These similarities are striking and instructive. Oversimplification aside, the meltdown of financial markets and global economies arose from a combination of overstretch and overreach; policies too often driven by ideology removed from reality; and denial. None of this happened overnight.

In the United States - and this radiated across world markets - overstretch and overreach produced too much cheap money that led to too much unsecured credit that induced an excess of leverage. Leverage meant accepting huge multiples of debt to assets or cash in hand ranging from between 30 to 100 to 1. Many jumped aboard this gravy train as billions of dollars were made, unsuspecting of the looming wreck.

Ideology evoked both too much and too little oversight. The left embraced the siren call of extending the American dream of home ownership beyond sensibility. The right shoved deregulation over a cliff first by ending the separation of investment and commercial banking; allowing hedge funds freedom from any oversight; and then legalizing credit default swaps that had been illegal since the 1907 financial crash.

As a result, banks, insurance companies and hedge funds made billions by slicing and dicing this explosion of mortgages into derivatives that few on Wall Street understood, particularly the down side risks. The subprime mortgage market was the fuse for the explosion. Main Street is still recoiling from the impact. One banker put it this way: "We may only be in an economic recession but we surely are in a psychological depression."

Now look at the Defense Department. The Pentagon is suffering from huge cases of overstretch and overreach in terms of commitments it is fulfilling; money it needs to sustain them; and strategy it is meant to carry out. Overstretch and overreach, as with financial markets, can be measured in invertible budget and dollar deficiencies. The Pentagon has an annual appetite of about $650 billion to 750 to sustain the military. A good chunk of that has been appropriated through emergency supplementals to support the wars in Iraq, Afghanistan and against terror but in which a great number of other programs have been funded.

With our national debt approaching $12 trillion, the annual federal budget deficit ballooning to more than half a trillion dollars and tax revenues shrinking, the chances of maintaining this level of defense spending, let alone increases, are about zero. Over the coming years, defense will be facing crippling shortfalls of possibly $100 billion to $200 billion a year. Intensifying this potential implosion are other time bombs.

Virtually all of the Pentagon's major weapons programs have at least doubled in costs in real terms; are taking about twice as long as planned to procure; and will be bought in roughly half the original numbers. Furthermore, there is no agreement over strategy. Will the military be largely shaped to fight "small wars" as are being waged around the world in crucial regions? Or will "big wars" against a resurgent Russia or China provide the military's main rationale?

Many of these implosive forces were ideologically driven. The war in Iraq was largely about spreading democracy to pacify the greater Middle East. Because the rest of the U.S. government lacked the tools to support this vision, the Pentagon was leveraged to undertake these tasks that should have been the responsibility of other departments, exerting further pressure on its ability to carry out its basic missions. There was both too much and too little oversight. Congress was AWOL in the way it rubber-stamped these huge spending increases. Yet, it still tried to micromanage the spending it authorized.

What does this mean? Because spending for "things" such as weapons systems and infrastructure are long-term, immediate large-scale savings cannot be derived from cancellation or reduction of these programs. Current operations will take the biggest hit as American families and businesses have been forced to cut back drastically in spending. But given the size of defense, this contraction can be implosive.

We have seen this movie before. After every war, we downsized. And as Vice President Dick Cheney famously remarked, each time "we screwed it up." The Obama team needs to know that if we are not careful, what happened to Wall Street and Main Street will happen to the Pentagon. Denial is not an option.

No, Mr. Ullman, denial is not an option.

They hailed from near Detroit; a loud and boisterous cast of aunts, uncles, and cousins. Staunch union Democrats all, mom’s clan was tied to the auto industry since my grandfather, an Arkansas hillbilly, moved to Detroit during the Depression. He was the first of four generations of Detroit autoworkers. 

Their life in Michigan was a stark contrast to our lives on a military base. My dad often worked 12 to 18 hours a day in a busy control tower, while my aunts and uncles seemed to have time on their hands. My dad deployed overseas, often a year at a time, and never complained. At the summer get-togethers my aunts and uncles sat around drinking beer and griped about the lousy pay and hours on the assembly line. Our family drove a used car and made do, while my Michigan relatives were never quite satisfied with their employee discounted new cars. As a child I couldn’t understand why they weren’t happy with what they had. Looking back as an adult I know why.

They saw a good paying union job not as a privilege, but an entitlement. The auto industry was a fact of life; an eternal and unmoving colossus. Through them I learned hubris isn’t the sole domain of the white collar worker. That hubris blinded workers and management alike as the seeds were being planted for Detroit’s eventual undoing.  

At one Fourth of July reunion I remember my uncle scoffing at a little Toyota as it puttered by amongst giant Oldsmobiles and Buicks. He cursed the little car. “Rice burner” he laughed and took another swig of Pabst Blue Ribbon. How dare this little car challenge America’s auto industry, the symbol of her might! My dad, just back from Vietnam, remained silent. I think, deep down, he knew the world had already changed.

Detroit didn’t change, and that’s why it died. They wouldn’t, or couldn’t, change their labor practices in the face of the global marketplace. They didn’t heed the warnings of half a dozen energy shocks since 1972 and produce energy efficient cars. Now, the Big Three automakers teeter on the brink of extinction, their good paying union jobs are almost gone, and Detroit is only a shell of the great city it once was.  There is no hubris left in Michigan, only fear. America’s indigenous auto industry will most likely pass into history before our eyes.

Two years ago I worked at a military logistics hub in middle Georgia. The base is a massive installation and the biggest employer in the state. Only a handful of the roughly 25,000 people working there actually wear a military uniform, the rest are government civilians and contractors.  It is a one industry town. I’ve seen many towns like it, survivors of numerous base realignment and closing (BRAC) rounds over the past 15 years. These fortunate military installations, through fate or strong congressional representation, grew and became economic lynchpins for the local communities.

On a humid evening several summers ago in that Middle Georgia town I sat in the bleachers watching my kid’s little league game. I was surrounded by families who depended solely on the defense industry for their livelihoods. The latest BRAC was the topic of conversation. These parents were third and fourth generation employees at the base. In their idle talk I heard the same assumptions, “…the base would always be here,” and “…I can always get a job on base if I can’t make it anywhere else,” and “…our congressman won’t let them close this base, it’s too important.” In them I saw traces of the same hubris my uncles and aunts exhibited all those years ago. The military depot and        it’s good paying government job wasn’t a privilege, it was an entitlement. These people saw the base as a fact of life, an unmoving colossus which would be there forever.

I didn’t know it then, but I believe I was witnessing the rise of a new General Motors - the US Defense Department.

These good people from Georgia were employed by a monolithic industry at the peak of its power, but not changing with the times. The parents in the stands watching their kid's play ball repaired the same aircraft their grandfathers originally built. Other than the Chinese-made computers atop their cubicle desks, little had changed at this base since Reagan was president. And little would change.

Like the Big Three automakers, defense has been inefficient for years. Massive government unions hold sway, ensuring change comes slowly, if at all. Instead of pumping money into new weapon systems, billions are being spent maintaining the status quo. And the status quo works just fine until the rules change. The rules changed quickly and mercilessly for Detroit. The same is happening to the defense establishment. 

First, federal social spending and national debt are beginning to starve the military of the resources it needs to carry out its missions and trillions in bailouts are accelerating the process. Second, the Pentagon’s bloated bureaucracy isn’t helping as it robs the services of the nimbleness they need to adapt and change. This fact has had its most devastating impact on weapons acquisition. Third, the Pentagon’s reliance on contractors puts it at the mercy of many who don’t have America’s best interests at heart. Fourth, congress’s political machinations exacerbate the damage inflicted by all the other factors. And like Japanese car companies of the 1970s, our military competitors see us sowing the seeds of our own demise and are working to accelerate the process. They know our military is the last symbol of America’s remaining might.