For the F-16, my point is that it wouldn't be worth the risk. As you say, gunships are right out. First time you get one of those into a troop transport, that will be the end of infantry (in a political environment). That doesn't leave much beyond carpet bombing.
As you say, the collateral damage will be massive and the effectiveness will only be as good as your "kill em all" rate, which means you throw a few more bombs per square mile. That's the crux of my question, I guess. It seems the only politically palatable response (from our side) if these rockets really proliferate is to load up the B1/B2's.
Am I missing something?
Yep -- the fact that there are no front lines anymore in the wars currently being fought. Friendlies and hostiles coexist in the same space. You can't carpet-bomb because you end up wiping out the friendlies along with the hostiles. Also, the fact that bombers and artillery make for fantastic support units but they won't win any wars all by themselves. (OK, they might, in truly exceptional circumstances, but not as a general rule.)
To elaborate a bit, consider the 2006 Israeli attack on Hezbollah in Lebanon.
The only really unusual feature was that the Hezb fighters didn't run and hide and then start doing hit-and-run attacks, the way guerrilla armies usually operate. Instead, they stay put in their tunnels and bunkers, and inflicted enough damage on the IDF that the assault became politically unsustainable. Now, I'm quite certain that had the IDF kept at it, they would eventually have overrun the Hezb's positions and eliminated their organized, conventional-style resistance -- they're superior in numbers and equipment, at least equal in training, and not far short in motivation. But then what? They would have held a strip of land in South Lebanon, they'd be dealing with a civilian population that's (a) massively pissed off and (b) in desperate need of aid that Israel is obligated to provide -- which means that Hezb resistance would have restarted quickly, in the traditional guerrilla hit-and-run style that they know so well. The Hezb would have relocated their C&C to Bekaa, or Beirut, or Damascus, or freakin' Tehran, and Israel would've been stuck managing *another* bloody, messy, expensive, demoralizing, politically costly occupation. That's a no-win.
The only thing that would change this picture for them is if genocide and ethnic cleansing become acceptable tactics again. If the IDF would have lined up all military-age Shi'ite men from the area they control in front of trenches and shot them, then expelled all the women, elderly, and children, and finished off by formally annexing the territory, the post-invasion military picture would have changed drastically. But they can't do that -- it's just not acceptable. Not yet, at least: the Gaza assault's "the boss has gone crazy" strategy is a big step in that direction.
So, you're both wrong and possibly, in the long run, right: wrong in that carpet-bombing or similar tactics by themselves won't make much of a difference even should the irregulars be equipped with this type of missile, but possibly right in that as these developments make life for the regular army more difficult, tactics are going to get tougher, and ethnic cleansing may eventually be back on the menu.
That, of course, won't solve anything either -- it'll simply displace and disperse the conflict into new areas. In our hypothetical Israel vs. Hezb situation, we'd just have the Hezb continuing combat over the new border, as well as performing terrorist attacks on Israeli and Israeli-allied interests all over the world. The fundamental dynamics of counterinsurgency warfare haven't really changed since Julius Caesar; the only thing that has varied over time are the power relations between regulars and irregulars. From the gunpowder empires to roughly the middle of the last century evolution favored the regulars; since then, irregulars have been closing the gap.
It's not the first time technological changes have caused fundamental shifts in power relations, of course. The invention of the stirrup shifted the balance radically in favor of professional, regular forces; the longbowman shifted it right back to peasant levies and irregulars. Artillery, followed by inventions like barbed wire and the machine gun shifted the balance back to regulars. Cheap, light rockets are the new longbows; gunships, tanks, and navies are the new armored knights they're damaging. Who knows, perhaps the 2006 Lebanon war will be known to future military historians as the modern parallel for the
battle of Agincourt.
This has some quite interesting geostrategic implications. For one thing, it'll raise the cost of "imperial" use of power -- non-state actors like the Hezb already possess weapons that pose a threat to "imperial" super-weapons like surface warships (they significantly damaged an Israeli gunboat in 2006). This sort of evolution is one of the factors that drove decolonialization -- we had some really nasty wars during the process, but the irregulars ended up winning (more or less). I think this pattern is going to continue, largely because (with the almost sole exception of Israel/Palestine) the irregulars generally just care more about it. If the USA withdrew from Iraq and Afghanistan tomorrow, your life would go on as normal -- you'd have some upside (less cost in blood and treasure), and some downside (potential threats to national security), but your existence or your way of life would not be under imminent threat. OTOH the people fighting you there would find their situation completely altered -- they'd be poised to take over the country again, which is the one thing they really want to do.
So, on balance, no, I don't think we (meaning Americans or Euros) will find ourselves resorting to genocide or ethnic cleansing in response to the increased capabilities of insurgent forces; instead, I think we'll go home and declare victory. Israel, OTOH, might, because (rightly or wrongly) they feel they are facing an existential threat. Time will tell.