Don’t Be Fooled: Military Benefits Are on the Chopping Block

Proponents of undoing Congress’ $6 billion in benefit cuts may be ahead this round, but there’s a bigger battle with the Pentagon looming.

 Corporal Arnold Franco, who served in the United States Army from 1943 to 1945 rides in a vehicle during the Veteran's Day Parade on November 11, 2013 in New York City.
National Journal
Sara Sorcher, Stacy Kaper and Jordain Carney
Sara Sorcher Stacy Kaper Jordain Carney
Jan. 29, 2014, midnight

Score one for the vet­er­ans groups who de­man­ded Con­gress go back on its plan to cut $6 bil­lion out of mil­it­ary pen­sions.

The cuts, passed as part of Decem­ber’s budget deal between Sen. Patty Mur­ray and Rep. Paul Ry­an, sent mem­bers in­to a tailspin. As vet­er­ans groups mo­bil­ized en masse against the cuts, law­makers have been trip­ping over each oth­er to put their names on pro­pos­als to re­peal the cuts.

And the re­peal crowd was handed a boost Tues­day from Pentagon of­fi­cials, who told the Sen­ate Armed Ser­vices Com­mit­tee that the pro­vi­sion in the budget deal was not the ideal way to re­form mil­it­ary com­pens­a­tion. “We won,” Sen. Lind­sey Gra­ham said, tri­umphantly, after the hear­ing.

The Pentagon sug­ges­ted that Con­gress, at the very least, modi­fy the cuts to ex­empt ex­ist­ing re­tir­ees and cur­rent ser­vice mem­bers who were already prom­ised cer­tain be­ne­fits. That mes­sage, the South Car­o­lina Re­pub­lic­an said, will guar­an­tee Con­gress fixes the is­sue.

But Gra­ham, and those up­set about the re­cent cuts to mil­it­ary be­ne­fits, should not get too ex­cited yet. They’ve yet to pass any­thing to re­peal the cuts — and they’re strug­gling to com­prom­ise on a way to do it without adding to the de­fi­cit. And even if they win this round, they have not yet won the im­pend­ing war with the Pentagon over broad­er com­pens­a­tion re­form.

Pentagon of­fi­cials prefer Con­gress ad­dress per­son­nel costs en­tirely after Feb­ru­ary 2015, so that mem­bers do not fur­ther in­ter­fere or in­flu­ence the work of a com­mis­sion set to re­com­mend ways to over­haul the mil­it­ary’s com­pens­a­tion and re­tire­ment sys­tem that would grand­fath­er re­tir­ees and those cur­rently serving. Mem­bers of Con­gress, however, are un­der polit­ic­al pres­sure. They want to get these cuts re­pealed now, even though they can­not agree on how to do it, to avoid ap­pear­ing in­sens­it­ive to vet­er­ans.

“Con­gress is sup­posed to get a say in this,” said Sen­ate Armed Ser­vices rank­ing mem­ber James In­hofe, an Ok­lahoma Re­pub­lic­an. “This is a test to see who ends up be­ing right on it.”

The tim­ing might seem like a re­l­at­ively small de­tail. But the fact that there’s so much mo­mentum to re­verse a re­l­at­ively small cut now means a much lar­ger battle over mil­it­ary com­pens­a­tion re­form is loom­ing on the ho­ri­zon, when the com­mis­sion re­port does even­tu­ally de­tail pro­posed re­duc­tions to what has his­tor­ic­ally proved a vir­tu­ally off-lim­its part of the budget. In many ways, the $6 bil­lion re­duc­tion in the budget deal be­came a de facto tri­al bal­loon. And Con­gress is, at least for now, shoot­ing it down.

Mem­bers of Con­gress are caught in a tough place. Either they heed the calls from Pentagon lead­ers, in­clud­ing the usu­ally-revered top uni­formed gen­er­als, who say they ur­gently need com­pens­a­tion re­form to keep the mil­it­ary ready and cap­able. Or they risk det­on­at­ing a polit­ic­al land mine: Break­ing faith with those who have served.

“If it were easy,” said Re­pub­lic­an Sen. Ro­ger Wick­er of Mis­sis­sippi, “it would have been done long ago.”

Sen. Richard Blu­menth­al said he was “doubt­ful” over­arch­ing re­form “will be as easy as it sounds, even by 2015.”

“This sys­tem is mind-bog­glingly com­plex,” the Con­necti­c­ut Demo­crat said, “and the polit­ic­al forces will be chal­len­ging, so re­tire­ment re­form is very far away from be­ing a done deal.”

But Pentagon of­fi­cials in­sist that re­form must take place. Due to in­creases in pay and be­ne­fits dur­ing more than a dec­ade of war, in­fla­tion-ad­jus­ted pay and be­ne­fit costs are 40 per­cent high­er than in 2001 — even though the act­ive-duty force today is only slightly lar­ger, ac­cord­ing to testi­mony at Tues­day’s hear­ing from Christine Fox, act­ing deputy De­fense sec­ret­ary. De­fense health care costs alone have grown from less than $20 bil­lion in 2001 to nearly $50 bil­lion in 2013; pay­ments for hous­ing costs have also in­creased faster than in­fla­tion.

“Giv­en today’s fisc­al real­it­ies… we are un­likely to see de­fense budgets rise sub­stan­tially for some time,” Fox said. “So if this de­part­ment is go­ing to main­tain a fu­ture force that is prop­erly sized, mod­ern, and ready, we clearly can­not main­tain the last dec­ade’s rate of mil­it­ary com­pens­a­tion growth.”

Put simply, the de­part­ment can­not af­ford it.

The uni­formed mil­it­ary lead­er­ship agrees. “De­mand­ing at this point that our com­pens­a­tion not only re­main at its cur­rently high re­l­at­ive level, but that it con­tin­ue to rise faster than that for the av­er­age Amer­ic­an, would be ir­re­spons­ible,” test­i­fied Navy four-star Adm. James Win­nefeld, vice chair­man of the Joint Chiefs of Staff, “and is simply not sus­tain­able at a time when our en­tire budget is un­der such great pres­sure.”

Dev­il’s in the de­tails

The $6 bil­lion re­duc­tion to mil­it­ary pen­sions does have polit­ic­al — and fin­an­cial — re­per­cus­sions.

This “back­room deal,” re­tired Navy Vice Adm. Norbert Ry­an, chief of the Mil­it­ary Of­ficers As­so­ci­ation of Amer­ica, said in a re­cent in­ter­view, means a ser­geant first class or mas­ter ser­geant re­tir­ing this year, with 20 years of ser­vice, would lose $83,000 com­pared to what he would have earned by the time he reaches age 62. It’s un­fair, Ry­an ar­gues, es­pe­cially be­cause com­pens­a­tion for mil­it­ary per­son­nel has re­mained about one-third of the de­fense budget since 1980. Com­pens­a­tion costs are go­ing up, as they are for say, weapons sys­tems, he says, but “they’re not out of pro­por­tion.”

Square that with the Pentagon’s call for a slower growth rate for pay, and high­er health care fees and co-pays for re­tir­ees, since DoD per­son­nel costs (in­clud­ing ci­vil­ians) make up about half the de­part­ment’s budget. Without ser­i­ous re­form, of­fi­cials have said, the mil­it­ary risks be­ing well com­pensated — but poorly trained and equipped, lim­ited in its abil­it­ies to fight and pro­ject power abroad.

So who’s right? Both sides are down­play­ing the met­ric that ap­pears to really mat­ter: the costs per per­son.

Com­pens­a­tion grew — yes, along with the rest of the de­fense budget — but the num­ber of ser­vice mem­bers has re­mained roughly the same, mean­ing that from 2001 to 2012, the av­er­age cost of ba­sic pay and be­ne­fits per act­ive-duty ser­vice mem­ber grew from $54,000 to $109,000 a year, ac­cord­ing to ana­lys­is by Todd Har­ris­on of the non­par­tis­an Cen­ter for Stra­tegic and Budget­ary As­sess­ments. When you ad­just for in­fla­tion, that’s a whop­ping 56 per­cent in­crease, ac­cord­ing to Har­ris­on. If the costs keep grow­ing at this rate — and the over­all de­fense budget does not grow — these costs could gradu­ally con­sume the en­tire de­fense budget by 2039.

High stakes

For law­makers, par­tic­u­larly those up for reelec­tion this year, it’s vir­tu­ally im­possible to sup­port cuts in be­ne­fits for those who have served, says re­tired Mar­ine Corps Maj. Gen. Arnold Punaro, a former staff dir­ect­or to the Sen­ate Armed Ser­vices Com­mit­tee. The is­sue is too com­plex to ex­plain to the Amer­ic­an pub­lic in a 30-second sound bite, or in a cam­paign ad, says Punaro, the chief ex­ec­ut­ive of con­sult­ing firm The Punaro Group, even though the COLA cuts are minus­cule com­pared to the re­forms the mil­it­ary needs to con­front in the fu­ture.

“The prob­lem is the polit­ic­al cycle. If you are a con­gress­man or a sen­at­or who is up for reelec­tion, they” — the net­work of vet­er­ans groups — “use a bump­er stick­er against you,” Punaro said. “The vet­er­ans groups are very power­ful.”

It’s not just be­ne­fits that are ham­stringing the Pentagon. Con­gress keeps put­ting re­stric­tions on DoD to pre­vent it from mak­ing oth­er re­forms it wants. For in­stance, mem­bers are already work­ing to pre­vent the Air Force from re­tir­ing the A-10 ground-at­tack air­craft to make room in the budget for new­er planes. And Con­gress has re­jec­ted the De­fense De­part­ment’s re­quest to re­duce the num­ber of bases it does not need.

The stakes are high: If the Pentagon is forced to downs­ize, it must make oth­er sac­ri­fices, with po­ten­tially more ser­i­ous con­sequences for the mil­it­ary’s abil­ity to fight and equip its people. By re­fus­ing to cut com­pens­a­tion — and oth­er polit­ic­al un­touch­ables — the rest of the de­fense budget, from weapons pro­grams to train­ing for troops, will likely be slashed.

“If you can’t go after in­fra­struc­ture — your bases — and you can’t go after force struc­ture — the cost of your people — what that leaves is in­vest­ment and op­er­a­tions,” Eric Fan­ning, un­der­sec­ret­ary of the Air Force, said in a re­cent in­ter­view. “So either you’re not mod­ern­iz­ing, buy­ing the next gen­er­a­tion of weapons, and/or not us­ing them, not train­ing. “¦ We joke that there’s not a caucus for read­i­ness.”

Even if the Pentagon cuts pro­cure­ment and re­search and de­vel­op­ment ac­counts, budget-cut­ters “will have little choice but to cut the size of the force,” Har­ris­on said. “And if the cost-per-per­son con­tin­ues to grow, they’ll have to con­tin­ue cut­ting people. So ul­ti­mately, we’ll end up with a force too small to fol­low through on our glob­al-se­cur­ity com­mit­ment.”

Some mem­bers, like Sen­ate Armed Ser­vices Chair­man Carl Lev­in, D-Mich., un­der­stand this mine­field. The De­fense De­part­ment has made it clear, Lev­in said at the hear­ing, that it can­not meet the budget levels Con­gress has set without cur­tail­ing growth in the cost of mil­it­ary pay and be­ne­fits, and that fail­ure to curb that growth “will ne­ces­sar­ily res­ult in drastic re­duc­tions to mil­it­ary force struc­ture, read­i­ness, and mod­ern­iz­a­tion ac­counts.” Still, Lev­in op­poses singling out the be­ne­fits of mil­it­ary re­tir­ees to re­duce the de­fi­cit.

By the time the com­mis­sion’s work is over, however, Lev­in will have re­tired.

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