America’s $1.36 trillion phantom arsenal

In early August, Reuters reported that the U.S. Army had fired off virtually its entire stockpile of long-range precision missiles. The administration rejects that account. President Donald Trump said the United States has massive amounts of munitions and that defense companies are building the largest number of plants and factories in American history.Whatever the truth may be, the dispute is a useful entry point to a much older problem, one that predates this war and seemingly will outlast it. Over the past several weeks, major defense contractors have issued a steady stream of announcements touting new production of critical munitions. But read the fine print and you see that these deals are somewhat less than meets the eye. “These are not contracts; they are agreements to agree,” Tom Karako, who directs the Missile Defense Project at the Center for Strategic and International Studies, told DefenseScoop. “I’m seeing a lot of cheerleading and a lot of premature celebration.”There is a key difference between a contract and an agreement. Contracts obligate a manufacturer to build something by a date and at a price, with penalties if it doesn’t. An “agreement to agree” obligates almost nothing. These cost a company nothing to announce, but still generate the same headlines as a real production commitment — without the capital outlay of one. That distinction shows up in the industry’s own bottom lines: across the five largest defense manufacturers, undelivered orders now total roughly $1.36 trillion, a figure that has grown faster than deliveries have. A backlog only shrinks when a company actually delivers, and an “agreement to agree” doesn’t commit anyone to delivering anything. Call it a failure of imagination over the course of multiple administrations led by both political parties. Indeed, today’s predicament is the result of America’s persistent failure to recognize obvious changes in how future wars would be fought, and a gross overreliance on exquisite, expensive systems made by our largest defense manufacturers. As The Atlantic observed, American and Gulf region forces are firing Patriot PAC-3 interceptors, million-dollar munitions with long production cycles, at Iranian drones that can be built for about $30,000. The current defense industrial base was intentionally designed. In July 1993, Defense Secretary Les Aspin and his deputy William Perry hosted the chief executives of roughly two dozen major defense contractors at the Pentagon, in a dinner that would later be nicknamed the “Last Supper.” That meeting was a directive to consolidate, and the message was that the Pentagon could no longer sustain so many suppliers. Over the following decade, mergers reduced the field to a handful of prime contractors. Perry would later call the result a disappointment: fewer, larger companies with less competitive pressure to innovate or control costs, rather than the leaner industry the Clinton administration aimed to produce.Every administration since has treated the symptoms, rather than addressing the underlying issue. Budget sequestration in the early 2010s cut into modernization accounts for years. Ukraine’s 2022 artillery shell shortage was a public preview of the problem now visible with Iran. Each episode flashed red lights — but none has changed how many companies the country could turn to.What has begun to change is that capital has started to challenge that arrangement. Since 2021, investors have committed more than $130 billion to defense-related companies, and roughly 100 new defense startups have been founded over the same stretch. Crunchbase reports that 2026 funding has already eclipsed the full-year record set in 2025 within the first five months of the year, and the Pentagon has opened new doors to match: CSIS notes that Space Systems Command alone issued 20 Other Transaction Authority awards to a dozen firms in late 2025 and early 2026. WE’RE RUNNING OUT OF MISSILES. TRUMP’S TARIFFS WON’T SAVE US WITHOUT AI FACTORIESThis new wave of entrants is bringing new thinking and innovation to a range of military challenges, including, but not limited to, AI-enabled weapons systems, new operating systems, autonomous fighters and sea drones, and lower-cost anti-air interceptors, among many others. The increased competition has also caused many of the largest prime contractors to up their own game in terms of production and innovation, which had been lacking for so many years. These real structural changes have begun to challenge the 1993 model.None of this is a silver bullet, and it would be a mistake to treat it as one. Consolidation in the 1990s was a policy choice made deliberately and reinforced for more than three decades. But if America is to effectively meet the myriad threats we face around the world, this change must come and be reinforced by both political parties. Eric Ventimiglia serves as executive director of Pinpoint Policy Institute, a nonpartisan, nonprofit educational organization dedicated to promoting and defending the essential pillars of American prosperity.