Let the military cost-of-living adjustments stand

The testimony of the Acting Deputy Undersecretary of Defense, Christine Fox and the Vice Chairman of the Joint Chiefs of Staff, Admiral James Winnefeld, before the Senate Armed Services Committee against slowing the growth of cost-of-living adjustments to the pensions of working-age military retirees, will come back to haunt both the Pentagon and the country.

First, the changes to working-age military retiree pay passed in the Murray-Ryan plan are relatively minor, but represent an important first step towards reforming military compensation and benefits.

These COLA reductions do not break faith with our men and women in uniform.  Even though the average enlisted retiree will receive about $30,000 less in retirement pay while they are still working-age, their retirement pay goes back to the full rate when they turn 62.  Military retirees will still receive about $1.7 million in retirement pay over their lifetime, about $200,000 more than they were promised when they joined, due to changes made in the late 1990s in the percentage of active duty pay retirees receive. 

Moreover, military retirees also receive generous health care benefits for which they pay little or nothing, in the form of TRICARE and TRICARE for Life, as well as expanded GI Bill benefits that they can pass on to their children. 

Second, their boss, Secretary of Defense Hagel, has not only supported the Murray-Ryan deal but has also argued for further changes to military compensation and benefits.  For example, Hagel has proposed raising the enrollment fees for TRICARE Prime, adding enrollment fees to TRICARE Standard and Extra, and holding military pay increases to the level of inflation, rather than raising pay faster than inflation. 

Unfortunately, up until last year, Congress, under pressure from the military lobby, has refused to make any changes that would trim the long-term costs of compensation and benefits for military retirees.  Now that Congress has found some courage and uncharacteristically taken a small step towards reforming military compensation (and taken the associated heat from veterans’ organization), the Pentagon’s leadership should support Congress’ efforts, rather than undermine them.

Third, the impacts on recruiting and retention are wildly overstated.  Less than 20 percent of enlisted personnel and 50 percent of officers will even serve long enough to retire.  Additionally, multiple studies have found that military personnel value cash compensation far more highly than future retirement benefits (which most will not serve long enough to receive) when making the decision to join or re-enlist in the armed forces.

Fourth, Fox and Winnefeld argued that no changes to military compensation and benefits should be made until the Military Compensation and Retirement Modernization Commission releases its report.  However, Congress has already pushed back the Commission’s report by nine months, until February 2015.  This delay means that the Commission will not have any impact on the FY2016 defense budget, which will be released at about the same time, and allow Congress to continue to kick the can of reforming military compensation and benefits down the road for another fiscal year. 

The problem with this approach is that military personnel costs are consuming an ever-increasing share of a shrinking defense budget, crowding out other priorities.  Military personnel costs have grown by 40 percent more than inflation between FY2001 and FY2012, according to the CBO.  Congress’ avoidance of the admittedly-contentious issue of reforming military compensation and benefits until the FY2017 budget is the equivalent of holding your hands over your eyes and chanting “you can’t see me!” 

Fifth, Fox and Winnefeld proposed grandfathering current working-age military retirees.  Delaying the COLA reductions to current-working age retirees will not only delay any savings for another two decades, worsening DOD’s budget pressures, it will open the door to this provision being rolled back entirely.  Congress has long appeared constitutionally unable to actually make hard choices about the defense budget, and this moment of reason may well be an aberration, particularly if DOD brass gives Congress an easy out.

In undermining the COLA reduction, Fox and Winnefeld may have torpedoed any chance of military compensation and benefits reform - reform that is sorely needed as growing personnel costs collide with a shrinking defense budget.

Korb, a senior fellow at the Center for American Progress, served as assistant secretary of Defense for manpower, reserve affairs, installations and logistics from 1981 to 1985.  Blakeley is a research assistant at the Center for American Progress.