Trimming budget not easy while still at war

August 4, 2011 

With future defense budgets in the crosshairs of plans to bring down the national debt, Washington think tanks, congressional budget analysts and Pentagon manpower experts have been sifting through ideas to get personnel costs under control, including health care and retirement.

The Department of Defense and the services identified $178 billion in cost efficiencies earlier this year. President Barack Obama said the department should shed another $400 billion by 2024. More ambitious debt-reduction plans would at least double the size of that spending cut for defense.

Because manpower costs represent more than 40 percent of budgets for the Army, Navy and Air Force, and more than 60 percent of the Marine Corps budget, personnel levels and programs will not be spared.

But politicians and military leaders also understand that nothing too significant can be done either to force structure or to "reform" compensation and benefits, even for retirees, while U.S. forces remain at war.

After several years of trying, Robert Gates, who retired last month as defense secretary, gave up on persuading Congress, in wartime, to approve steep increases in health care fees for working-age retirees. This year he did propose, and Congress will allow, a modest $60-a-year increase in the Tricare Prime family enrollment fee for retirees under age 65. Prime coverage for individual retirees will climb by $30 a year.

Last fall, an internal working group wanted to cut $50 million from the Defense Commissary Agency and close 14 stores in areas with more than one on-base grocery store including at Fort Hood, Texas; North Island in San Diego; Schofield Barracks in Hawaii; and Joint Base Anacostia-Bolling, Washington, D.C. The plan never reached Gate's desk as commissary advocates and trade groups learned of it and raised protests.

In early June, during Gates' final visit with troops in Afghanistan, a soldier asked about debt-reduction panels targeting military retirement.

"First of all," Gates responded, "my judgment would be that any change in military retirement is not going to happen until after we've drawn down here in Afghanistan. I think nobody's going to take any actions that are seen by the troops as a negative while we're still heavily in the fight."

Gates added, "I would wager a lot of money that the only way they could ever get it passed would be to grandfather it so that nobody who is now in the active force would be affected."

But Gates said he endorsed changes to military retirement within a few years so it allows some benefits to members who leave short of 20 years, and discourages an exodus of talent and experience after only 20 years.

Gen. Martin Dempsey, Army chief of staff, seemed to splash some figurative cold water on ideas surfacing at the Pentagon and elsewhere to cut future retirement obligations and other personnel costs, deeply and soon.

Testifying at his confirmation hearing before the Senate Armed Services Committee to become the next chairman of the Joint Chiefs Oct. 1, Dempsey acknowledged that personnel costs are becoming untenable, particularly as the debt crisis drives down spending. In the Army, he said, manpower costs already consume 42 percent of his budget. It will rise to 47 or 48 percent in just five years if no changes are made, he predicted.

"That is not sustainable," Dempsey said. "So the question comes back: What should we do about it and how can we do so in a way that maintains the trust we've established with our force over time?"

But, he added, as a student of history, he has studied drawdown eras including the post-Vietnam War and the post-Desert Storm periods.

"What makes this period different is we are doing all this (cost cutting) while we're still actively engaged in conflict and we have young men and women in harm's way. And that adds a degree of complexity and a degree of uncertainty that, I think, we can't discount," Dempsey said.

Nominated to succeed Adm. Mike Mullen as senior ranking member of the armed forces and the president's principal military adviser, Dempsey said military cuts must be balanced across accounts -- for personnel, equipment and modernization, operations, maintenance and training.

"That includes pay, compensation, retirement and health care because it's important that we place everything on the table, assess the impact, and then request the time to do it in a deliberate fashion so that we maintain balance at whatever level we end up in," he said.

On July 21, just days before Dempsey's hearing, the Defense Business Board, a group of businessmen who advise the secretary of defense on fiscal matters, unveiled recommendations for modernizing military retirement.

A seven-member task force of the board concluded, as have numerous past studies, that military retirement is overly generous to those who qualify, yet fails to provide any benefits to anyone who leaves short of 20 years.

In proposing a more complex but less costly alternative, built on service contributions into a tax-deferred Thrift Savings Plan, the task force blasted the current retirement system. It was designed when active duty pay was low, retirees had shorter life spans and "second careers were rare" because "military skills did not transfer easily to the private sector."

All that has changed, said the task force, adopting a divide-to-conquer tone in many of its arguments. For example: The military's "contribution" for retirement is "10 times greater than in the private sector. Average private sector pension contributions range from 4-12 percent per year (while the) military retirement benefit equates to 75 percent of annual pay per year for those who retire."


Military Update

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