Two influential analysts told lawmakers on Capitol Hill this week that America’s strategic position in the world is eroding. America is losing its technological edge and is in deep financial trouble, while purchasing power is shifting from the West to Asia. Those trends cannot be undone, they warned, so the U.S. must adapt and seek greater cooperation with allies and establish “rules of the road” with potential rivals.

The non-partisan CBO said defense budgets must grow by at least six percent beginning next year to pay for weapons programs currently on the books. The base defense budget would have to increase to an average of $567 billion annually for two decades. While that might not appear all that high, it must be viewed in the context of sluggish U.S. economic growth, record deficits, and the need to pay interest on that growing pile of debt.

Amid warnings of the perilous state of the rotary-wing industry comes a new GAO report warning of a looming “tactical airlift gap” because no aircraft can move the Army’s “medium weight” weapons about the battlefield. The Air Force and Army are looking at the Joint Future Theater Lift (JFTL) effort, still in the conceptual stages, to provide a new aircraft that might fit the bill. The JFTL could be a massive rotary-wing aircraft, if the Army gets its way.

DoD is sufficiently worried about the long term health of the helicopter industry that acquisition chief, Ashton Carter, wants to create a new intitiative, run from his office, that would corral the different services’ research and development money (altogether about $110 million) and funnel it to where it can have the most impact. The new initiative would include a partnership between government and an industry consortium.

Now that the V-22s have landed in Afghanistan, it’s time to take a look at how they will be used. Robbin Laird, a defense consultant who works for the Marines — among other clients — got a chance to interview the flight crews of VMM-261, headed by Lt. Col. A. J. Bianca, about the concepts of operations they expected to follow. We’ve got links to the interviews, an interview with Laird and links to video of the V-22 teams undergoing deployment to Afghanistan and some of their training.

In what appears to mark a major shift in Chinese military and arms control strategy, the head of the PRC’s air force has said in an official interview that military operations in space are an “historical inevitability.” General Xu Qiliang said that, “As far as the revolution in military affairs is concerned, the competition between military forces is moving towards outer space… this is a historical inevitability and a development that cannot be turned back.”

The second engine for the Joint Strike Fighter needs a fancy lug nut redesigned and should be back up on the test stand by the end of the year, a GE spokesman says. The program has been dogged by rumors that it faced a potentially significant redesign of its combustor but the real problem lies with a lug that attaches the diffuser to the cumbustor, GE spokesman Rick Kennedy said Tuesday morning.“The actual combustor will not have to be redesigned,” he said.

Rumors flew last week that GE faced the prospect of having to redesign its cumbustor and that the engine is in such deep doo doo that it would be off the test stand for at least six months. Then Loren Thompson, uber-source for many defense reporters, put out an item this morning summarizing the rumors and now Congress wants answers — right away.

During the days of the Cold War, intelligence analysts tracked Soviet missile deployments and launches, as well as mass maneuvers, using the technological wonders of change detection, the arcane art of looking at satellite and U-2 photos to see what had moved where and how fast they were moving. Now Northrop Grumman is developing a fast, broad-area radar that may give analysts better tools to work with.

Sen. Richard Shelby of Alabama notes “with alarm” in a letter to Defense Secretary Robert Gates that the draft tanker RFP “omits an assessment of risk associated with either schedule, past performance, or price…” Shelby supports the Northrop Grumman tanker. Rep. Norm Dicks of Washington, a Boeing tanker supporter, cites four “serious concerns” about the RFP which he believes “demonstrate a clear bias for the EADS/NG tanker proposal” in his letter to Shay Assad, director of defense procurement at the Pentagon.

The governors of Alabama, Louisiana and Mississippi completed a move we first reported several months ago, setting up a non-profit group to bolster their chances of getting jobs from award of the KC-45 tanker contract. Governors Bob Riley (R-Ala), Haley Barbour (R-Miss.), and Bobby Jindal (R– La.) launched The Aerospace Alliance, intended to “establish the Gulf Coast and surrounding region as a world class aerospace, space and aviation corridor.” But job one is winning the tanker contract.

In a rare public appearance, Gen. Xu Caihou, vice chairman of China’s Communist Party’s Central Military Commission, came to Washington and told an audience that his country remains a “developing country and would not, could not threaten developed countries.” In fact, the PRC seeks “accommodation, not confrontation.”

A preliminary Pentagon cost estimate that the F-35 could cost as much as $17.1 billion more than currently planned is prompting calls from congressional sources for the program to be reassessed and restructured. The congressional sources also wryly noted this new estimate seemed to raise questions about the wisdom of Defense Secretary Robert Gates’ recent trip to the F-35 plant in Fort Worth to show his support for the program. One aide scoffed that the new cost estimates were “no surprise to anyone who hasn’t drunk the JSF Kool-Aid.”

Defense Secretary Robert Gates upped the ante in the war of wills with Congress, threatening to tell President Obama he should veto the defense spending bill should it contain funding for the VH-71 presidential helicopter.

Gates made the veto threat in an Oct. 14 letter to the chairman and ranking member of the House Appropriations defense subcommittee.

With the Senate likely to vote next week on the defense authorization bill, concern is growing that one or more senators may filibuster the bill to make clear their displeasure or unease with hate crimes legislation that was attached to the bill.

The CEO of Europe’s premier missile company, MBDA, thinks the US should use the MEADS and Aster anti-missile systems and buy European radar and subsystems as part of its missile defense plan for the continent.

UPDATED: JSF Program Office Details Damage to Engine

The engine war plot thickened Wednesday as GE/Rolls Royce, builders of the F136 alternate engine for the Joint Strike Fighter, stopped testing the engine this week after a routine inspection revealed “dings and nicks” on the turbine blades.

The full Senate convincingly snubbed Sen. John McCain, who had fought to strip 10 C-17s added by Sen. Daniel Inouye’s appropriation committee, voting 30–68 against his spending amendment. The C-17 amendment was not McCain’s only attempt Tuesday afternoon and evening to whack spending from the bill. He tried to cut earmarks with a series of amendments but he failed on all of them.

UPDATED: Pratt Says Bill Not Signed Yet; GE Crows

House and Senate conferees rejected the Obama administration’s mild threats and fully funded the alternate engine for the Joint Strike Fighter in the defense authorization bill.

Army drones will have to curtail training and operational flights by fiscal 2012 in the United States unless the FAA approves some form of UAS deconfliction, a top Army UAS official says.