Making the Cuts, Keeping the Benefits

By CINDY WILLIAMS
Published: January 11, 2005
The New York Times

Cambridge, Mass. - IN an effort to reduce the growth of the military budget, the Bush administration is poised to cut back a wide array of Pentagon programs, from jet fighters to a missile defense system. Pentagon leaders say the cuts will save more than $55 billion over six years.

Whether these reductions herald the end of the rapid rise in military spending that began in 1999, however, is open to question. While fewer weapons systems than planned will be purchased during the next six years, in financial terms, putting an end to the buildup will require cutting far more than what is now on the chopping block. One reason is that much of the recent rise in spending has been fueled not by new tanks or missiles, but by new costs associated with military personnel - especially retirees. These costs amount to a permanent increase in the military budget. Unlike spending on equipment, they cannot be canceled or deferred.

Since the start of the buildup, the rising costs of military pay, retiree benefits, health care and family housing have greatly outstripped inflation and added more than $40 billion to annual Pentagon budgets, even though the number of active-duty troops has essentially stayed the same. Moreover, the annual costs continue to grow rapidly. The program reductions that are reported to be under consideration would not be enough to offset the growth in spending for military pay and benefits anticipated during the next several years. Even holding the increases in the military budget to the level of inflation would require tens of billions of dollars in annual reductions.

To the extent that added pay and benefits ensure the nation does right by the men and women who fight for it, these increases would seem worthwhile. Unfortunately, a large share of new spending is devoted not to helping soldiers serving today, but to improving the benefits for military retirees - that is, the small minority of veterans who stay in the military for 20 years or more and are eligible for immediate benefits upon their retirements.

In recent years, Congress has expanded retiree benefits substantially, making them the fastest-growing category of entitlements for military personnel. In 1999, Congress reversed a 1986 law that would have trimmed pensions for retirees who joined the military after 1986. That change costs the Defense Department some $1 billion annually. A health care entitlement granted by Congress in 2000 pays virtually all medical expenses for older retirees and their spouses - including the cost of prescription drugs - that are not covered by Medicare. That entitlement costs the Defense Department nearly $4 billion now and its costs will rise over the coming years.

Another benefit, granted by Congress last year and scheduled to be phased in over a decade, will permit retirees who depart the military with moderate to severe disabilities to collect retirement pensions in addition to their disability payments. Its cost, about $500 million this year, will rise to some $2.5 billion a year in six years. In addition, a change authorized in October 2004 will enrich the pensions of spouses who outlive retired service members, at a cost of about $200 million this year and nearly $1 billion in 2011. As expensive as these new benefits are, advocates are pressing Congress for more.

These deferred entitlements do nothing to help men and women now in uniform. These members of the military face long and frequent family separations, deployment to distant lands, fighting in a dangerous counter-insurgency and more. Cash bonuses, improved family services, modern and well-maintained equipment and increases in troop strength (which would mean less frequent call-ups and deployments) are far more likely to serve their needs.

In fact, most active-duty military will never get anything - because they will leave the service before they are eligible to retire with benefits. Fewer than one in 12 of today's living veterans qualify for retiree benefits, and fewer than one in five of today's active-duty service members are expected to stay for the 20 years it takes to receive them.

Moreover, deferred benefits will not help the Army or the National Guard overcome the recruitment and retention problems they face as a result of the war in Iraq . The prospect of receiving such benefits in the distant future is virtually worthless in helping the military to persuade an 18-year-old to join the military or encourage a 23-year-old to re-enlist.

The rapid growth of retiree benefits has already greatly complicated the budget picture for military leaders. Even if Congress decides against further expansion of such benefits, the ones it has already granted will make it hard to slow budget growth without further reducing the size of the military. Giving in to pressure for another round of entitlements, in the face of the challenges facing the troops serving in Iraq and elsewhere, would be irresponsible.

Cindy Williams, a principal research scientist in the Security Studies Program at the Massachusetts Institute of Technology, is the editor of "Filling the Ranks: Transforming the U.S. Military Personnel System."