As bitter as the budget battle has become, there’s no topic more toxic than pay and benefits for military personnel. Pentagon budgeteers and the top brass warn that increasing compensation costs, especially for health care, are growing at an unsustainable pace that threatens every other priority from weapons procurement to combat training. But personnel advocates are well organized, especially military retirees defending their healthcare and pensions, and no one wants to do badly by our hard-fighting troops. But, argues Stimson Center scholar Russell Rumbaugh, a former Pentagon and Hill staffer himself, there’s a new willingness in Congress to take the problem on. – the editors.
For the most adamant, personnel costs are about to eat the entire Department of Defense budget, reducing it to just a welfare agency and leaving the United States at the mercy of its enemies. Since the creation of the All-Volunteer Force, spending per servicemember has risen inexorably. The Department—as with the rest of the country—has watched its healthcare costs dramatically outpace inflation. Since the defense budget started expanding in the late 1990s, Congress has consistently heaped largesse on defense personnel. It repealed the retirement reform passed in the 1980s just before it kicked in, let former military members double dip by taking their military retirement pay while drawing a full civil service salary, allowed retirees to keep both their retirement and disabled pay, created the $10 billion-a-year TRICARE for Life Medicare supplement, and expanded eligibility for both healthcare and retirement benefits.
But the Murray-Ryan budget deal shows that personnel costs can be changed — and that sometimes Congress is the one caring for the national defense. The Murray-Ryan deal includes two provisions that shift defense spending from personnel costs to other defense priorities, like readiness and modernization. The first provision slows the appreciation of pensions for military retirees under the age of 62, keeping annual increases at one percent less than the normal adjustment. CBO estimates such a provision will generate savings of over $1 billion a year within a decade; savings that will continue to occur each year. Since the eventual costs of these pensions are paid for by accrual payments from the Defense Department’s discretionary funds, spending less on pensions frees up money underneath the spending caps that can be used for other priorities.
The second provision in the Murray-Ryan deal does something similar for civilian pensions; it requires new civilian employees to contribute a greater share to their pensions. Since the Defense Department is responsible for the remainder of the pension costs—again out of its discretionary funds—it has to spend less. Yet there is one big caveat; the deal does not let Defense keep that savings because it uses the new revenue to pay for existing civilian pensions that are not fully funded. Once that unfunded portion is paid off—though that will not be for decades—the Defense Department will start seeing savings of around several hundred million dollars a year that can be used to fund other priorities.
Both of these measures are prime examples of ways to shift funding from personnel costs to other defense spending that keeps the military ready and well-equipped. And both were enacted by Congress without prodding by the Defense Department, undermining the usual narrative that it’s Congress who is profligate with military spending and the Pentagon who carefully stewards it. That narrative also ignores how the very benefits now being lamented came about; both the repeal of retirement reform and the creation of TRICARE for Life were first proposed by the military service chiefs, not Congress, as part of an effort to undo the caps on defense spending that were in place at the end of the 1990s.
Today’s chiefs have started to be more vocal about the need to shift costs from personnel, most notably in a November hearing of the Senate Armed Services Committee, but more is needed. It’s unreasonable to expect members of Congress, who were elected to represent the very constituents whose benefits are being cut, if the men and women whose first job is to protect and defend the nation are not leading the call to reform pay and benefits.
Maybe the biggest missed opportunity was the weak input the Pentagon provided last month to the Military Compensation and Retirement Modernization Commission, which is charged with recommending better ways to care for military members . The Pentagon’s required official recommendation to the commission was a three-page letter that simply repeated relatively small proposals, like fee increases and greater cost-sharing, the Pentagon had already made.
The commission itself is one of the best hopes for change. It has a wide writ, good staff, and a prestigious membership. By looking at the question holistically, it has the chance to truly modernize military pay and benefits so military members get more out of their compensation while still freeing up resources for the equipment and training they also need.
The All-Volunteer Force has performed superbly in Iraq and Afghanistan, and answered a call few have. Those who serve must be compensated generously. But how matters. When the Gates Commission recommended going to an all-volunteer force, it recommended increasing military pay. It also recommended differentiating pay by skills, getting rid of in-kind compensation, and doing away with the 20-year requirement for retirement. That was forty years ago, and none of those recommendations have been implemented.
The current commission has a chance to propose such far-reaching changes. With the vocal support of the current military chiefs, change is possible. The Murray-Ryan deal shows Congress will support it.