The question is likely to remain unanswered until after the November election. If President Obama does win, a preview of the sweeping change that appears to be underway may have been discernible at a closed-door, invitation-only meeting at the Council on Foreign Relations in Washington in March. Two respected defense intellectuals – Barry Posen of MIT, Stephen Walt of Harvard’s Kennedy School – made the case that the need for deep cuts in the defense budget was providing financial reinforcement for bloody lessons of strategic over-reach meted out to the U.S. in Iraq and Afghanistan. They cited current facts – on the battlefield, in the budget wars and among American public opinion – as all pointing to the same conclusion. The longstanding U.S. security posture based on forward-leaning interventionism and prolonged military occupation for stability and nation-building needs to be replaced with a U.S. role of “off-shore balancing” to regional allies protect their regional interests as part of global stability underpinned by U.S. capabilities.

Both professors (along with colleagues such as John Mearsheimer at Chicago) have long espoused this shift. Posen calls it “a grand strategy of restraint” based on the view that America’s position in the world is so secure that the nation can afford to draw back from the global activism born in the cold war and reborn at 9/11. In practice, the U.S. would back away both from extensive ground-force interventions with its own military and also from security guarantees that have fostered dependence.  Instead, Washington would put its emphasis on political work encouraging regional powers to negotiate their own solutions to regional problems. Allies would have to build their own defense capabilities, and U.S. power would be used mainly as “balancing leverage” to maintain stability in regional rivalries. For this role, America does not need the current array of manned bases around the world: its air and naval forces give it unmatched global power-projection.

None of this doctrine was a surprise to listeners at the Council, who are familiar with the recurring academic debate on grand strategy.

What did cause surprise among specialists in the room was the response of a White House official there – Shawn Brimley, National Security Council Director for Strategic Planning. As some in the audience understood him, Brimley argued that the Obama administration is already practicing a strategy of restraint and “off-shore balancing.” That interpretation was subsequently denied by NSC spokesman Tommy Vietor – though he declined to make Brimley available for interview. Of course, Brimley may only have been engaging in a reality check of the Posen/Walt thesis by holding it up for examination in the light of contemporary decisions. Yet Brimley did come into the Obama White House believing that the U.S. needed a radical rethink of its global strategy. So did Michele Flournoy, until recently Under-Secretary of Defense for Policy. At the pro-Obama think-tank founded by Flournoy, the Center for a New American Security, she and Brimley proselytized during the 2008 election campaign about the need to halt what Brimley called “the strategic drift” and “inertia of the post-cold war era.” In a volume that included essays by himself, Flournoy and Posen, Brimley argued that “it is long past time to renew the debate over whether America should pursue…a more modest grand strategy that accepts or imposes limits on the exercise of American power abroad.”

Money (or rather the lack of it) has lent urgency to that re-think. The U.S. defense budget has been cut and is certain to be cut again. In broad-brush terms, the defense budget has been taken hostage in the battle to reduce the U.S.’ overall debt. The Budget Control Act, passed last August in a Congressional deal to raise the government’s debt ceiling, mandated that $487 billion be cut from defense spending to be distributed over the decade to 2021. The 2012 defense budget is $550 billion, plus $115 billion to finance the wars in Iraq and Afghanistan.) Presenting the Pentagon budget for next year, Defense Secretary Leon Panetta went some way to starting on cuts aimed at that $487 billion target. He called for eliminating 92,000 Army and Marine Corps troops, retired ships and aircraft and delayed some costly new weapons systems. But that is only a first installment. Panetta’s announced cuts are only those to be made in the next five years and take him only 70 percent of the way to the target, so a second round of cutbacks must follow. And there is worse news for the Pentagon on the horizon. Because Congress has failed to agree on further government-spending cuts as part of an overall deficit reduction deal, so-called “sequestration” will be applied starting in January 2013: this mandates another $550 billion cut in defense spending over the next decade. The Pentagon regards the prospect as so outlandish that, at least officially, no planning has begun on how to meet it. In reality, said one Congressional defense analyst: “The building thought 487 [billion] would be the floor under defense spending. They’re beginning to realize it will be the new ceiling.”

So here is the question: is the Obama administration starting to reshape defense priorities – not merely as a budgetary imperative but also as a function of a new grand strategy? If so, how deep will the cuts go and what new sustainable strategy will emerge?

The cuts will go very deep, predicts Gordon Adams, a respected defense budget analyst who oversaw defense spending at the Office of Management and Budget in the Clinton White House. In his view, whoever wins in November will confront three interlocking tasks: deficit reduction; entitlement reduction; and the tax reforms to allow these. The defense budget, Adams predicts, will be the “bank” that people raid to avoid cuts elsewhere -- or to make those more politically palatable. Adams sees sequestration’s further $550 billion cut as inevitable: the question, he says, is not whether but when still deeper cuts are made.  Other analysts – Todd Harrison of the Center for Strategic & Budgetary Assessments, for example – tend to agree with this forecast, notwithstanding the campaign pledges of the Republican party and its presidential contender Mitt Romney to protect defense spending.

This likely prospect is unwelcome news for Europe because the U.S. presence there is prime candidate for the “hollowing out” of U.S. forces that Panetta predicts will result from deeper cuts. “The Obama administration is signaling that most cuts, at least those that can be regionally allocated, will come in Europe,” says Kori Schake, who was Director for Defense Strategy and Requirements in George W. Bush’s National Security Council. And indeed that has been the case in the pull-backs announced so far. All are in Europe: bringing home two (of four) army brigades; shutting down a corps headquarters; inactivating two Air Force squadrons based in Europe; closing four of twelve Army bases in Germany; bringing home 10,000 of the 80,000 U.S. service personnel now in Europe. And Panetta has signaled that more drawdowns will follow.  His phrasing was oblique but his message unmistakable when he said that “the U.S. military’s force posture in Europe will, of necessity, continue to adapt and evolve to meet new challenges and opportunities, particularly in light of the security needs of the continent relative to the emerging strategic priorities that we face elsewhere.”

In other words, the Obama team (and many others) considers that Europe faces no real threat of conflict on the continent. In Washington’s evolving defense thinking, Europe’s role is to take the lead in handling crises around its periphery, to provide forces trained and equipped to work alongside the U.S. military in contingencies further afield, and to be the “springboard” (as one pentagon official put it) to project U.S. and allied military power into crisis situations to the east or south of Europe.

So no one expects the U.S. military to withdraw completely from Europe. Ramstein, the giant air base in Germany, is too valuable as a global hub; the military hospital at nearby Landstuhl would be too costly to replace at home; some facilities will remain where U.S. troops – rotated from bases stateside – can help train up European forces for those expeditionary missions ‘out of area’, as NATO terms the rest of the world.

This represents an “epochal change” in Europe’s defense, according to senior French defense analyst and adviser, Francois Heisbourg.  Kori Schake sees a fundamental change in U.S. attitudes towards Europe:  “Europe is no longer at the center of American security calculations, and the U.S. will judge its usefulness by its results.”  U.S. ambassador to NATO, Ivo Daalder, warned recently that “if there ever was a time in which the United States could be counted on to fill the gaps that may emerge in European defense that time is rapidly coming to an end.” How Europe responds to the challenge of increased responsibility for its own and its neighbors’ security --- whether Europe even proves capable of a coherent response --- will be a shaping factor in European politics for years to come.

But is there a strategy behind these American moves?  Even though finances forced action, Panetta insists that the Pentagon “would need to make a strategic shift regardless of the nation’s fiscal situation. We are at that point in history. That’s the reality of the world we live in.” For Panetta, the budget crunch was a useful spur: “Fiscal crisis has forced us to face the [global] strategic shift that’s taking place now.” President Obama added another reason why the U.S. is at a moment of momentous transition: the end of the Iraq expedition and an end in sight in Afghanistan. With a decade of war winding down, according to the President, “we have the opportunity and responsibility to look ahead,”

When his team looks ahead, what do they see? In January, they released the latest “defense strategic guidance,” the collective wisdom of the defense establishment. It was the 11th such effort since the cold war’s end – a series that, taken as a whole, Congressional Research Service analyst Stephen Daggett calls “snapshots of an ongoing evolution of strategic thinking away from planning for smaller versions of cold war-era conventional conflicts.”

Actually, there is a sharp break in the series – before and after the 9/11 terrorist attacks.  The reviews of the 1990s clung to the cold War paradigm: standing forces, mostly forward-deployed, sized to fight two major regional conflicts of the traditional sort -- U.S. forces halting and reversing cross-border aggression by massed mechanized forces. The 1991 Desert Storm campaign to expel Saddam Hussein from Kuwait was, in all essentials, a battle plan borrowed from the European central front.  But that was an exception. As a rule in the 1990s, the U.S. military found itself enmeshed in a chain of smaller operations: Iraq no-fly-zones, Bosnia’s civil war, Haiti, Rwanda, Somalia and Kosovo. Meanwhile, the military was being asked to pay a “peace dividend” after the cold war’s end, with military shrinking by a third and defense spending dropping 40 percent. As in the wake of Vietnam, the specter loomed of a “hollow force.”

Then came George W. Bush and Donald Rumsfeld. Nowadays it can be hard to remember what Bush contemplated coming into office the year before 9/11. He had made predictable campaign pledges to restore military spending (“help is on the way”), but he had also criticized Pentagon failures to adapt to the post-cold war world. Bush saw the U.S. military as clinging to cold war weapons systems rather than embracing the “revolution in the technology of war” – he instanced too few precision-strike and unmanned systems and too many troop garrisons dispersed around the world. “As President, I will order an immediate review of our overseas deployments in dozens of countries,” he said. While pledging to continue defending allies from aggression, he said that “the problem comes with open-ended deployments and unclear military missions.” He pointed to the peacekeeping forces in Bosnia and Kosovo – ironically, both small-scale precursors of the then-unforeseen campaigns in Iraq and Afghanistan.

At the time, those who drafted that speech murmured that the U.S. deployments in Europe would be in Bush’s sights, too. In Donald Rumsfeld, Bush found a corporate make-over specialist impatient to bludgeon the Pentagon into change to “stimulate [his] thinking” as defense secretary, Rumsfeld commissioned a series of studies by a mix of in-house and outside experts, instructing them to “be bold.” The “conventional forces study” was led by David Gompert, longtime Rand analyst and National Security Council veteran. The study’s prescience is striking, nowhere more so for Europeans than its rethink of U.S. “forward presence” and its changed view of allies. Gompert’s group recommended, as he put it, “a concept which is not, I repeat, not to abandon the idea of forward presence” but which transformed its rationale. “The [cold war] notion of a fixed, large permanent presence on U.S. bases isn’t going to be adequate,” Gompert said.

Instead, he added, “[a]s I look at the bases in Japan and in Europe, I see them as having most value not for the protection of Japan and the protection of Europe, but for staging to the other areas where we’re more likely to have to use force.” That notion was soon to be overtaken by events, but only temporarily: it has re-emerged under Obama (who not coincidentally relied on Gompert in 2009-2010, as his acting director of national intelligence). In this now-recurrent view, the U.S. needs a permanent military presence at only a handful of ”main operating bases” around the world that function essentially as key logistical hubs. In times of crisis and combat, they will be supplemented and gain outreach by bilateral agreements giving U.S. forces strictly temporary access to a network of bases in other countries -- “lily pads,” Rumsfeld called them.

Then came 9/11. That horror and the wars that followed convinced Rumsfeld of several things. The U.S. military’s overseas deployments were “seriously obsolete.” And NATO, as such, was of uncertain value. Rumsfeld’s bitter crack about “Old Europe” was passed off as rhetorical overkill, but he meant it. Some European allies were willing to collaborate with the U.S. in expeditions outside Europe; most were not. Very well, the U.S. would look for “coalitions of the willing.”

In fact, 9/11 confirmed a view that Rumsfeld and his officials had already been forming. Less than three weeks later, Rumsfeld’s first Quadrennial Defense Review appeared: it changed the metrics in all previous reviews (essentially force-planning based on defined scenarios of likely future conflicts) and replaced them with what Rumsfeld called “a ‘capabilities-based’ model” contingencies of a global war on terror. U.S. forces must be ready to fight anywhere, against all sorts of adversaries. Henceforth, the “central front” (Europe, facing Russia) was no longer a threat: “With the notable exception of the Balkans, Europe is largely at peace.” And, from an old cold warrior such as Rumsfeld, this momentous conclusion: “Russia…does not pose a large-scale military threat to NATO.”

It was the decisive signal of a shift in America’s strategic focus away from Europe as the main theater for U.S. power. Now Rumsfeld’s review pointed to China: “although the United States will not face a peer competitor in the near future, the potential exists for regional powers to develop sufficient capabilities to threaten stability in regions critical to U.S. interests. In particular, Asia is gradually emerging as a region susceptible to large-scale military competition…Maintaining a stable balance in Asia will be a complex task. The possibility exists that a military competitor with a formidable resource base will emerge in the region.” Coping with that would mean “developing systems capable of sustained operations at great distances with minimal theater-based support” – meaning naval and long-range air power.

Every subsequent review has echoed Rumsfeld’s judgment. In August 2004, Bush announced the first earnest of the shift away from Europe: “the most comprehensive restructuring of U.S. military forces overseas since the end of the Korean War,” the White House boasted. The U.S. would “close hundreds of U.S. facilities overseas and bring home about 60,000 to 70,000 uniformed personnel and approximately 100,000 family members and civilian employees.” “The world has changed a great deal, and our posture must change with it,” Bush said. Worldwide, the U.S. would cut its foreign installations from 850 to 550 – two-thirds of those closings in Europe. Of the 70,000 coming home – most of them Army – 40,000 would come from Europe. In total, the biggest pull-back would be from Europe.

Rumsfeld was expected to elaborate on a strategy underpinning those dramatic shifts in his next Quadrennial Defense Review in February 2006, offering what one aide predicted would be “a fulcrum of transition to a post-9/11 world.” But Rumsfeld was distracted – and increasingly exhausted – by Iraq and Afghanistan. And, as a former Congressman, he knew the grueling bureaucratic battles with the military and Congress that would greet any precise detailing of how the services and their weapons programs should be reshaped.

What his QDR unequivocally did in 2006 was put America’s allies, and especially the Europeans, on notice that the U.S. looked for their help in contingencies outside Europe. British, Canadian and Australian officers were even integrated into some QDR analysis teams; Pentagon civilians racked up frequent-flyer miles in multiple discussions with NATO as an organization and with its core members. The QDR stressed America’s need to work with existing allies and to find new partners – especially for large-scale “stability” operations like Iraq and Afghanistan, which the QDR saw as a major future mission. (Gone was Bush’s initial disdain for “nation building” as beneath the U.S. military.) The task of “building partnership capacity” was singled out as one to which the Pentagon would devote more time and thought. Implicit in this, of course, was the need for allies to invest in the new technologies that the Pentagon was now pouring money into.

A severe critic of this review – as lacking strategic specificity – was Michele Flournoy, who then under Obama was ensconced on the Pentagon’s E-Ring as Under-Secretary of Defense for Policy. But her own first attempt to refocus American defenses went nowhere – mainly because of Robert Gates, who had replaced Rumsfeld as Defense Secretary and was then asked to stay on by Obama. In fairness, Gates thought that gazing into the future had its place, but first and foremost he was determined to keep a reluctant Obama focused on winning the wars America was already fighting: even though they were “Bush’s wars.” Iraq and Afghanistan must be “the top of the institutional military’s budgeting, policy and program objective…because we now recognize that America’s ability to deal with threats for years to come will depend importantly on our success in the current conflicts,” Gates maintained. Even Flournoy accepted this argument about changed circumstances when she presented Obama administration’s first QDR in 2010: supporting and bolstering the all-volunteer forces fighting in Iraq and Afghanistan, she said, “we see not as aberrations but really as harbingers of a dynamic and complex future landscape.”

So, preparing for “major stabilization operations” was judged to be crucial in Obama’s first term. Circumspectly, China was noted as “one of the most consequential aspects of the evolving strategic landscape” and relations with China would be “multi-dimensional.” It was mentioned that China’s lack of transparency about its military raised “legitimate questions” – which, as one Congressional analyst noted drily, “is as close as the discussion [came] to treating China’s growing military capabilities as a potential threat.” On the other hand, the QDR’s stress on new capabilities to defeat “anti-access” and “area-denial” strategies – and its push on cyber and space warfare – were clearly responses to Chinese developments. But shackled by Gates to current wars, this QDR looked out only five-to-seven years, rather than the 20 years Congress had mandated for the study.

Six months later Congress waded in with its own “QDR independent panel” that was told to go beyond the bureaucratic shortsighted approach and look out 20 years. It did and it saw China. Its findings were brutally critical of the Obama team’s effort. The QDR’s proposed force structure “may not be sufficient to assure others that the United States can meet its treaty commitments in the face of China’s increased military capabilities.” The remedy? In the Asia-Pacific region, “a robust U.S. force structure, one that is largely rooted in maritime strategy…will be essential.” The panel called for a bigger navy, and much greater long-range strike capabilities for warplanes and warships.

And Gates agreed. Gates used his final months in office last year to make a series of speeches laying out what he saw as “hard truths.” In Brussels, he was scathing about European “nations apparently willing and eager for American taxpayers to assume the growing security burden left by reductions in European defense budgets”, and he warned of “dwindling appetite and patience in the U.S. Congress” to finance this.    In his last address to the cadets at West Point, Gates was equally blunt about future U.S. force structure.  He observed: “The reality [is] that the most plausible high-end scenarios for the U.S. military are primarily naval and air engagements – whether in Asia, the Persian Gulf or elsewhere. The strategic rationale for swift-moving expeditionary forces…is self-evident…but in my opinion, any future defense secretary who advises the president to again send a big American land army into Asia or into the Middle East should ‘have his head examined’, as General MacArthur so delicately put it.” (Gates evidently expected the cadets to know that this phrase had been MacArthur’s advice in 1961, to incoming President John Kennedy, regarding U.S. military intervention in Vietnam.) To ram the point home, Gates repeated it later: “The odds of repeating another Afghanistan or Iraq – invading, pacifying and administering a large third-world country – may be low.”

His comments have seismic implications for the shape and missions of future U.S. armed forces. Instead of “major stabilization operations,” the shaping function for U.S. forces will be one looking to what has been called “a second transoceanic era.” Through the cold war, America deployed its military according to what imperial Britain used to call the Continental Strategy: direct commitment of forces on land. Now America, at least the Obama administration, seems to be moving towards what those same British planners called a Maritime Strategy: an offshore presence, intervening when necessary to support allies through unmatched power-projection.

In practice, America seems to be quietly reverting to what was U.S. strategy for almost all its history: expeditionary forces housed almost wholly on U.S. territory, with access to bases pre-negotiated with allies around the world. After the 2008-2009 economic crisis and this election-year focus on America’s unsustainable budget deficit, the near certainty of drastic cutbacks in defense budgets has finally forced a decision that defense reviews approached but then shied away from: U.S. deployments in Europe are a hangover from the cold war; and the U.S. role in NATO needs to be re-thought.

Everyone seems to be taking a moment to get their breath back. Gates’ recognition of political reality cut the Gordian knot. He recognized – and, in his view, his successors will too – that the American public will not support a re-run of Iraq or Afghanistan for a generation or more. In this view, the Army and Marine Corps need no longer to be sized for infantry-heavy “stabilization” or “democratization” operations: instead, they can be shrunk dramatically. Obama said so at his January presentation in the Pentagon:  “As we look beyond the wars in Iraq and Afghanistan – and the end of long-term nation-building with large military footprints – we’ll be able to build our security with smaller conventional ground forces.” Panetta said flatly: “The Army and Marine Corps will no longer need to be sized to support large-scale stability operations.”

The gloomier scenarios circulating inside the Pentagon foresee Special Forces continuing to expand, while conventional ground forces shrink by a third or more – taking the active-duty Army down from its present 570,000 to well below 400,000. Numbers like that indicate the political calculus behind the new strategy: to meet any significant ground-combat contingency, America will be calling for forces from its allies --- well-equipped forces.

Meanwhile, the shift in focus to Asia is already under way. Panetta talked of “enhanced presence, power projection and deterrence in Asia-Pacific.” But he also talked of “develop[ing] low-cost and small-footprint approaches to achieving our security objectives.”  The moves in Asia fit that pattern.  The first of 2500 Marines have already arrived at an existing Australian base in Darwin. The Navy will have use of Perth, Australia’s great west coast port. The Cocos Islands, an Australian-owned cluster of coral atolls in the Indian Ocean, will house long-range U.S. surveillance drones. Agreements with Vietnam and Singapore give the U.S. access to bases there. Washington is negotiating with the Philippines to expand U.S. access to part of its former giant bases there. In effect, piece by piece across the region, a network of U.S. bases is being put together that much resembles Rumsfeld’s notion of “lily pads.”

As a global strategy in action, all this is a long way more activist than advocates of “off-shore balancing” have in mind. Yet what is being tried is definitely a new approach. The handling of the Libyan intervention, letting the regional powers – Europeans – take the lead while delivering U.S. military resources they lacked – was described by a White House briefer as “leading from behind.” That brought some jeering among American defense hawks. But the approach fits an emerging pattern in U.S. strategic thinking that all parties of the alliance will henceforth need to heed and to broach in their own national security and budget debates.

John Barry has been National Security Correspondent for Newsweek magazine from 1985 to 2011