Spending Right: How Conservatives Can Make Defense Spending Great Again

It has long been conservative dogma that American defense spending is good for our economic and national security. Recently, this has been paired with the idea that our defense industrial base is broken and unable to deliver technological innovation. While criticizing large defense contractors has never been verboten amongst conservatives, there is a new trend afoot. At its core is the idea that the current defense complex cannot effectively innovate.

The 2026 National Defense Strategy (NDS) centers its acquisition approach on this concept, arguing that the United States must “return to being the world’s premier arsenal, one that can produce not only for ourselves but also for our allies and partners at scale,” by “reinvest[ing] in U.S. defense production, building out capacity; empowering innovators; adopting new advances in technology, like artificial intelligence (AI); and clearing away outdated policies, practices, regulations, and other obstacles to the type and scale of production[.]”¹ These are undoubtedly the right ideas, but they are also fraught with challenges that could block success.

Defense Spending & Budgetary Reform 

There can be no question that we need to spend lots more on defense to supplement decades of underspending and limited core technology innovation since the end of the Cold War. At approximately $1.5 trillion, the president’s budget—if enacted—will be the largest single-year defense expenditure in history.² That level of spend is solid; the real question is whether we are committed to this path. If the president were to continue such increases and shift the spending from supplemental to base, we would be on a path to a robust 5 percent of GDP, a number long advocated for but rarely achieved.³

To make good on this promise, now may also be the right time to do what Mackenzie Eaglen suggested two years ago: “splitting the defense budget in two [by]…separating warfighting operations from capital expenses” and spending more on both.⁴ With munitions drawn down for recent operations in Latin America, the Middle East, and Ukraine, there is little question that a force-on-force conflict with China would be nearly impossible to fight in the near term and rapid replenishment is therefore an immediate necessity.

Whether we are spending correctly today is also a difficult question. The shifting battlefield dynamics in Ukraine have driven the White House’s commitment to achieving “drone dominance” and deploying counter-UAS technology.⁵ The administration’s focus on space and cyber—as well as its investment in domestic supply chains, critical minerals, microelectronics, batteries, and resilient power—are critical, as are the Department of War (DoW)’s investments in Golden Dome.⁶ And yet we continue to spend on programs like the B-21, that while perhaps transformational at invention, now principally serve, in this case, to replace an aging strategic bomber fleet. This is not to say such expenditures are unnecessary—there is little doubt such a strategic capability is crucial—it is just that the bill for taking our eye off the ball for so long is finally coming due. Worse still, we are underspending on important efforts like the Pacific Deterrence Initiative and may even pull back on supplying Taiwan what it needs to defend itself—and to put ourselves in a place to step in if needed—right as each of these efforts becomes central to staving off conflict in the Indo-Pacific through a robust deterrence posture.

Executing on the NDS Vision

Regardless of whether we make the long-term financial commitment we ought to make, there is still significant value in relying on the NDS vision for defense modernization. And, in fact, with combined action from the administration and the Hill, a new path is being cleared for defense acquisition reform.⁷ This includes a significant rewrite of the FAR, a clear move away from the DFAR to the expanded use of CSOs and OTAs under the Software Acquisition Pathway, and similar approaches elsewhere across the defense acquisition base.⁸ Quadrupling down here makes good sense, but it will also require making real changes in force structure and reshaping the fundamentally sclerotic acquisition culture if we are to see real success.

The reality is that the innovation once funded by or developed under government research contracts is now increasingly funded by venture capitalists and built by entrepreneurs. This is true not just in traditional areas like cybersecurity but is increasingly the case for defense tech more broadly.

And this brings us to two of the most transformational investments in the president’s defense budget: the investments in artificial intelligence for the DoW and the efforts to accelerate venture capital in defense technologies, creating new prototyping and next-generation options.⁹ At nearly $60 billion, the president’s AI request invests in infrastructure, internally developed and commercially available technologies, and R&D to support both military and business activities.¹⁰ While it is hard to know whether the requested amounts match current needs, capabilities, and ability to uptake—and whether the money will actually deliver on warfighter needs—it certainly reflects a leadership prioritization of these capabilities.

Likewise, the nearly $25 billion sought for the Office of Strategic Capital, the National Security Investment Fund, the Defense Innovation Unit, and the Strategic Capabilities Office clearly reflects the White House and DoW’s recognition of the role of private capital in defense, the importance of technology innovation, and a plan to get VCs and others more engaged.¹¹ More can be done, such as providing security clearances to leading-edge investors and innovators and creating more opportunities for them to understand DoW and warfighter needs in order to match public problems up with cutting-edge private capabilities. Together, these investors and innovators alongside our defense and intelligence communities are the bulwark for America to maintain its advantage over China.

The Secretary of War has described a deliberate move “away from the current, prime contractor-dominated, low-competition defense industrial base” toward a “dynamic vendor space that accelerates production by combining investment at a commercial pace, with the uniquely American ability to scale and scale quickly.”¹² This is the right aspiration. However, today the total spend on venture-backed defense-tech firms is less than 1 percent of Pentagon spending.¹³ This problem must be solved, not just through a commitment to buy more from smaller companies, but by actively prioritizing the acquisition of innovative ideas and capabilities from new players to solve real, hard problems not just more requirements for primes to bring smaller players into the fold (although that matters as well).

Moreover, while DoW’s core acquisition reform initiatives are critical, massive cultural change is also needed. If we do not change how the actual buyers in DoW operate and modify the incentives they respond to, we will continue to fail. This will require a commitment to finish what the DoW has sought to begin: a real shift from a risk-averse culture to a fail-fast, fail-often mentality.

Conclusion

None of this requires DoW to divorce itself from traditional contractors; rather, it requires incentivizing them through competition to both be innovative on their own and to become acquirers of startup technologies.¹⁴

In providing resources to new companies, we must not let our drive to innovate be satisfied solely through the creation of a set of “neo-primes” that simply grow in size, scale, and scope to become a new generation of sclerotic primes. We need actual, consistent innovation coming out of a consistently growing supply of new innovators. And this means truly partnering with the investors that back these innovators, not simply taking a piece of the action for the government.

The key to all this is forcing an embrace of a fundamentally different approach to resourcing and acquisition. This will require money, courage, and leadership. Whether we have it and use it will determine whether there will be another American century.