“The consolidation of the defense industrial base has created a less resilient and less competitive.” National Defense Magazine explains it best. Our dependence on adversaries underscores this reality, with China producing over 70 percent of the world’s rare-earth minerals and dominating the global supply chain for critical technologies, such as commercial drones. This vulnerability undermines our defense investment, making the application of the free-market blueprint a national security imperative.
The Hollowed Arsenal: Acknowledging the Strategic Risk
The current state of the American defense supply chain is a result of a shortsighted bargain. For decades, a flawed economic narrative drove policy, prioritizing quarterly earnings over the long-term erosion of our industrial commons. This was a strategic miscalculation of historic proportions.
The pursuit of immediate cost savings and the promise of a “peace dividend” following the end of the Cold War led to a dangerous complacency. We allowed our industrial might to atrophy, believing we could always source what we needed from a globalized marketplace. This fundamentally misunderstood the nature of national power.
The Illusion of Efficiency: A Decades-Long Strategic Miscalculation
The dramatic consolidation of the defense sector sped up this decay. The number of prime defense contractors fell from over fifty to just five. This created a less competitive market, but the damage ran far deeper. With each merger and factory closure, we lost more than just capacity—we also lost a sense of community.
We lost the complex ecosystem of smaller, specialized suppliers, skilled labor pools, and irreplaceable institutional knowledge. This “industrial commons” is the true foundation of a manufacturing superpower. It includes the family-owned machine shop, which features unique tooling and metallurgical expertise passed down through generations.
When the large factories left, the entire support structure withered. This hollowing out of our industrial base was a self-inflicted wound, leaving the nation dangerously exposed and less capable of responding to a crisis.
The Geopolitical Trap: Ceding Control to Our Adversaries
This industrial decay created a dangerous geopolitical trap by outsourcing the production of critical goods to authoritarian regimes. This handed them a powerful weapon to use against us. The threat is most acute in the form of weaponized supply chains.
China’s dominance in critical materials is a prime example. It produces 90 percent of the permanent magnets required for advanced weapons systems. These are essential for everything from missile guidance fins and drone motors to the actuators in stealth aircraft. Beijing has already demonstrated its willingness to use export controls as a political tool, giving a primary adversary direct leverage over our ability to arm ourselves.
Additionally, the hidden dangers of espionage and sabotage are immense. Foreign-produced components, especially microchips, carry an unacceptable risk. Malicious actors could embed hidden backdoors or kill switches into sensitive military hardware. These could be activated remotely in a time of conflict, disabling our most advanced systems.
The threat is compounded by rampant, state-sponsored intellectual property theft. For years, adversaries have systematically stolen American innovation. They have used our own research and development to build their industries and modernize their militaries. This was not a competition; it was a coordinated campaign of economic warfare on a global scale.
The Drone Dilemma: A Case Study in Dependency
No technology better illustrates this vulnerability than unmanned aerial systems, commonly referred to as drones. Modern warfare, from Ukraine to the Middle East, has demonstrated that these systems are increasingly dominating the battlefield. However, China controls the commercial drone market, which drives innovation and economies of scale. Companies like DJI hold a commanding share of the global market.
This creates a multi-layered national security crisis. First, it makes the U.S. military and civilian agencies dependent on a Chinese supply chain for a critical war-fighting technology. A sudden cutoff could cripple our ability to field these systems in large numbers. Second, the data collected by these drones, from critical infrastructure surveys to military reconnaissance, could be vulnerable to espionage, with data flowing back to servers accessible by the Chinese government. This dependency is a strategic blunder of the highest order.
Rebuilding the Foundation: The Imperative of Reshoring
Making the case for reshoring is not an argument for protectionism. It is a clear-eyed assessment of national security requirements. A powerful nation must be able to build the tools necessary for its own defense. This requires a robust, resilient, and domestic industrial base.
National Security is Economic Security
The concept of “economic sovereignty” is a vital component of national strength. It insulates the nation from foreign coercion and supply chain blackmail. It ensures that in a time of crisis, America can produce what it needs without needing to ask a competitor’s permission.
This echoes the original concept of the “Arsenal of Democracy” from World War II. Then, our industrial might was the ultimate guarantor of freedom. President Franklin D. Roosevelt understood that military victory was impossible without overwhelming industrial production.
Today, rebuilding that industrial capacity is just as crucial for preserving our liberty in an increasingly dangerous world. A nation that cannot forge its own swords will soon find itself at the mercy of others.
A Market-Driven Realignment
The trend toward reshoring is not a government mandate. It’s a market-driven realignment, a rational market correction to decades of mis-priced geopolitical risk. The pandemic, the Suez Canal blockage, and chronic port congestion exposed the fragility of extended supply chains.
Businesses are now prioritizing resilience over the illusion of cheap overseas production. Rising labor costs in Asia and the increasing threat of political instability have further shifted the calculus. Recent data shows that nearly half of original equipment manufacturers (OEMs) are now actively reshoring or formally considering it.
About 30 percent are already. This momentum proves the private sector is leading the way. Smart policy should seek to accelerate this trend by removing barriers, not by picking winners and losers.
Fostering Innovation and Technological Superiority
This shift also fosters the innovation required for technological superiority. History shows that progress accelerates when engineering and production are co-located. This is especially true for rapidly evolving technologies, such as unmanned systems. This creates a virtuous cycle of feedback and improvement.
The practical lessons learned on the factory floor inform the next generation of design. Separating production from design causes a loss of “tacit knowledge.” Rebuilding our domestic industrial base will reunite our designers and makers. This proximity is essential for maintaining our competitive edge.
The Policy Levers for an American Industrial Renaissance
The solution to this vulnerability is a principled application of the free-market blueprint. It rests on four key policy approaches that work in concert to create an environment that enables domestic manufacturing to thrive. These are not top-down industrial policies. They are foundational reforms designed to unleash the power of American enterprise.
Unleashing Capital Through Pro-Growth Tax Policy
The first approach is unleashing capital, and the One Big Beautiful Bill Act (OBBBA) was the foundational first step. The power of this legislation lies in the certainty it creates. By making the globally competitive 21% corporate tax rate permanent, the law ends the ambiguity that chilled investment for years.
For too long, the threat of future tax hikes forced businesses to factor that political risk into their long-term planning. This uncertainty drove capital overseas in search of more stable environments. With a permanent, competitive rate, businesses can now engage in confident, multi-decade capital planning for new factories and facilities in America.
Additionally, the OBBBA directly incentivizes investment in American production. The provision for 100% bonus depreciation, or full and immediate expensing, is a powerful tool. This allows businesses to deduct the full cost of new equipment and machinery in the year of purchase.
This fundamentally changes the return on investment calculation for modernization. It improves cash flow and directly encourages companies to upgrade their facilities with the latest technology. The law also restored the ability of companies to expense research and development costs immediately. This is a direct injection of fuel for the innovation needed to create next-generation defense systems, from hypersonic missiles to autonomous drone swarms.
A Great Unburdening for the Defense Industry
The second approach is a “Great Unburdening” of the regulatory state. This hidden tax of nearly $2 trillion annually chokes investment [1] before it can begin. For the defense industry, this burden manifests as crippling delays and soaring compliance costs, making building in America prohibitively expensive. To reverse this, we must target the specific mechanisms that obstruct bureaucratic processes.
Dismantling the Permitting Paralysis
The most significant barrier is often the perception of paralysis. The National Environmental Policy Act (NEPA), signed into law with modest intent, has metastasized into the single greatest obstacle to building anything in the United States. Radical environmental groups have weaponized the law to wage a war of attrition against American infrastructure and industry.
As discussed previously, through a tactic known as “sue and settle,” these groups file endless lawsuits, often colluding with friendly administrations to create new regulations outside of the public and congressional process. This litigation abuse can delay a critical mine, a new semiconductor fab, or a drone manufacturing facility for years, driving up costs until the project becomes unviable. With the right changes, we can make improvements, such as the new Brook Mine in Wyoming, the first of its kind in over 70 years, which is taking place throughout America.
This is a victory against this inertia, but it must be the rule, not the exception. To achieve this, we need a set of specific, principled reforms:
- Impose a “shot clock.” A two-year deadline for all major project environmental reviews is a realistic goal that would eliminate indefinite delays.
- Limit judicial review. After approving a project, authorities must curtail endless legal challenges to provide investment certainty.
- Enact “loser pays” provisions. Requiring litigants who bring frivolous lawsuits and lose to pay the defendant’s court costs would be a powerful deterrent to litigation abuse.
Restoring Constitutional Order
Furthermore, we must restore constitutional order to the regulatory process. The rise of the administrative state violates the fundamental principle of the separation of powers. For forty years, the flawed legal doctrine of “Chevron deference” forced courts to defer to a bureaucrat’s interpretation of the law.
This gave unelected agency officials immense power to virtually write laws. This past summer, the Supreme Court overturned this precedent in Loper Bright Enterprises v. Raimondo. As we detailed in our analysis of the administrative state, legislative action must codify this judicial victory.
The next logical step is for Congress to pass the REINS Act. This vital legislation would require any “major rule” with a significant economic impact to face an up-or-down vote in Congress, restoring a critical check on bureaucratic power by ensuring those who make our laws are accountable to the American people.
Fueling the Arsenal with Energy Dominance
Third, an industrial revival requires cheap and reliable energy. This is a non-negotiable prerequisite, especially for energy-intensive defense manufacturing sectors like steel, aluminum, and advanced chemicals, where energy is a primary input cost. A nation that cannot affordably power its factories cannot hope to compete.
Unleashing American Abundance
We must pursue an “all of the above” energy strategy that unleashes our vast domestic resources. This means removing federal roadblocks to oil and natural gas exploration, pipeline construction, and LNG export terminals. Technologies like hydraulic fracturing and advanced drilling have unlocked generations of affordable energy.
This abundance is a key competitive advantage that will lower costs for our entire defense supply chain, from foundries casting vehicle hulls to the clean rooms producing microelectronics for drone guidance systems. This strategy stands in stark contrast to the self-defeating policies seen in Europe, particularly in Germany. Their ideological pursuit of a green agenda, which led to the shuttering of nuclear plants and created a dangerous dependence on Russian gas, resulted in deindustrialization and severe economic consequences.
We must not repeat their mistakes.
Embracing Next-Generation Nuclear Power
Our energy strategy must also embrace the future of clean, reliable power, including next-generation nuclear energy. Advanced modular reactors (AMRs) offer a path to safe, scalable, and zero-emission power that operates continuously and reliably. Unlike the massive, bespoke plants of the 20th century, AMRs can be built in factories and deployed where needed, providing a reliable power source for an industrial base.
Yet, our regulatory framework for nuclear energy is stuck in the past. Many criticize the Nuclear Regulatory Commission (NRC) for being slow and burdensome, claiming its one-size-fits-all approach stifles innovation. We must modernize its processes to allow for the rapid testing and deployment of these advanced technologies. Energy dominance is a cornerstone of national security.
Rebuilding the American Maker
The final approach is rebuilding the American maker. A manufacturing renaissance is impossible without a skilled workforce. For too long, our culture has undervalued the skilled trades, resulting in a significant and dangerous labor shortage.
Projections indicate that a shortfall of 2.1 million manufacturing jobs by 2030 could jeopardize $1 trillion of economic output. We cannot build the arsenal of democracy without the welders, machinists, and technicians needed to build and maintain everything from aircraft carriers to sophisticated drone fleets. This requires a fundamental shift in cultural and educational perspectives.
A Blueprint for Workforce Freedom
A policy blueprint for workforce freedom must support this cultural shift. We must champion vocational training and apprenticeships as respected and valuable paths to prosperity without debt. Recent policy victories, such as the expansion of Pell Grant eligibility to cover high-quality, short-term credentialing programs, represent a major step forward.
This new law provides students with more flexibility, enabling the education system to respond dynamically to the evolving needs of the economy.
To build on this momentum, we must:
- Reform K-12 Education. Reintegrate technical and vocational tracks into high school curricula, treating them as equal and honorable paths alongside college preparatory programs.
- Unleash Apprenticeships. Cut the red tape that discourages businesses from offering earn-and-learn apprenticeship programs, which are the most effective model for skills training.
- Empower Workers with Choice. Protect worker freedom by ensuring every state has Right-to-Work laws. These laws prevent forced unionization, which drives up costs and reduces flexibility. Data consistently shows that Right-to-Work states outpace their peers in job growth and investment.
A Choice Between Dependency and Strength
For too long, America has outsourced its industrial strength and, with it, a measure of our national security. The military supply chain is fragile, leaving the nation exposed. The path forward presents a clear choice between growth and managed decline. The passage of the OBBBA proves the free-market blueprint is politically achievable. We must now apply this full blueprint to secure the arsenal of democracy for generations to come, ensuring that the future of warfare, fought increasingly with autonomous systems, is built on a foundation of American industrial might.