A grand experiment in “defense transformation” is underway at the Pentagon. New Defense secretary Pete Hegseth has promised to field emerging technologies, reform the acquisition process, and build a resilient defense industrial base. He has also directed an 8 percent budget cut—some $50 billion—to shift funds toward new priorities, including technologies such as unmanned systems.
Proponents of this shakeup argue that the U.S. grew complacent after the Cold War, consolidating its defense industry into a handful of bloated “prime” contractors, like Lockheed Martin and Raytheon. Meantime, China and other adversaries developed cheap technologies that could neutralize America’s powerful, but expensive, platforms. Unless the U.S. deploys its own arsenal of cheap, software-enabled weapons, it will face a prohibitive “cost exchange ratio” in a war with China—losing multibillion-dollar warships, for instance, to missiles that cost a few hundred thousand dollars. Research and recent developments (like drone deployment in the Russo-Ukrainian War) seem to confirm this challenge.
Hegseth’s experiment joins the priorities of several parts of President Donald Trump’s coalition. The Tech Right—including upstart defense contractors such as SpaceX, Palantir, and Anduril and their venture capital supporters—believes that it can revolutionize U.S. warfighting readiness with cheap, mass-produced weapons and cutting-edge software. The more populist “New Right,” for its part, sees a military build-up primarily as a way to restore American industry and the middle class.
For now, both sides think they can have it all: build an unmatched military, create jobs, and save money. But this ambitious project faces several problems.
First, the success of defense transformation is not foreordained. The Tech Right’s futuristic weapons have not yet been manufactured at scale, much less deployed as system-of-systems across all military branches. In addition, many defense experts caution that future wars will require a “high-low mix” of technologies. The cheap, mass-produced weapons celebrated by the Tech Right have a role, but so do the exquisite—albeit expensive—platforms of yore, such as aircraft carriers, which give the U.S. unique advantages over its adversaries.
Second, the Tech Right’s focus on efficiency may not produce the New Right’s desired re-industrialization. The new companies’ business cases—that they can produce more, for less, than the primes—depend on industrial automation and labor-saving software. Anduril, for example, manufactures “expendable systems” like cruise missiles, autonomous platforms, and rocket motors. Anduril’s manufacturing process—recently announced for an Ohio plant that the company says will create 4,000 jobs—uses a software-first approach explicitly modeled on Tesla, a company known for automating away jobs. Saronic, a firm that produces unmanned surface vehicles (sea drones), will do the same with a new port recently announced in Texas.
This is not exactly the industrialization that the New Right imagines: the kind that will employ non-college-educated workers en masse. There is also a danger that, as the U.S. simultaneously tries to buy new technologies and trim costs, large programs in the budget—e.g., the ships, submarines, and manned aircraft the prime contractors build—will get prematurely scrapped. This would kill many jobs both at the prime contractors and up the supply chain, before it’s clear that the Tech Right’s business models can replace them.
Moreover, showing preference for new competitors like Anduril risks their transformation into “neo-primes”: new versions of the old behemoths that critics blame for the military’s current state. Such hypothetical neo-primes would be unlikely to avoid their predecessors’ profit-seeking pathologies, such as bureaucratic capture or anti-competitive practices (e.g., writing regulations that raise barriers to entry, or monopolizing data rights), which led to defense-industry sclerosis in the first place.
Accordingly, defense transformation should proceed with caution, allowing time to assess the risks to national security and defense economics. Above all, the Pentagon should avoid the fantasy that new technologies can fully replace old ones. Instead, it should embrace the high-low mix, and find savings not from cutting proven platforms, but from changing how the U.S. hedges for threats around the world.
That starts with Hegseth’s waste-reduction goals. Cost-cutters—whether traditional deficit hawks or New Right efficiency warriors—will eventually run out of “woke” programs and miscellaneous items to slash. They will then have to choose between cutting the Pentagon’s modernization accounts, which purchase new equipment or software for future wars, and operations and maintenance (O&M) accounts, which maintain preexisting units in a ready state for near-term threats.
Cutting the first (modernization) would favor the Tech Right, by forcing a zero-sum choice between new weapons and the old. With a tighter modernization budget, the Tech Right’s allegedly cheaper weapons would be more enticing than the primes’ offerings. On the other hand, cutting the second type of account (operations and maintenance) leaves the U.S. unprepared for today’s threats.
Here, Hegseth and Trump’s emphasis on restraint and allied burden-sharing can help. Reducing the military’s overseas responsibilities can save money on O&M accounts without crimping spending on readiness. This can ensure that modernization accounts avoid cuts, or even grow. The U.S. can pull back more, encourage allied rearmament initiatives, and above all, forcibly negotiate an end to the wars in Ukraine and the Middle East. This will allow the Department of Defense to maintain operational readiness for existing units, while continuing to fund the future high-low mix—no zero-sum solutions required.
Cost-cutting during an experiment is a risky maneuver: it forces change before the results of the experiment are known. Many defense startups demonstrate extraordinary promise, but for the sake of both American national security and industrialization, the administration should keep a close eye on the Tech Right.
Top Photo by Jen Golbeck/SOPA Images/LightRocket via Getty Images
