More than just pay and health care are at risk of being cut in the name of deficit reduction as lawmakers look to reduce defense spending. (Colin Kelly / Staff)
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As the wagons circle the defense budget, it's becoming clear that more than just pay and health care are at risk of being cut in the name of deficit reduction.
Career-changing cuts in the active-duty force, scaled-back community and family support programs and facilities, and the elimination of service-specific career fields such as chaplains, lawyers, linguists and meteorologists — ideas considered and rejected in the past — have resurfaced as ways to cut spending without seriously eroding combat capabilities.
But even as think tanks recommend personnel cuts, basic pay, retired pay and health care are still targets. The nonpartisan Congressional Budget Office issued a report Nov. 14 laying out options to cut costs, just as Congress and the White House began post-election deficit reduction talks.
Changing careers and lives
One of the most prominent reports recommending personnel changes was issued Nov. 15 by the nonpartisan, nonprofit Stimson Center, based on recommendations from a task force of defense experts and former military officers.
The report says it is possible to improve U.S. military capabilities while cutting overall defense spending if there are major reforms of personnel programs, nuclear forces are reduced and prolonged ground wars are avoided.
Called "A New U.S. Defense Strategy for a New Era," the report's recommendations would change military careers and the military lifestyle.
For example, the report recommends reducing but not eliminating the number of U.S. troops permanently based overseas. The report says the U.S. needs to maintain ground, air and naval forces in Japan and South Korea while developing a "more trusting" relationship with China and a smaller force in Europe "until lingering uncertainties about Russia's intentions are resolved."
However, it also recommends cutting troops based elsewhere, relying instead on frequent rotations of expeditionary forces so they can "familiarize themselves with potential combat theaters."
The report also proposes changes in personnel policies and benefits:
• It suggests eliminating duplication among the services by combining training for chaplains, judge advocates general, meteorologists and linguists, an idea discussed in the post-Cold War drawdown that never gained traction because the services balked at the idea.
• Some health care clinics and hospitals, gyms and athletic fields and community facilities could be closed because there are existing facilities nearby that could be used.
• Up to 100,000 active-duty jobs could be eliminated by cutting staff and support-related positions or by turning these into jobs for contractors or federal civilians.
Like many other recent reports on cost-cutting at the Pentagon, the Stimson report suggests savings are possible in military pay and benefits. Its options could save between $175 billion and $300 billion over 10 years by changing pay, noncash benefits, retired pay and health care.
It does not recommend specifics but talks about capping or even freezing basic pay levels, limiting health care benefits for retirees and reservists while increasing fees for others, phasing out the 20-year military retirement system, and providing cash in lieu of fringe benefits, such as providing a modest increase in basic pay while closing commissaries.
More calls to cut pay raises
The Congressional Budget Office report, "Cost of Military Pay and Benefits in the Defense Budget," says military compensation is ripe for cuts, pointing out that the services are having little problem recruiting or retaining qualified service members at a time when personnel costs are soaring.
The Pentagon could control the cost of cash compensation by capping military raises, and by relying more on bonuses and special pays to recruit and retain service members in critical jobs and specialties who might otherwise leave for private-sector employment, the report says.
Defense officials have already said they want to cap raises beginning in 2015 so that basic pay increases for troops are smaller than annual hikes in average private-sector salaries. Defense officials plan to propose a 0.5 percent pay increase in 2015, a 1 percent increase in 2016 and a 1.5 percent increase in 2017, a cumulative savings of $16 billion over 10 years.
Even smaller raises would save more money, the CBO report says.
"Although retention of military personnel might suffer, that effect could be mitigated by boosting the amounts available for selective reenlistment bonuses," the report says. "One advantage of shifting some portion of cash compensation from basic pay to SRBs is that such bonuses are paid only to service members who have come to the end of an obligated term of service and are deciding whether to reenlist. That makes SRBs much more cost-effective than providing a pay raise to the entire force as a way to retain some fraction of the total."
Bigger bonuses in lieu of pay increases also save money over time because bonuses do not factor into calculations of military retired pay, the report notes.
Hitting retirement, health care
Defense officials have not made a specific proposal to overhaul military retired pay, but they have asked Congress to approve an independent commission to look at money-saving changes in the retirement system. The CBO report says a radical overhaul is possible by replacing the defined benefit available after 20 years of service with a personal pretax retirement benefit based on the federal Thrift Savings Plan.
Even if DoD grandfathers all current service members so they are not affected, such a change could create immediate savings by reducing how much money the services have to put away each year to fund the future retired pay of current service members, the report says. For 2012, the retirement contribution for future benefits was about $52 billion, the CBO said. The report does not estimate the size of the savings, saying this decision would be made by DoD actuaries who calculate retirement costs.
Health care is another good area to cut, the congressional report says. DoD has been trying to sell Congress on various proposals to make beneficiaries shoulder more of the costs of Tricare health coverage, but lawmakers have rejected the idea, proposing to cap future increases at no more than the annual cost-of-living adjustment in military retired pay, usually just a few percentage points.
Providing ammunition for those who want beneficiaries to pay more, the congressional report says the total Tricare Prime out-of-pocket costs for a military retiree family is just 18 percent of what a nonmilitary family would pay for the same benefit.