The United States is selling, lending, and donating weapons to its allies all over the world.
Surging munitions to Israel, prepping a one point one billion dollar arms sale to Taiwan.
Giving Ukraine an additional three hundred and twenty five million dollars in military aid.
America has already committed more than forty four billion dollars in security assistance to Ukraine, and on top of that, the White House wants Congress to unleash more support for Ukraine, Israel, and Taiwan. Here's what President Joe Biden had to say on Wednesday, hours before a major Congressional vote on military aid.
Congress needs to pass supplemental funding for Ukraine before they break for the holiday.
Resource as simple as that.
All of that is straining the US defense industry's supply chain, especially when it comes to the bullets, artillery shells, and missiles that the country itself might need in the event of a war. According to some measures, with current military policies, it would be roughly a decade before we'd be stocked for battle.
The strategy is like taking out a full banner ad in Times Square to the Chinese and the Russians. That says Hey, we're really going to be prepared in twenty thirty five, but could you guys just kind of chill and not bother attacking us until then.
That's retired Army Major General John Ferrari looking at America stockpiles today. He says the country has a problem. And Bloomberg reporter Courtney McBride told me he's not the only one.
So the exact levels of US stockpiles are classified. But there is concern from really from all corners, you know, members of Congress, folks in the Pentagon that they are becoming depleted.
Today on the show, America has a defense supply chain problem. How did we get here? And what could happen if we don't get it under control. This is the big take from Bloomberg News. I'm your host Salaamosen with a special report from Washington, d C. Retired Major General John Ferrari spent thirty two years in the US Army. Do I call you major General? I don't know what the Army protocol is.
Yeah, you call me John.
You also have a very cool last name.
I do, but I drive a Camray.
So Ferrari's service included working in the Army Material Command, that's the group that makes sure there are enough bullets to go around. He's seen firsthand what happens when there aren't.
I was in the Pentagon on nine to eleven, right, and so when we had to start fighting that war, all of a sudden, we were running low on small arms munitions to give the soldiers, and we had to struggle just to provide people in the infantry with bullets. And if you remember at the beginning of Iranki freedom, when the Secretary of Defense Rumsfeld went to Iraq and he talked to the army force and they were complaining about their hillbilly armor.
Our vehicles are not armored. We're digging paces of rusted scrap metal and compromised ballistic glass that's already been shot up, dropped, busted, picking the best out of this scrap to put onto our vehicles to take into combat.
I've seen that scared look in everybody's face that we actually have to go fight and we don't have what we need. We owe them the bullets and equipment to be prepared in the training on the first day of war.
And when it comes to our stock of bullets today, he says, America is already feeling a squeeze.
If the question is is the United States ready to fight perhaps two and a half or three wars, well, our defense strategy says we're not.
How much of the poor numbers would you blame on the fact that the Ukraine war has dragged on far longer than folks seem to have expected.
Wars always drag on longer than expected, right, So if you go into a war thinking that it's going to be over quickly, and you size your stockpile of bullets for it to be over quickly, you're probably going to be on the wrong end of that fight. War is about in some ways, it's not about military capacity in the short term, because you're trying to break the will
of the person you're fighting against. And if you don't have enough bullets and they know that they just have to last a little bit longer, right, you're giving them hope and the reason to keep fighting.
To understand the current scale of America's weapons shortage, I sat down with Courtney McBride. She covers diplomacy and national security for Bloomberg News.
So since Russia's full scale invasion of Ukraine in February of twenty twenty two, the US has sent more than forty four billion dollars in weapons and other assistance to Ukraine. Rockets, missiles, tanks, helicopters.
Where are these weapons coming from? Are the ones the US already had in warehouses somewhere?
It's a mix, but yeah, much of the assistance has come from US inventory. The US government has pulled equipment from existing US stocks to be able to send that to Ukraine as quickly as possible. There have been some contracts for new equipment, but there's a much longer lead time for those, as it would have to be built before being sent to Ukraine.
The US sending weapons to its foreign allies isn't new. It's been doing that for decades, both in times of war and peace. Part of what makes now different is the number of active conflicts America is supporting. First, there's the war in Ukraine. Just this September, the Army Science Board released a report saying that Ukraine had exposed fragilities in the Army's defense base. Those fragilities left the board concern that the American defense supply chain may not be
able to meet demand. And that's despite the US being the largest military spender in the world. Then a month after that report, sort the Israel Hamas War started, so the US would be expected to send weapons to yet another ally. Two days after the initial attack, on October seventh, the US Army Secretary Christine Warmouth told reporters at a press conference that the current defense stock wasn't enough to supply both Israel and Ukraine in.
Terms of our capacity to expand production and then to also pay for the munitions themselves. We need additional support from Compress, so I hope we'll see that soon.
And let's not forget America is also backing Taiwan in its stand off with China. Earlier this year, a war studies think tank ran a simulation modeling what would happen if a conflict with China broke out in the Taiwan Strait, and it found the US would run out of some key weapons in less than a week. Experts don't think America is on the brink of a direct military conflict, but it's the government's job to be ready.
The Pentagon would say, they have to plan for every contingency and be prepared for it.
And what is the real concern? Why should anyone be worried about the US weapons supply dropping really low.
There are concerns that adversaries are watching, and you could potentially seize an opportunity presented by US weaknesses or shortfalls and equipment. So it's natural security, yes, protecting the homeland, and beyond that, not only could the US need these weapons or these systems, but there could be another ally or partner that needs assistance.
That increased demand from US allies is part of what got the country here in the first place, but it's also a supply problem. After the break, we'll learn about a meeting in the.
Nineties famously called the Last Supper.
That changed the course of a supply chain and what it would take to boost weapons production. Now we're back looking at the US weapons supply and how it wound up spread so thin. Retired Major General John Ferrari told me, the US didn't just wake up one day and find its stockpiles empty and its allies begging for weapons. The country made a choice back in the nineties at the end of the Cold War to stop investing so much in defense.
What happened was wishful thinking and rosie planning assumptions. We assumed away the problem.
The idea was that if the country trimmed that budget, it could spend more on other things in loose the economy. It became known as a piece of it end.
Two years ago, I began planning cuts in military spending that reflected the changes of the new era. But now this year, with imperial communism gone, that process can be accelerated.
That's President George H. W.
Bush.
He was speaking during his State of the Union address in nineteen ninety two, a month after the Soviet Union collapsed.
So what happened in the nineteen nineties was we said, we don't want to spend as much money on defense, and so we cut the defense budget.
In the decade after the Cold War, the military's annual budget and real terms dropped about thirty percent, and part of that meant trimming down the number of companies the government could pay to produce weapons. So the Deputy Secretary of Defense at the time, William Perry, gathered all the defense contractors in a room for a.
Meeting famously call the Last Supper.
Picture about twenty CEOs sitting around a table in the Secretary's dining room at the Pentagon. They ate their meal and then they shuffled over to a conference room next door. That's where the Secretary told them, we need to trim the fat.
They decided which defense companies were going to fold and which ones were going to stay alive.
This set off a chain reaction of consolidation. At the time of the Last Supper, there were fifty one so called prime contractors, which are considered the highest quality. Today there are just five. So now, when America suddenly finds itself in need of bullets, those few companies have a hard time quickly scaled up production, and they rely on a patchwork of American factories with the capacity to produce
specific weapons systems. For example, there's one single factory in Louisiana that can produce the black powder that's needed for the artillery shells that are most commonly used in Ukraine. This stuff is hard to make and dangerous. In the last twenty five years, that factory has had at least seven fires and explosions, so it's not like we can just spin up several new factories to make this stuff overnight.
On top of spending less on defense overall, Congress also passed laws that led to changes in what the US spent its defense money on. These changes led the military to focus on big ticket items like tanks and ships and let the smaller, less sexy ones like bullets fall to the wayside. Addressing the shortfall that this created isn't going to be cheap. Let's take the example of one highly sought artillery shell, the one five five millimeter round.
Before Russia's invasion of Ukraine, the US was producing about fifteen thousand of those a month, but Ukrainian fighters are blowing through almost half of that every day. So the Pentagon is trying to ramp up production by five hundred percent in the next two years. That's going to cost an extra one point five billion dollars. The idea of increasing defense spending like that is something that some of our leaders want to avoid, especially when the government is
already trillions of dollars in debt. But Ferrari says not taking action now can have serious consequences.
There's a saying, right, the only thing more expensive than preparing for war is fighting a war, and the only thing more expensive than fighting a war is losing a war. There is no strong economy without a strong defense. What do you think is going to happen to the stock
market if we lose a war with China. What's going to happen to everybody's four one k in there right there, Iras, And so that's what's at state, is the economic viability of our nation if we don't maintain the free flow of goods across the world.
But of course the best thing for the economy, it would be peace. Bloomberg Economics calculated that this year, the cost of conflict of the global economy is on track to be the highest since the end of World War Two. Lost trade deals, loss investments, and domestic programs, not to mention lost lives, and that cost is immeasurable. Thanks for listening to the Big Take from Bloomberg News. I'm Salaiah Moosen. This episode was produced by Julia Press, Anna Masarakis, and
Naomi Shaven. It was fact checked by Oshna Shah. It's part of a special series from our DC newsroom. Blake Maples is our mixed engineer. Our story editors are Caitlyn Kenny, Wendy Ben Jaminsen, and Mike Sheppard. Sage Bauman is our executive producer and head of podcasts. Thanks for tuning in. I'll be back next week.