Paying Any Price: Starting the Next Chapter of Military Compensation

November 18, 2013

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Over the last dozen years, America’s volunteer warriors have shouldered the burden of multiple deployments to two combat zones, risking death and permanent injury while enduring long separation from their loved ones. As we shift into a peacetime mindset and cope with budget austerity, we’re looking at ways to save money on defense, including reforming the way we compensate those we send downrange.

Retired Navy Admiral John C. Harvey, Jr. recently criticized the popular discourse on military compensation for under-valuing the sacrifices made by our soldiers.  Harvey is quite right that “we’re not just debating about pay and allowances or commissary benefits or TRICARE fees. We are talking about the future of our All-Volunteer Force, how we will sustain it, and how it will be able to attract the kind of men and women who will repeatedly deploy into harm’s way.”

But that cuts both ways. While the sacrifices borne by those who serve are priceless, pay, allowances, benefits, training, and equipment are not. And, like it or not, the exploding health care and retirement benefits costs for the troopers of today and yesterday are going to make it harder to train, equip, and pay the troopers of tomorrow.

Harvey fears that we’re sending the wrong message to the force that is serving today, signaling “that we are looking for a way out of fulfilling our commitments to them” now that the wars they fought are winding down. Everyone agrees that the current force must be grandfathered and that any compensation changes should apply only to those who join in the future, and the leadership indeed needs to do a better job of reinforcing that message.

But we can’t wish away hard facts.

The cost per active duty service member has skyrocketed, increasing 57 percent in real terms between 2001 and 2012 – or 4.2 percent annually – owing to annual pay raises that far exceeded inflation; improved benefits, such as a major enhancement in the GI Bill to spur recruitment and large retention bonuses for in-demand skill sets; and an explosion in health care costs.

Healthcare costs alone have more than doubled, going from $17.8 billion in 2000 to $49.8 billion in 2010. The CBO projects that, absent major changes, those costs will double again by 2030. CBO’s Carla Tighe Murray estimates we could save “several billion dollars” over the next decade simply by increasing the out-of-pocket expenses paid by military retirees under 65 TRICARE users to levels comparable in private sector.

Harvey rightly notes that our troops are watching “sequestration take away their training, take away their professional development and take away their opportunities to prepare for the deployments that we will not hesitate to send them on,” and wonders “What are they thinking while we debate whether or not we’re paying them too much?” But these are not separate issues.

Even with a $682 billion annual defense budget, which is more than four times what runner-up China spends, there are limits. And, as we all know, that number is going down. Yet, even in amidst the abject stupidity of sequestration, Congress continues to raise uniformed military pay at a rate that is above both inflation and the requests of Pentagon leaders.

Harvey takes offense at the Defense Department’s Reserve Forces Policy Board’s conclusion that “The all-in cost of the all-volunteer force is one of the time-ticking bombs that could explode our defense capabilities if not dealt with responsibly.” But the fact that the fully-burdened cost to the taxpayer for compensating and caring for each service member is $384,622 and rapidly rising is undeniably a real threat to our ability to sustain our current model.

Harvey quite reasonably suggests that “we need to ensure the current members of the armed forces have a voice –  an active voice – in this discussion about their compensation.  What aspects of the current, and very complex, structure of pay, allowances and benefits do they most value and why?” But the Military Compensation and Retirement Modernization Commission, which is charged with recommending reforms, is doing just that and finding that troops do not value in-kind benefits such as retirement pensions nearly as much as they cost the government.

He also argues that “we should view the resources we devote to our men and women in uniform as investments in our future, not simply as costs to be minimized as much as possible.” That’s a vital point to remember. But even valuable assets are subject to cost-benefit analysis.

I agree with Harvey that “our most junior enlisted members must be highly skilled, able to rapidly adapt, and capable of growing into mature leaders” and that “This will not be possible without high-quality young men and women want to enlist and then want to stay in the force.” Nor will it be possible if retiree pensions and healthcare costs continue to escalate and eat away at the resources available for training and equipment for the next generation of warfighters.

Personnel and overhead costs already account for nearly half the defense budget and Army Chief of Staff Ray Odierno forecasts that 80 percent will go to compensation by 2023 unless we fix the problem.

Harvey is right to fear taking away benefits that incentivize people to join and make careers of the military. But it absolutely makes sense to explore more cost-effective ways of achieving those goals.

So, for example, military base pay exploded during the last dozen years when two shooting wars made recruiting volunteers more difficult. But these increases impact not only the present, but also reverberate into the future through the retirement system. It may be that lump sum enlistment and retention bonuses would do the job at a fraction of the lifetime cost.  We should almost certainly increase massively the bonus paid to those actually deployed downrange into hostile fire zones, now a paltry $225 a month, rather than pay everyone more simply for taking a theoretical risk. And, yes, we might even need to consider asking people who retire from the military at the beginning of middle age to start a second career to pay a little more for their health benefits.

We’re spending $20 billion a year on pensions for military retirees. To be sure, those who served under the promise of this benefit must be paid. But continuing to offer generous lifeline benefits to young people (as early as 38 years for enlisted personnel and 42 for officers) after twenty years of service is an expensive way to keep our best personnel. The system was put in place in an era when military pay was very low; paying half their small base pay for life was both a necessary enticement to a career of service and relatively affordable. For decades now, our troops have been compensated at a very competitive level and still earn a pension plan found nowhere in the private sector.

Harvey concludes by warning us that “Choices have consequences.” Indeed they do. Continuing down an unsustainable course out of fear of making hard choices will have the consequence of a force less prepared to fight America’s next war.

 

James Joyner is an associate professor of strategic studies at the Marine Corps Command and Staff College and a nonresident senior fellow at the Brent Scowcroft Center on International Security at the Atlantic Council. These views are his own.

 

Photo credit: The U.S. Army

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7 thoughts on “Paying Any Price: Starting the Next Chapter of Military Compensation

  1. Do any of the medical cost calculations factor in that we will no longer be deploying at the rate we did for the last decade?

    While combat-related costs are easy to identify and account for, I think the physical stress of multiple deployments can lead to nagging injuries (especially in the knees and back) as well as general wear and tear that increases medical costs even for soldiers who were never wounded in action.

  2. There is a huge amount of fraud in VA disability claims. Navy Med\OSHA need to get on this in a proactive manner to document conditions existing before military service and not pay out for bs claims that either don’t exist or existed prior to the fraudsters military service. I’m looking at you, ‘sleep apnea’ sufferers.

    1. Chuck Dantes – you are correct to call persons afflicted with sleep apnea (caused or worsened by military service – as upheld by the VA) sufferers. We do suffer – and we die young, even with CPAP intervention. Try sleeping on what amounts to a ventilator every single minute of your sleeping hours for the rest of your life. Shame on you or anyone else who judges another individual without knowing enough information to make a reasonable, supportable decision. Of course, this assumes that you have some minimal qualifications that would make your opinion worth considering in the first place.

  3. And what proof do you have Mr. Joyner? Facts and figures please. Compare a base pay chart to real world salaries for starters. Why do so many junior enlisted soldiers enroll in WIC? Why are many service members on food stamps? Commissaries take EBT for a reason.

    As to retiring at the “young age of 38 or 42. Ahem, those injured or worn out from 20 years of service have EARNED that right.

    What is the alternative? An exodus of talent as pay and benefits go down? A draft of people who don’t want to be in the service and resent the military every second they are in?

    Either you pay us what you promised or don’t cry when we ETS, retire do don’t sign up. Taking away what we’ve earned is a slap n the face to those in uniform regardless of rank.

  4. As a retiree, veteran, and taxpayer I want the best defense that we can reasonably afford. Unfortunately, I believe that many of these “studies” miss the mark with regard to providing achieving that goal and only work around the margins while ignoring what I believe is the core issue of manning the force; namely, are the base assumptions build into the 20-30 year career up or out personnel system still valid today, given that life expectancy has increased significantly since the 1940’s and todays force requirements put a greater premium on experience and knowledge over brute force? Working only within the confines of adjusting the compensation model is akin to trying to fly an aircraft while only using one of the controls.

    What would be the effects/savings if we moved retirement eligibility to 25 and 35 years? What if we only discharged the unqualified at each promotion opportunity as opposed to eliminating those that may be fully qualified by no vacancy exists for promotion? What’s the true cost of having civilianized positions in the 90’s? If the required qualification for the job can only be met by having performed significant military service, wouldn’t it be actually cheaper to keep a person in uniform working rather than have them draw retired pay and a full GS salary and benefits?

    As to the increases in pay, I would like to see actual figures as to how much increases in compensation since 9/11 can be attributed to base pay, incentives/bonus, and health care. My guess is that base pay accounts for a very small percentage of the overall increase over the last decade plus (while admitting that it might be slightly ahead of inflation and private sector increases); while the author readily admits that runaway healthcare costs are the lion’s share of the increase, which sounds like the same healthcare crisis that everyone in America.

    In light of our recent and ongoing decade of combat, it is worth considering what the financial personnel costs would have been had we used an alternate pay system more similar in structure to what is used on the USG civilian side. Given that a USG received an extra 70% (35% for hardship, 35% for danger) of base pay during the deployment the increased cost for military personnel would have been between 30-40% higher. As we also don’t pay uniformed personnel overtime, it’s fair to say that the US taxpayer came out way ahead under the current military pay system.

  5. Whilst I appreciate the sentiment and feelings of chockblock, I feel that he may have missed the key point that those currently serving are looking at receiving “grandfather” rights to retain the benefits etc. they have accrued or been promised already. Which unfortunately renders the strongly-felt argument redundant.

    Changes are being made globally to Armed Forces; a good place to look for comparison is the UK, where a New Employment Model (combined with a new Pension Scheme) will dramaticaly change the way the Armed Forces work. The US needs to accept that without changes, the military will simply break when it runs out of money. It must adapt to current and future constraints.

    It is possible to retain the ability to project immense power like only the US can do on less money and a different package of benefits that doesn’t hamstring the nation; it just needs to be thought through properly prior to any implementation.

  6. I am suspicious of anyone espousing the opinion that the compensation model must change. Why? Because none understand ALL of the variables of the equation. Armed Forces Journal published an article last year about three independent studies looking at the issues of direct and indirect compensation. The military retirement model (50%@ 20yrs) is affordable even though growing b/c that rate is minimal. VA benefits are not a significant issue either. Medical costs are by far, the much larger concern and I wonder where all of these cost concerns were when the Affordable Care Act was being debated … afterall, TRICARE was a great proxy for a national healthcare system and the costs for the DoD segment of the population doubled already in the first 12 years of TRICARE for Life and are projected to double again. Now, CBO and analysts are going to reccommend reduced benefits across the board and higher out-of-pocket costs for members/retirees in order to kick the can some more. Why do you think that is? What are they really hiding?