A bad omen for Pentagon budget?

The swift work in Congress to repeal $6 billion in cuts to military pensions that passed just two months earlier is a bad omen for future efforts to curb military personnel costs, budget analysts say.

Congress included the reductions in military retirement pay as part of the December budget deal, but it quickly reversed course amid a major backlash from veterans groups.

“It is definitely a step backwards and is going to make future efforts much more difficult,” said Ed Lorenzen, a senior adviser to the Committee for a Responsible Federal Budget. “The lesson unfortunately that a lot of members took from this effort is that doing anything that effects military retirees is going to be too politically difficult.”

The pension cuts in the budget deal — which reduced the cost-of-living adjustment (COLA) for working age retirees by one-percentage point below inflation — were seen as a test case by both opponents and proponents of curbing military compensation costs.

Budget hawks have warned that growing personnel costs threaten the rest of the Pentagon’s budget, as increases in healthcare, pay and other benefits are eating up a bigger chunk of the military budget.

They argued that the COLA reduction was a modest one, only affecting annual pay increases and the small percentage of veterans eligible for retirement pay after serving for 20 years.

But veterans organizations came out swinging, launching a major offensive to convince lawmakers that the cuts were unfair because they affected current service members and retirees.

They warned that allowing this cut to stand would lead to new efforts to take benefits away from veterans, from health care fee increases to cutting commissary stores.

In the end, the veterans groups won overwhelmingly.

Congress voted to repeal the pension cuts 326-90 in the House on Tuesday, and the 95-3 vote was even more decisive in the Senate. The bill did leave in place the pension cuts for future enlistees, but that doesn’t make a dent in the Pentagon budget for another two decades.

The repeal was a rebuke to House Budget Chairman Paul Ryan (R-Wis.), one of the authors of the budget deal who had defended the COLA cuts.

“This bill undermines one part of last year’s bipartisan budget agreement,” Ryan said in a statement after this week’s House vote. “Our military leaders — and the math — have been clear: Compensation costs are hollowing out the Pentagon’s budget. They are taking resources away from training and modernization—and putting our troops at risk.”

Rep. Adam Smith (D-Wash.), the top Democrat on the House Armed Services Committee, was one of the few lawmakers to speak out in support of the pension cuts.

“If we don’t do something about personnel costs, the thing that’s most likely to suffer is readiness,” Smith said in an interview. “It is a big concern and certainly this is pretty clear evidence that we’re going to have a tough time doing anything.”

Veterans advocates, however, say that Congress never should have made the cut to military retirees in the first place — particularly one that caught the Pentagon by surprise and did not exempt current service members and veterans.

“I think this was a really huge test balloon to let Congress understand and the Pentagon understand that the military community is extremely vocal and a lot more connected than we ever were,” said Tom Tarantino, chief policy officer for the Iraq and Afghanistan Veterans of America (IAVA).

“Veterans, military families and retirees are no longer going to be used as Congress’s piggybank,” he said. “We can’t sacrifice things that troops and veterans need to live because they say it’s too expensive — that’s a decision to make when you decide send them to war, not at the end.”

Budget analysts who support compensation reform say there are important lessons to come out of the pension fight for the next effort made by the Pentagon or Congress to tackle compensation costs.

Todd Harrison, a defense analyst at the Center for Strategic and Budgetary Assessments (CSBA) said it was clear a piecemeal approach did not work, and that any changes had to apply to future service members only.

“I think they’ve got to bite into the whole apple and not try to do little fixes along the way, because they’re going to spend too much political capital and not going to keep everyone on board,” Harrison said.

Lawrence Korb, a defense analyst at the liberal-leaning Center for American Progress who backed the pension cuts, said that having buy-in from the Pentagon was key to successfully reforming personnel costs.

Korb lamented the fact that the Pentagon did not defend the cuts in the budget deal, even though Pentagon leaders have called for broader compensation reforms.

“The Pentagon didn’t step up,” he said, arguing that the testimony from senior Pentagon officials opposing the cuts for current service members cleared the way for Congress to reverse the cuts.

Arnold Punaro, a former Armed Services staff director and retired Marine major general, said the congressional reluctance to cut military compensation was part of a larger problem preventing any changes to entitlement spending.

“Since the sequester committee failed, Congress has been a ready and willing partner of all of the outside groups that have pushed against any change to any program, whether defense or domestic,” Punaro said.

Many lawmakers opposed to pension cuts say they still support broader compensation reforms. They say they want to wait for the commission tasked with studying the issue to reach its conclusions, which are due by February 2015.

“There’s a growing recognition we have to address issues of military benefits, but we have to protect people who have served, and we have to do it in a way that they will accept,” Sen. Jack Reed (D-R.I.) told The Hill. “So that requires thoughtful implementation, not a sudden change.”

Some analysts, however, said that Congress might use the commission as an excuse to delay any discussion of changes — and then ignore the recommendations.

“I am concerned that once it comes out it will be disavowed and shelved, as Congress then awaits the next report or next groundbreaking analysis,” said Mackenzie Eaglen, a defense analyst at the conservative-leaning American Enterprise Institute. “I’m definitely concerned the commission is not being set up for success.”