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Korb on pay and benefits reform: Inaction carries heavy cost

Apr. 10, 2014 - 10:29AM   |  
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I am proud to be one of the 23 million living American men and women who have earned the title of veteran by serving our country in the nation’s armed forces. I am also proud to have joined such groups as the Veterans of Foreign Wars, the American Legion, the Fleet Reserve Association, the Association of the U.S. Navy and the Military Officers Association of America.

However, I am appalled that all of these groups, particularly MOAA, have waged such a misleading campaign that succeeded in overturning a provision of the recent Ryan-Murray budget deal, which was vigorously defended by Reps. Paul Ryan, R-Wis., chairman of the House Budget Committee, and Adam Smith, D-Wash., ranking member of the House Armed Services Committee.

This provision would have slowed the growth of retirement pay for working-age military and given the resulting savings, which would have amounted to about $7 billion over the next decade, to the Pentagon to improve the readiness of today’s armed forces. However, MOAA and other groups successful fought this provision using a variety of underhanded tactics.

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First, these groups gave the impression that the provision, which would allow military pensions to grow by 1 percent less than the cost of living each year until the retiree reached 62, then would be readjusted to the full amount, was a cut.

In fact, the pension would still grow, but not by as much as it might have. For example, the average enlisted member retiring in 2012 left at age 43 after 22 years of service, and receives retired pay of about $28,000 a year. Eighteen years from now, at age 61, his or her retired pay would have grown to about $37,000 per year. When he or she turns 62, the pension amount would be adjusted up to about $46,000, the amount it would have been without the COLA reductions, and then is adjusted with the standard cost-of-living increase every year for the rest of his or her life.

Assuming that the person lived to be 79, he or she would have received $1.67 million over his or her lifetime, or an average of $45,000 per year for 37 years of retirement, plus additional health benefits, in exchange for 22 years of active duty service.

Second, these groups foster the impression that the change impacted all of our veterans, or at least a majority of them. As Sen. Mark Begich, D-Alaska, said on the Senate floor, a vote for repeal of the COLA provision was a vote “for our vets,” while a vote against repeal was a vote “against our vets.” However, less than 4 percent of the 23 million people who served our nation would be impacted. Moreover, since the average age of current retirees is 61 for enlisted members and 66 for officers, most of them would be affected by the lower COLA adjustments for only a very short time, if at all.

Third, these groups exaggerated the impact that the change would have on recruiting and retention, and therefore the impact it would have on military readiness. Anyone who has joined the military knows that the last thing you’re thinking about when you enlist is your retirement benefits. When you join up in your late teens or early 20s, you do not think about what life will be like when you are 30, let alone 40 or 50. Moreover, less than 20 percent of enlisted members stay in for the full 20 years necessary to receive retirement benefits. That is especially true of those enlisted soldiers and Marines who bore the brunt of fighting in Iraq and Afghanistan, as well as Vietnam and Korea. Similarly, when we have made changes in military retirement benefits, such as basing the percentage of retired pay that one receives on average basic pay over the three highest earning years, rather than on the single highest year of base pay, or reducing the percentage of retirement pay after 20 years from 50 percent to 40 percent under the “Redux” alternative, there was no impact on recruiting or retention.

Fourth, these groups mistakenly argue that this change would break faith with veterans, ignoring the fact that the government has more than kept faith with those most affected by this change. Any retirees who joined the armed forces after July 31, 1986, are currently receiving much more retired pay then they were promised when they joined or reenlisted. For example, the percentage of base pay that current military retirees receive after 20 years of service is 25 percent more than they were promised, because of changes to the retirement system made in 1999. Moreover, Congress has raised the base pay on which retirement pay is calculated above the cost of living six times over the past decade, resulting in base pay that is about 20 percent higher than the accepted standard. The cost of retiree’s health care under the Tricare is also several times less than it is supposed to be because Congress, under pressure from the military lobby, failed to raise the premiums to reflect the growth of health care costs for 13 straight years. Retirees also receive GI bill benefits worth about $100,000, and which they can pass on to their dependents, something never before allowed.

Fifth, these groups have ignored the warnings of senior military leaders, who have argued that the rising cost of military pay and benefits will not squeeze out funds for training and new weapons by assuming that the defense budget will continue to grow as it has for the past decade, which in real terms has reached levels not seen since World War II. As retired Marine Corps Maj. Gen. Arnold Punaro, a Silver Star recipient, put it: “We’re on a path in the Department of Defense to turn it [the military] into a benefits organization that occasionally kills a terrorist.” And these veterans groups ignore the fact that the Treasury added more than $50 billion over and above the Pentagon’s budget to pay for the cost of military retirement in fiscal 2013. Over the next decade, the government will pay over $500 billion to military retirees. Again, the COLA cap provision would have reduced that by about 1 percent.

The military lobby may have scored a victory for a small percentage of veterans, but the cost to the country and the vast majority of veterans and those currently serving will be substantial. The last four defense secretaries and the Joint Chiefs have urged Congress to begin bringing military personnel costs under control. Up to now, Congress has refused. When congressional leaders like Ryan and Smith took the lead on the COLA proposal, real patriots would have supported them.

In its fiscal 2015 budget plan, the Pentagon has once again proposed modest and sensible reforms to slow the growth of military compensation costs, so that the military will have sufficient funds to train and equip our volunteers. Let us hope that the veterans’ lobby does not repeat the tactics of the recent retirement COLA debate.

_____

Dr. Lawrence J. Korbis a senior fellow at the Center for American Progress, a think tank in Washington, D.C. He served as Pentagon personnel chief from 1981 to 1985 during President Reagan’s first term.

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