Inflation will wreck the defense industrial base – leaves the US vulnerable to external threats

Inflation is a national challenge impacting us all. It is eroding our savings, challenging our daily lives, and sapping our economic strength. We cannot allow it to weaken our national security as well. Businesses across the country are finding ways to cope with record-high inflation. Some are raising prices on their goods; others are offering fewer goods for the same price. But what happens to companies who can’t charge more, or offer less? For those that have an important role to play in keeping us all safe, the options are more limited. If increased costs cannot be accommodated, companies may abandon Department of Defense work for commercial enterprises. Many companies I talk to, including critical suppliers, are ‘on the bubble’ right now and may flee the defense industrial base, which would be an enormous strategic setback. DoD admitted in May that one company has already requested to cancel a long-term contract due to inflation. And last week, top Pentagon officials acknowledged concern about inflation driving small companies out of business. Small businesses are being particularly hard hit by rising costs. For example, one small aerospace and defense business owner shared with me that his company’s lead time for some materials has increased threefold, transportation delays and costs are so significant that they have had to buy their own vans to deliver products, and salaries for skilled workers have jumped by as much as 40 percent. Small businesses did not have an opportunity to budget for these kinds of costs, and right now, the only certainty they have is that their costs will continue to rise. The ever-increasing threats from abroad – from Russia’s brutal invasion of Ukraine to ongoing malign activities emanating from China, North Korea, Iran, and other actors – mean that the industrial base can’t slow down or offer less. The security of our country depends on the defense industrial base’s ability to get the job done.