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.

Defense Secretary Robert Gates and Director of National Intelligence Dennis Blair should sign by Dec. 1 a document laying out new responsibilities for the National Reconnaissance Office, builder and operator of America’s spy satellites. This will set in motion the first substantial changes to the NRO charter since 1965, four years after then-Defense Secretary Robert McNamara created the NRO and drafted its charter.

The man at the pointy end of the spear of missile defense and of nuclear weapons warned today that the US must carefully weigh any increase in missile defense — particularly on the West Coast — to avoid triggering a “destabilizing” reaction by the Peoples Republic of China. “We have to be cautious about missile defense…[which] can be destabilizing if you are not careful,” said Air Force Gen. Kevin Chilton, commander of Strategic Command and one of the military’s brightest brains. When the US places anti-ballistic missile assets on the West Coast, “What does it make the Chinese think…?” he asked.

When Senators Carl Levin and John McCain drew up the Weapons Systems Acquisition Reform Act, it’s hard to believe they knew they would help reshape an industry. But that is exactly what is happening as a result of the conflict of interest provisions written into the bill. Proof of that came this weekend with Northrop Grumman’s announcement that it was unloading its TASC unit and selling it for $1.65 billion in cash to an investor group.

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.”

In his first public appearance, the director of the National Reconnaissance Office pledged to deliver the nation’s spy satellites on time and on budget after almost a decade of botched programs such as the Future Imagery Architecture.

The Pentagon created a team one month ago and sent it to Iraq and Afghanistan to figure out how to achieve the Holy Grail of intelligence sharing, one network architecture that shares intelligence from every satellite, UAV and plane and gets it to everyone on the ground and in the air who needs it.

The Senate wants to build an unproven but technologically attractive reconnaissance spy satellite said to be relatively cheap. The House wants to build a technologically proven but more expensive spy satellite. So far, at least, they can’t agree on which one strikes the best balance between risk, cost and capability. And they may not be able to agree given how divergent their solutions are.

The nation that made it to the Moon in 12 years now struggles to build a satellite in that time and is at risk of losing its preeminence in space. So said one of the top four space intelligence lawmakers on Capitol Hill, Rep. Dutch Ruppersberger, chairman of the House Select technical and tactical intelligence 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.

Expect fireworks from a pair of meetings yesterday and Wednesday about the future of what was one of Americas most closely guarded secret weapons, the National Reconnaissance Office. A tiger team is meeting to discuss what could be an enormous expansion of the NRO’s power, from its current focus on building and operating highly classified imaging and radar satellites to building and operating all US military and intelligence space and ISR assets

Persistent hardware and software problems that have dogged the Space Based Infrared System for almost two years have not yet been solved, Air Force Space Command Gen. Robert Kehler told reporters at the Air Force Association’s annual conference. The Senate Appropriations Committee agrees with Kehler, noting that that SBIRS is more than eight years behind schedule and will cost “at least” $7.5 billion more than its original cost estimate.

Covering highly classified spy satellite systems always entails a great deal of cryptic language, sometimes incomprehensible hints from well-meaning sources and small bits of real information about these hugely important and expensive systems. Today we have a perfect example of a spy satellite story. At the end of today’s Senate Appropriations defense markup I rushed up to Sen. Kit Bond, vice chairman of the Senate Select Committee on Intelligence and a subcommittee chairman on the appropriations panel.

Less than a month after President Obama signed the Weapons Systems Acquisition Reform Act into law, the National Reconnaissance Office acted with almost blinding speed and issued a memo detailing its adamant stand against the possible appearance of any corporate conflicts of interest. NRO officials and a former senior intelligence official offered staunch defenses of the agency’s actions.

The acquisition reform legislation passed by Congress is forcing major defense companies to sell subsidiaries so they don’t fall afoul of new restrictions forbidding manufacturers from owning companies that advise the government about acquisitions. The most glaring example appears to be the pending sale by Northrop Grumman of TASC, a company with some 5,000 employees who provide the military and, especially, the intelligence community with technical advice on acquisitions and operations.

It’s official. Jamie McIntyre, who used to cover the military for CNN, has joined the Military.com team with his own site, Line of Departure. I knew Jamie from my days covering NATO at Defense News and we shared a few flights with then-Defense Secretary William Cohen. He’s a rock solid reporter who will bring a deep source book and a unique perspective on how the military is faring and how relations between the media and the military shape both enterprises. Move out!

5. 4. 3. 2. 1. Northrop Grumman employees will be holding their breath around Sept. 15 when the enormous billows of flame and smoke begin to spew forth from a rocket lifting a new generation of space sensors into orbit. That launch will carry two demonstration satellites of a $1.4 billion program known as the Space Tracking and Surveillance System that has been plagued by quality control and other technical problems.

The QDR is pretty much finished and the major decisions made by Defense Secretary Robert Gates on April 6 are likely to comprise most of the review’s major decisions. “It appears to be essentially over:” that’s the judgment of a Pentagon official with detailed knowledge of the review. “There appears to be no appetite for anything bolder than the 6 April decisions,” this source said.

The Obama administration’s guidance for the 2011 science budget makes clear that basic research spending will stay flat in most areas or decline, including at the Pentagon. Money will first go to research that can “drive economic recovery, job creation, and economic growth,” says the guidance issued in an Aug. 4 memo by White House Office of Management and Budget Director Peter Orszag.