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Military pay, benefits surface for possible cuts

Nov. 19, 2013 - 01:53PM   |  
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The Congressional Budget Office has proposed 103 ways to reduce the federal deficit, including controversial ideas for cutting military and veterans benefits.

The Congressional Budget Office has proposed 103 ways to reduce the federal deficit, including controversial ideas for cutting military and veterans benefits.

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The Congressional Budget Office has proposed 103 ways to reduce the federal deficit, including controversial ideas for cutting military and veterans benefits.

CBO produces such reports every two years, usually to minimal fanfare. Some past options have made it into law, but most of the recommendations are tough actions that would cause major outcry from affected constituencies — and a lot of political pain for lawmakers — if they were formally proposed.

The latest report could be sidelined just as easily, if not for the fact that it surfaced in mid-November, just as House and Senate negotiators are wrestling with ways to cut spending and raise revenues in hopes of avoiding a repeat of the recent government shutdown.

With negotiators facing a Dec. 15 deadline, the CBO report is a quick reference guide of options to achieve substantial savings — if lawmakers are willing to take some politically unpopular moves.

Some of the highlights:

Cap military raises

This option, already adopted by the Obama administration for 2014, would reduce the size of military raises to save money. The administration proposed capping the next basic pay raise that takes effect Jan. 1 at 1 percent, rather than the 1.8 percent required under a federal pay formula that is still technically in effect. That formula is designed to provide annual military raises that match average wage-growth in the private sector.

The CBO option would cap military raises starting in January 2015 at 0.5 percentage points less than average private-sector increases, and continue doing so through 2023. Over 10 years, that would yield $24.9 billion in savings.

The CBO admits that a lot of troops won’t like the idea, but suggests “the effect of such an option would be minor,” since troops would still receive pay raises.

Change retirement pay

Military retirement pay is calculated, in part, on the average basic pay over a service member’s three highest earning years in uniform, almost always the last three. As part of a larger reform in government retirement, the CBO said $2.1 billion could be saved over 10 years if retirement pay was calculated on average basic pay over a service member’s five highest earning years in uniform.

The CBO envisions applying the change to those who retire starting Jan. 1, 2015. The net effect would be an average 3 percent reduction in the lifetime value of military retired pay.

Halt concurrent receipt

Savings of about $108 billion over 10 years are possible if Congress ended a practice begun in 2003 that allows many disabled military retirees to receive full military retired pay and veterans disability pay, a move that has boosted the pay of about 420,000 people.

The big savings would result from terminating the dual payment in 2015, affecting those already eligible for both payments and preventing any new payments. But the savings would result exclusively from taking money away from military retirees, making it a particularly difficult political decision — especially since Congress overruled the Pentagon to create the dual benefit in the first place.

Limit disability pay

Troops who incur injuries while at home or on leave, or develop disabilities while in the military that have nothing specifically to do with military service, would not be considered to have service-connected medical conditions under this proposal.

This change, which would apply to both disability compensation and to dependency and indemnity compensation, would save $20.4 billion over 10 years by preventing payments to about 520,000 people.

Tighten unemployability

About 80,000 veterans who receive additional disability compensation because they are considered unable to work would have that compensation reduced under an option that would save $15.3 billion over 10 years. This would apply to veterans whose disabilities are rated at between 60 percent and 90 percent who have their disability pay increased by an average of $1,500 a month because they are considered unable to work, known within VA as “individual unemployability.”

Under this proposal, unemployability could not be awarded until a veteran is past Social Security age for full retirement. The age for full Social Security eligibility ranges from 65 to 67, depending on birth year.

Set minimum TFL fees

Medicare-eligible retirees would be required to pay $550 each calendar year before Tricare for Life started covering any payments, and then would cover only 50 percent of the next $4,950 of expenses, under an option that would save $30.7 billion over 10 years. This plan would take effect in January 2015, with dollar limits indexed to the average cost growth in Medicare.

Raise other Tricare fees

Much like the Defense Department’s current plans for raising Tricare for Life fees for older retirees, CBO proposes saving $21 billion over 10 years with higher enrollment fees, deductibles and copayments for retirees under age 65 and saving $75.4 billion over 10 years by also making them ineligible for Tricare Prime, the military version of a health maintenance organization.

Access to Tricare Prime for working-age retirees already is being restricted by the Defense Department in some areas and fee increases are pending before Congress.

Cancel/delay weapons

The CBO report does not focus only on pay and benefits. It also lists options for achieving significant savings over 10 years by altering some of the Pentagon’s big-ticket weapons programs:

■ Replace the Joint Strike Fighter with F-16s for the Air Force and F/A-18s for the Navy and Marine Corps. Savings: $48.5 billion.

■ Defer development of a new Air Force long-range bomber until after 2023. Savings: $32.1 billion.

■ Cancel the Army’s ground combat vehicle program. Savings: $15.1 billion.

■ Halt construction of the Ford-class nuclear-powered aircraft carrier after completion of the carrier John F. Kennedy. Savings: $17.8 billion.

■ Reduce the planned purchase of 14 Ohio-class ballistic missile submarines to just eight by 2020. Savings: $15.7 billion.

■ Cancel the Navy’s Littoral Combat Ship program after building the 24 now built or under contract. Savings: $18.3 billion.

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