Stuck in the Cul-de-Sac

Executive Summary

For more than a decade, the United States has sought to modernize its military to deter China, but it has become stuck in a developmental cul-de-sac that has allowed China to steadily shift the balance of power in the Indo-Pacific in its favor. Recent U.S. defense budgets have disproportionately invested in long-term developmental programs at the expense of producing sufficient capabilities available for the near term. As a result, today’s Joint Force is smaller, older, and less capable than at any other time in recent history.

Over the past 15 years, the average time and cost the Pentagon has taken to field major weapon systems has grown significantly, and the share of research, development, test, and evaluation (RDTE) spending within the broader defense budget has continued to steadily grow. Despite extended periods of very expensive research and development, major weapon systems have frequently failed to enter production on time or in numbers large enough to make a difference for U.S. warfighters. RDTE cost growth has also affected mature programs, where unexpected modernization challenges have interfered with plans to expand production of available capabilities.

Bolstering deterrence involves a challenging balance of time horizons: The Department of Defense (DoD) must expand procurement of today’s capabilities to support near-term deterrence but cannot risk sacrificing next-generation modernization programs that sustain America’s long-term military advantage in doing so. As China’s accelerated conventional military buildup places significant pressure on today’s Joint Force, the urgency to close near-term capability gaps has become critical. Reductions in the Joint Force’s overall size and relative conventional capability have opened a dangerous window of opportunity for China.

This report finds that the fiscal year (FY) 2026 budget request and one-time reconciliation funding from the One Big Beautiful Bill Act (BBB) ultimately fail to make the needed investments to strengthen deterrence in both the near and long term. Instead, the current administration appears to be falling into the same mistake as many previous administrations by prioritizing costly development of next-generation systems at the expense of purchasing and fielding capabilities that are available to fill deterrence gaps today. Moreover, by pursuing modernization through reconciliation, the FY 2026 budget risks subjecting future modernization priorities to the political outcomes of nondefense debates. Absent a return to standard defense budgeting processes, modernization programs that received a down payment from the BBB will likely stall or fail entirely.

There are some opportunities in future defense budgets to produce greater numbers of existing high-end capabilities that can meaningfully contribute to deterrence in the near term while pursuing critical long-term modernization investments. This report’s analysis highlights five major capability areas where existing or near-ready capabilities, such as ground-based fires or combat aircraft, can be procured in meaningful quantities and contribute to important missions in the Indo-Pacific. Additionally, this analysis highlights important areas, such as hypersonic weapons, in which extensive developmental timelines and exorbitant procurement costs likely preclude near-term contributions to deterrence and in the long term will only be fielded in small quantities. Expanding the U.S. military’s capacity and capability in the near term will likely require both larger budgets and the rapid development and production of complementary, less expensive capabilities.

The United States faces a generational inflection point in how it approaches its defense investments. Rather than continue the disproportionate focus on next-generation technologies, the White House, Congress, and the DoD must budget a sustained pivot to purchasing existing capabilities that close near-term deterrence gaps. While this pivot must be balanced with continued investments in long-term modernization, the United States can no longer afford to sacrifice near-term procurement imperatives. Breaking out of the developmental cul-de-sac will require future defense budgets to emphasize procurement and accelerated RDTE across major defense programs.

This report recommends that in the near term the White House, Congress, and the DoD:

• Evaluate and justify how annual procurement and RDTE investments contribute to deterrence across time.
• Procure viable and ready combat aircraft (such as the F-15EX and B-21) and ground-based long-range fires (such as the Precision Strike Missile Increment 2, Navy-Marine Expeditionary Ship Interdiction System, and Mid-Range Capability).
• Reduce runaway RDTE spending on mature weapons programs.
• Pursue the rapid development, production, and scaling of lower-cost weapon systems, such as cheap cruise missiles or drones, to bridge and complement the arrival of next-generation capabilities.
• Consider reallocating shipbuilding procurement funds away from nonpriority maritime platforms, such as amphibious transport ships, toward more pressing shipbuilding priorities, such as industrial capacity and undersea capabilities.

This report recommends that in the long term the White House, Congress, and the DoD:

• Continue to pursue annual increases to the topline defense budget to ensure deterrence across time.
• Require that priority modernization efforts are subject to regular budgeting and long-term planning and oversight processes.
• Strengthen critical space supply chains and expand national security space launch capacity.
• Continue to fund long-term investments in the surface and submarine shipbuilding industrial bases.

Introduction

Since taking office, the second Trump administration has emphasized the importance of preserving America’s military edge. The fiscal year (FY) 2026 defense budget request and one-time reconciliation funding provided by the One Big Beautiful Bill Act (BBB) represent the new administration’s first major effort to advance this goal.

For over a decade, the United States has sought to modernize its military to deter great power adversaries like China and Russia. While the Department of Defense (DoD) has made considerable progress in some areas, it has struggled to consistently buy enough of the weapons that it needs to strengthen deterrence. In 2014, the Pentagon unveiled the Third Offset Strategy, which sought to develop advanced technologies such as artificial intelligence, autonomy, hypersonic weapons, stealth, directed energy weapons, and modernized space capabilities to counter China's and Russia’s anti-access and area-denial capabilities.¹ Four years later, President Donald Trump’s 2018 National Defense Strategy explicitly prioritized great power competition, identifying China as the U.S. military’s “pacing challenge” and investing in many of the same technologies that were emphasized by the Third Offset.² President Joe Biden’s 2022 National Defense Strategy reaffirmed the importance of deterring China and Russia and identified 14 critical technology areas that were essential to achieving this goal.³

Despite a decade of investing in new technologies, the United States has failed to deliver new capabilities at the scale warfighters need in order to maintain a favorable military balance against China. As of August 2025, many leap-ahead technologies the Third Offset promised in 2014 have yet to arrive, and the Joint Force is now in a worse position than it was in 2018.⁴ Meanwhile, China has rapidly modernized the People’s Liberation Army (PLA) and is steadily moving toward parity with the U.S. military in the Indo-Pacific.⁵ The United States now faces a near-term window of increasing vulnerability in which China may believe that the PLA could defeat the United States and that it may be better to act now than to wait for the Pentagon’s most advanced capabilities to reach the field.