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
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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