At a recent book party for Winslow Wheeler’s new history of the military reform movement of the 1970s and 1980s, I was asked for my views on the prospects for genuine reform. I replied that “So long as the money flow continues, nothing will change.” Chuck Spinney, a reformer who spent decades as a polyp in the bowels of the Pentagon, agreed.

Events on Wall Street suggest that the day when the money flow stops may be approaching. Despite President Hoover’s assurance that “Prosperity is just around the corner,” the American economy is in free-fall. After decades of frivolity, that economy now amounts to little more than a pyramid of financial pyramids, all requiring a constant inflow of borrowed money. The inflow is endangered by the developing Panic of ’08, where the junk mortgage crisis and the collapse of the housing market combine to dry up lending. What happens to pyramid schemes when money stops flowing in at the bottom? Maybe a recession; maybe a depression. That’s why pyramid schemes are illegal, unless the government runs them.

A tanking economy and world credit markets tighter than Scrooge’s sphincter will require large cuts in federal spending. That will include the Pentagon. If a new administration were to turn to the military reformers and ask us how to cut defense spending while still securing the country, what would we advise?

Here’s what I would propose:

First, adopt a defensive rather than an offensive grand strategy. America followed a defensive grand strategy through most of her history. We only went to war if someone attacked us. That defensive grand strategy kept defense costs down and allowed our economy to prosper. We do not have to be party to every quarrel in the world.

Second, scrap virtually all the big-ticket weapons programs such as new fighter-bombers, more Aegis ships, and the Army’s Rube Goldbergian Future Combat System. They are irrelevant to where war is going.

We should not plan for conventional wars against hypothetical “peer competitors,” which can only be Russia or China. We should do our utmost to make Russia an ally, and we should make a fundamental, bipartisan national strategic decision that we will not go to war with China. Regardless of who “won” such a war, it would destroy both countries, just as the two World Wars destroyed both Germany and Britain. The world needs China to serve as a source of order in what will be an increasingly disorderly 21st century. We should welcome the growth of Chinese power, just as Britain learned (reluctantly) to welcome the growth of American power in the 20th century. It is only a threat to us if we make it one.

Third, as we cut, preserve combat units. That means, above all, Army and Marine Corps infantry battalions. Cut the vast superstructure above those battalions, but keep the battalions. Infantry battalions are what we need most for Fourth Generation wars, which we should do our utmost to avoid but which we will sometimes be drawn into, even with a defensive grand strategy.

In the Navy, keep the submarines. Submarines are today’s and tomorrow’s capital ships, and geography dictates we must remain a maritime power. Keep the carriers, too, though there is little need to build more of them. Carriers are big, empty boxes, which can carry many things besides aircraft. Mothball most of the cruisers and destroyers. Build lots of small, cheap ships useful for controlling coastal and inland waters, and create strategically mobile and sustainable “packages” of such ships. Being able to control waters around and within stateless regions can be important in 4GW.

Fighter-bombers are largely useless in Fourth Generation wars, where their main role is to create collateral damage that benefits our enemies. Keep the air transport squadrons and the A-10s, and move them all to the Air National Guard, which flies and maintains aircraft as well as or better than the regular Air Force at a fraction of the cost. Reduce the regular Air Force to strategic nuclear forces and a training base.

In all the services, vastly reduce the baggage train: the higher headquarters, the development commands, the education bureaucracies, and the armies of contractors. As Mark Twain said of the male teat, they are neither useful nor ornamental.

Finally, as we cut, undertake reforms that cost little but will make our remaining forces more effective. Reform the personnel systems to create unit cohesion, eliminate the surplus of officers above the company grades and reduce careerism by ending up-or-out. Reform tactics and doctrine by moving from the Second Generation to the Third, which is to say from French attrition warfare to German maneuver warfare. This requires a change in military culture, in education, and in training. The adoption of Third Generation tactics, doctrine, and culture must be real, not just words on paper as it has been in the Marine Corps.

A program of military reform along these lines could give us more effective forces for Fourth Generation wars and such minor conventional wars as we might face within a defensive grand strategy than the forces we now possess. It could do so for a defense budget half or less the size of the current budget. To the reigning military-industrial-congressional complex, that potential is a threat, not a promise. When the MICC’s money runs out, it will suddenly become a necessity.