Gates said it may be time for the Pentagon to more carefully review the planned weapons programs of the individual services to stop costly duplication....

 

 

In H.G. Wells 19th Century science fiction classic “The Time Machine” a Victorian gentlemen invents a time machine. He hurdles forward thousands of years to the distant future and finds a world where mankind degenerates into two distinct species, Eloi and Morlocks. The Eloi live in a decaying Garden of Eden in a life of complete ease. The Morlocks dwell in the subterranean darkness, tending the dirty industries which feed and cloth the Eloi. For payment the Morlocks took only one thing…the flesh of the Eloi.

 

Let’s examine how H.G. Wells describes each race and their relationship to each other.

Wells writes of the Eloi: I could find no machinery, no appliances of any kind. Yet these people were clothed in pleasant fabrics that must at times need renewal, and their sandals… were fairly complex specimens... Somehow such things must be made.

 

Now compare this to America by simply going to your local Wal-Mart. The car your drive there was probably built overseas or built in America with foreign parts. Once you arrive at Wal-Mart, try to push your way past the hordes of illegal immigrants (doing “work Americans won’t do anymore”) to buy anything made in America. Good luck. On the way home don’t forget to fill up that car with Arab gas. The world sells us most of our finished goods, cars, clothes, electronics, energy, and an ever growing portion of our food. We only make “services” with which to service each other, and even this sector is slipping away.  

Wells writes of the Eloi: ...I soon discovered about my little hosts...was their lack of interest. They would come to me with eager cries of astonishment, like children, but like children they would soon stop examining me and wander away after some other toy…  

Wells couldn’t describe us any better than he does in this passage. American’s are known for their short attention span and even shorter memories. We flip from one diversion to another, easily distracted. We play video games, obsess over sports and are addicted to reality television. We invented the disease ‘ADHD’.  With terms like ‘failure to launch’ true adulthood is delayed for a growing portion of our ‘20- and 30-somethings.’ We’re becoming a society of fickle, spoiled children.

The only thing Wells didn’t foresee was video games. If he had, he might have described the Morlocks taking away the docile, fattened and stupid Eloi for slaughter while they still clutched their Wii remotes in their pale, pudgy hands. Speaking of ‘pale and pudgy...’ 

Wells continues to describe the Eloi: …I perceived that all had…the same soft hairless visage, and the same girlish rotundity of limb. Seeing the ease and security in which these people were living…there is no necessity - for an efficient family, and the specialization of the sexes with reference to their children's needs disappears. 

America is getting more “rotundity of limb” every year, our families are disappearing, and we’re definitely not addressing our children’s needs. We’re also witnessing the blurring of the sexes with the acceptance (no, embracing) of homosexuality, metrosexuality, radical feminism, and the transgender/sexual movement.

Homosexuals are adopting children and the need for traditional male roles is openly discouraged by our culture. More child rearing responsibilities are being foisted upon the state every year.  Senator Hillary Clinton once said, “It takes a village to raise a child.” No, it takes a village to raise an Eloi.

So what of the dreaded Morlocks, denizens of the underground industrial labyrinths? Can I make a fair comparison between them and the modern Chinese?  

Wells writes of the Morlocks: So, in the end, above ground you must have the Haves, pursuing pleasure and comfort and beauty, and below ground the Have-nots, the Workers getting continually adapted to the conditions of their labor…I wondered vaguely what foul villainy it might be that the Morlocks did under the new moon… the Morlocks made their garments, I inferred, and maintained them in their habitual needs, perhaps through the survival of an old habit of service…clearly, the old order was already in part reversed. The Nemesis of the delicate ones was creeping on apace. Ages ago, thousands of generations ago, man had thrust his brother man out of the ease and the sunshine. And now that brother was coming back changed… Great shapes like big machines rose out of the dimness, and cast grotesque black shadows, in which dim spectral Morlocks sheltered from the glare. The place, by the by, was very stuffy and oppressive, and the faint halitus of freshly shed blood was in the air. 

This passage brings to mind a recent 60 Minutes segment about American companies outsourcing computer recycling to China. It was this story which made me first think about the similarities of the Time Machine to today’s American/Chinese relationship.  Read the passage below from the article. then re-read Wells’ passage above.

This is a story about recycling - about how your best intentions to be green can be channeled into an underground sewer that flows from the United States and into the wasteland. 60 Minutes followed the trail to a place… in southern China - a sort of Chernobyl of electronic waste - the town of Guiyu…Women were heating circuit boards over a coal fire, pulling out chips and pouring off the lead solder. Men were using what is literally a medieval acid recipe to extract gold. Pollution has ruined the town. Drinking water is trucked in. Scientists have studied the area and discovered that Guiyu has the highest levels of cancer-causing dioxins in the world. They found pregnancies are six times more likely to end in miscarriage, and that seven out of ten kids have too much lead in their blood.

"These people are not just working with these materials, they're living with them. They're all around their homes. The situation…is actually pre-capitalist. It's mercantile. It reverts back to a time when people lived where they worked, lived at their shop. Open, uncontrolled burning of plastics. Chlorinated and brominated plastics is known worldwide to cause the emission of polychlorinated and polybrominated dioxins. These are among the most toxic compounds known on earth…We have a situation where we have 21st century toxics being managed in a 17th century environment” 

“The air I breathe in every day is so pungent I can definitely feel it in my windpipe and affecting my lungs. It makes me cough all the time," one worker (said)…the 60 Minutes team passed by a riverbed that had been blackened by the ash of burned e-waste.

While not a subterranean realm, it’s still an abysmal, man-made industrial hell. It is a malignant place where there is no sunshine and “great shapes rise out of the dimness and cast grotesque black shadows. A place stuffy and oppressive which changes there very people which live and work there. 

What of the evolving relationship between America and China?  

In 2005, “The Big Picture” financial blog released this insightful article. As far as I can tell, it met with little fanfare. Some of these 2005 predictions are chilling (emphasis mine):

The Peoples Bank of China (PBOC) announced to day that they are effectively

taking over the interest rate responsibilities from the US Federal Reserve…The Fed’s inability to significantly impact long rates anymore is what led to the outsourcing. 

…today's actions are the net result of the United States consuming far more goods or services than it produces. Because of that, the Chinese have accumulated nearly a trillion dollars of US Treasuries. That makes them a de facto player in setting our interest rate policy and impacting our economy. 

As we have been writing for quite some time now, the Real Estate Complex has been the most robust segment of the U.S. economy. If the Chinese can succeed (where the Fed failed) in raising U.S. long rates, the strongest part of the US economy is at risk. While we know real estate had to slow eventually, the question is how fast will it occur, and how dramatically. 

In an unlikely – but possible – scenario, the Chinese can, at will, and without ever firing a shot, inflict as much economic damage on the U.S. as if we were at war. Armed conflict becomes unnecessary when countries can net impact their competitors as if they were at war. 

What is not uncertain, however, is that our Current Account Deficit has granted a degree of control and authority to another sovereign nation over our own economy. The net results of that may be determined over the coming decade.

To emphasize the impact of the Big Picture’s 2005 predictions, in 2007 China flooded the US market with toys painted with lead-based paint. In a stunning development, Mattel Toy Company issued an apology to the Chinese manufactures, not the American public. Time Magazine wrote “Mattel needs China just as much as China needs Mattel, and it cannot afford to jeopardize its relationship with the country that produces 65% of its toys.”  

China forced an American corporate giant to grovel. The Morlocks now have the upper hand.

I'm not saying the Chinese are becoming mosters, I'm saying both nations are entering into an unhealthy and dangerous arrangement, one which is transforming us into something neither side truly wants to become. Where will this new relationship between America and China lead? Maybe H.G. Wells said it best… 

The Upper-world people might once have been the favoured aristocracy, and the Morlocks their mechanical servants: but that had long since passed away…These Eloi were mere fatted cattle, which the ant-like Morlocks preserved and preyed upon.

Wake up, America. You are being eaten.

Already the Eloi had begun to learn one old lesson anew. They were becoming reacquainted with Fear.

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.

This is important because everything which sustains the military (money, personnel, and technology) comes from the economy, not government. Government only allocates those resources and sets policy, the economy creates the resources. I think our generals and defense secretaries might have forgotten this important point. If America is the economic engine of the Western world then those professionals who defend it should know how that engine works.  

This is why I stand on my Townhall soapbox and preach to the few readers who stumble in here about the dangerous road our government is taking. If I’m becoming a one-note blog, so be it. I can’t think of anything more important to talk about.  

The mainstream media (MSM) is talking about the mounting pressures to cut the defense budget based on the slowing economy and massive bailout spending. I point to the two articles below as examples.

From the 10 November Boston Globe:

A senior Pentagon advisory group, in a series of bluntly worded briefings, is warning President-elect Barack Obama that the Defense Department's current budget is "not sustainable," and he must scale back or eliminate some of the military's most prized weapons programs…It contends that the nation's recent financial crisis makes it imperative that the Pentagon and Congress slash some of the nation's most costly and troubled weapons to ensure they can finance the military's most pressing priorities…

And a few cuts here or there won't do the trick, they add. "Taking cuts at the margin won't work this time, nor will pushing things off to later years."
     

And this is the 3 November New York Times:  

After years of unfettered growth in military budgets, Defense Department planners, top commanders and weapons manufacturers now say they are almost certain that the financial meltdown will have a serious impact on future Pentagon spending.

Across the military services, deep apprehension has led to closed-door meetings and detailed calculations in anticipation of potential cuts. Civilian and military budget planners concede that they are already analyzing worst-case contingency spending plans that would freeze or slash their overall budgets...

In all, the Defense Department now accounts for half of the government’s total discretionary spending, and Pentagon and military officials fear it could be the choice for major cuts to pay the rest of the government’s bills…

Some critics, citing the increase in military spending since Sept. 11, 2001, say it would be much easier to cut military spending than programs like Social Security and Medicare at a time when most people’s retirement savings are dwindling because of the financial crisis. Representative Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, has raised the idea of reducing military spending by one-quarter.

I’m glad the MSM is finally paying attention to the subject, but I think they’re missing the real point. It’s not that the current spending spree and recession will hinder defense spending; its quite possible America might be wrecking her currency and economy to the point we cannot sustain basic government functions like defense at all. If you think I’m exaggerating, read this article from CNBC:

The United States may be on course to lose its 'AAA' rating due to the large amount of debt it has accumulated, according to Martin Hennecke, senior manager of private clients at Tyche…"The U.S. might really have to look at a default on the bankruptcy reorganization of the present financial system" and the bankruptcy of the government is not out of the realm of possibility, Hennecke said…In order to solve or stem the economic slowdown, Hennecke suggested the US would have to radically reduce spending across all sectors and recall all its troops from around the world. As for a stimulus package, there is not much of an industry left to stimulate back into life, Hennecke said.

Tyche, a respected international finance corporation, goes further in this online article, “The Coming Cash Crash” by comparing the US to Zimbabwe. Both nations are destroying their currency with out of control debt and by relentless currency printing. In Zimbabwe it resulted in reduction of its national bonds to less than AAA status and panic selling of its debt and currency. Bankruptcy. 

America’s bankruptcy is a real and imminent possibility. What happens in a bankruptcy? Simple, an entity is reorganized in a way which allows it to function in the best interest of it creditors. Who are America’s creditors? I’ll let the reader answer that one and then ponder this question…

Can a bankrupt nation defend its international interest at home and abroad?