Todd Harrison is a senior fellow at the Center for Strategic and Budgetary Assessments and the author of the study “Rebalancing Military Compensation: An Evidence-Based Approach.”
Defense and entitlements. That’s how Washington has tried to define the debates over cutting federal spending, as if the two inhabited entirely distinct spheres. Yet, the Pentagon is dealing with an entitlements problem of its own, one that threatens to consume the defense budget if unchecked.
Over the past decade, the Defense Department experienced rapid growth in military compensation, in no small part because of health care and pensions. From 2001 to 2012, the average cost of pay and benefits per active-duty service member grew from $54,000 to $109,000, an increase of 56 percent once you consider inflation. That includes pay, allowances for housing and food, health care, and retirement benefits. It doesn’t include other kinds of compensation that are outside the regular military budget or in supplemental war funding — such as tax exemptions for service members, extra pay for deployments in Iraq or Afghanistan, or benefits from the Department of Veterans Affairs.
Americans rightly feel a sense of gratitude and obligation to our men and women in uniform; no one wants to break faith with the troops. Since the end of the draft four decades ago, compensation has become an important tool to entice men and women to sign up for military service. Any changes should be made with great thought and care, and out of fairness, they should not be forced on those who are currently serving or who have previously served. One of the best ways to honor the sacrifices of our troops is to put military compensation on a sustainable, long-term path — and in a way that considers the preferences of service members.
The rapid growth in military compensation over the past decade was due to several factors, some beyond the Pentagon’s control. From 2001 to 2012, basic pay grew by 20 percent, adjusting for inflation, because of higher-than-requested raises enacted by Congress. Annual payments by the Defense Department to the military retirement trust fund, which pays the future cost of pensions, rose by 39 percent. And military health-care costs increased by a stunning 118 percentas new benefits were added and more retirees and family members opted for the military health-care system rather than private insurance.
If military personnel costs continue increasing at the rate they did over the past decade — and if the overall defense budget grows only with inflation — these costs will consume the entire defense budget by 2039, leaving no funding for equipment, training, bases or other necessities. This is not a prediction of what will actually happen, but a clear indicator that the current path cannot be sustained.
One could take a lawn-mower approach to scaling back military compensation: cutting whatever grows fastest and sticks out above the rest. Indeed, this month’s budget request by the Pentagon calls for cuts in fast-expanding benefits, specifically health care and basic pay, to reduce costs. But are these forms of compensation the right ones to trim? Do the proposed reductions consider the impact on the all-volunteer force? Without answers to these questions, Congress may understandably be reluctant to act.