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Military pay gap fiction, nonpartisan CBO says

Jan. 2, 2010 - 09:20AM   |   Last Updated: Jan. 2, 2010 - 09:20AM  |  
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The fate of the 2011 military pay raise may rest on how much weight lawmakers give to a claim by a nonpartisan congressional office that a purported gap in military pay doesn't exist.

Instead of the 2.4 percent pay gap cited by military associations as reason for Congress to continue increasing military basic pay by slightly more than average private-sector raises, the Congressional Budget Office says there is a 10.3 percent military pay surplus.

The dispute about whether there is a pay gap or surplus is not new, but it is getting new attention from Congress as a result of warnings that rapidly growing military personnel costs are squeezing other needs out of the defense budget.

In particular, the CBO, which does budgetary analysis, and the Congressional Research Service, another analytical arm of Congress, have warned that the services will have trouble paying for new weapons and equipment if personnel costs, which now make up about 25 percent of the defense budget, are not reined in.

Analysts noted that there are ways to find money for weapons and other defense needs that do not involve cutting payroll costs, such as reducing the number of active duty troops, trimming other benefits or increasing the overall budget.

Crunching the numbers

The crux of the debate hinges on how military pay and private-sector pay are compared.

The Military Coalition, a group of more than 30 military-related associations, has tracked the pay gap by comparing annual percentage raises in military basic pay since 1982 to percentage raises over the same period in the Employment Cost Index, a Labor Department measurement of private-sector compensation costs.

By that yardstick, a pay gap steadily grew during the Reagan administration because of pay caps that followed huge military raises of 11.7 percent in 1981 and 14.3 percent in 1982.

By the late 1990s, the gap had grown to 13.5 percent, leading Congress to approve 11 straight years of military raises that were at least half a percentage point higher than the average annual ECI increase. That effort has whittled the gap to 2.4 percent today, according to the Military Coalition.

The Congressional Budget Office also uses ECI as its comparison gauge but it uses a broader definition of military compensation that includes not only basic pay, but also military housing and food allowances, and the tax advantage of those tax-free allowances.

By that measure, known as Regular Military Compensation, CBO said any gap between military and private-sector pay vanished in 2002, and that robust pay and allowance increases in recent years have pushed the military ahead of the private sector.

At a Nov. 18 House hearing, Matthew Goldberg, CBO's deputy assistant director, did not advocate pay cuts or caps for the military; CBO only suggested options for lawmakers, without taking sides. But he warned that continuing raises for troops and federal civilians that outpace private-sector wage growth is a potentially serious budget problem.

He said five years of adding an extra half a percentage point to military raises to close a pay gap that doesn't exist will add $2.8 billion to the defense budget. And even if the practice stopped in 2015, it would still add $3.6 billion to the budget through 2028 because basic pay and retired pay rates that are calculated on the higher raises would be affected.

The "best barometer" of military pay, Goldberg said, is whether the services are able to recruit and retain skilled people. Even with continued combat deployments, he noted, the Defense Department is meeting its recruiting and retention goals, "perhaps because military compensation compares favorably with civilian options."

CBO's view has not dissuaded the Military Coalition from continuing to push for bigger military raises, however.

The coalition's joint legislative agenda calls for military raises to remain half a percentage point above average private-sector increases through at least 2013.

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