The Military Retirement Complex
Congress and the administration missed an opportunity by not adjusting veterans' benefits.
The repeal of the provision slowing the growth of retirement pay for working-age military retirees that was a part of the bipartisan budget act is being heralded as a victory for the veterans’ lobby. However, this is a significant loss for our both national security and the nation’s financial well-being.
For the first time in the Barack Obama’s presidency, leaders from both sides of the political aisle offered a legislative solution to begin balancing ends vs. means in the defense budget. In a rare moment of bipartisan compromise, the budget deal prevented another government shutdown and gave the Defense Department relief from the blunt instrument of sequestration for the next two years. Slowing the growth of retirement pay for working-age military retirees would also have saved $6 billion over the next decade and allowed the Pentagon to shift the savings to much-needed routine training, such as restoring flying hours for pilots, which has been decimated by the sequester.
Moreover, this small change to military compensation was enthusiastically backed by two of the leading members and rising stars from each party. Adam Smith (D-Wash.), the ranking member of the House Armed Services Committee, and Paul Ryan (R-Wis.), chairman of the House Budget Committee, former Republican vice presidential candidate, and most likely a future Republican presidential candidate, spoke out forcefully in favor of the proposal. Repealing this provision without any offsetting reductions elsewhere in the budget is a step away from a real, bipartisan effort to balance our national security needs with the reality of our limited financial resources.
This 1 percent reduction in cost-of-living adjustments was a promising first step to bringing the Pentagon’s spiraling personnel costs under control. Over the last decade, military personnel costs have more than doubled in real terms. According to the Joint Chiefs of Staff, these costs will consume nearly 80 percent of the defense budget within the next decade. Given the fact that the defense budget is projected to remain flat in real terms over this period, this explosive growth in personnel costs will crowd out vital readiness and modernization spending and reduce our military capability.
This budget provision also marked the first time that the Congress has taken the lead in trying to slow the rapid growth in personnel costs. For the past decade, Congress has resisted repeated calls from Defense Secretaries Donald Rumsfeld, Robert Gates, Leon Panetta and Chuck Hagel to bring these costs under control, consistently failing to adopt such sensible reforms as having military retirees pay a fair share of their TRICARE health costs and keeping pay raises from rising faster than inflation. Congress’s rapid reversal of the modest cost-of-living adjustment reductions makes the prospect of a serious congressional attempt to address rising personnel costs quite dim.
Both the Obama administration and the Pentagon’s leaders threw Smith and Ryan under the bus. Obama failed to threaten to veto the unpaid-for repeal of the COLA reduction or to promise support to the members who were bold enough to stand up to the veterans’ lobby. This intransigence is not new. Since Obama took office, this nation has been trying to find a bipartisan solution to its longtime deficit problem. Although Obama created the Simpson-Bowles deficit reduction commission in his first term, neither the administration nor Congress embraced their findings, which, like the COLA reduction, attempted to slow the growth in entitlement and military personnel costs. Unfortunately, by not supporting the slowing of the growth in retiree pay, the president has missed an even better chance to begin to deal with the problem.
The Pentagon’s leaders also did nothing to confront the specious claims of the veterans’ lobby. For example, groups like the Military Officers Association of America (MOAA) argued that rising military personnel costs were not a problem, even though the Joint Chiefs of Staff have warned for years about the dangers of personnel costs taking over the defense budget. MOAA also claimed that the COLA reduction would lead to a loss of more than $100,000 for the typical retiree, while a Congressional Research Service analysis found that the real numbers for the average retiree would be about $69,000, or 4 percent of their total lifetime retirement pay, not including other non-cash benefits. Also, the average age of current retirees is 61 for enlisted and 66 for an officer, meaning that most current retirees would be impacted by the slower rate of COLA adjustments for only a few years.
The veterans’ lobby also argued that the slower growth of retirement pay would mean breaking a promise to veterans, when this small change is more than offset by generous increases to retiree benefits that have been made since current retirees enlisted. As Smith put it, “If we are going to deal [based] on what you were promised when you came in, then let’s get rid of the [post-9/11] updated GI bill, let’s get rid of the yearly pay increases, let’s get rid of all the increase in combat pay, let’s get rid of all of the billions, the tens of billions of dollars that we added [to military retirement benefits] after you got recruited.” These tens of billions include an increase in the percentage of base pay veterans draw when they retire, health care premiums that are thousands of dollars below the rates advocated by Rumsfeld, and expanded G.I. Bill benefits that can be passed on to a service member’s dependents for the very first time.
Ryan noted correctly after the House voted to repeal the COLA provision that the legislature has a way of dodging needed reforms to military retirement compensation. Rather than making the tough choices, Congress sidesteps them. Unfortunately, the same can be said for the Obama administration.