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The New General Motors (Revisted)

It looks like Mr. Carofano from the Heritage Foundation came to the same conclusion I did. His piece "Will the Armed Forces Fail Next?" echos the same theme as my blog entry "The New General Motors." Both are good reading, check them out.
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Latest Column

Check out my latest column in the Air Force Times in this week's print or online edition.
 
 
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The New General Motors

 

I was an Air Force brat in the 1970’s, a sergeant’s son. We lived in a mobile home tucked away in a tidy trailer park on Wright Patterson Air Force Base near Dayton, Ohio. I remember fondly those mild summers; barbequing, listening to the Reds on an AM transistor radio, and watching Jaws and Star Wars at the base theater. Summer was also the time my mom’s relatives came visiting.

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.  

1972 Toyota CorollaAt 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.

Like General Motors all those years ago, the seeds of our future woes are already planted in fertile soil.  
Department of Defense Seal (Color).
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Defense: It's Time to Take a Hard Look.

 
In my 21 September blog entry "The World Has Changed" I made some predictions the day the first bailout package was announced:

This weekend and over the next month they’ll send their high-powered lobbyist to gain assurances from their pet senators and congressmen that their key programs will remain safe from any future cuts.  Our legislators will try to put on their best face and tell them all is well. All the while they’ll quietly send their staffers to the Pentagon...Those staffers will tell the Pentagon budget planners…to start planning deep cuts. They’ll give these planners draconian bottom lines and tell them to meet them - period...Over the next few months rumors of the deep budget cuts will seep outside the Pentagon. Small programs, big programs – nothing will be sacred...The Air Force will get hit hardest since it’s currently the least favored branch among the political elites.... Don’t hold your breath on a new replacement rescue helicopter...Expect early retirement for various weapons systems...

Let’s see where we stand one month and over a trillion dollars later:

(Leaders) will assure defense contractors defense spending will remain strong: According to Rueters, "U.S. Defense Secretary Robert Gateson Tuesday struck an upbeat note about the future outlook for U.S. defense spending, citing strong bipartisan support for U.S. national security goals." 

Deep defense cuts: I guess Sec. Gates hasn't been talking to the movers and shakers in the upcoming Democratic congressional super-majority.
Two weeks ago this story hit the papers:  "After the November election, Democrats will push for a second economic stimulus package that includes money for the states' stalled infrastructure projects, along with help paying for healthcare expenses, food stamps and extended unemployment benefits, U.S. Rep. Barney Frank said Thursday...(He) also called for a 25 percent cut in military spending, saying the Pentagon has to start choosing from its many weapons programs..."

Congress is already looking for offsets to pay for the bailout and stimulus packages.

 'Big programs, small programs, nothing will be sacred'…expect early retirement for various weapon systems’: According to Inside Defense and the Air Force Times, the service will cut over 300 frontline fighter aircraft by 2010, almost a decade ahead of schedule. This is about 15% of the services fighter force, significant by any standard.

Don’t hold your breath on a new rescue helicopter:  On 23 October the Washington Times reported the Air Force postponed awarding the CSAR-X helicopter until sometime next year, leaving it for the next presidential administration. The tanker is also now delayed until the next administration is seated.

While these events were expected, they happened much faster than even I expected. The US Military is entering uncharted and dangerous fiscal waters. It must conduct a serious inventory of the global and national economic situation, not just look to the next budget cycle. Where does the American defense community stands right now?
 
  1. After the election the Pentagon likely faces an openly hostile congress and administration in time of active war. Rep. Barney Frank’s 25% cut comment is a clear message of things to come.
  2. Never has the Pentagon had to maintain a sustained forward force posture and active combat operations while America was so deep in debt (public and private).
  3. Never has so much of that debt been held by potential hostile powers. He who holds the debt makes the rules.
  4. Never has America experienced a deep recession as a consumer, not manufacturing or farming, economy. The Pentagon keeps many of America’s remaining heavy industry on life support, what happens to them in a shrinking economy and lower defense spending is uncertain.
  5. The Pentagon has yet to factor in the new realities of global free trade into its acquisitions or defense posture. Its current budgeting and acquisitions framework hasn’t fundamentally changed since America was a creditor nation and General Motors ruled the world.
  6. Never has the Pentagon had to rely of foreign sources, many potentially hostile for three critical items: funding (via investment in US debt), energy, and critical technologies. This is the true national security issue of our time.
  7. What happens if we enter a period of increased inflation due to our current massive bailout and stimulus spending? This is a real possibility. A severely weakened dollar will discourage foreign (i.e. Chinese) investment in the debt & dollar. Inflation makes everything more expensive – like fuel for fighter jets or computer chips for guidance systems. A defense budget passed one year may assume a 5% inflation rate, but face 10% inflation when executed. Though the government doesn’t officially factor it in, energy is one of the biggest drivers for actual inflation.
  8. Never has the Pentagon had to rely on an all-volunteer force during times of sustained combat operations. This has resulted in enormous personnel costs for a relatively small force. The only good news here is a poor economy makes for good recruiting and gives the Pentagon more flexibility in reigning in benefits.

All of these factors will come into play in the next 24 months and beyond to reshape how America defends herself and her global interests. I won’t venture anymore predictions other than hold on…its going to be a bumpy ride.

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