If we could only transfer jobs in Defense into this sector. There are plenty of resources, they are just being misallocated. The US needs desperately to learn how to exist without such a huge military.
I completely agree with you, but unfortunately they're in so deep now they can't just suddenly reallocate massive amounts of military spending with huge repercussions. I believe the transition would have to slow and gradual to accommodate the job loss and retraining of those employed by the military. Another fun thing to think about it what effects it would have on global politics if the US withdrew military presence around the world.
Incrementalism. Most things in government work through incrementalism. As you said, you can't change this overnight. It would probably take a ten year process to reallocate billions of dollars without it having a truly detrimental effect. As for withdrawing military presence, I think other countries such as China or Germany would consider picking up those pieces. Either that or we would be in an era with less international interference.