US troops patrol village in Afghanistan's Logar Province. Getty Images

U.S. defense modernization efforts are "failing to keep pace" when compared with its two big adversaries, and American forces are "poorly postured to meet key challenges in Europe and East Asia," according to a starkly worded new report from think-tank Rand. As tensions with North Korea heighten, Rand's 190-page report, entitled "U.S. Military Capabilities and Forces for a Dangerous World," also discussed war scenarios with NATO-Russia involving the Baltic states. It also broke down a possible U.S.-China clash over Taiwan and gaps in existing U.S. capabilities. With those factors in mind, the Rand report's authors said that the nation's armed forces are "insufficiently trained and ready" when looking at the active service components. That assessment comes despite the U.S. military presence in several regions of the world, and ongoing anti-terrorism missions and the war in Afghanistan, which is nearing its 20th year. "In short, providing the military power called for by the United States' ambitious national security strategy, which has never been easy, has recently become considerably more challenging," said the report. "The coincidence of this new reality with a period of constrained defense budgets has led to a situation in which it is now far from clear that our military forces are adequate for the tasks being placed before them," the authors wrote. More tellingly, Rand's analysis also noted that the capabilities of China and Russia have advanced so far they could potentially beat American forces in certain situations. "Put more starkly, assessments in this report will show that U.S. forces could, under plausible assumptions, lose the next war they are called upon to fight, despite the United States outspending China military forces by a ratio of 2.7:1 and Russia by 6:1," read the report. "The nation needs to do better than this." CNBC reached out to the Defense Department for comment on Saturday, but did not receive an immediate reply. However, Rand's study was funded in part by the department, suggesting they are aware of its contents.

Fighting Complacency

David Ochmanek, a senior international defense researcher at Rand and one of the authors of the report, said that from members of Congress to others, "there's a sense of complacency about the U.S. military capabilities." He said the priority shouldn't be to build more aircraft carriers, submarines and airplanes, but to start equipping those things better. Also other investments are needed that let the U.S. armed forces operate to their fullest potential. For example, Ochmanek said spending on advanced cruise missiles, jam-resistant tactical and theater communication systems, satellite defense technology, and even hardening American military bases from attacks are just some of the things that should be done to enhance the nation's forces. "We're talking something on the order of an added $20 billion to $30 billion a year on a sustained basis could allow us to pretty smartly move the needle back where it needs to be, vis-a-vis both Russia and China," Ochmanek told CNBC in an interview on Friday. According to the report, the U.S. spends about 3.4 percent of its GDP on defense, while it estimates Russia spends some 4.5 percent. NATO has a target for members to spend 2 percent of GDP on defense but only five of the 28 member countries are meeting the alliance goal.

... we concluded that, as currently postured, NATO cannot defend the Baltic states against a determined, short-warning Russian attack. Rand analysis

Rand analysts wrote that even the combined forces of NATO might have a tough time if the Russian military were to make a move into some Baltic states, which regained independence in 1991 after the collapse of the Soviet Union. It pointed out that Russian President Vladimir Putin might use the same military playbook he used during Moscow's aggression against Ukraine, and the annexation of Crimea. The report said Putin in making the moves against Ukraine showed he's willing to take "a more confrontational policy" with the West and European security matters to achieve his political aims. Previously, Rand developed a Russia-NATO war scenario that depicted Russian military aggression in the Baltics in 2020, which included Moscow sending forces to the borders of Estonia, Latvia and Lithuania. One of the things it found was Russian forces could invade by using armed and motorized units heavily supported by artillery pieces and other military equipment. Meanwhile, NATO would rely on light infantry — and essentially have its ground forces "badly outgunned." The question is whether the U.S. could use its air forces quickly to give NATO "relative advantage" in a war. Russia's advanced surface-to-air missile systems could prove formidable in a conflict against U.S. combat aircraft and potentially limit NATO's air access, Rand's study estimated. "In short, we concluded that, as currently postured, NATO cannot defend the Baltic states against a determined, short-warning Russian attack," the authors said. "Until rectified, the capability shortfalls that account for this vulnerability mean that the Baltic states live under the threat of a swift, low-cost coup de main by Russian conventional forces."

Defending Taiwan

Similarly, Rand said China now has weapons and capabilities that would make it tougher for the U.S. to prevail in a battle to defend Taiwan against Beijing potentially retaking the breakaway island republic. It also said China has improved training and readiness of its forces and studied past American military campaigns, so it can develop strategies of its own that counter the U.S. power-projection capabilities.

Russian President Vladimir Putin (L) shakes hands with Chinese President Xi Jinping ahead a bilateral meeting at Diaoyutai State Guesthouse in Beijing, China, 14 May 2017

Rand said China's military spending grew at double-digit rates every year from 2000-2014, resulting in a total increase during the stretch of more than 480 percent in real terms. China has invested heavily in modernizing its air force and air defenses as well as developing advanced land-based ballistic and cruise missiles that can be launched from mobile vehicles that make them harder to find. In fact, Beijing has an anti-ship ballistic missile with a range of up to 2,500 miles that is sometimes known as the "carrier-killer" missile, which could potentially threaten a U.S. aircraft carrier deployed to protect Taiwan. "For example, in a war with China set in 2020, if U.S. forces were to use the same operations concept for power projection that they have used since Operation Desert Storm [in 1991] and employed currently programmed weapons and munitions, those forces would likely face great difficulties in achieving air superiority over the Taiwan Strait," the report said.

North Korean threat