They wouldn't want to increase their capacity right now even if they could.
The military keeps saying they will be reducing our combat role in Iraq soon. The Dems want to pull us out now.
Why build capacity, when your customer keeps telling you that you won't need it soon?
The government isn't going to pay ammo manufacturers to have capacity available, just in case, they are going to buy what they need.
Our government should buy what it can from domestic suppliers, and then buy the rest from quality foreign suppliers, which appears to be what they are doing.
After all, if they buy up every round of domestic ammo, what are the rest of us going to shoot?