The political drama resulting from Democrats’ landslide midterm victory will start in early December with budget talks, especially those focused on defense spending. The plot is as tangled as a daytime soap opera. Legislators have already taken a stab at removing Defense Secretary Pete Hegseth, and the Iran war hangs over negotiations like a dark, ominous cloud.

No doubt Democrats have a mandate to oppose the Iran conflict, but this must be balanced against giving the Pentagon what it needs to replenish missile stockpiles, build more nuclear-powered submarines and ships, fund new stealth aircraft, and invest in weapon systems to defeat cheap drones and to defend space. This is not the time to contemplate budget cuts given the growing threats to national security from China’s rapid military buildup, a dangerously wounded Iran and a desperate Vladimir Putin whose war on Ukraine has ground to a deadly stalemate. Congress using the power of the purse to press for a quick exit to the Iran war could backfire if the regime takes control of traffic in and out of the Strait of Hormuz.

The Pentagon and congressional spending committees were drafting a $1.1 trillion budget even before the midterm verdict was out, according to Politico. That’s well short of the record $1.5 trillion of reconciliation and mandatory funding demanded by the White House but in line with the 2026 outlay, so there is a deal to be struck with Democrats. While headline-grabbing programs such as the Golden Dome missile shield may end up with less support, a budget amount that starts with a “t” instead of “b” would boost the confidence of a defense industry that is seeking to keep pace with China, which is forecast to have 48% more warships than the U.S. Navy in four short years.

Growth in the U.S. defense budget hasn’t kept up with economic output since the last peak in 2010. Spending adjusted for inflation saw a single-digit percentage increase between 2006 and 2025. China’s inflation-adjusted military spending over that same period jumped almost fourfold to $335 billion, according to a study by the Center for Strategic & International Studies. Official numbers likely understate China’s defense expenditures and the speed of its military modernization. Actual spending could be 40% to 90% higher than government statistics, according to a 2024 defense department report to Congress. The U.S. is significantly behind in areas such as shipbuilding capacity and small-drone manufacturing.

It needs to close the gap. The Navy needs more ships and to maintain its edge on nuclear-powered subs. More importantly, the defense industry needs to invest in developing innovative weapons systems that are inexpensive and can be mass produced to beat back the threat of cheap long-distance drones and other autonomous weapons. And production of missiles and interceptors must increase after stockpiles were depleted in the Iran conflict. This shortage is making all U.S. allies more vulnerable, especially Ukraine.

The Pentagon has made good progress on its Acquisition Transformation Strategy, which seeks to increase speed and efficiency for procuring weapons and shore up the supply chain. Stable funding will allow the Pentagon to offer companies including Lockheed Martin Corp. and RTX Corp. long-term contracts, such as the seven-year deals agreed on this year to increase missile and interceptor production, providing industry with the certainty to invest for the long term.

The willingness to work with defense startups such as Anduril Industries Inc. and Palantir Technologies Inc. in areas including the production of components for nuclear submarines and systems based on artificial intelligence has unleashed new energy and urgency into the supply base, while lighting a fire under legacy defense companies. Also controversial but necessary have been the Defense Department’s direct investments in private companies, mostly tied to the rare-earth minerals and magnets used in defense systems from the F-35 stealth fighter to Tomahawk missiles. China controls about 90% of rare-earth refining after using subsidies and low prices to put competitors out of business; it has used the supply stranglehold as leverage over the U.S. in trade talks.

Congress should exercise its oversight role on the new procurement process and on all these deals, judging them on merit and not on politics. The Senate’s draft of the National Defense Authorization Act, a blueprint of defense priorities, recommends the defense secretary establish a code of ethics, similar to ones adopted by financial professionals, for officials involved in giving direct loans and taking equity stakes in companies, tools the department is using to support suppliers. Such a code of ethics, if followed, would protect defense officials from charges of corruption or impropriety.

For defense contractors, the midterms have introduced more uncertainty, but these companies are experienced at weathering political storms. All the major manufacturers are boosting production to whittle down record backlogs. The defense work pending at the four largest publicly traded contractors — Lockheed Martin, RTX, Northrop Grumman Corp. and General Dynamics Corp. — had been growing at an average 9% clip over the last five years and then jumped 47% from the end 2025 through September, reaching a collective backlog of $727 billion.

Long-term contracts, the push for quicker procurement decisions and efforts to repair the supply chain are beginning to pay off. MP Materials Corp., a mining company in which the department took a direct stake, began producing magnets this year and is building a second, larger factory to supply defense contractors and commercial customers. The department is also the anchor customer for establishing a small drone industry in the U.S. after the federal government banned Chinese drones, including popular ones made by SZ DJI Technology Co.

China is a much more dangerous adversary than the Soviet Union was during the Cold War because of its economic and manufacturing prowess. Wars are won in shipyards and factories, Bloomberg Opinion’s James Stavridis wrote recently while contemplating the lessons we should take from World War II. It would be wonderful if peace broke out in Ukraine, Iran and other hot spots. The reality is that the world is only growing more dangerous, driving this defense boom that will keep going whether the Democratic-controlled Congress likes it or not.

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This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Thomas Black is a Bloomberg Opinion columnist writing about the industrial and transportation sectors. He was previously a Bloomberg News reporter covering logistics, manufacturing and private aviation.

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