School of War - Ep 161: Mackenzie Eaglen on China’s Military Spending and Ours

Episode Date: December 3, 2024

Mackenzie Eaglen, senior fellow at AEI and author of Keeping Up with the Pacing Threat: Unveiling the True Size of Beijing’s Military Spending, joins the show to discuss the dire situation the U.S. defense budget is in.  ▪️ Times      •      01:22 Introduction      •      02:48 Keeping up      •      05:26 China’s spending      •     10:01 Equipment costs       •      13:46 “Stealing our stuff”     •      18:25 5 alarm fire     •      20:32 U.S. budget truths       •      24:50 BCA 101      •      31:32 Today or tomorrow      •      39:23 Defense is cheaper, not better     •      43:21 Solutions   Follow along on Instagram or YouTube @SchoolofWarPodcast Find a transcript of today’s episode on our School of War Substack

What does China spend on its military? What do we spend on ours? How do you measure these things and how do you assess the strategic impact of budget decisions? Believe it or not, my discussion today with McKenzie Eagland on these issues is one of the more harrowing episodes we've recorded this year, because the upshot of our talk is how we are on track to lose a major war if we don't get our act together. Let's get into it. It is the for war this Milwaukee invasion of the way. December 7, 1941, a date with a date with you.

We'll live in history. A bloody experience of Vietnam is to end in a state. We continue to face the rain, the situation in France. We shall fight on the beaches. We shall fight on the landing grounds. We shall fight in the fields and in the streets. We shall never surrender. For more, follow School of War on YouTube, Instagram, Substack, and Twitter.

And feel free to follow me on Twitter at Aaron B. McLean. Hi, I'm Aaron McLean. Thanks for joining the School of War. I am delighted to welcome to the show today. Mackenzie Eagland, who is senior fellow at the American Enterprise Institute. She's a defense strategy policy expert, expert on the defense budget. It is my fault that we are a couple years into this project, and we have not yet had you on the show, McKenzie. Thank you so much for making the time today. It's my pleasure. Thank you for having you. So you've made a couple big contributions to the debate on the defense budget, essentially here in Washington this year. And the, in the, in the, One I want to start with that caught my attention and as best as I could tell, it either started a huge debate or it altered the course of a big debate. And the subject was the size of the Chinese defense budget. And listeners are probably familiar with this sort of line that's often delivered with a bit of a sneer.

Like why are people like you and I, McKenzie, why are we so interested in increasing the size of the American defense budget? don't we know that actually the American defense budget is bigger than, and then I forget, it varies. But the next eight, you know, countries behind us put together. And it always struck me as odd or surprising, not that I did anything about it, that this could be true about China, given that they were on the way to building what is now the world's largest Navy. He's like, well, how's that possible that their defense budget is so far behind ours? And yet they seem to have a lot of people and a lot of stuff.

And here you came earlier this year with this paper that was put out directly by AEI, I believe, called Keeping Up with the Pacing Threat, unveiling the true size of Beijing's military spending that leveraged some releases from the intelligence community. Tell us about this project. Tell us how you got interested in it. And how the heck is it that China's budget is actually about as big as ours, it turns out? Well, thanks for asking the right question, because if we're just looking at our own investments in isolation, and not accounting for the enemy that always gets a vote or the competitor in this case, right?

Deterrence is expensive, although I'd rather spend an ounce of deterrence instead of a pound of war. Just talking about what we're spending, and if that's enough, doesn't mean anything all by itself. Because is that enough relative to what? And of course, our global obligations are whether we like it or not, for now, the nation's political leadership has decided that we are going to balance power across three freedom. three theaters at the same time, Eurasia in the Middle East. Now, that doesn't mean we're not going to do things differently at different risk profiles, different temporal dimensions, different services and domains across those three. Nothing is the same in the three. But right now, we believe that's in our economic and national best interest, which I, of course, tend to agree with. And so I like to

look at our spending relative to what we need to do with this tool of statecraft, which is, as busy as it ever was. That's the thing about the military. At the end of history in 1991 and the so-called end of history, we took the very real for Truman holiday. And ever since, the military has been used at a wartime tempo, whether the troops are at war or not. There's no rest or reprieve. Like, look at Army's missile defense units, right? So a long kind of winding answer to say that it matters what Beijing is spending because they're increasingly, not only are they outpacing us in outputs of their defense investments, which is manifest all over the world. They have a blue water navy full stop. They are present

every single major waterway where we are. But of course, how is that changing the risk calculus for what they might do that we would disagree with to change the status quo, whether that's the Philippines, Taiwan, or somewhere else? And so I'm done with tyotropes like you are. It doesn't matter what we spend. And by the way, what my research shows is we don't spend more than anyone else, actually, if you put us next to China's budget on a relative basis. And okay, so how do you get there? Because the Chinese say you're wrong.

The Chinese say, let's see, can I actually pull this number up quickly? The Chinese say that as of a few years ago, 2022, they only spend $229 billion. And if I'm not mistaken, we were somewhere in the 700s that year or that vicinity. That's like, what, a third of us? That's right. Are you saying that the PLA and the Chinese Communist Party are lying? It's shocking, I know. So once a year through state media, Beijing puts out its annual defense budget expenditure, total figure, top line number.

And we're supposed to just nod and take them at their word and move on. And yet, again, let's go back to the outputs. So let's put aside the state media for a moment in their honesty or lack of. And when I span the globe, right, you, you, you, you, reference the Blue Water Navy of which the Chinese militaries is the largest on the planet. But then the trend lines hold up for the Air Force, for their army, all in, for their space, for their sub-strategic missile force, some of their rocket forces. It's pretty much across the board.

They have a level of mass, and they're not just marginally bigger than we are. And then, of course, there's a, well, they're kind of arguing, well, okay, that size would have about strengths. Yep, I'm counting the LFLs too. I'm counting missiles. Their missile production and capacity rate is absolutely astounding. And I'm mostly focused on conventional forces. If we were to talk nuclear, but I know you've had other guests on who do that. It gets even worse.

The trend lines get even worse. So the math and firepower, the thighs and strength of the Chinese military across the board is overwhelming. But so I get there by looking at primarily, I'd say about, it's not quite half, But a lot of the funding is what I call uncounted Beijing military expenditures. Now, the Pentagon says in its own report that they have, you know, their annual China power report. And the Pentagon says Beijing's budget omits several major categories of expenditures and actual military-related spending.

So this isn't me reaching here. In fact, I was extremely conservative. So as to just start a conversation to get everybody, you know, kind of to a consensus. So we started adding in basically firepower, conventional combat power that we see in use around the world. So quick example, this is just one of many, the China Coast Guard. That's the same Coast Guard that's sailing alongside PLA and vessels in Sabina Shoal, ramming Filipino vessels, rendering them operable, itself an act of war, conducted by the China Coast Guard, not counted in their military budget. If you're using your gray-hold vessels to inflict violence for a political end, that is a military capability, whether or not you call it that.

So we start adding up those, for example, space and counter space. Military research and development, there is at $1 in the China stated defense budget for R&D, the Coast Guard, the people's armed police. There's other ones like mobilization, retirement, pensions, construction of bases. I can go on, but you're getting the picture. A lot of things that they say are not military debt. course, clearly are. And then there's two other adjustments we made. And this is the area where people get a little, you know, question about it. But we had to throw a dart on the wall because somebody has to take the first, fire the first salvo. We account for our different buying powers of

our different economies and the lower cost of labor. And we were very selective whenever we did use purchasing or economic adjustments to be narrowly scoped. And of course, with all the caveats for the reader to take it into account. I'll just conclude by saying, you know, this, all started as you asked and why did we even bother because America's intelligence communities have told Congress that they believe Beijing's true defense budget is about 700 billion. I assume they were referring to 2022, which is the last set of figures we have publicly available. And when I tried to rack and stack it, we got about to there, which was close to our expenditures for that year, the United States military. And like I said, if I really went, you know,

full bore McKenzie, it would have been closer to a trillion that they're really spending. Yeah. So sorry to sort of get really technical here for a second, but the purchasing power, the parity question is really interesting if kind of in the weeds. So the personnel thing is easy enough, not easy. It's easy for me to say, you did the work. It seems, it seems straightforward to do some back of the envelope calculations on labor costs.

And I think there's a number in the report. It costs like something like one 16th to pay a Chinese soldier as it does to pay an American soldier, which is not particularly surprising. And I feel like I could sit here and reverse engineer some of the steps that you would use to make such an estimate. How do you think about it in terms of equipment? Like, doesn't, I mean, at some point, like really expensive high-end stuff is also expensive in China too, right? And like, I don't even know how to start thinking about that. Like, how, can you, can you share a little bit of your thinking there? Well, the first thing I did, like any smart American Enterprise Institute colleague was to go ask Derek scissors, one of the world's leading

China economists really wanted to be not that he's leading he's one of the only one and basically said tell us how not to think about converting you know kind of making a full-sum assessment of China's military and how to think about it and so and he helped us begin to answer your question and so we know what we know was a market exchange rate would misrepresent the true cost efficiency of China's military spending like where you convert yuan to dollars based on a currency exchange rate overseas right That's just too simplistic. We know that because that overstates our capacity relative to theirs. And prices for goods are lower there.

Now, to your point, military equipment tends to be more expensive. And I agree. But then there's that other big pot of spending we haven't covered yet, which is how much China's cyber espionage, how much theft, particularly intellectual property they're stealing from America in particular and simply copying and doing quick second mover market. build. So that's why so much of their aircraft and many of their ships, a lot of their missiles look like ours. It's literally by stolen design. When you do it that way, it's not going to be

the perfect product. It's not as good as ours at first, but you can rapidly iterate once you've stolen the IP and come up with a better product. So we started there. Then next we've talked about the limits of purchasing power parity to compare military expenditures because it doesn't give a completely accurate measure of a country's buying power. This is a term you hear Pentagon leaders in the U.S. talk about all the time. We're losing buying power every single year and we can get into what that means when we talk about our own defense budget. So it doesn't translate perfectly across economies. We regard it as an approximation, but it does hold up well for labor costs for military people, including civilians and hardware. I don't think people are aware of the scale of China.

Chinese, well, espionage broadly, but theft specifically. I kind of like how they don't even hide it. Like, they even call the plane the same thing. Like, this is the J35? You know, it's just like, there's no, there's, it's like, screw you guys. Yeah, we stole it. It looks like it, you know, it's presumably not quite as good on the inside. But, you know, it's just remarkable.

My favorite story of this was when I was in the Senate, these Chinese graduate students were arrested. I think it was at the Memphis airport. and they were stealing rice. They were stealing, like, artificially bred, you know, fancy, high-performing rice from a university lab in Arkansas. Like, they're literally stealing the rice. Now, I don't mean to do it.

It's actually, it's more serious. When you think about it, it's about food production. Like, it's actually not a light matter. But, like, it just hammered home for me to scale this. And I'm kind of constantly surprised this is getting a little out of the weeds and just asking your general opinion here. but this telecom hacking news from the last several weeks that basically the CCP has had the capacity to listen to our phone conversations, read our texts, basically act like an American law enforcement organization would act if it had a warrant in full access.

For a long period of time, it would appear. And it's not entirely clear to me just based on the public reporting if this is resolved. Like, I can't quite tell if it's resolved, which suggests to me that it's probably not. That's insane. that's wild, and yet I don't see a tremendous amount of public concern about it, which is also kind of wild to me. Exactly. And there have been figures put out by the FBI and other spy communities in recent years

about how much military intellectual property China has stolen and then broadly just from our U.S. economy because you and I both know our innovation is truly what sets our, one of the things that sets our country apart from everywhere else. But if they can capitalize on that innovation through staff, I mean, it negates the margin of our advantage significantly. So I'll tell you a little fun tidbit. After we put out the report, I got that phone call from a friend on a Pentagon board saying, thank you for starting the conversation.

This is extremely important research. We know, and we're going to put our own version of, your report out eventually. But we know that China's out investing the U.S. military in procurement and research and development. And of course, we already know that China's industrial base is significantly larger. We'll talk in a moment about why that is. But public sources, the China economy is 15% larger than the United States in the CIA World Stackbook. Okay. So we started getting into the weeds of so, you know, what did AEI not even consider in our report? And the value of, the value of the value of the stolen IP. So a couple of points were raised here that it's de-risking for Beijing when

they steal our stuff. And they're stealing at what is called a TRL level, a higher technology readiness level. So that's the phases of how the military builds its stuff. So then there's fewer failures when they steal it and go and try and redevelop it for themselves. So fewer development cycles, fewer failure rates, and then higher success rates of initiatives. And this is all stuff that they can take off their balance sheet, right? Because we're the ones absorbing all of that. That's really interesting, I thought, and terrifying. Then they have, Beijing has a broad policy that they call military civil fusion. No, it's not civil military relations like we like to think of it.

So basically this is, we don't know where a China equivalent of a dollar for civilian purposes ends and the defense begins. And this matters because this is basically government subsidies, right? It's like what Airbus gets from the EU. And we're always getting freaked out about it. That's not a fair competition. But the market asset securitization account is it estimated by some pending on insiders at $60 billion. So this also guarantees the safety of these investments, right? It's not just that you won't fail as much because you've stolen it, but these are just subsidies to prop up your industry.

I haven't even gotten to the scale of their commercial slash military infrastructure that, right, so we already know, you think of EVs, but it's the same thing in shipbuilding, right? their commercial shipbuilding, commercial yards are also building military and greathold ships as well. But just the overwhelming capacity, it's over 200 times ours. So it doesn't just matter. It affects the calculus of deterrence, meaning if they know if this ever got beyond competition, does something with the use of violence. We don't have that kind of capacity to rapidly repair and resupply forward in

Asia, and it's a really long way home to sail and fly things. And so it starts, you see how Beijing's starting to win without fighting with some of these policies. And so it was good to hear, but also frightening, that AEI underestimated its calculation. I just saw it was just a clip. I should watch the whole event, but it was Admiral Paparo, some event, just a few days ago. And they were asking about, you know, drone swarms and do we have a solution? And he was like, yeah, yeah, yeah, drone storms, cool. I'm all for it.

I'm paraphrasing, obviously. Though not that, not by that much. And he said, but let's talk about this. I have to get the stuff across the Pacific to deploy it. And if there are humans involved here, or for that matter, you know, things that need fuel or whatnot, I have to sustain it. And then I think he literally said, I think I'm going directly, how am I supposed to do that? Right. And this is in a public forum.

And, you know, I'm used to a certain degree of bluster for my senior military leaders, which I know is half BS some of the time, unfortunately. But I know why they do it, you know. I found that alarming. I found that moment extremely alarming. I thought that it was supposed to send a message to Congress. Yes. If you're taking the risk that the Chinese hear that and take from it what they must, you know, that's like as much as a, that's as much of a fire alarm as you're ever going to get.

Preach. My new bumper sticker that I'm going to create for my car, obviously not really, but it's Beijing can count. Because Washington's only fooling itself, right? We haven't even talked about, you know, munitions and missile production, right? which China's also running circles around us, if we have certain capabilities of precision munitions that run out in six and nine days, which Beijing knows,

they're not afraid if they can go 60 days, 90 days, 600, right? So I agree with you. It tends to be those in uniform are a lagging indicator of the actual real world. So, granted, combatant commanders are obviously front line, but I'm with you all the way. This is about as five alarm fires you're going to get. Yeah. Yeah, on the theft thing, just before we leave it behind, and I guess I should be limited in what I should say in a podcast here, though, you're probably going to, I feel like I know you well enough to know that you're just going to shoot this down. You know, if you know the robbing you blind on this high tech stuff, you could be kind of creative with that and have some fun with that if you're us. And I hope that we are being creative and having fun because it's like the only silver lining upside of it. But it's probably, it's like the theft is happening at such a scale. I wonder how much of a difference you could even make.

I hope we are being creative with our deception and other capabilities, but I'm not sure we are because so much of this resides in the private sector, as you know, who we rely on with their skill sets and the amazing work that they do to build credible combat power. So I'm not sure. Yeah, fair enough. Okay, so you make, we're going to sort of begin the process of transitioning from discussing the Chinese budget to the American budget and how it works. And you make a couple of sort of big points in this China paper that are relevant here. The first is you point out that while the way in which people have talked about the Chinese budget to include the Chinese themselves significantly underestimates its true size, actually the way we talk about the American budget

significantly overestimates its effective size. What do you mean by that? It's a huge way. We're going to be up at a trillion dollars before long. That's going to be an uncomfortable political moment, by the way. I'm all for it, but it's going to be uncomfortable. Why is this overstating the case? So for a couple of things, the biggest point to remember, again, because we could always dispute some of the details, and that's okay. There might be better analysis or additional points and things to consider. And the more smart minds are in on this debate, the better. But the single biggest takeaway is Beijing is the military significantly larger than ours, probably close to around the same strength as ours, if you're talking tonnage or.

missile numbers or things like that, trained personnel, et cetera, they're getting close to us in strength as well. So it's not just size. It's size and strength. And they concentrate it on one region. Are they globally present everywhere? Sure. But they really are only care about their backyard, the Indo-Pacific, the Western Pacific specifically. And so their dollar, you know, has an effect of spending five dollars because it's so concentrated, highly concentrated in one area. And relative to our allies and partners in that region, I mean, if they're on par with the United States military, they're outpacing our allies, you know, by double digits to one. And so while we can lull ourselves, again, into sort of false comfort and complacency that, well, we spend more than China,

nope, well, we have allies and partners, they don't. Okay. But when you even rack and stack those, you're still outspending everybody. And it's all very, it's all in one place. And we're spread pretty thin, like I mentioned. It's not just that we care about and have interest across three theaters, but it's these two grinding, bloody, violent, long wars of attrition in Ukraine and in the Middle East and the Bob Al Mendeb straight near the Red Shee. So these are hugely taxing on our forces. Are we getting better kit out of it on the back end? Sure. But the back end is a couple years away in some cases for the things that we're providing to our allies that we might then get back later. And we're having to ramp up our presence every time Iran and Israel lob missiles back and forth.

What we've seen the Houthis provide thanks to the global actress of resistance and the capabilities and tech know-how from Iran in particular, their capabilities do not look like third-rate counterterror group, right? It's highly sophisticated stuff. Just asked the commander of Sentcom. And so that's the biggest point. They get $10 to R1 bang for their buck because it's mostly, their budget is mostly combat power, and it's concentrated in one place, which gives it a force multiplying effect. Our budget is mostly paying professionals because China's moving away from conscription in some cases, but for now they still have a blended system. We, of course, don't force you to join. And so when you have professionals, they're extremely expensive.

We have professionals who take risks. Others don't want to take. Double the expense. And there you go. So that's the biggest line item on our balance sheet. Then you look at the trend lines across the two countries in my last point for now, although these are the first of my three, the first three of many, I mean. Then you look at just 30 years of spending.

We already talked about the end of history, supposedly. But the last 28 years, China's averaged a 9% annual defense budget increase per year. they spend significantly more as a percentage of their economy than we do. We've averaged 0.8% annual growth over the last 30 years. And so we're more, you know, feast, famine, peak trough repeat. That's how we fund our military, which means you never actually get ahead. You really truly, you tread water and you actually kind of lose ground. It's why you don't get things like a 1980s like military buildup when you're always busy repairing the potholes that you didn't pay for in the last budget when you

cut it. Well, let's talk about the biggest and most significant pothole. It's more of a gaping crater wound. I'm going to guess that, I mean, for listeners who are maybe more senior in the military, they know what the Budget Control Act was, they know about sequestration. I'm going to bet that probably a lot of listeners don't. Could you give us BCA 101 and what happened and why it happened and the unbelievably harmful effects it continues to deal out today? Amen. It really does. Well, I'll give you the two-line summary before BCA because everything, how we fund our military or how poorly, those decisions are compounding over time. It's like inflation and compounding interest, right? It's why people don't feel like their pocketbooks have recovered when things are leveling off supposedly. The same thing happens with military buying power. So, you know, there was the procurement holiday of the 1990s. The military became a shadow of its former self overnight with the expectation that we wouldn't use them.

And of course, we continued to do so. And that was followed by, you know, the 2000s and early aughts and two huge, long, very taxing wars on our forces, highly manpower intensive, followed by a hollow buildup, not unnecessary, just hollow. Primarily all of the expenditures were for readiness, which is perishable, and equipment that you needed to counter that specific threat. Now those are in the Boneyard and in the Ghost Fleet, and they're not around anymore. Then you followed that with a budget control act that started when we still had troops in both Iraq and Afghanistan, which is almost unprecedented in American history.

I really, it's kind of shocking that, you know, I understand. So the politics of the time where Obama had swept into Washington with a trifecta in 08, there were worrying indicators about our debt in 2010. And then the Tea Party was his shalacking. He called it in the midterm. And that was the rising sentiment around behind his supposed midterm shabacking. So there was a deep desire by some in Washington allowed group to reduce annual deficits and our overall federal debt. There was a super committee that stood up and Republicans and Democrats to find ways that were

bipartisan, cut spending, increased taxes, and everything in between, shared sacrifice, basically. And this super committee did it. There were members like John Kyle, former senator from Arizona, who've talked about what they came up with. And Republicans gourd their sacred cows and Democrats did the same. And then the White House killed it. And what followed was the Budget Control Act, a 10-year limit on domestic discretionary spending in the federal budget, of which defense right now is about 45, 46%. So, but it disproportionately cut defense steeper than non-defense discretionary. By taking all of the mandatory spending off the table, of course, we know that's,

Pac-Man that each every federal dollar now and interest on the debt. And then a series of budget deals were enacted to help offset the impacts of that. But sequestration in 2013 was the remarkable trigger. So this was like the hostage of Congress. We're going to give you a little more time to make a better deal. We've already launched the Budget Control Act with, by this point in 2013, it started in 2011. Hundreds of billions have been wiped out of defense, planned and current spending. And sequestration was this automatic trigger in the absence of action by Congress to do what that Super Committee didn't. There would be an additional round of spending cuts.

And if the terrorist was the sequestered, the hostage that they held the gun to their head was the U.S. military. So everyone said, oh, well, we won't pull the trigger. And of course, guess who Washington did pull the trigger. And the sequestration launched. And the way our budget works is that was calendar year and fiscal year 13. But the ripple effects, they're still being felt today because, you know, you have a Navy building submarines today in the economy of 24 under contracts negotiated in 2017. That's just how the dollars flow. It takes a long time for things to move through the system.

And so you start seeing really big consequences in 2015 of sequestration. So, for example, the Army idled the 155 plant for two years. didn't buy a single round for two years. These are the kinds of seemingly one-off choices that sequestration made that now when you put them together collectively, you realize how far we're falling behind. And this went on for another six years. So not to get too nerdy about it,

but I also attribute other terrible consequences to the budget control acts we could get into if you want. Well, no, feel free. And then, you know, we end up, perhaps in some ways we always were, but even more acutely today in this, you call it a doom loop. And you have, I think, one of the, one of the best descriptions of this cycle, which I'm going to mingle now, but you'll correct me, which is broadly speaking, this is not technical, but broadly speaking, you can spend on your needs today or you can spend on your needs

tomorrow. So today, obviously, as you point out, we're supporting the Israelis, we're supporting the Ukrainians, we're fighting a war. We're not winning it, by the way, in the Red Sea. we've kind of lost as best as I can tell, and we've just kind of accepted that, and the public doesn't seem too upset about it. And I'd be fascinated to see what the Trump administration does about it.

I have some thoughts. I have some recommendations. But even there, when we win, we're losing, right? Because even if you solve our problem in the Red Sea, it's going to expend more munitions, et cetera. So anyway, we got issues. We got problems today. And they're expensive problems, and we need troops,

and we need stuff that we need today. But everyone expects there to be, You know, there's a high likelihood of a war with China and the Western Pacific. Most conventional wisdom, it's not going to happen today. There's some who argue the late 20s, mid to late 20s, so a couple of three years. That's not long, by the way. But then, you know, I don't know, maybe it's the 2030s and maybe there will be other things in the 2030s. And technology will change.

And we have to prepare for that force too. And that's expensive. And there's AI. And there's all kinds of new stuff. There's new stuff in space. There's new stuff in the undersea. There's just lots of new stuff. By the way, it's super expensive.

And since the Second World War, a recurring theme of our defense strategy, broadly speaking, is a qualitative edge. You know, we get away with less mass because we've got better stuff. I mean, from having nukes when nobody else did all the way up through, you know, their stealth. There's all kinds of, you know, revolutions that we've been at the forefront of. So you can either spend what you need on today's stuff or you can spend what you need on tomorrow's stuff. but then this is where I thought your formulation was really interesting because everything I've said up until now is reasonably commonplace. You point out how, and maybe I'll just let you describe this, because you're not actually

spending quite enough on the future stuff, its quality is degrading, even as you're harming your present stuff and even as you're continually spending more. Like walk me through, how does that work? Yes, well said, you know, tomorrow's readiness is today's modernization, but that's, you know, that's the bill pair. So take that munitions example I just gave you. So the Army Idol is the 155 plant for two solid years, not one shell. And then the Army, you know, the Ukraine war starts and the Army, you know, the nation's policymakers open the national cabinet and say, where's the magazine debt? It's not there. And these were all choices that everyone signed off

on, of course. And it's across every portfolio in domain in defense. And so, and part of the challenge, of course, is the future never arrives on time. And we're always a blend as the U.S. military of high, low, and old, new. But Washington's been sold a bill of goods that it's only going to be high and new. Well, that's not even what's happening in Ukraine. You know, they're still riding on in tanks as they're fighting drone swarms. It's all together at the same time. And the promise of the future that doesn't arrive on time when you sacrifice the president. which is what the Pentagon calls divest to invest, well, then the current force that you're not using them less, right? They're still everywhere operating all the time to keep the crises from

becoming problems that are wars. So they're even, they're as busy as they would be potentially in a war. But you took away their, you know, you took away the number of tails on the ramps for this or that unit. So then the ones that are left, man and machine wears out faster. And then you wind up in that doom loop of spending more to keep the old stuff flying. Right, right, right, right. You're asking people to do two jobs for the salary of one. They don't want to stick around, and so goes the loop and downward. And then the funds for that future started to get tucked, nipped and tucked like the Air Force's new six-generation fighter.

That's getting cut right now because they can't afford that, much less anything today. They've cut everything in the active duty aircrafts. inventory. So then what you're left with is your conventional and your strategic forces are both at a nader at the same time when you, the whole point or the second offset strategy was you can take risk in one, but you have to recapitalize the other when you're doing that modernized. And so, you know, we're just hoping that the music doesn't stop and you're not the political point you're sitting in the chair. Yeah, it's a hell of a way to run a country. So can I, can I rant about something for just a second that all this inspires me and it's been a point I've been wanting to get

off my chest. And I'm actually, I'm going to do a whole episode here soon about, I just spent a few days with the IDF up on the Lebanese border and then also in Gaza. And, you know, this is a theater where I think there's strong evidence that we have grown all too comfortable with the notion that we are, we are in a world where the defense is primary. There's probably not going to be some kind of lightning attack in the Pacific for this is audio only, but just so viewers know McKenzie is nodding and gesticulating. I'm going to come out of my chair. That, and I actually, I'm guilty here because I've said versions of this on the show

that I think about a cross-straight invasion scenario in the Western Pacific. And I think it's like D-Day, but without any prep, like, that's pretty harrowing. Like, are they really going to try that? So I've said this, and there's some truth to that, and I've thought about this. But, like, in Israel, on October the 7th, a not especially impressive group of terrorists, like basically the least threatening terrorist formation that Israel faces, Hamas. pulled off strategic surprise and got real operational effects for days, for days. Arguably came into the neighborhood of getting strategic effects too.

I think you have an interesting debate there. But certainly, I mean, one, I mean, it was winning operationally for a while. In the north, in the middle of September, Israel went on the offensive into the teeth of a more serious terrorist organization, a more sophisticated terrorist organization directly backed by Iran. I mean, Hamas obviously has Iranian backing too, but to a greater extent of integration into the teeth of a prepared countervalue defense that Hezbollah had spent a generation, but certainly since 2006, developing that you can assure you can invade southern Lebanon if you want, idiots. And first of all, we're going to tritch you, you know, valley by valley. And then we're going to level Tel Aviv. We're going to level Haifa.

And you guys can just enjoy that. Israel attacked into the teeth of this thing. And none of that happened. None of that happened because they had a sophisticated. campaign that leveraged intelligence, dominance, technological overmatch. It's actually been incredible. And like, look, again, you can debate at the highest strategic level who's winning. I think, I think Israel is, but it's interesting.

It's a more interesting debate, the higher up you go. At the operational level and below, it's been just catastrophic for Iran, catastrophic for Hezbollah. So I'm sorry. Like, I'm not so sure the defense has quite as much. overmatch value of its own, if you will, against the, against the offense, given the proper conditions, given the proper conditions. And so this cliche that we're sort of back in World War 1 and like, look, we've had, we had the failed Russian Blitzkrieg on Kiev in 2022 that failed.

We had the failed blitzkrieg style Ukrainian counteroffensive in 2023 that failed. So it's all trenches and it's like World War I with drones and that's the world. So like, luckily, we don't want the lines to change. So we're probably going to be okay. Actually, the Chinese will probably just blockade and that'll be complicated. I'm not so sure. I'm not so sure. Sometimes, sometimes big shots take big gambles.

And, you know, the Japanese in 41, when they went to Pearl Harbor, they had this sort of, it's fascinating. They kind of had this sense of doom when they did it. They knew that we were going to outproduce them in the long run. And they had this scheme where they were going to have this defensive line. I realize I'm telling you things you already know across the Pacific. And they were going to slow us down and it trit us. And the American democracy was.

going to give up. That was their plan. It wasn't that we couldn't defeat them. They knew we could. It was that they thought it would be too long and too costly, and we would give up, and we would come to some sort of modus vivendi in spheres of influence. That was a huge risk, and they took it, and they lost. Today, I mean, if you take everything that we've said in the last half an hour as basically true, the situation is much, much worse. And vis-à-vis China. And if the Chinese, I think about Israel in Lebanon in the last couple months. Well, what is the level of Chinese intelligence domination of the battlefield? Do they know where Taiwanese leadership sleeps at night?

Do they know where the head of Indo-Pakom sleeps on Oahu every night? Just to be really alarming, but I think like totally within the bounds of what we should be thinking about. Do they know where his kids go to school? Do they know, you know, you can go on and on with the nightmarish details of what intelligence dominance could look like. And by the way, they're listening to our phone calls. I'm guessing it's pretty good. And what is the level of overmatch just on tech?

And by the way, this is all for the opening phase, if you wanted to do some kind of crazy cross-straight scenario. Is it crazy that you could just shape things for a few days and then go for it? Is there that firm of a line between blockade and invasion? I feel like we could start with a blockade and be in an invasion at the snap of a finger, and the snap of a finger.

And then they're banking, they have a much better bet to make than the Japanese had in 1941. Because as you point out, if we go out to 60 days, let alone 600 days, their situation is far superior unless we start bombing the shit out of the Chinese mainland, which, of course, if we do that,

we can expect the same in return. I'm not seeing the good news here, McKenzie. I'm not seeing the good news. I'm not either. But the defense-dominant thinking has taken over Washington, I think because it's cheaper. It's just cheaper,

and we don't want to admit it. But the same thing, it's interesting that the pivot to Asia was announced the same year as the Budget Control Act. It's not a coincidence. It was a way to sound strategically smart as you bankrupt the military. Oh, don't worry, we got a plan. We might be smaller, less ready and less modern, but we're still going to win somehow. And people are like, okay, great, they've got this. You know, everyone thinks it's always the invasion of Kuwait again, that we're going to be the ones, you know, who somehow pulled this out of our back pocket and storm with precision and stealth, as you mentioned earlier. We don't have those in our pocket right now, those, the third offset strategy solutions. They're being developed, and I'm confident in some of them, but they're not in every soldier's

backpack, rucksack. I hope they'll forgive me for that. Taking your excellent Israel example, and I heard the same thing from an AI call, you could just return from the front lines as well, just on a very small scale, quickly you apply it to the Houthis versus the United States Navy. and our Washington's firm position to not attack countervalue targets in Yemen. And you said it earlier. And what the U.S. Navy has seen slowly over time is the steadily increasing capability

and technological prowess of the Houthi capabilities. You're starting with so-so stuff and rockets and then to cruise missiles and intercom, you know, to ballistic missiles. And then our Navy's putting out pictures of a ship captain with his like pistol scope backward. Because. Yes. So the defense, you said it, we probably have lost. And we lost not just actually against this unimpressive group because we won't take the offense,

but we've lost so much in terms of our own munitions that we really, really do need for other scenarios. I wrote the article earlier this year that the Navy fired more tomahawks against the Houthis one day in January than they bought all last year combined. We can't sustain that level. And like I said, my Beijing can count. See, I should say like, Mullahs can count.

I'll use the bumper sticker. I keep ads trading with my chain of command for School of War's swag. And listeners keep agitating with me for it. The people demanded Nebula's podcast. she'd be listening. I think you're right. You're on to something.

Beijing can count subset of that. Right. Exactly. So it's just Washington that's fooling itself into complacency. And so then you get really scared. So if losing the Houthis isn't bothering anybody,

but Tehran is watching, right? And Beijing is watching. And they're like, well, guys, this is pretty, I think you're right. It makes it more likely they want to take the big bet. And then last you add to it, the maniacal fear of escalation, in this town. It's both parties. It's the defense department. It's the civilians who control them.

It's everyone in between, which contributes to this inability to go on the offense for a sustained period of time. And Beijing knows that too. Throw in a little lawfare and a little intelligence, EW, cyber something, and it's over. I worry too about this, not to be too best. Well, it hasn't been a happy 45 minutes. So for the few that we've got left here, obviously you and I keep showing up for work every day. So we haven't moved to a bunker in New Zealand. I don't know if that's because of some costs in Washington, D.C. real estate. I'm not going to speak for you, McKenzie.

You know, what the hell are we going to do? What is the McKenzie Eidlin plan sticking maybe narrowly with the defense budget? Because there's a lot of problems. So let's just stick with this one. We have President Trump coming back into office. We're going to have unified Republican control of government. What is the McKenzie Eagland agenda? So, you know, Washington is going to eventually break glass in case of emergency.

And you better have something ready. Otherwise, they do really stupid things like stand up Department of Homeland Security after 9-11, an equivalent solution. And nobody, no one thinks that one's a good idea. So, but it just shows you that anybody who's been thinking about the solutions, you know, will be relevant when the moment is ripe. And I think we're getting there, not just, it's not limited to the Trump when it's the unique global geostroval. strategic moment that you've been talking about and our relative weakness to to keep shaping that moment away from us, meaning we're shape, we're trying to shape it and it's still moving away from us, the status quo or the balance of power. And so it's coming sooner or later in some

way. I don't even know that we'll be able to predict. You know, I'm often asked about black swans, but the pink flamingo is the obvious things that need to get done that are in front of everyone, staring them in the face, and no one does it. And I think that's what we're. we are. So it could be a smaller trigger that sort of mobilizes Washington to respond to the pink flamingos because they're everywhere in the defense realm. And so I think there needs to be not like a doge for DOD or anything to get too acronym. But it really is an organization where if you pull a thread, the whole sweater does start unraveling because because there needs to be reform across the financials, across the strategy making and setting and prioritization, across

the policies like goldwater nickels and things that need to be scrubbed and sunsetted. And then across your industrial base that supports all these warfighters, the traditionals and the new entrance and growing the pie and everything in between. How do you account for disruption? Well, it's still, you know, while you still need your classic public utility equivalent companies that are going to make your, you know, nuclear submarines or whatever. So there's a whole bunch of different things. And it trickles all the way down to public education in America, you know, prioritizing the highly skilled trades, maybe taking some subsidies for college studies in the humanities and transferring that to welding and soldering at shipyards. You know, there's a whole set

of solutions from the strategic narrowing the cone to the every day that we, I've certainly thought about at AEI and I think the new team's going to need to focus on all of them. Now, you don't want to boil the ocean, I get it. But this is an organization, the Defense Department, that really is in need are a shakeup. I don't want to say a total tear it down, but fresh eyes and new ideas. But I guess I'll close with the optimism. If it can be, I think the organization would respond brilliantly. But it requires honesty of where we actually are relative to ourselves and everyone else. It requires humility that, nope, government doesn't always have the best answer. but then you need political leadership and courage because, like, let's say you want to take on

this or that issue or this or that funding pot inside the defense budget that's fenced and fixed with all its own special interests. This is really about retirees, veterans, and public unions. You want to change a single dollar in the defense budget. You got to go after one of those three. Who's doing that? Who's having the conversation on shared sacrifice? But I think if someone made the chase, those groups would all say, yes, we will do that for future generations and for the current warfighters. And so it's a blended optimism. Yeah, even though I asked you to stick with the budget, I'm glad you went further afield. And the point you made about education, I just want to say one thing quickly myself, because it highlights something, which is, you know,

national strategy is national strategy. That's to say it's not just about the defense budget, even though that's our subject today. And I just saw this story in the Washington Post this morning that just made my head explode because it also, I rarely. talk about these things here in the show, but these are also hobby horses of mine. So this was about the headline is rural students' options shrink as colleges slash majors. And here's the lead, Cleveland, Mississippi. With no car and a toddler, Shamiya Jones enrolled this fall at the four-year university in her small town in Mississippi, Delta State University. She planned to major in digital media arts. But before she could start, the college eliminated the major, along with

20 other degree programs, including history, English chemistry, and music. And it goes on. It's a young woman, mother, who wants, through education, to have a better life and a better career, there's not much more noble than that or more understandable. I question what the digital media arts economy is like in this part of Mississippi, not to sound sneering, but just real talk here. Meanwhile, the Gulf Coast has got all kinds of major manufacturing defense infrastructure. These colleges, so many of them, so many of these programs are complete scams.

complete scams from start to finish that provide you with no real education and nothing of economic value. And by the way, I think that's more of a Venn diagram than an identity, but that's a conversation for another time. Subsidized in large part by the federal government. 100%. 100%. So why don't we divert those subsidies for gender studies in the humanities to electricians and plumbers and welders and make that an equally esteemed and worthy career in the eyes of America?

From your lips to God's ears, McKenzie Eagland, it's been a harrowing conversation. Please come back sometime. I would say come back with good news, but then you may never come back. So let's talk again soon. And thank you, really, for making the time. Thank you. What a great conversation. I enjoyed it.

Thanks. This is a nebulous media production. Find us wherever you get your podcasts.