Reagan Institute 'report card' gives U.S. government F- grade amid stalled budget

The Ronald Reagan Presidential Foundation and Institute has released a "National Security Innovation Base Report Card” that, citing ongoing congressional dysfunction, has given the U.S. government the grade of an “F-” for failing to provide the Defense Department and private sector with the predictability of timely and stable funding.

The report card, crafted in partnership with McKinsey & Co., defines an “F” grade as signifying a “catastrophic area of weakness that will have major implications for American technical, military, and/or economic leadership, if unaddressed.”

Congress is finalizing negotiations to vote this week on a final fiscal year 2024 appropriations package, but defense officials have said the delay in funding has hurt the department’s efforts to outpace China.

The report card also notes several “green shoots” of progress in defense modernization, like the Collaborative Combat Aircraft program, “have largely been negated by Congressional failure to pass a budget, which is limiting progress and the strength of demand signal to industry and investors.”

The Pentagon has also been unable to scale innovation at levels necessary to send clear demand signals to industry.

“While America still leads in innovation, disconnect persists between progress in digital technologies and scaled implementation,” the report card states.

The Reagan Institute has released the report card ahead of a Washington conference scheduled for Wednesday focused on defense innovation and competition with China.

The rest of this year, the report card states, will be “a litmus test for novel pathways (e.g., Replicator) to match rhetoric and action.”

The Pentagon has declined to provide details about the Replicator program, which aims to field thousands of “attritable,” autonomous drones, but Deputy Defense Secretary Kathleen Hicks recently said the program seeks to spend $1 billion between FY-24 and FY-25.

Meanwhile, the report card gives the government high marks on “innovation leadership,” however, noting bright spots like the elevation of importance of the Defense Innovation Unit.

Still, the report notes that there have been “no new programs of record that address National Defense Strategy/NSIB priority areas” in the past year.

“Use of commercial tech is trending upwards for select portfolios (e.g., space), but the lack of new programs of record addressing NSIB priorities underscores the lack of scaled progress,” the report card states. “Failure to act on innovation priorities and pull through technologies at scale is materially affecting overall readiness levels and the ability to fight and win against a pacing competitor.”

The report card makes several recommendations, including that DOD and Congress fully fund Replicator in FY-25 and provide “sustained and predictable funding” across the future years defense program.