Military Entitlements Are Killing Readiness

The Pentagon and President Obama understand this. So why doesn’t Congress?

(WALL STREET JOURNAL 26 JUL13) … Mackenzie Eaglen and Michael O’Hanlon

Members of Congress rarely miss an opportunity to trumpet their support for the troops, and the 2014 Defense Appropriations bill passed Wednesday by the House trumpeted away. Health coverage for life with minimal cost sharing? Check. Retiree pensions? Check. Generous housing allowances, grocery discounts, tuition assistance, tax breaks and more? Check. That’s just a small recompense to the men and women who risk their lives for us, right? Not exactly.

America has arrived at a moment when the honorable instinct to keep boosting military compensation risks harming the very men and women Congress claims to be helping. The reality is that the U.S. doesn’t have one sacred contract with our troops: It has two.

In addition to generous care and compensation, we owe them the best possible preparation for combat—weapons and other technologies that outmatch the enemy, excellent intelligence, training and logistics support. When they fight, our troops should prevail quickly and decisively.

These two noble promises are now in direct conflict. Defense entitlements are well on their way to crowding out military readiness and capacity, a fact even the Pentagon has acknowledged. But lawmakers refuse to address this challenge. Unless Congress reverses budget sequestration and restores three years’ worth of additional cuts, the Pentagon is in for more belt tightening.

The Navy will retire more ships over the next five years than it will build. The fleet now stands at about 285. (At the height of the post-Soviet “peace dividend” era, it was 375.)

The Air Force is even worse off. The U.S. has fewer than one-third the number of bombers it had during the Vietnam era. Most of the Air Force’s planes are B-1s and B-52s that predate modern stealth technology, and even the stealthy B-2s are nearly two decades old.

Troop numbers are also declining. By the end of fiscal year 2014, active duty Army and Marine Corps personnel are set to decrease by about 13% and 10%, respectively, from 2010 levels.

Some of these cuts may be acceptable, even necessary, but sequestration will soon make the situation much worse. Mandatory and arbitrary cuts are already forcing many service members to “take the summer off,” forgoing crucial training time. Additional automatic cuts looming for 2014 will mean more downtime.

Now consider the realities of Defense Department entitlements: Between fiscal year 2001 and 2012, the inflation-adjusted compensation cost per active-duty service member grew by 56%. From 2000 to 2010, defense health-care costs skyrocketed nearly 180%, to $49.8 billion from $17.8 billion—more than double the rate of the national increase. The nonpartisan Congressional Budget Office projects that military health-care costs will nearly double again by 2030.

Some benefits should remain unassailable. Solid salaries, world-class health care for our service members and their families, educational benefits through the GI Bill for those returning to civilian life, and Veterans Administration services for the disabled (which are resourced outside the defense budget) must not be threatened.

But it is time to reconsider other benefits. Doing so will not make sequestration a good idea, though it may lead to fewer cuts elsewhere that harm readiness.

The Tricare program, highly subsidized health care for military retirees, supposedly honors a promise made many years ago by some military recruiters to provide service members free health care for life. Setting aside that such a promise was never officially made, Tricare is incentivizing overuse of the health-care system.

In 2004, for example, the rate at which Tricare recipients used outpatient services was 44% higher than in civilian plans; the inpatient rate was 60% higher. That is unsustainable, and it is the main reason President Obama has promised to veto the House appropriations bill unless Tricare fees for military retirees are raised.

Military retirees receive an extremely generous pension. For example, under the “High-3” retirement system—one option available for troops who entered the military after Sept. 8, 1980—retired active-duty forces receive 50% of an average of their three highest years of basic pay after 20 years of service, up to a maximum of 75% of their “High-3” pay after 30 years of service, along with an annual cost of living adjustment determined by the Consumer Price Index.

Begun in an era when those leaving the military often struggled in the workforce, the military retirement system is long overdue for an overhaul. It cost the Pentagon nearly $20 billion in 2011 and does nothing to address the fact that the vast majority of combat veterans (who are officially “veterans” but not “retirees”) don’t serve a full 20 years—and therefore get zero pension. In other words, those who deploy overseas and fight are often getting nothing while those who may well have stayed stateside for two decades before leaving the military get a very generous post-service pension.

Conveniences like commissaries also need rethinking in the era of Wal-Mart and Home Depot. So does military pay, which should generally track the rate of inflation but need not increase faster (as it often has of late), given the solid and generous compensation packages already provided to service members.

There is plenty more to consider, including addressing the 20% excess capacity in military bases and the bloat in the roughly 760,000-strong civilian workforce, which has grown even as the uniformed military has shrunk. A 10% cut to that bureaucracy, implemented intelligently and without furloughs, is sensible and fair.

This sort of prioritizing—something every American family does in hard times—apparently hasn’t occurred to Congress. The fact that the two pacts with Americans in uniform are on a collision course has been shrugged off. Even the Pentagon’s own requests for base closures, increases in health-care premiums, and a slowdown in the growth of military pay were ignored in the appropriations bill just passed by the House.

It is important that the U.S. maintains its contract with those who serve by providing them generous pay and benefits. But it is unfair to those very same troops to undercut the other sacred contract we have with them, which demands they have access to the best weapons and training so they are ready for whatever the nation asks of them next.

Ms. Eaglen is a resident fellow and defense analyst at the American Enterprise Institute. Mr. O’Hanlon is a scholar at the Brookings Institution.

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