Gradually and Then Suddenly: Explaining the Navy’s Strategic Bankruptcy

June 30, 2021
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“How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually and then suddenly.”

– Ernest Hemingway, The Sun Also Rises



The U.S. Navy is on the verge of strategic bankruptcy. Its fleet isn’t large enough to meet global day-to-day demands for naval forces. Due to repeated deployments and maintenance backlogs, the fleet also isn’t ready enough to meet these demands safely, nor can it quickly surge in an emergency. Finally, the fleet isn’t capable enough to meet the challenges posed by China’s increasingly modern and aggressive People’s Liberation Army Navy. How did this happen to a force that, as recently as two decades ago, dominated the world’s oceans to a degree perhaps unequalled in human history? The answer is gradually and then suddenly.

Myriad authors have responded to the Biden administration’s Fiscal Year 2022 defense budget request with a mix of confusion and consternation. Critics have directed their ire, in particular, at the budget’s treatment of the Navy, given the administration’s purported focus on China as a strategic competitor. However, the issues noted by critics aren’t limited to this budget, but reflect a persistent trend since at least the FY2019 request, which was the first defense budget request to prioritize China as a strategic competitor. Despite the need for “urgent change at significant scale” to meet the Chinese military challenge, the last four budget requests have offered only measured change at moderate scale.

Why is that?

The stock response is usually a mix of bureaucratic inertia, service parochialism, and congressional obstruction. Inertia and parochialism are powerful forces, but hardly insurmountable ones, especially when facing a clear and pressing challenge. While Congress certainly determines the final shape of the authorized and appropriated budget, it has less influence on the executive branch’s initial budget request. Moreover, the bureaucracy, the services, and key components of Congress all generally agree on the core precepts of the 2018 National Defense Strategy. Specifically, they recognize that China is the most pressing military challenge facing the United States; the U.S. military response should focus on deterring Chinese aggression against U.S. allies, partners, and vital interests in the Indo-Pacific region; deterring China rests on a credible ability to defeat its aggression or deny China its objectives; and that this form of deterrence will require new methods of fighting wars backed by modernized air and naval forces.



The real impediments to urgent change are a lack of consensus on the risks posed by China, a lack of a shared vision for the future of the fleet, and limited options for implementing a new vision. Even if the Pentagon and Congress could reach consensus on these questions, the U.S. military lacks mature defense programs and the industrial capacity to build them at scale. These gaps aren’t unique to the Navy, but it serves as a useful example for the rest of the Defense Department because its gaps are so glaring in the context of the current strategic environment.

Lack of Consensus

While the U.S. defense community mostly agrees that China is the “pacing challenge” for the Department of Defense, there is much less consensus on what kind of threat China poses, or when the risk of conflict will be most acute. Some analysts believe that China poses an immediate threat. This position usually, but not always, correlates with a belief that competition below the threshold of war — like seizing unoccupied features in the South China Sea — represents a greater concern than the possibility of conventional war, such as over Taiwan. Others are more concerned with America’s medium-term vulnerability due to China’s rapid military modernization and the increasing age of the U.S. Navy fleet. This perspective tends to correspond with a belief that conventional war in five to 10 years is the most pressing risk. Still others are most worried that Chinese investments in AI and quantum computing could allow it to “leapfrog” the United States in the long-term military-technical competition, thereby establishing itself as the world’s foremost military power.

Lack of a Shared Vision

Any strategist’s view of what the Navy should look like will be shaped by how that strategist assesses the challenges posed by China and the distribution of risk across time. Someone focused on near-term day-to-day competition will tend to prioritize a large, highly ready fleet to maintain naval forces in key waters like the South China Sea. Someone concerned about the risk of conventional war in the next five to 10 years would sacrifice some near-term readiness and capacity to build a force capable of winning a future conflict with China. A defense planner or strategist who prioritized the long-term military-technical competition would eschew near-term investments in order to go all-in on next-generation systems with game-changing technologies that maintain the Navy’s technological advantage over the People’s Liberation Army Navy.

Further complicating this picture is the way that these risk assessments and future visions tend to correlate with different groups within the defense community. Traditional Navy advocates tend to fall into the “near-term group,” as it aligns most closely with their strategic vision of the Navy as a force that sustains the global order and ensures peace through forward presence. In this view, the fundamental purpose of the Navy is to be “haze gray and underway,” showing the flag across the world’s oceans. Persistently maintaining this overt forward presence demands large numbers of highly visible surface vessels like frigates and destroyers. Pentagon force planners, programmers, and analysts tend to worry about conflict in the medium term because that coincides with the five-year Future Years Defense Program, and conflict scenarios are a critical benchmark for the ability of the force to execute the defense strategy. From their perspective, a bigger fleet isn’t helpful if it lacks the capability to intervene directly in a war with China because it’s too heavily weighted toward surface vessels that are vulnerable to China’s arsenal of long-range missiles. Meanwhile, the research and development community, technologists, and horizon-scanning organizations like the Office of Net Assessment typically fret about the long-term military-technical competition. From their perspective, the traditional navalists and force planners are dangerously shortsighted. Every outdated, non-upgradeable piece of equipment acquired today or in the near future could become a white elephant that the department can’t divest quickly enough when AI and other technologies transform warfare.

The competition between these visions plays out yearly with each program review and budget submission and is partly responsible for a raft of recent studies and white papers on the future of the fleet. In these debates, near-term navalists advocate for increased readiness spending and acquiring more small surface combatants to reach the Navy’s goal of 355 ships and increase its ability to meet the demands of the geographic combatant commands. Mid-term force planners push for platform upgrades, additional munitions, more submarines and undersea systems, and longer-range carrier aircraft. Long-term technologists argue for greater research and development spending and investments in leap-ahead unmanned and autonomous systems to create a radical new fleet architecture comprising large numbers of unmanned and autonomous systems. The result of this competition between perspectives is usually an unsatisfying compromise that creates a fleet that’s not big enough for navalists, not capable enough for joint force planners, and not farsighted enough for the futurists.

Some believe that the 2020 future naval force study represents a shared vision for the future fleet. Developed cooperatively by the Navy and the Office of the Secretary of Defense — particularly the Office of Cost Assessment and Program Evaluation — this document presents a 30-year shipbuilding plan with purportedly realistic cost estimates. There are reasons for skepticism, however. First, this plan was developed under the last administration, and it’s likely that the new team is closely reviewing its assumptions and analysis, especially regarding the budget and costs. Second, the Navy has released countless “realistic” 30-year shipbuilding plans over the last 30 years, and none of them has ever come close to fruition.

Finally, the study doesn’t clearly articulate a vision of the future Navy, but instead lays out an overstuffed buffet of future forces with something for everyone. Navalists see a return to the glory years of Secretary John Lehman, the 600-ship Navy, and the 1980s maritime strategy. The force planners get excited about the huge growth in undersea systems and the Combat Logistics Force — both of which would be critical in any conflict with China — and are sanguine about the possibility of a more distributed and resilient fleet architecture. The futurists look at the huge investments in unmanned systems and have hope that the Navy has finally “gotten religion” about the disruptive potential of advanced technologies. The problem is that the Navy will never build all of these ships because the plan rests on overly optimistic budget assumptions and would require 30 years in which no major event intervenes to shift U.S. defense spending priorities. Determining what gets cut when the budget axe inevitably falls depends a lot on the initial assumptions about risk and the overarching vision of the future Navy.

Lack of Options

The Navy’s FY2022 request suggests that the Biden administration will pursue a mix of the medium-term and long-term approaches, given its emphasis on advanced munitions and research and development alongside cuts to the legacy surface combatant fleet. These proposed ship cuts, combined with the lack of replacements in the budget, are yet another shoal barring the Navy’s path to a fleet of more than 300 ships. It is the failure to address this persistent shortfall that has truly aggravated the Navy community. Blake Herzinger summed up this position perfectly in War on the Rocks, writing that “The Biden administration’s Fiscal Year 2022 defense budget was an opportunity to arrest the Navy’s decline and recapitalize the fleet to address this uncertain future. Instead, its authors elected to perpetuate a status quo that would see the fleet continue to wither, while the competition surges ahead.”

The problem with this line of reasoning is that there are few credible short-term options to recapitalize the fleet. The Navy has been trying to retire its aging Ticonderoga cruisers for years without a proper replacement in the works since the cancellation of the next-generation cruiser (CG-X) program. The proposed retirement of four littoral combat ships in the 2022 budget request seems to indicate that the Navy may have belatedly recognized that it is unsuited to the demands of competition and conflict with China. And yet the Constellation class frigate isn’t ready to swap out for littoral combat ships and won’t be a one-for-one replacement given its higher cost.

The lack of options becomes painfully acute if one ascribes to the mid- or long-term perspectives of the China threat. Further upgrades to the Arleigh Burke destroyers and Virginia submarines that comprise the backbone of today’s fleet will require new clean-sheet designs that are at least a decade away or more. Unmanned surface vessels offer a way to increase the Navy’s capacity within reasonable budget constraints, but current ships are immature, as are the concepts and analysis needed to integrate them into the fleet. They simply aren’t a viable near-term option to backfill proposed cuts to the surface fleet. The Navy has become like a sports team filled with aging superstars. It knows change is needed, but its choices are limited to proven systems with long-term limitations, or immature systems with significant technical and conceptual risks.

Even in areas where mature designs exist, like the Burkes, Virginias, and Constellations, there isn’t enough capacity at the shipyards to enable a rapid fleet recapitalization or sustain a larger fleet. This reflects a longstanding trend to consolidate and rationalize the defense industrial base in search of efficiency. The downside is a lack of slack capacity and the flexibility it enables. To his credit, Herzinger notes this limitation in his article, and other navalists such as Jerry Hendrix have frequently decried the state of the U.S. shipbuilding. Still, the reality is that aggressive fleet recapitalization isn’t possible without major up-front investments in industry that would require additional time and money. From industry’s perspective, these investments require predictability — there’s no sense in building new facilities and hiring and training thousands of workers without an unambiguous long-term demand signal from the Pentagon and Capitol Hill. Such predictability is impossible without a common perception of risk and a shared vision of the future fleet.

As though all of these hurdles weren’t enough, the Navy’s shipbuilding budget is hamstrung by the need to recapitalize the nuclear ballistic missile submarine (Columbia-class) fleet and the decision to purchase a “block” of two Ford-class aircraft carriers. For nearly a decade, Navy budget observers have sounded the alarm that the Columbia would punch a huge hole in the Navy’s budget when it shifted from development to procurement. The block buy of the Fords saved the Navy money but arguably exacerbated this problem by committing so much of the Navy’s shipbuilding budget up-front.

The Heart of the Matter

A series of decisions (and indecisions) decades in the making have backed the Navy into a budget and force-planning corner. Even if the Navy were to receive a larger share of the defense budget — which Herzinger and others suggest — there simply is no way to build a bigger fleet quickly, and any attempt to do so might burden the Navy with ships of limited utility in the long-term strategic competition with China. While perhaps unsatisfying, the Navy’s 2022 budget request is a product of these constraints. It prioritizes the ballistic missile submarines, munitions, auxiliary ships, and mature combatant designs, and divests older or less-capable ships. At the same time, the budget attempts to rebuild readiness (again) and invest in research and development to accelerate next-generation capabilities like unmanned surface and undersea vessels. It doesn’t rapidly grow the fleet for the same reasons that no budget request has rapidly grown the fleet in decades: There is no widespread agreement on why the fleet should grow; or how it should grow; and the underlying ideas, designs, and infrastructure needed for rapid growth have all withered.

The problems facing the Navy weren’t created in a single budget, and they won’t be fixed in a single budget. To get the Navy out of its force-planning doldrums, the next National Defense Strategy should clarify its assessment of the China challenge and serve as a forcing function to create a shared vision of the future Navy. The 2018 defense strategy tried to prioritize modernizing the Navy to deter future war with China over building near-term fleet capacity to supply ships to service geographic combatant command requests for forward forces. This prioritization got lost in implementation, as “Dynamic Force Employment” became shorthand for running the Navy ragged with repeated deployments, often to tertiary theaters like U.S. Central Command.

A clear assessment of the China challenge and a shared vision for the future fleet would help improve the gap between strategy and implementation that plagued the 2018 strategy. Perhaps more importantly, it would enable Navy and department leadership to work with, rather than against, Congress to undertake a long-term program to rebuild the Navy and reinvigorate the maritime industrial base on which the Navy and the nation depend.

Achieving consensus on this won’t be easy, as there are good reasons why China observers vary in their assessments of the risk of conflict and why U.S. naval and defense strategists differ on their visions of the future fleet. However, without this consensus and a concerted effort to reverse decades of drift, the Navy will continue its gradual slide toward strategic bankruptcy, and the risk of its debts coming due suddenly (and perhaps violently) will increase.



Chris Dougherty is a senior fellow in the Defense Program and co-lead of the Gaming Lab at the Center for a New American Security (CNAS). Prior to joining CNAS, Mr. Dougherty served as senior adviser to the deputy assistant secretary of defense for strategy and force development at the Department of Defense.

Image: U.S. Navy (Photo by Mass Communication Spc. Seaman Oswald Felix Jr.)