Tuesday, January 01, 2013

2013's #1 National Security Challenge

I'll give you a hint; it has nothing to do with the military.

Mort Zuckerman outlines it well;
All eyes have been on the clear and present danger of the fiscal cliff—understandably—but there's a sound in the mountain range that's even scarier than the cliff. It's the sound made by an avalanche, the trillions of dollars of debt that's heading our way, gathering speed and mass. For most people, it's out of earshot now, and that's the way our government prefers to play it in its financial statements. Liabilities are not set out there in accordance with the well-established norms of the private sector, where this overhang of liabilities would set off alarm bells in the markets, with boards of directors in emergency sessions.

We'll come to why that's not happening, but let's consider first why we should regard our predicaments as gravely as any private company does on the path to bankruptcy.

We are on a trajectory of cumulative fiscal deficits that cannot possibly be sustained. We have gone from being the world's largest creditor nation, with no foreign debt at the end of World War II, to the world's largest debtor, with roughly half of our public debt held by foreign lenders. Over the last four years, our national debt has grown by more than $5 trillion to over $16 trillion. We have to service that debt. The Federal Reserve is keeping rates historically low but here's the cost of paying interest on the debt for fiscal 2012: $359,796,008,919.49.

What do you get for that? Nothing.

The greatest fiscal challenge to the U.S. government is not just its annual deficit but its total liabilities. Our federal balance sheet does not include the unfunded social insurance obligations of Medicare, Social Security, and the future retirement benefits of federal employees. Only in the small print of the financial statements do you get some idea of the enormous size of the unfunded commitments. Today the estimated unfunded total is more than $87 trillion, or 550 percent of our GDP. And the debt per household is more than 10 times the median family income.
If we continue in these irresponsible ways, an eventual reckoning cannot be avoided. The liabilities are so huge, and multiplying so fast, that there will be one unavoidable demand as the various bills come to their due date. Show us the money!

How will the bills be honored? Let's remember that 100 percent of the payroll taxes for Social Security and Medicare are spent in the year that they are collected, leaving no leftovers for the unfunded obligations. And this doesn't take into account other risks, hardly minimal, like the fact that the Federal Housing Authority confronts a $16.3 billion net deficit after its latest audit that may force a taxpayer bailout for the first time in its 78-year history. And just four years from now, in 2016, the Disability Insurance trust fund will be fully depleted.
Merely to avoid going deeper into debt, to cope with the speed at which compound interest is growing the real debt annually, we would have to collect $8 trillion in taxes each year, Cox and Archer point out. And here's the nub of it: All individuals filing tax returns in the country with incomes over $66,198 have a total adjusted gross income of about $5.2 trillion. The total corporate taxable income (at its peak in 2006) amounted to $1.6 trillion. This means that we have a maximum of roughly $7 trillion available if the government confiscated the entire gross income of individuals and corporations—not nearly enough to cover the yearly growth of U.S. liabilities.
Read it all - that only touches the surface in an article that really pulls it all together. None of your military theory, concepts, COAs or contracts mean anything if a nation's economic structure eats itself alive.

The "deal" that everyone is talking about from last night will do nothing. The problem is spending, and all the class warfare perpetual campaign taxing will do nothing to either grow the economy of fix the budget problem.  A promise to cut spending some insignificant amount at a later date is just an advertisement of the dismal state of leadership, vision, and courage we are in.

The Republicans only control the House, so there is only so much they can do even if they had a different Speaker than Boehner. Senator Reid's Senate has not passed a budget (in violation of the Constitution) in years. The President has neither the background or the inclination to be a national leader or to govern, he is a revolutionary. He is doing exactly what he wants to do, that is to create wholesale change in this nation more in line with his ideology.  We elected him to do so, and he is doing it.  Agree or disagree, but what do you expect him to do?

So, as we talk about "payloads and platforms," Pacific Pivot, the LCS makeitwork patch of the month, and all that good stuff, remember this - it is no more important than Napoleon in 1812 deciding on the best winter gear for his infantry. Important in an isolated sense, but not critical to the macro decisions happening in the background.

All this has been known for years - Professor Lieberman warned us about it in the late 80s as I sat in his classroom in quasi disbelief that we would ever let this happen.  Well, we did, and here we are.

As I outlined in an email to some folks last night, our plans for a future fleet right now is vapor-locked, and unless a major global war or significant regional maritime war breaks out in the next decade, there is a better than even chance that on the Surface side of the house at least, we will be in stasis until we leave the 2020s. 

The big challenge for the next 15-years will be force level preservation in a military fiscal environment not unlike the the time period of 1920-1933 - without the innovation that we saw in the same period in carrier and cruiser development.  

Where does anyone see innovation in a tight budgetary environment that can seed future advancement if/when the fiscal house is put in order? I'm looking. Rail guns, maybe coming out of the 2020s. UCAV (aka re-usable TLAM) may add some flavor to the mix, though are problematic in their own way. We can at worst hold our own or be a half-generation ahead in cyber if we want. Directed energy is half a century out from operational utility. 

No, as unsexy as it is, the smart minds are looking at force and capability preservation with the best technology and weapons we have now. We already had one lost decade of PPT success, we don't need another. With the cutting edge Chinese technology tickling the late 70s through the late 80s, and the Russians just bringing themselves in to the late 90s in places - we have time.

As always, the question will be - do we have the leadership?


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