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Think tank recommends big benefits cuts

Nov. 1, 2012 - 11:36AM   |   Last Updated: Nov. 1, 2012 - 11:36AM  |  
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A new report by a liberal-leaning think tank recommends a dramatic overhaul of military pay, retirement and health care benefits as part of a $1 trillion cut in defense spending over 10 years.

The Center for American Progress calls for capping pay raises, eliminating military health benefits for many retirees who are covered by an employer-provided plan, and reducing the value of military retired pay as well as making retirees wait until age 60 to start receiving it.

Recommendations are included in a report, Rebalancing Our National Security, released Oct. 31 by the progressive think tank and advocacy group. The report opposes across-the-board cuts in defense spending that could occur beginning in January under sequestration but still calls for major reductions in defense spending.

Capping pay raises, the report says, could save $16.5 billion over the next five years. Reducing retiree health care benefits, through a combination of restricting care and raising fees, could save $15 billion a year. Reforming military retired pay could save, in the short term, up to $13 billion a year, and over time could save up to $70 billion a year off the current plan.

In addition to cutting compensation and benefits, the report also recommends cutting the number of active-duty troops permanently based in Europe and Asia, saving $10 billion a year. It recommends withdrawing 33,000 troops from Europe and about 17,000 from Asia.

In calling for less spending on military pay raises, the report basically endorses a plan proposed, but not yet executed, by the Defense Department. Under the http://www.militarytimes.com/news/2012/08/PRIMEmilitary-dial-back-pay-raises-report-says-082012/">Pentagon plan, pay raises beginning in 2015 would be capped at less than the average increase in private sector pay, a move that responds to a belief that military members are being paid more than civilians with comparable jobs and experience. This happened because Congress, over Pentagon objections, has regularly provided the military with raises that were slightly larger than the average private-sector raise to eliminate what had been perceived as a pay gap. The end result, says the report, is that the average service member is receiving $5,400 more in annual compensation than a comparable civilian.

The Defense Department plan calls for a 0.5 percent raise in 2015, a 1 percent raise in 2016 and a 1.5 percent raise in 2017 to bring pay levels back in line, which the CAP report endorses.

"To its credit, the Department of Defense has attempted to tackle this problem in its FY 2013 budget request, outlining a plan that would gradually bring military pay back in line with the Employment Cost Index without cutting any service member's pay," the report says. "Congress should demonstrate political courage and allow the Department of Defense to execute this long-term plan."

Similarly, the report endorses many of the Defense Department's proposals for cutting health care costs by raising fees, mostly on retirees and their families. But the report goes a step further: "To truly restore the Tricare program to stable financial footing, the Defense Department should enact measures to reduce the overutilization of medical services and limit double coverage of working-age military retirees," the report says.

One idea would be to modify Tricare for Life benefits for Medicare-eligible retirees so that the program would not cover the first $500 of costs per year and would cover only 50 percent of the next $5,000.

Another idea would be to mandate that working-age retirees could only have Tricare benefits if they or their spouses do not have access to employer-provided health benefits. The report suggests this would be an income-based restriction but does not say what the cutoff should be.

The report also recommends modifying military retirement benefits. For anyone currently in the military with fewer than 10 years of service, benefits could be cut: Instead of receiving 50 percent of basic pay after 20 years of service, with immediate benefits, the report says the benefits would be 40 percent of base pay with payments not beginning until age 60. For people not yet in the military, there would be no fixed retired pay in the future, only a pre-tax retirement savings plan based on contributions from the service member.

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