of Management and Budget on the budget proposal said investments in the industrial base “will generate expanded capacity” and provide “a foundation for future scalable munitions production.”
It also states, “One of [the Department of War’s] highest funding priorities in the Budget is to rapidly procure twelve critical munitions and invest in our long-neglected defense industrial base,” but did not specify which munitions are included and how much money is allocated for each in the budget.
Pentagon officials have stressed the importance of speeding up the delivery and expanding production of those munitions, and conflicts in the Middle East and Europe have demonstrated that need.
The U.S. Navy included a $3 billion request for additional funding to replenish its stockpile of Tomahawk missiles as a part of the Pentagon’s budget request released last week. The specific request to produce more Tomahawks represents a 1,200% increase over last year.
It used last year’s funding to purchase 58 missiles for $257 million, meaning this year’s request should finance the production of more than 780 missiles. The Navy has expended 850 Tomahawk missiles during the Iran war, the Washington Post reported about 10 days before the ceasefire commenced, making the total number likely much higher.
The speed with which services expended these expensive munitions demonstrates how costly a war against a more advanced military than Iran could be for the United States.
The department has already agreed to increases in production with multiple defense companies that produce the weapons the U.S. has been expending. In February, Raytheon announced agreements that included producing more Advanced Medium-Range Air-to-Air Missiles, Standard Missile-3, SM-6, and Tomahawk missiles. In January, the Pentagon announced a deal with Lockheed Martin to quadruple THAAD interceptor production from 96 to 400 annually.
The 2027 budget proposal also includes a request for 494 Advanced Medium-Range Air-to-Air Missiles, valued at approximately $800 million, up from the 106 AMRAAMs, valued at roughly $69 million, it requested in fiscal 2026.
The department is trying to overcome decisions made in the 1990s that made sense at the time — following the end of the Cold War — but no longer do, especially in light of China’s military modernization and expansion.
“A generation of government underinvestment in the DIB has increased the burden on the industry and stands in stark contrast to China’s and Russia’s substantial military and industrial build-up,” the president’s economic report said.
In 1993, Secretary of Defense Les Aspin and Deputy Secretary of Defense William Perry hosted representatives from major defense companies at the Pentagon for a meeting, which has been nicknamed the “Last Supper,” where they informed those representatives that the Clinton administration intended to decrease defense spending after the end of the Cold War.
At the time, there were more than 50 defense contractors, but by the early 2000s, the total number of prime defense contractors had been consolidated to five: Lockheed Martin, Raytheon, Boeing, General Dynamics, and Northrop Grumman.
Around the mid-1990s, the Pentagon began a significant decrease in its use of commercial companies that do not exclusively serve the defense and aerospace fields. Before the “Last Supper” conversation, exclusive defense specialist firms handled only about 5%, while that number is now about 60%, according to the president’s economic plan.
Trump’s economic plan, which was released on Monday, notes that the consolidation has shown the “significant downsides” involved “in the emerging strategic environment: decreasing competitiveness and the resulting increased costs of defense articles,” as well as “inducing” those companies “to engage in oligopolistic tendencies.”
As part of its effort to revitalize the defense industrial base, the administration has sought to bring in non-traditional defense contractors, which have allowed new and emerging technology companies, in particular, to enter the defense industrial base.
“We saw some progress over the past 10 years, and fits and starts, but no wild sea change until now. And that is what I think is remarkable about what the Trump administration is doing in this space,” Tara Murphy Dougherty, the CEO of Govini, a defense acquisition software company, told the Washington Examiner. “There has been true action and the beginning of a sea change in terms of the vibrancy, the dynamism of the kind of companies that are working directly with the Department of War, and just so many more from outside of the traditional space.”
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In February, Secretary of War Pete Hegseth acknowledged that the department has not always been a good customer, which has contributed to the situation they’re now in.
“A lot of the hang-up has been us, so we’ve got to look at ourselves first, the way we do business,” Hegseth said. “We’ve been impossible to deal with, a bad customer, who year after year changes our mind about what we want or what we don’t want — and then we make little small technological changes, which makes it more difficult for them to produce what they need to produce on time.”
