America no longer enjoys military primacy in the Indo-Pacific and its capacity to uphold a favourable balance of power is increasingly uncertain. The combined effect of ongoing wars in the Middle East, budget austerity, underinvestment in advanced military capabilities and the scale of America’s liberal order-building agenda has left the US armed forces ill-prepared for great power competition in the Indo-Pacific. America’s 2018 National Defense Strategy aims to address this crisis of strategic insolvency by tasking the Joint Force to prepare for one great power war, rather than multiple smaller conflicts, and urging the military to prioritise requirements for deterrence vis-à-vis China. Chinese counter-intervention systems have undermined America’s ability to project power into the Indo-Pacific, raising the risk that China could use limited force to achieve a fait accompli victory before America can respond; and challenging US security guarantees in the process. For America, denying this kind of aggression places a premium on advanced military assets, enhanced posture arrangements, new operational concepts and other costly changes. While the Pentagon is trying to focus on these challenges, an outdated superpower mindset in the foreign policy establishment is likely to limit Washington’s ability to scale back other global commitments or make the strategic trade-offs required to succeed in the Indo-Pacific. Over the next decade, the US defence budget is unlikely to meet the needs of the National Defense Strategy owing to a combination of political, fiscal and internal pressures. The US defence budget has been subjected to nearly a decade of delayed and unpredictable funding. Repeated failures by Congress to pass regular and sustained budgets has hindered the Pentagon’s ability to effectively allocate resources and plan over the long term. Growing partisanship and ideological polarisation — within and between both major parties in Congress — will make consensus on federal spending priorities hard to achieve. Lawmakers are likely to continue reaching political compromises over America’s national defence at the expense of its strategic objectives. America faces growing deficits and rising levels of public debt; and political action to rectify these challenges has so far been sluggish. If current trends persist, a shrinking portion of the federal budget will be available for defence, constraining budget top lines into the future. Above-inflation growth in key accounts within the defence budget — such as operations and maintenance — will leave the Pentagon with fewer resources to grow the military and acquire new weapons systems. Every year it becomes more expensive to maintain the same sized military. America has an atrophying force that is not sufficiently ready, equipped or postured for great power competition in the Indo-Pacific — a challenge it is working hard to address. Twenty years of near-continuous combat and budget instability has eroded the readiness of key elements in the US Air Force, Navy, Army and Marine Corps. Military accidents have risen, aging equipment is being used beyond its lifespan and training has been cut. Some readiness levels across the Joint Force are improving, but structural challenges remain. Military platforms built in the 1980s are becoming harder and more costly to maintain; while many systems designed for great power conflict were curtailed in the 2000s to make way for the force requirements of Middle Eastern wars — leading to stretched capacity and overuse. The military is beginning to field and experiment with next-generation capabilities. But the deferment or cancellation of new weapons programs over the last few decades has created a backlog of simultaneous modernisation priorities that will likely outstrip budget capacity. Many US and allied operating bases in the Indo-Pacific are exposed to possible Chinese missile attack and lack hardened infrastructure. Forward deployed munitions and supplies are not set to wartime requirements and, concerningly, America’s logistics capability has steeply declined. New operational concepts and novel capabilities are being tested in the Indo-Pacific with an eye towards denying and blunting Chinese aggression. Some services, like the Marine Corps, plan extensive reforms away from counterinsurgency and towards sea control and denial. A strategy of collective defence is fast becoming necessary as a way of offsetting shortfalls in America’s regional military power and holding the line against rising Chinese strength. To advance this approach, Australia should: Pursue capability aggregation and collective deterrence with capable regional allies and partners, including the United States and Japan. Reform US-Australia alliance coordination mechanisms to focus on strengthening regional deterrence objectives. Rebalance Australian defence resources from the Middle East to the Indo-Pacific. Establish new, and expand existing, high-end military exercises with allies and partners to develop and demonstrate new operational concepts for Indo-Pacific contingencies. Acquire robust land-based strike and denial capabilities. Improve regional posture, infrastructure and networked logistics, including in northern Australia. Increase stockpiles and create sovereign capabilities in the storage and production of precision munitions, fuel and other materiel necessary for sustained high-end conflict. Establish an Indo-Pacific Security Workshop to drive US-allied joint operational concept development. Advance joint experimental research and development projects aimed at improving the cost-capability curve.