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Sounds to me like he was just saying that's just about your only option, not calling military people stupid. I would guess, given that comment, he probably doesn't have a high regard for that career path but I don't think he is calling them stupid. He could just as easily have said "back hoe operator" but the military is a bit more topical.
For people who can't read you do have seriously depleted options, obviously, and many of them do end up in the military because it's just about the best option for someone who can't. That being said.. I'm pretty sure the army requires literacy, though given the vets I work with that can't... it doesn't seem to enforce it that hard.
It also seems like a pretty off the cuff remark. I don't know about you, but I wouldn't want to be judged entirely on some random remark I make. I sound like a jerk all the time without really meaning it because of some badly phrased comment or another.
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