Debtpocalyse: Army Futurists See Fiscal Meltdown on the Horizon

10/28/2011
By Sandra I. Erwin

Generals, admirals and politicians have beenpushing the panic buttonrepeatedly in recent weeks over proposed cuts to the Pentagon’s budget.
But don’t tell that to the forward thinkers who are shaping the future of the U.S. Army.
Army strategists say they are planning for an era of austerity, simply because they might not have a choice. According to the conclusions of the service’s “alternative futures” seminar conducted this week in Chantilly, Va., the United States is headed for fiscal calamity as early as two to three years from now. The message: The national security of the United States does not rest in bigger military budgets but in getting rid of its atrocious debt and restoring its fiscal health.
“We are embracing the requirement that we have to contribute to solving our debt crisis. We are not fighting it,” said Brig. Gen. Patrick J. Donahue II, director of the concepts development and learning directorate at the Army Capabilities Integration Center (ARCIC), Army Training and Doctrine Command, in Fort Eustis, Va.
“How are we going to come up with a military that [might be smaller but] is still effective?” he asked. That is the “big issue” that the Army is facing, Donohue said in an Oct. 28 interview on the final day of the Alternative Futures Symposium, which ARCIC oversees.
Col. Kevin Felix, director of ARCIC’s future warfare division, said during a presentation that the Army designed the Alternative Futures study as a means to become more knowledgeable about global trends that could affect the service’s role in national security. “We wanted to prevent the Army from talking to itself,” Felix said.
The seminar included 85 experts from academia, industry, civilian government agencies, U.S. and foreign militaries. They were divided into four groups that independently developed a “vision of the future” grounded in current trends.
Among the trends that could dramatically impact U.S. national security in the next decade, several experts at the symposium said, are the country’s deteriorating finances.
Between 2013 and 2015 is “when we’re going to see bad things,” said Robert A. Wiedemer, a participant in the Army’s seminar and one of the authors of the best-seller “Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown.”
With the U.S. debt about to reach $15 trillion and annual deficits in excess of a trillion dollars, “if you were a banker would you lend us money?” he asked. “The answer is ‘no.’”
He said the reason things don’t look so dire now is because interest rates remain low, at about 2 percent. But he noted that just a 1 percent increase in rates would jack up the interest owed by the United States by $150 billion each year. “That’s about the same as the entire budget for the Army,” Wiedemer said. “When you hit 10 percent, all bubbles burst.”
Frank Finelli, managing director of The Carlyle Group, a global private equity firm, in a presentation to the symposium said the United States must either slow down its borrowing or risk a big meltdown. The Federal Reserve is fueling a future crisis by flooding the economy with money. The Fed’s balance sheet more than tripled since 2007 by $2.5 trillion, said Finelli. “Such tremendous increase in the money supply has not been accompanied by economic growth in the United States.” A rather shocking statistic, he said, is that the U.S. economy was actually larger in the fourth quarter of 2007 than it was in the second quarter of 2011.
The money supply problem, combined with potentially rising interest rates and inflation, could leave the United States facing trillion-dollar-a-year interest payments and unable to continue to live on borrowed money, Finelli said. “The United States for the next couple of years probably muddles through,” but the pain will come in the second half of the decade, he forecasted. “That is when Bob Wiedemer projects the money supply will start manifesting itself in higher interest rates and higher inflation.”
The U.S. military’s feared potential peer competitor, China, is expected to overcome future economic shocks more easily than the United States or Europe could, Finelli said. The strength of China will not come from its missiles or submarines, but from its wealth, he said. “China does view financial power as an exercise of power in a way that the United States does not. The United States only exercises financial power through its corporations.”
Against this chilling backdrop, the Army is beginning to plan for how it will draw down after the war in Afghanistan ends, and still remain “effective and ready to do things,” Donohue said in the interview. One option that is being contemplated is a redesign of Army units. Other cost-saving measures could involve cutbacks in overseas bases and setting up new alliances with foreign partners so they can pick up duties that the Army currently performs, Donohue said.
Cutting costs, he added, “requires some change in how we think and how we operate.”
Anyone who believes the Army is incapable of change is wrong, he said. Institutional inertia is no longer an obstacle, he added. “I think the Army has embraced the requirement that we have to act differently.”
The Alternative Futures seminar is part of the Army’s “Unified Quest” series of war games, which are conducted annually to examine issues that the Army chief of staff considers critical to current of future force development. The conclusions of this week’s event will be included in a “Vision of 2028” paper that will inform Army doctrine and education programs.

Topics: Defense Department, DOD Budget, Simulation Modeling Wargaming and Training

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