Hagel announced a reduction in troops but did not address irrational spending on benefits.
By Ryan Alexander
Fiscal realities have real consequences. If there was one recurrent theme in Monday’s peek at the upcoming Pentagon budget, that was it. And it was in Secretary of Defense Chuck Hagel’s concluding remarks that he really brought that point home, saying, “This is the first time in 13 years we will be presenting a budget to the Congress of the United States that’s not a war-footing budget.”
Hagel’s briefing covered a lot of ground, too much for me to comment on today. But perhaps the most obvious outward sign of a military that is not currently at war is the reduction in the number of service members. It’s hard to make the details of this kind of statistic interesting, so I will skip to the bottom line: Overall, this plan reduces the active duty military by about 13 percent. This is coupled with plans to reduce the National Guard and Army Reserve by about 5 percent. The Army and Marine Corps take the largest hits, which makes sense as we wind down from two ground wars. The Navy and Air Force stay about the same and special operations forces will increase slightly.
As the secretary pointed out, personnel costs of all types make up about half of all Pentagon spending. Since 2001, spending on pay and benefits for uniformed members has increased 40 percent more than those same costs in the private sector. Both Hagel and the Army Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff, have said this rate of growth cannot be sustained. Among the most controversial of the policy changes being driven by our fiscal realities are those that tackle this benefits creep, including:
- Reduction to tax-free housing allowances: In the 1990’s, the average out-of-pocket expense for housing was 18 percent of the service member’s overall housing cost. Today 100 percent of the service member’s housing is covered with a tax-free allowance. The secretary is proposing a gradual reduction of the housing allowance to 95 percent with a 5 percent out-of-pocket contribution.
- Reduction of the direct subsidy to commissaries: Currently we spend $1.4 billion a year to subsidize commissaries here and abroad. The plan revealed yesterday would reduce the direct subsidy to commissaries in the United States by $1 billion over three years. Commissaries will continue to enjoy free rent and pay no taxes. At Taxpayers for Common Sense, we advocate for closing all commissaries in the United States. This is a step in that direction, but we believe more can be done.
- TRICARE modernization: Without giving us many details, the secretary said his proposal would consolidate plans and adjust deductibles and co-pays for the military’s health care program. However, those he called the “most vulnerable” would continue to pay a smaller share of the costs of health care than other retirees. These most vulnerable include people who were retired for medical reasons (and their family members) and the survivors of service members who are killed on active duty. The Congressional Budget Office has estimated cost savings for TRICARE modernization at about $6.5 billion a year. Until we know more details, we won’t know how much could be saved with this recommendation.
These changes are a good step forward and indicate the Pentagon is grappling with current fiscal realities. But Hagel stopped short of even approaching the most difficult challenges in this area. The budget proposal did not include any recommendations that would change the benefits of military members currently serving on active duty. In fact, the secretary specifically stated the Pentagon continues to support “grandfathering” those people on active duty to insulate them from future changes. And the secretary actively side-stepped other hard personnel issues by deferring to the Military Compensation and Retirement Modernization Commission. The commission will not produce a report until February 2015.
If we are going to rise to the fiscal challenges the whole country is facing, we can’t keep holding military members in a special, somehow untouchable, class when it comes to benefits. Even after 13 years of war, we are meeting all recruitment and retention goals. Citizens still sign up for and choose to make a career of military service. In some cases, it is the family “business.” In many cases, these young men and women just want to serve their country. We need to stop acting as if the only way we can get good people is to offer them benefits completely out of step with the private sector.
The klieg lights in the Pentagon briefing room hadn’t even cooled off before members of Congress began picking apart the recommendations. My hope is that these modest recommendations, offered by a former Republican Senator and endorsed by the chairman of the Joint Chiefs of Staff will get the real consideration they deserve. I believe more can be done in the area of pay and benefits, but I’m pleased to see this attempt to rein in personnel costs given our fiscal realities.