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Saturday, November 5, 2011

What are the crucial economic challenges and opportunities that confront the United States in the near to medium term, and how must our national defense strategies be adjusted to account for these strategies and opportunities?

     The US is currently struggling in the aftermath of one of the worst economic downturns since the Great Depression. Millions of individuals have been laid off and businesses are just too uncertain about the future to begin hiring. Households do not want to spend because they don’t have sufficient income, and businesses do not want to hire because there is insufficient demand. American people no longer trust government policies on the economic sectors. According to the survey of The Hill,  69% responded that the US is now in decline, 57% presented that the children won't live better lives than their parents, and 83% indicated that they worry about the future of the nation with 49% very worried. These public perceptions are presenting the most pressing near term challenges for policymakers. How did we get into the crisis?
     The fundamental problem is the collapse of the middle classes because of the systematic problems in banking sectors with government policy errors. In 2000, the Federal Reserve lowered the interest rates to keep the economy strong upon miscalculation of the dot-come bust. The government didn’t recognize that lowering interest rates caused banks to borrow money from other countries such as China, Japan, and countries in Middle East. With leverage and CDO (Collateralized Debt Obligation), banks were able to make millions of money. However, such behaviors brought down the subprime mortgage problems resulting in the collapse of the middle classes. The banking sectors changed into a perforated jar so that banks are too big to allow bankrupting.
     Upon collapsing of the middle classes, the inequality between the very rich people and the middle classes are getting more serious. The people who could have become middle classes have dropped into the bottom and changed into the poverty. These gaps forced the price of foods and energy to rise, which again affected the middle classes whom the United States relies on to supply the growth to pay the debt.         
     Despite these tremendous near term challenges, the United States has even more pressing underlying structural challenges. By far, some challenges for the United States are the aging of the population and natural resource security. Simply put, the United States public sector has promised far more than it can deliver to the coming retirement of the baby boomers. The cost overruns swamp any of the near term fiscal issues so something needs to change with hard choices: reduce benefits, increase revenues, or reduce spending in other areas of the budget. 
     The world just witnessed its 7 billionth person born last week. The demands being placed on the planet are extreme. The things we take for granted, grain, water, fossil fuels are becoming more and more limited, while the demand is increasing. Paul Ehrlich wrote the population bomb in 1968, where he projected the world would see mass starvations in the coming decades. This did not happen owing to the green revolution that dramatically increased crop yields. Since then the population has gone from 3.5 billion  and is now 7billion. Will we see another green revolution? Who knows? But securing the resources to sustain national populations’ increasing demands will be the largest challenge in the coming 50 years.
     With respect to the military concerns, the government had engaged to cut military budget between $400 billion and $1.15 trillion dollars over the next decade. It is a very challenging time for the defense budget and for the national security needs. How do military strategists to  make the case to save the defense budgets so that the military is able provide the national security in effective ways?
     In terms of ‘ends, ways, means,’ the Pentagon must find effective ‘ways’ to meet the ‘ends’ without necessarily jeopardizing ‘means’. For example, with regards to the skill sets, if we cut the defense budget and stop building submarines or fighters, we might not be able to bring the capability back several years later. The skilled engineers and innovate ideas for the national security coming out of the manufacturing of the defense industry place enormously positive role in the national economy.
     The military also should admit that savings can be found within the defense budget. Some factors must be considered for that purpose: how can we reshape force presence in key areas, such as Asia, the Middle East, and Africa? What type of forces are we going to need for future challenges? What kind of programs we might need?
     With regards to the risks, the Chairmen of Joint Chiefs of Staff addressed that the military would not go to the civilian leadership with simple priorities, rather the military will recommend to the civilian leadership the strategic options the military can do and need to do in terms of time. His approaches to the risks and challenges amid economic crisis will lead us to another opportunity for both the military leadership and the civilian leadership.
     The fundamental question regarding opportunities is, “How does the United Sates to  get it back to the way it used to be?” Broadly speaking, the United States must reverse the Capitalism with expansion of policy on globalization. There is some distance between what the market is doing in its own zone and where the government wants to be in terms of optimal use of resources. The government has power to pull the market all the way to that efficient point with surgically precise regulation and intervention.  

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