War on the Rocks
November 18, 2013
Over the last dozen years, America’s volunteer warriors have shouldered the burden of multiple deployments to two combat zones, risking death and permanent injury while enduring long separation from their loved ones. As we shift into a peacetime mindset and cope with budget austerity, we’re looking at ways to save money on defense, including reforming the way we compensate those we send downrange.
Retired Navy Admiral John C. Harvey, Jr. recently criticized the popular discourse on military compensation for under-valuing the sacrifices made by our soldiers. Harvey is quite right that “we’re not just debating about pay and allowances or commissary benefits or TRICARE fees. We are talking about the future of our All-Volunteer Force, how we will sustain it, and how it will be able to attract the kind of men and women who will repeatedly deploy into harm’s way.”
But that cuts both ways. While the sacrifices borne by those who serve are priceless, pay, allowances, benefits, training, and equipment are not. And, like it or not, the exploding health care and retirement benefits costs for the troopers of today and yesterday are going to make it harder to train, equip, and pay the troopers of tomorrow.
Harvey fears that we’re sending the wrong message to the force that is serving today, signaling “that we are looking for a way out of fulfilling our commitments to them” now that the wars they fought are winding down. Everyone agrees that the current force must be grandfathered and that any compensation changes should apply only to those who join in the future, and the leadership indeed needs to do a better job of reinforcing that message.
But we can’t wish away hard facts.
The cost per active duty service member has skyrocketed, increasing 57 percent in real terms between 2001 and 2012 – or 4.2 percent annually – owing to annual pay raises that far exceeded inflation; improved benefits, such as a major enhancement in the GI Bill to spur recruitment and large retention bonuses for in-demand skill sets; and an explosion in health care costs.
Healthcare costs alone have more than doubled, going from $17.8 billion in 2000 to $49.8 billion in 2010. The CBO projects that, absent major changes, those costs will double again by 2030. CBO’s Carla Tighe Murray estimates we could save “several billion dollars” over the next decade simply by increasing the out-of-pocket expenses paid by military retirees under 65 TRICARE users to levels comparable to the private sector.
Harvey rightly notes that our troops are watching “sequestration take away their training, take away their professional development and take away their opportunities to prepare for the deployments that we will not hesitate to send them on,” and wonders “What are they thinking while we debate whether or not we’re paying them too much?” But these are not separate issues.
Even with a $682 billion annual defense budget, which is more than four times what runner-up China spends, there are limits. And, as we all know, that number is going down. Yet, even amidst the abject stupidity of sequestration, Congress continues to raise uniformed military pay at a rate that is above both inflation and the requests of Pentagon leaders.
Harvey takes offense at the Defense Department’s Reserve Forces Policy Board’s conclusion that “The all-in cost of the all-volunteer force is one of the time-ticking bombs that could explode our defense capabilities if not dealt with responsibly.” But the fact that the fully-burdened cost to the taxpayer for compensating and caring for each service member is $384,622 and rapidly rising is undeniably a real threat to our ability to sustain our current model.
Harvey quite reasonably suggests that “we need to ensure the current members of the armed forces have a voice – an active voice – in this discussion about their compensation. What aspects of the current, and very complex, structure of pay, allowances and benefits do they most value and why?” But the Military Compensation and Retirement Modernization Commission, which is charged with recommending reforms, is doing just that and finding that troops do not value in-kind benefits such as retirement pensions nearly as much as they cost the government.
He also argues that “we should view the resources we devote to our men and women in uniform as investments in our future, not simply as costs to be minimized as much as possible.” That’s a vital point to remember. But even valuable assets are subject to cost-benefit analysis.
I agree with Harvey that “our most junior enlisted members must be highly skilled, able to rapidly adapt, and capable of growing into mature leaders” and that “This will not be possible without high-quality young men and women want to enlist and then want to stay in the force.” Nor will it be possible if retiree pensions and healthcare costs continue to escalate and eat away at the resources available for training and equipment for the next generation of warfighters.
Personnel and overhead costs already account for nearly half the defense budget and Army Chief of Staff Ray Odierno forecasts that 80 percent will go to compensation by 2023 unless we fix the problem.
Harvey is right to fear taking away benefits that incentivize people to join and make careers of the military. But it absolutely makes sense to explore more cost-effective ways of achieving those goals.
So, for example, military base pay exploded during the last dozen years when two shooting wars made recruiting volunteers more difficult. But these increases impact not only the present, but also reverberate into the future through the retirement system. It may be that lump sum enlistment and retention bonuses would do the job at a fraction of the lifetime cost. We should almost certainly increase massively the bonus paid to those actually deployed downrange into hostile fire zones, now a paltry $225 a month, rather than pay everyone more simply for taking a theoretical risk. And, yes, we might even need to consider asking people who retire from the military at the beginning of middle age to start a second career to pay a little more for their health benefits.
We’re spending $20 billion a year on pensions for military retirees. To be sure, those who served under the promise of this benefit must be paid. But continuing to offer generous lifeline benefits to young people (as early as 38 years for enlisted personnel and 42 for officers) after twenty years of service is an expensive way to keep our best personnel. The system was put in place in an era when military pay was very low; paying half their small base pay for life was both a necessary enticement to a career of service and relatively affordable. For decades now, our troops have been compensated at a very competitive level and still earn a pension plan found nowhere in the private sector.
Harvey concludes by warning us that “Choices have consequences.” Indeed they do. Continuing down an unsustainable course out of fear of making hard choices will have the consequence of a force less prepared to fight America’s next war.