Todd Harrison: Are We Already in a Cold War in Space?

[upbeat music] My guest today is Todd Harrison, a senior fellow with the American Enterprise Institute and one of Washington's leading experts on military space, missile defense, and the Pentagon budget.

For most of our lives, space meant astronauts, exploration, and science fiction,

but today it is becoming the nervous system of modern welfare, and perhaps the decisive arena in America's competition with China.

So today, we're going to ask where this is really going. Are we already fighting a cold war in space? If China wins the space race, how much power would that give Beijing here on Earth? Does Golden Dome ultimately mean putting weapons in orbit? And can America physically build or afford any of it?

Todd Harrison, welcome to The Puck.

Hey, glad to be here. Let's just drop right in. When you look at America's strategy and our capabilities today, what worries you the most? My biggest concern right now is that the rate at which we're using our military, uh, and the rate at which we're using up, you know, key missiles and munitions is far exceeding our rate to rebuild and support the military. So I worry that is creating a dangerous gap in capability that we're not really ready for, that could have, you know, some catastrophic strategic implications.

But I think we also have a lot of vulnerabilities, including in our space systems, that we are beginning to address, but we have not yet fully addressed. So I'm worried we've got a gap period here over the next few years where we're gonna be more vulnerable. If we're more vulnerable, as you speak and as you're talking about our ability to defend ourselves, if China were to go after Taiwan right now, and it broke out into some kind of war, what would the battle in space look like?

Yeah. Well, you know, a lot of folks have gamed this out over the years, and our expectations are based on the capabilities that we've seen China develop and test, and based on their own writings and our understanding of how they think about fighting a conflict with us. Space would likely be among the opening shots in that battle, that they would seek to disrupt, degrade, deny the United States and our allies and partners in the region from using space effectively to support and defend Taiwan.

It would be a way of essentially, you know, pushing us back and saying, "You don't want to do this. You don't wanna get involved," without, you know, directly attacking American forces and service members, right? You can attack our space systems, but no one dies. No one goes home in a body bag directly because of that. And so I think that that would likely be the, the first attacks we would see, or at least among the first attacks we would see.

Is it gonna be just things that affect navigation of ships? Would it affect banking, communications, our air travel, our electric grid? What does it really practically look like to the average American? Yeah, so it depends. An attack like that, it really depends on how far the adversary wants to go, how far they wanna take it. Some forms of attack would be very localized, would not have broader effects that would affect the civilian economy.

So for example, the, the Chinese have developed and have demonstrated lasers that they can point at the optics of imagery satellites, our spy satellites, that can temporarily disrupt them or permanently blind them. That would have a very contained and localized effect. And so, you know, in terms of the, you know, private sector, we may not even know that that happened. It might be kept secret. It wouldn't be visible, wouldn't affect most people.

But there are other things they can do, like jamming GPS signals, that could have a relatively broad impact within the region, but still not affect us here in the United States. They could jam our communications, things like that, that would be more localized in that region. Or they could launch attacks that have much more systemic effects. They could go after the command and control of the GPS constellation and try to take it out entirely, you know, with something like a cyber attack.

That would absolutely disrupt our economy. Or worst case, an adversary

could do something incredibly foolish, like set off a nuclear weapon in low Earth orbit, or create a large amount of debris by destroying satellites in low Earth orbit that could then take out the, you know, space systems that our civilian economy absolutely depends on for communications, for weather, for all sorts of purposes. So when I grew up, you know, we had the Air Force, and we had the Navy, and we had the Army, but now we've got this thing called Space Force.

For, for the average listener who doesn't really know what Space Force does, can you make that real for us? Yeah, the Space Force is another military service. It was created in 2019 by Congress, so it's created in law, not by the President. The President proposed it, but Congress created it, and it is another military service, just like the Air Force, Navy, Marine Corps, and Army. Now, the way the Navy has been organized, uh, all along, since the beginning of our nation, was you have a Department of the Navy, and within that you have the Navy, the service, and the Marine Corps.

Right. So the Navy and Marine Corps are both under the Department of the Navy. When the Space Force, Force was created, since most of the components that went into forming the Space Force, the vast majority Came out of the Air Force. Congress decided to make the Space Force and the Air Force sister services under the Department of the Air Force. So they sit under the Department of the Air Force, but they are co-equal branches of the military.

Interesting. I did not know that. So you, you went out of your way to say that Congress approved this, and we know that Congress doesn't approve a lot of things these days unless they've really got real motivation to do it. So one of the things that I have been focusing on is kind of this, this competition between China and the United States, and we know there's a competition going on with AI, and we think about electric cars and all the commercial competition.

But what I don't think people are focusing on is this competition in space. When we look at space and the relation between China and the United States, are we already in a Cold War? In space, I think we're in something like a Cold War. It is a bit different, though. So, you know, during the, the past Cold War, it was two strategic rivals, us and the Soviet Union, and part of that, you know, Cold War did play out in space.

We developed anti-satellite weapons to take out Soviet satellites. They developed and tested anti-satellite weapons to take out our satellites, and we kind of reached a detente and understanding, somewhat explicit, that we would not attack each other's satellites in space because that would be viewed as a prelude to nuclear war, right? And so deterrence was established in space during the Cold War. It's not that space wasn't contested.

It absolutely was contested, but deterrence was established and helped throughout the Cold War. What is different today is the military competition in space is not between ... It's not bipolar. It's between the US and China, for sure, but also still Russia. Russia retains all of the space capabilities it inherited from the Soviet Union after the breakup. And you've got, you know, a lot of other countries that are doing things in space and a lot of private companies that have much greater interest in space than they ever did during the Cold War.

So you've got a much more complicated terrain in space, but yes, I think it is still a Cold War of sorts. It's a multipolar Cold War, and I think deterrence, while it is, you know, largely holding now, I think deterrence is much weaker in space than it used to be, and that's a big concern. It sounds like, as you just said, it's a concern, and

taking it all the way, if China, for instance, won this space race, would that mean in practical terms that it would dominate the world? So I actually think that there are four different space races going on in parallel, and only two of them are really in a military dimension. So one is the commercial race that's going on in space. The United States is far ahead of all other countries in that by an order of magnitude.

A lot of that is due to SpaceX, but other companies as well, like Amazon and a whole host of, you know, smaller startup space companies that many of your, you know, listeners may not have ever heard of, but they're doing phenomenal things in space. So we're far ahead in the commercial space race, and our lead is expanding, quite honestly. The second race going on is a race in civil space. It's about science and exploration, and that race right now is centered on getting back to the moon.

That's a race that's being fought between NASA and its equivalent civil space organization in China, and China also has partnered with Russia to go back to the moon. But, you know, that's one where I think the Chinese actually have the potential to pull ahead of us because our Artemis program to go back to the moon has been very delayed. So I'm worried about that one. Then there's the military competition in space that, you know, that we've talked about.

We have far greater military capabilities in space than any other country. China is catching up in terms of their military space capabilities, but they're not where we are yet. And then the fourth is a related one, and I, I call ... And I separate it because it's, it's ... The, the result is very different. The fourth space race really is in counterspace capabilities, the ability to disrupt, degrade, destroy someone else's satellites.

And in that one, we are far behind. China is absolutely the world leader in counterspace capabilities. So you marry these things up that we've got really great military space capabilities, which we are very dependent on for the way we fight war, and China has much better counterspace capabilities. That is a destabilizing situation to be in right there, right? And that's why I say deterrence is, is much weaker and it's much more questionable right now.

Let's go back to deterrence. You're saying that it's not as strong as it was, but you said, for instance, playing to our strengths, that we are very far ahead on the commercialization. So how does commercialization, for instance, help, if at all, our military objectives? You know, here's some direct ways that it helps. One of the things we can do to make our space systems less vulnerable to attack is called proliferation, where instead of having, you know, four or five satellites that are very large, very expensive, hard to replace, that, you know, together they can cover the whole Earth, but they're multibillion-dollar satellites and, you know, they take five or 10 years to build and launch.

Instead of architectures like that where if a country takes out one or two of them, it has a significant impact, a proliferated constellation of satellites is more like what SpaceX is building, where you have hundreds or thousands of satellites that are constantly moving around the Earth, and collectively they provide global coverage in very, you know, high capacity- You know, a- and much, you know, a better capability overall.

Each individual satellite is much smaller, much cheaper, and much easier to replace. So now you've given your adversary a very different targeting problem. Instead of an adversary needing to target, you know, one or two satellites to have an impact, they now need to target hundreds of satellites, right? So you've flipped what in military speak we call a cost-exchange ratio, and now you've made it much more expensive and difficult for an adversary to carry out an attack in space.

So that's one of the ways we can leverage the great things that are going on in the commercial sector in terms of mass-producing satellites, in terms of bringing down the cost of launch, to make proliferated architectures real and feasible for the US military. Going back to, as you said, commercialization helping the US military, one of the things we're hearing a lot about is Golden Dome. And, you know, as we're trying to differentiate between China's strengths and our strengths and weaknesses, what is Golden Dome actually supposed to do?

Golden Dome is basically a, a label that, that President Trump has put on something that has been around for a long time, which is the idea of homeland air and missile defense. Right? Uh, and a lot of people probably, you know, remember Star Wars in the Reagan administration. It was focused on some of the same problems. How do you protect the, you know, the United States, our US territory, against an adversary launching, you know, an, an ICBM, a very long-range missile, or today launching, like, a hypersonic cruise missile or a drone that could do substantial damage?

How do you protect our homeland from that? So that, that is the focus of Golden Dome. Now, you know, one of the ways that they're exploring to do that would be to use space-based interceptors. That is, you know, interceptors that you deploy into orbit. They're constantly whirling around the Earth, and when there's an incoming missile or when, when a missile is launched, one of these interceptors that's gonna be within range of that launching missile would de-orbit and fly as fast as it can, accelerate, and try to hit that, that missile while it's still in the boost phase of flight.

And so you really only have a window of, like, uh, basically two or three minutes, uh, depending on your assumptions, in which you could hit the missile. And so that, that is one of the things they're looking at for Golden Dome. The other space component of Golden Dome, which absolutely is essential and was already in, in the works before Golden Dome started, is better sensing, to be able to sense missiles better when they launch, throughout all, you know, the, all the courses of their flight, all the way, you know, until they're re-entering the atmosphere and coming down on us, and the ability to detect other airborne threats from space, like drones and hypersonic cruise missiles and other types of conventional cruise missiles.

We have a lot of gaps in our coverage. As you can see from the conflict in Iran, we have trouble spotting a lot of these threats, especially the low-cost drones that, like the Shahed drone Iran has been using against us. You can do that from space. You need a large constellation of radar satellites, effectively, to do that. We can. There's commercial technology already available that we could use to build that, but we haven't done it.

And so that is one of the, you know, focus areas of Golden Dome is to build out that missile sensing, missile tracking, and even what they call the airborne moving target indication. That's the military language for being able to track airplanes and drones and cruise missiles using a radar satellite. So all of that is part of Golden Dome, and so it's, it's a very big effort, very expensive effort right now. So we know there's a lot of satellites in space, and we know that we can do a lot of amazing things with those satellites, which includes using drones to go after people and being able to find people and they say read a quarter from space and all this other stuff, but yet you're pointing out that there's limitations to this as we've experienced in Iran.

What are we doing to rectify that? And, and why with all the satellites in space so far has it been so hard to accomplish that? Well, you know, part of the reason it's been hard is that a lot of senior policy makers, the senior leaders in government, don't understand space capabilities. So for example, how many times has President Trump said that the Space Force is keeping an eye over these nuclear facilities in Iran, and that they could even read the name tag on the badges of people going in and out of the buildity, building?

Two things wrong with that. Many things wrong with that, but I'll name two. Number one, the United States Space Force does not have any imagery satellites. None.

That is the job of the National Reconnaissance Office. That's an intelligence agency. They have the imagery satellites. So not the Space Force. Number two, even the NRO's best imagery satellites cannot read at that level of detail from space. You are simply too far away. Imagine, y- you know, a, a spy satellite is essentially a very large camera, but it's in space, so it's a couple hundred miles up. Imagine trying to take a picture of something a couple hundred miles up while the camera itself is moving at a speed of about 17,000 miles per hour over the surface of the Earth and trying to focus on one spot.

You cannot get resolution down to the level you would need to read a name badge. So I don't doubt that the president is seeing imagery like that. It is probably coming from drones in the air that are flying over those targets that are only a couple of miles away, who do have high-power cameras that could see something at that level of detail from that distance, right? So- A, a lot of, you know, policymakers get very confused about different intelligence and where it comes from and, and what the Space Force and overall US space capabilities can actually do.

But the other part of it is that, you know, there was a long period of time of decades when, you know, the Space Force was under the Air Force, where it was not properly funded. It was repeatedly denied funding to build out new mission areas. And the cadre of leaders that the Air Force put into those space jobs, quite frankly, weren't, weren't the top, you know, of the, the Air Force. It was kind of a dead-end career field within the Air Force for many years.

They combined it with the missileer career field, so people who sit in silos, you know, waiting to launch a nuclear-armed missile if they need to. They're unrelated career fields, but they were both kind of subservient to the pilot culture in the Air Force. That is one of the main reasons, if you look back at the Congressional Record, that the Space Force was actually created. It was created to fix this fundamental personnel problem, to create a dedicated cadre of personnel that were focused on space, that would pursue new and expanded mission areas in space, and that is actually what they're starting to do today.

It sounds like we're making progress. And when you look at the discussions we're having about re-industrialization and our ability to make things, where do we sit vis-a-vis China from a manufacturing perspective to be able, if y- y- let's game this out over the next several years. I mean, how do you see this playing out if China keeps on their trajectory and we're on our trajectory? I mean, help us understand what's at stake.

Yeah. So when it comes to space and our industrial capacity, we far exceed the rest of the world combined by about an order of magnitude. No joke. And I, I would divide it up in a couple of ways. One is our launch capacity, you know, how much payload we can put into orbit each year, metric tons to orbit. It's about eight to ten times the rest of the world combined, what we put into orbit every year. And I say we, I mean US companies, and a lot of that is SpaceX.

The vast majority of that is actually SpaceX. The other area of capacity in space is just being able to build satellites, production lines to do that. And again, we far exceed China and everyone else in the world combined. If you just look at SpaceX alone for the Starlink constellation, it's churning out more than 200 satellites per month. Amazon.com is also deploying its own satellite constellation in space. They're ramping up to a rate where they're gonna be producing a similar number of satellites per month.

And Jeff Bezos, separate from Amazon, also started a space company called Blue Origin, and they've had some setbacks recently, but they're gonna be ramping up their launch cadence as well. And, and their new launch vehicle is gonna have tremendous capacity. It's gonna be partially reusable, so that allows you to launch much more frequently. So we've got a lot of structural advantages here when it comes to building out space capabilities at scale.

So we're in a very good position there. And again, that is almost entirely because of our private sector and private sector investment. Are you familiar with what Chris Kemp's been doing with satellites? Somewhat, yes. So I mean, a- again, in terms of less expensive ways to do things and our ability to compete on various frontiers, I mean, how are we doing there? Yeah. So we've got a whole host of smaller space companies that are developing novel satellite designs, interesting new ways of collecting data from space, from monitoring RF signals and being able to geolocate those and detect, you know, who's where and what are they doing, all doing that from space.

Lots of different radar satellite companies, electro-optical imagery companies. We've got companies that are doing on-orbit servicing of satellites, where they can go and attach to your satellite and refuel it or maybe even make some repairs or move it to a different orbit for you. W- we've got a lot of private sector investment going into companies that are doing a lot of great things, and many new capabilities have a dual use.

It can be used for commercial purposes

or for military purposes. So yeah, it, it is a very vibrant, very high capitalized, a- and very innovative industry that we've developed in the space sector in the US. It sounds like you're optimistic in our ability to compete effectively in this space race with China? I am. I'm, I'm very optimistic that we have a lot of inherent advantages. And, you know, the, the one structural advantage that we have over China i- is kind of fundamental and innate to the competition itself.

It's our, our structure of government, the structure of our economy, our, our free market system that rewards innovation and it rewards investment, and our open society that attracts talent. Those are really core,

you know, asymmetric advantages that we have over China that helps us not just in the space race, but helps us more broadly in our economic security and our national security. So I'm optimistic that we have what we need to succeed and to win and to ultimately deter a fight with China. Where I'm concerned is things, you know, government policies that start to erode those advantages and near-term disruptions that can create a period of vulnerability, which China might, may take as a signal of, "Hey, I better act now while I have a chance, because the longer I wait, the further ahead these guys are gonna pull." So that's what concerns me, but I think we've got a lot of structural advantages going in our favor as long as we don't screw it up.

Are there signs that we could screw it up? W- I mean, or do you feel like we're really heading in the right direction? Yeah, um, in terms of space, I think we're doing a good job. We're not, you know, over-regulating our space companies, not too much. There's still, you know, there's still some things we could do better, but honestly, the first Trump administration, they made a lot of good regulatory decisions for space that actually had a lot of bipartisan support as well that has helped us, and I think they're continuing to work on some of those things with, like, launch approvals, mission authorization, some bureaucratic stuff like that that will help our, our space industrial base continue to innovate.

So overall, and, you know, I don't think we're, we're a- at risk of screwing it up too much in space. The biggest thing is the Space Force is pursuing all these mission areas, requires new funding. That funding, a lot of it is pending right now in Congress, so the question is, like, is Congress gonna let the Space Force loose and go do these things, you know, and try to accelerate i- i- its development of more, you know, protected and proliferated satellite systems, or is Congress, you know, gonna pull back some of that funding and, and slow it down?

I think that that is one of the biggest risks right now is just getting the funding into the pipeline, and then getting the expertise within the civilian workforce in the Space Force to do the contracting that needs to happen. So if I'm reading it correctly, I mean, the different numbers, whether or not the Defen- the Department of Defense has talked about numbers to build things over the next 10 years, or the CBO estimates, but I mean, I've read things from a couple hundred billion dollars to over a trillion dollars, and when the gap is that large, I mean, does the public understand what's really going on and what's at stake?

I don't think that i- it's easy for the public to follow along and to understand these debates and, and what's really at stake. I mean, that's part of my mission, you know, at a nonprofit think tank is to write and publish about these things, but it's difficult to communicate that. I'll say one of the biggest misunderstandings right now, I would say, is a conflation of Golden Dome, which we talked about, you know, air and missile defense for the homeland, a conflation of that with space in general, or space-based interceptors in particular.

S- you know, Golden Dome, you know, is much more than just space. Space-based interceptors are just one part of Golden Dome, but they are by far, if you actually run the numbers and think about the size of constellation of interceptors you would need to provide the type of level of defense against the, you know, missile threat from China and Russia, space-based interceptors is by far the most expensive part of Golden Dome.

That's why I don't think it goes anywhere. You know, space-based interceptors for all kinds of complicated reasons of orbital mechanics that we could spend a whole hour talking about, they just don't scale with the threat. And, you know, people can find some of my work about this on the AEI website. I did a study last summer called Build Your Own Golden Dome. I went through the analysis and broke it out in more detail there.

I even made an online calculator tool where you could design your own Golden Dome system and see how much it costs. But the whole point of that was to help educate policymakers on the Hill that space-based interceptors don't scale with the threat. They're far more expensive than we're willing to actually pay for, and there are better alternatives. So keep all the other space stuff in Golden Dome, the sensing and everything.

Keep all the other parts of Golden Dome, but space-based interceptors, we just have to stop chasing our tail there. So I understand that that's difficult to do, but you did say we have better alternatives. What are those alternatives? We have a lot of ground-based interceptors that can do the job. We have what we call the ground-based midcourse defense system, and the follow-on to that is called the Next Gen Interceptor.

These are missiles that sit in silos. When we see an incoming threat, we launch them, and they try to hit that warhead in the midcourse phase of flight. That's not ideal, because in the midcourse phase, you know, a, a missile can deploy multiple warheads. You have to hit each one of them independently 'cause they spread out. And it can deploy do- decoys, and it's hard to tell the difference between a decoy and a real warhead in the midcourse phase.

So you have to hit the decoys as well, so you may have to fire dozens of these interceptors at each incoming missile. But we can do that, and it still ends up the numbers have run out, uh, end up better than trying to do it with space-based interceptors in the boost phase, so. I mean, it's one... The calculations is hard to understand. It's non-intuitive, but when you actually get into the math of it, you're like, "Oh gosh, yeah.

Okay." So midcourse is not great, but it's better than the space-based interceptors. The other, you know, layer of defense is what they call terminal phase.

That is, you know, whatever gets through that midcourse phase, once it starts to reenter the atmosphere, then you can tell the decoys because they slow down much faster. And so now you know which are the actual warheads you need to hit. You know which ones are making it towards a target and aren't going off course, so you've narrowed it down, then you can fire your terminal phase interceptors. We have those, we just don't have nearly enough, and we're using them, you know, far too fast in the conflict with Iran right now.

Our main terminal phase interceptor is called THAAD, and we've used up far too many of them. We don't have enough replacements or the capacity to build the replacements fast enough, so it's one of the things that concerns me. So we have all these alternatives, and we could build newer, cheaper interceptor missiles, things that are designed to be produced at a much larger scale. We can also do that. Those programs appear to be getting started right now, so we have those alternatives.

You don't need the space-based anyway. So in the short run, as you're saying

Solving these issues, you know, are, are monumental in terms of doing it in space. And yet, let, let's zoom out. Is there a universe, if we're talking about putting interceptors in space that are, that are essentially rockets, do you think eventually, 10, 20 years from now, that there will be weapons in space? I would say that depending on how you define a weapon, there probably already are weapons in space. [laughs] During the Cold War, this has all been declassified, but the Soviets deployed and tested satellites that had weapons on them that could shoot at other satellite, at other satellites.

Even more recently, the Russians have deployed satellites that can deploy other satellites that then can shoot at things themselves, shoot projectiles in space. So I would argue that we already have that. That already exists. The United States doesn't do it as far as we know, but certainly Russia does. China also has demonstrated the ability to have a sat- a one satellite maneuver next to another satellite and grab onto it.

So that would obviously disrupt, it could destroy the satellite that you're grabbing onto. So is that a space-based weapon? I would argue it probably is. So I, I think, you know, if people are worried about crossing the Rubicon to the weaponization of space, I think we've already done it, that we've been there for decades. We just haven't realized it. So we've already crossed the Rubicon, and we just haven't realized it.

At some point, again, looking at winners and losers, is there a situation where laser weapons and/or missiles could be put in space to use offensively against project... I mean, objects on the Earth?

Yeah, so that's something that's been explored in the past. And to the best of my knowledge, based on unclassified sources, no one has ever deployed or tested a weapon based in space that would have effects on Earth other than, like, electronic effects like jamming, right? But theoretically, you could have a satellite that fires a projectile down at Earth. We had a concept for this years ago. They called it rods from God.

[laughs] They were basically very large tungsten rods about the size of a telephone pole that you would de-orbit from space. They would come screaming down through the atmosphere more than 20 times the speed of sound, and when they would hit a spot on Earth, it would ha- create an enormous explosion, you know, just from the sheer kinetic energy of that object hitting, not because it actually had explosives on it. Uh, so there have been i- you know, ideas explored like that in the past, but it's theoretically possible.

You just need to advance that, that technology quite a bit further than it is today. Without being an alarmist, but just to play contrarian for a second because I'm really trying to understand this,

you've, you've talked about your concern about our ability to replace weapons fast enough, and yet you've talked about we should be optimistic because when it comes to some of these very sophisticated systems, we're winning.

But now let's talk about industrial manufacturing base and the ability to build, for instance, all the electricity that China can do that we can't do, or the fact that they can build robots and electric cars in, in ways that we can't even imagine. I know we were called the arsenal of democracy wor- during World War II when we were able to out-manufacture the rest of the world.

Should we be concerned that if Golden Dome can't really protect us to the extent that we want it to, that as China gets more and more manufacturing capability and is building millions of drones and building satellites and offensive weapons, that we are not gonna be able to keep up with it? Yeah, well that's where I think you have to look broader at strategy and deterrence theory and, you know, the, the best way to win a war is to deter it, right?

Is to never have to fight it. And so the things you need to deter, unfortunately, are not always the same things that you need to win a war. You know, to win a war, you're gonna need large volumes of munitions. You're gonna need all sorts of, you know, sensors and communication systems in space. A lot of things you're gonna need to actually win that war, and many of those things you need to win the war, you're gonna keep classified.

You're gonna keep it secret so your adversary doesn't know how many or where or exactly how they work, right? When you keep those things secret, they don't contribute to deterrence if your adversary doesn't know they exist, right? You can try to fool them and make them think something, you know, or speculate, but if you've got a really, like, war-winning capability that you have to keep secret for it to be effective, you know, it'll help you when you need it, but it won't help you before the war starts.

So there are other things you have to do for deterrence. I would say a lot of that right now, if you're talking about a big fight with China, a direct fight between the US and China, I think it's gonna come down to who can persist, right? Who can survive, who can endure a protracted conflict the longest and with the least amount of damage to their economy and their broader national security interests. That's where we could do a lot more to deter China, I think,

by improving our visible outward signs of being able to mobilize. Because we have a better mobilization base than they do. We have a larger economy. We have a more advanced and sophisticated economy. You know, we got a lot of potential. We've got a, you know, great access to natural resources within the United States, you know, much better than China in many areas.

How do we show that we're still capable of mobilizing that in wartime like we did in World War II, right? And so that's where I think we're a bit lacking is in our mobilization readiness. Like, yeah, we're doing great in sub-sectors like space, but we're not doing great in many other areas like aircraft production, ship building, munitions proj- production. W- we have, you know- Basically fallen into the trap of just getting kinda relaxed about low production rates and thinking, "Oh, well, we'll be able to ramp up in the future," but never actually taking the steps to be able to ramp up.

We're starting to see signs of change in this Defense Department. Uh, that's a lot of the big increases in investment we've seen in this, you know, the, the latest defense budget request, is really targeted at trying to, you know, i- improve our ability to d- deliver things at speed and at scale. So I think that gets back to our mobilization readiness. But, you know, the question is, number one, is Congress gonna improve that funding, and, and how much, if not the full amount?

And then number two, the ability of the department to actually execute on it, which doesn't have a great track record on that. And I've been reading recently that because of what's happened with munitions in Europe with the Ukraine war, obviously what's going on with Iran right now, that there are different pockets of re-industrialization and building weapons and so forth. So are you seeing positive movement and, and is...

If you're looking at, like, w- what does this look like 10 years from now, and what is it we actually have to accomplish in the next five years to get there? Yeah. I mean, you know, we're starting to see some, some good signs, some good movement. You know, one thing is if you want industry to be able to build, you know, munitions, for example, at a much higher rate, they need some assurance that you're actually gonna buy them at that rate, because they've got to expand produ- you know, their factories, they've got to, you know, m- m- sign contracts with their suppliers, they gotta hire more workers, right?

They don't wanna do that just because DoD says, "Well, maybe I would buy more in the future. I'm not sure." They need to see a real concrete sign that DoD is committed to buying at these higher levels before they go and hire all these people and build new buildings. We're starting to see that, that DoD is sending those signals, it's signing multi-year contracts, things that will give industry an incentive to actually invest in that infrastructure for defense production.

We're also seeing the department invest in new types of weapons systems that are easier to build at scale, that are faster to build at scale, like drones and counter-drone systems. So that's encouraging as well, that we're starting to change the types of things that we buy. But what needs to happen in the next five years so that we're ready 10 years from now, is all of this has to continue. It all has to work.

And where it doesn't work, we have to be willing to fix it and make it work, and we've got to sustain the attention and the investment on it. You know, even when the administration changes, even when the makeup of Congress changes, you know, these areas have to remain a priority and have to remain a focus of someone. It seems to me when we talk about the American public and our willingness to fund these programs, especially in a world of deficits and where healthcare spending is getting unaffordable for a lot of people, when you're seeing people talking about putting their groceries on credit cards, I mean, do you think the messaging in terms of what's really at stake with China is something that we should be messaging better?

And, and if so, what should we be saying to the American public? Yeah. No, I think the messaging is pretty terrible, quite honestly, because what is required of the nation, of the average person, is they're gonna have to make some sacrifice, right? That if you look at the overall federal budget, the deficit is far too high, it's unsustainable, and it's getting worse, which means our debt is accumulating, and that is something that cannot continue forever.

We're already at a point now where the interest we pay on our national debt is more than we pay for national defense. So,

you know, to support the level of defense spending that we're talking about, to sustain, you know, the industrial base at the level we need, I think to be a credible deterrent, you know, number one, you've gotta do, you know, you gotta do everything you can within the defense budget to root out unnecessary things. Stop building things you don't need anymore. Close bases and facilities you don't need anymore. Cut back on, you know, different types of benefits that just don't work, that people don't really like.

[laughs] Uh, you know, DoD owns and operates its own set of grocery stores around the world called the DoD Commissary system, that costs to the tune of about $1.2 billion a year to run those grocery stores. Like, is that really necessary? So you gotta do everything you can to get your house in order within the DoD budget. But then we've also gotta get our house in order outside the DoD budget. We've gotta look at all the, the different benefits programs, what people like to call entitlements, like Social Security and Medicare, Medicaid, veterans benefits and services.

Those are the big drivers of the overall federal budget. That's, you know, those things together total close to 75% of overall federal spending, not defense. Um, and so you've gotta, you know, take a hard look at those programs as well. I'm not saying, you know, you have to make drastic cuts or, or anything, but you've gotta put them on a sustainable, you know, trajectory for the future. And then the other third rail of this that we have to look at is tax revenue, that the reason we run a deficit is because we spend more than we bring in in taxes.

And so you can do everything you can to try to bring down your level of spending, but at some point, you know, raising taxes has gotta be on the table. It's gotta be one of the options considered as well if we wanna actually close this deficit. You know, and in the long run, all of this actually does relate back to national security because we've never fought a war in our history that wasn't financed, that wasn't paid for in part by borrowed money.

And in the long run, our deficit and our current fiscal situation is putting at risk the credit of the nation, our ability to borrow money in sufficient sums in a, a future conflict. And, you know, talk about, you know, the way we mobilized in World War II Becoming the arsenal of democracy, that was only possible because we had good credit, and we could borrow tremendous sums of money to finance that. If you take away our ability to borrow like that from the, the open markets and being the, the world's reserve currency, if you take that away or if you just put it in jeopardy, that undermines our national security and our ability to deter conflict.

So I think we've gotta make some hard choices here in the next few years. I couldn't agree with you more, but a friend of mine who's a congressman said when he does special interest polling, eight out of 10 Americans want their taxes to go down and their benefits to go up. How do we create a sense of urgency without a major catastrophe to get our attention? Yeah. Well, you know, part of it I think has to start with the administration, with the President doing a better job of articulating the threat.

And when it comes to China, this administration, for whatever reason, seems very reluctant to do that, to really name China as the pacing threat. You know, if you look at the National Defense Strategy, it pulls a lot of punches when, you know, in the short section, relatively short section that talks about China, and it pulls a lot of punches when it talks about, you know, our support for allies and partners in the region like Taiwan, Japan, Korea, and Australia.

So I think we've gotta be more direct, and I think that's gotta come from the top down, quite honestly. And then I think for members of Congress, I think they have to be honest with their constituents and just say, "What you're asking me to do is not sustainable and is not in your long-term interest," and have that frank, that candid conversation, you know, about what our real trade-offs are. And, you know, the urgency of it, I think, is the sooner we start making these changes, the less drastic they have to be and the less painful they will be.

The longer you wait, the more the risk goes up that a country like China will take advantage of it, and the more painful it's gonna be in the long term one way or the other. Why do you think we're pussyfooting around this with China? I, I think there are a lot of different theories, but ultimately, you know, talking about the China threat does not blend very well with America first. Because, you know, to talk about the China threat, you gotta talk about defending our allies and partners in the region, and it is several layers removed from protecting the homeland, quite frankly.

You know? And, and so it's a much more difficult connection to build and to make, and there are fair arguments that our allies and partners in the region should be doing more for themselves, and most of them are actually are starting to do much more for themselves. But there's also an argument that we're the indispensable partner. We are the balance, the counterweight to China in that region, and without us, China will dominate that region, and therefore dominate much of the economy of the w- of the world, and therefore become a very big problem for us.

Even if we say, "Hey, we're not interested," it still becomes a problem for us in the long run because we live in a global economy, and so we can't just, you know, put walls around us and, and live inside a fort. That is not an existence that we want. [laughs] That's a much lower standard of living in, you know, for the next generation if we were to settle for that. But that's where, you know, taking our eye off of the, the threats that we face around the world, that's where that could lead us ultimately.

When you look at, you know, this, this tension between getting our allies to do more but not abandoning them, when you look at the reality of the size of China's economy, I know you're saying ours is bigger, but when you adjust for pricing power, you know, there's at least some arguments that their economy is, is, uh, more effective than we give it credit for. I guess when you look at our ability to catch up, so to speak, or to stay and, and reestablish that deterrence, h- how do we keep South Korea and Japan and Europe in the tent, so to speak, so that we're all working collectively together against this threat?

Yeah, no, it, it's, it's a great point you raise and it's absolutely true that you can't just make, you know, dollar for dollar comparisons between the US and China when it comes to defense spending because a dollar goes a lot further in China because their labor costs are so much lower. Now, when it comes to material costs, like yeah, a lot of those are traded in a global market, but even so, if the materials are coming from China in the first place, you know, then they've got a price advantage there as well s- 'cause they're not, you know, shipping it as far.

But yeah, China's got price advantages, so they can build an equivalent size military at a lower cost than we could. But what that means is like yeah, it's gonna, it's gonna take a greater share of our economy to compete with China than it may take of their economy, even though our overall economy is larger. It's not a one-to-one comparison, but then when you start looking at our allies and partners in the region, they're a fraction the size of China, and they're right up by the threat, many of them, right?

A- and so they've got a much more difficult problem, you know, operating in that region, a much more pressing threat. There's really no way for them to balance China without us. Although we were in Japan recently and, you know, when you look at the distance between the, the, the Japanese last island and Taiwan, the, the distance [laughs] is not that great. And, you know, people are concerned about T- Taiwan, and I do think there's been movement in, in Japan to, you know, start to spend more money on defense and to relook, start looking at these things.

So do you think we're going in the right direction there? Yeah, I, I think Japan, you know, is absolutely going in the right direction. I think part of the problem is they're starting at a very low point. For a very long time, they've been spending around 1% of their economy on defense. That is great to help your economy and to keep taxes low for people, so I get it. I know why they did it, but they've got, they got a long way to go to catch up to build the size military, the capability of military, that they really need to face the, the threat, you know, posed by China that, that's right on their border.

And I think Korea, they've had a lot of political upheaval lately. I think that is much more of a mixed bag situation. Taiwan absolutely is trying to do more. The biggest bottleneck in Taiwan building up its own defenses is actually getting sales of US weapons to them approved. And so that is held up with the president right now.

Maybe that's something he's using as, like, negotiation bait with China over broader economic issues and tariffs. That is what Taiwan needs in order to be able to defend themselves better. I think that one of the things that's constraining us right now is these raw materials. You know, my understanding is that there was a certain arrogance with the tariff war, but when China started limiting the export of some of these raw materials that we use for everything from engine manufacturing to our weapons systems, I think we, we got a little bit humbled by that, and, and so that is playing into this, that we, we, we are vulnerable in ways that we didn't really focus on.

I think that's absolutely right, and the vulnerabilities are several levels deep that aren't always visible to us until it becomes a problem, right? That raw material may come out of China, it might go to Vietnam, and then pass to a producer in Taiwan, and then end up coming back in a manufactured product that's used in the US, perhaps used in weapons systems. And so you don't always know that traceability of everything, every component in this come from.

So we've seen that in a lot of rare earth metals,

and China's been playing that game with rare earth metals for over a decade now, quite frankly. But that's where we've got to do more to identify these vulnerabilities in our supply chains, both for national security and economic security, and we've got to then create alternative sources, identify alternative sources, ideally in the US or in easy-to-defend allies and partners around the world. There's a lot of focus on what AI can do and how it's gonna transform things.

As your team sits around and talks about the different issues going on, just help our listeners understand, how does AI figure into all of this? It is still early. It is hard to tell. I think that AI is gonna be transformative, not just in our economy, but in the way that we conduct war, in the way that we build weapons systems and employ them. So we'll be talking about this for probably the next several decades, but we're just at the cusp of it now.

It's only getting better, and it seems to be getting better at an exponential pace, so watch out. I'm reluctant to make predictions about it, but the way I see the competition shaping up right now is it's in developing the models themselves, the frontier models, and that's where our companies really do have a good lead for now, and in the processing infrastructure, the data centers, right? And then all of the things that feed those data centers, the power grid, water supply, all of that.

We're doing pretty well right now, but China does have some advantages there with their power grid and their lax regulations and ability to build out large data centers and not really care if people in the local community object. So I think that that is something we've gotta watch, and over time, these kinda global capabilities like this may very well become commoditized, and you may not know or care which model you're using.

You may not know or care which data center it's going through, whether it's in the US or China or in space, wherever. And so if it becomes commoditized like that in terms of the commercial use of AI, that could advantage China. If they play their cards right, they could be the ones that end up with their finger on the light switch of that infrastructure. So that's something that has huge national security implications, and that's something I think we've gotta keep an eye on.

We d- we don't want China having their finger on that switch, on the data centers or the models. We'd rather the US keep that control. But also, if we exercise that control too much, too early, we could actually cause the thing we're trying to prevent by driving other countries and other consumers to Chinese systems that don't have the same safety controls. If knowledge does become more ubiquitous because of these programs catching up and the open source nature of a lot of this, then it really is gonna come down to manufacturing capability.

And if you game this out and you say a lot of that's gonna be automated and using robots, then a lot of it's gonna come down to natural resources and ingenuity and that creativity. And, you know, from that perspective, are you optimistic in terms of America's ability to compete there? Yeah, we do have a lot of great advantages in our access to natural resources and our ability to fos- foster entrepreneurial, you know, ventures, innovation, our ability to attract capital.

You know, because of our laws and regulations, our ability to attract talent from around the world, as long as we don't screw up our immigration system, because we are the place that, you know, bright minds want to come to make it big, to live the American dream. And so we've gotta keep those doors open. But yeah, we've got a lot of natural advantages here, as long as we don't screw it up. That's a great way to end, Todd, and I really appreciate your time today.

It's been a real honor, and thank you so much for your time. Thank you. Glad we could do it. [upbeat music] The Puck Venture Capital and Beyond is brought to you by CMBG Advisors. If you enjoyed the conversation today and haven't yet subscribed, you can find us on YouTube, Spotify, and Apple Podcasts. Feel free to leave a review while you are there, and maybe even a five-star rating. Follow us on socials @puckventurepod or the Puck Venture Capital and Beyond.

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