When Whistling Past the Graveyard Meets the Gloomy Science

U.S. Navy Continues to Fall Behind China in Shipbuilding – Part 1

United States military is in decline while China is ascending in Asia according to the Australian based Lowy Institute and this is particularly true in regard to naval power.  The naval imbalance in the western Pacific looks to favor China and gives it the ability to project its aggression throughout the region. The largest navy in the world, the People's Liberation Army Navy (PLAN), is challenging the U.S. Navy, the second largest in the world, in ways not seen since 1943. The PLAN, including the Chinese Coast Guard, or CCG, has 1,015 ships, compared to the U.S. Navy’s 364 ships of all types, as reported in mid-2024. China is also the biggest shipbuilding nation in the world and has the industrial capacity to produce warships at a rate that the United States cannot meet now or in the near future. The outcome of the western Pacific will depend on the U.S. addressing this production imbalance if it hopes to maintain the U.S. Navy's naval dominance in the region.

The military leadership, the political leadership in the executive branch, and Congress all recognize the seriousness of the issue facing the U.S. Navy. The issue is becoming more pressing as the U.S. Navy is retiring more ships than it is producing, while China continues to expand its fleet. The positive news is that the U.S. Navy maintains larger and more capable ships than the PLAN and CCG. The result is that the U.S. Navy’s displaced tonnage stands at 3.6 million U.S. short tons, and the PLAN-CCG is around 2 million short tons. With 9,900 Vertical Launch Systems (VLS) compared to China's 4,200, the United States holds a significant advantage.

However, the retirement of some guided missile Ohio class submarines will significantly reduce the number of U.S. launchers, while the PLAN will continue to rise. Nearly all U.S. ships can operate as part of a blue-water navy and can project far from their bases, while a significant portion of the PLAN is limited to shorter range and coastal areas. Despite this, the U.S. Navy's scenarios in the western Pacific require it to project force over a long distance in the region, and the PLAN will have many of its short-range ships available for battle.

How did the U.S., with once the largest navy in the world, get to this point? The U.S. struggles to produce enough ships and faces constraints in shipbuilding. The U.S. defense budget is the largest in the world and continues to grow, while the U.S. Navy continues to shrink. Currently, the U.S. Navy is involved in several large-scale projects, including the Ford class aircraft carrier, the F-35 B and C variant fighters, and the replacement of the Ohio class SSBN submarines with the Columbia class, all of which are considered "big ticket" programs. However, it is important to note that these costly programs are not displacing funding for ship construction. It is largely an economic issue and not a budget or financial one. The economic factors of production are land, labor, and capital for the classical economist, and entrepreneurship for the modern aspects of economic philosophy. 

According to the U.S. Census, the United States, being a country surrounded by two oceans and the Gulf of Mexico, spans over 12,000 miles (over 19,000 kilometers), so land is not the issue. Demand determines the remaining three production factors. In this case, the U.S. is facing an increasing demand for more naval ships to counter a potential adversary. However, the industry's capacity to meet this growing demand is either constant at the currently low rate or diminishing.

As a result, we expect the price of the in-demand product, navy ships in this case, to rise. At this point, the U.S. is willing to bear the higher costs, even if it means incurring larger annual budget deficits. However, despite this willingness to bear the higher costs, production is still falling short of even modest expectations. U.S. leaders in the executive and legislative branches are currently identifying the production factors that play a role, determining the bottlenecks, and suggesting corrective actions.

The second part of this paper will focus on economic factors of production that are playing a role in the challenges of U.S. naval shipbuilding. Both the executive branch and the U.S. Congress are finally considering these issues as they strive to enhance American industrial capacity, particularly in shipbuilding. The analysis by the DoD and Congress makes it clear that fixing the shipbuilding bottlenecks is not an easy task, nor is it a quick fix, but at least they are not ignoring the problem and are actively seeking solutions. The defense industry and government lacked foresight, resulting in unintended consequences that remained unaddressed until they became risky.  Foresight is crucial and a key to the deterioration of U.S. warship building. 

Addendum: Construction times for new U.S. warships

For example, it will take six years to build ten Arleigh Burke-class destroyers which is an existing warship.  The U.S.S. Gerald Ford, the lead ship of a new aircraft carrier was procured in 2008, commissioned in 2017, and just finished its first full deployment in 2024.  The new Columbia SSBN has an estimated 7-year construction time and only one is being built now with a total of 12 planned with construction not starting until 2021 which is five years after General Dynamics Electric Boat was awarded and two years after budget was approved in 2019. 

The DoD with lead times like these should have addressed these issues more than 25 years ago and not before the issues in the western Pacific and with China are approaching a point of crisis.

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References will be available at the end of Part 2.