‘Major warning signs’: American national security innovation at an ‘inflection point,’ report warns

There are “major warning signs” swirling within the U.S. national security sector that could hold back America’s ability to innovate at a crucial moment in the intensifying global competition with adversaries such as Russia and China, according to a new report made public Tuesday. The National Security Innovation Base (NSIB) Report Card, released by the Ronald Reagan Institute’s Center for Peace Through Strength, offers a deep dive into the overall health of American defense innovation. It examines “national security agencies and organizations, various research centers and laboratories, universities and academia, traditional defense ‘primes,’ commercial sector disruptors, venture capital and the innovative systems of American allies and partners” around the world, providing a comprehensive snapshot of the national security sector. In many instances, the report’s authors warn, the results aren’t encouraging. The U.S. defense sector remains a global tech leader, but the breakthroughs are not always being translated into greater security for the country, with the government’s broken budgeting process a prime culprit. “Maintaining America’s edge over our pacing competitor, the People’s Republic of China, depends on our ability to integrate new technologies into our national security ecosystem,” Roger Zakheim, director of the Reagan Institute, said in a statement Tuesday. “While the American private sector still leads in global innovation, and the U.S. government has made some progress over the last year, we are at an inflection point when it comes to translating innovation priorities into capabilities.” “The defense budget — both the top line … and its allocation within the president’s budget request — is stifling the health of the NSIB.” The report card’s release came just days after the Biden administration submitted its $850 billion Pentagon budget request for the next fiscal year, which begins in October. The figure amounts to a 4.2% increase over its base level request in the 2023 fiscal year — $815.9 billion — and a 4.2% increase in the $817.3 provided by the FY 2024 continuing resolution, a stopgap measure that freezes spending at the previous year’s level and prevents Pentagon officials from initiating new programs. But the Reagan study took direct aim at the federal government for failing to provide “sufficient and stable funding” for national security innovation that is vital to “acquire and scale critical technology” in the sector. As a result, the U.S. government got an “F-” grade for its inability to provide sufficient and stable funding needed to fund cutting-edge technology. That’s the lowest mark in the sweeping Reagan study. Other defense industry sub-sectors also received less-than-stellar assessments. Defense modernization, generally defined as the ability for America to modernize its armed forces and national security capabilities for the 21st century, received a “D” grade, down from the “C” it got in last year’s inaugural report card. “Failure to act on innovation priorities and pull through technologies at scale is materially affecting overall readiness levels and the ability to fight and win against a pacing competitor,” the report reads in part. More specifically, the report says that the U.S. “failure to act on innovation priorities and pull through technologies at scale is materially affecting overall readiness levels and ability to fight and win against a pacing competitor.” But the U.S. did receive an “A” for its innovation leadership, citing the country’s global leadership in patent filings and other key indicators. It also received a “B” in the innovation capital category, reflecting a widening pool of available money from venture capital firms and other avenues. Such funding streams have especially benefited high-tech initiatives, such as those in the artificial intelligence realm. Systemic challenges The creation of the NSIB report card came at a crucial moment for the U.S. defense industry. Major production and logistical challenges stemming from the COVID-19 pandemic have continued to dog the sector. There are also growing concerns in national security circles that the U.S. isn’t investing enough money to ensure it stays ahead of its rivals, particularly communist China. And there are signs of rising stockpile shortages as the U.S. ships weapons to its allies such as Ukraine. Indeed, while the recent $850 billion Pentagon budget request is undoubtedly an eye-popping number, specialists say it’s not as impressive as it appears on the surface. “It’s a little smaller than I would prefer … because it does not really provide any real growth. People who say that’s a huge amount of money are correct, but relative to the size of our economy, it’s only 3.1% of GDP,” Michael O’Hanlon, senior fellow and director of research in foreign policy at the Brookings Institution, told The Washington Times’ “Threat Status Podcast” recently. “As long as we hold flat in nominal terms, that means we’re going down relative to inflation,” he said. “Meanwhile, the economy is still growing, so we’re going down even faster relative to the size of GDP.” The federal government’s inability to provide long-term funding stability for the Defense Department and private-sector defense firms and Congress’s reliance on short-term funding resolutions, the Reagan Institute report said, are major concerns. Even in areas where there has been substantial progress on defense funding, modernization efforts have been plagued by funding uncertainty. The report card gave a “D” grade to “customer clarity,” warning that the Pentagon, CIA and other key arms of the national security infrastructure have seen their progress largely “negated by congressional failure to pass a budget, which is limiting progress and the strength of the demand signal to industry and investors.” The national security base’s talent base also received a “D” grade, with the report warning that “the industry continues to face a graying talent pool and demographic trends that foreshadow persistent talent pipeline challenges like inefficient skills matching and manual, burdensome vetting processes.” The struggle to attract talent — and to quickly get them through the necessary security checks to work in the defense industry — has become a leading concern for the sector. • Ben Wolfgang can be reached at [email protected]. Copyright © 2024 The Washington Times, LLC. Click here for reprint permission. Click to Read More and View Comments Click to Hide