Proposal would cut taxpayer support of commissaries

By Tom Philpott

As congressional inaction on the debt crisis deepens the threat of indiscriminate axe-wielding on defense programs in January, advocates for military-base grocery stores hope to emboss a “hands off” sign on military commissaries and their $1.3 billion annual appropriation.

In particular, they want Congress to ignore a “dangerously flawed” cost-saving option presented last year by the Congressional Budget Office, to merge the commissary system and the three military exchange services into a single base resale operation.

The CBO proposal would phase out taxpayer support of commissaries, allow grocery prices to rise by at least 7 percent and then soften the blow for active duty families by providing an annual grocery allowance of $400.

Retirees and other store patrons would get no such allowance. They would just see shopping discounts decline under what CBO has labeled “Discretionary Spending—Option 6” in its 2011 Reducing the Deficit report.

The cost-saving option is among many already priced and endorsed by CBO, which gives them credibility with deficit hawks and with congressional leaders who might be pressured by approaching deadlines to slash federal spending fast.

Patrick Nixon, president of the American Logistics Association, which represents manufacturers, brokers, distributors and service companies that do business with the military resale system, aggressively attacked the CBO store consolidation plan during a June 7 hearing of the House armed services subcommittee on military personnel.

Later, in an interview, Nixon said he had good reasons for doing so. First, though CBO has a reputation for objectivity and solid research, in this case its assumptions on cost-savings and the after-effect of consolidation on store operations simply “unravel” on inspection, he said. Yet the consequences likely would include the eventual demise of discounted grocery sales on military bases, Nixon said.

“The reason we attacked it is that an uninformed reader is going to say, ‘This looks like it might work,’ ” Nixon said. “But when you look at it, line item by line item, you want to put Congress and anybody else on alert. … This is not a panacea. This is a hodgepodge of recommendations. A lot of them are catastrophic and some of them make no sense at all.”

A second reason that the ALA, the Armed Forces Marketing Council and other lobbyists for stores want to expose flaws in the CBO option exposed is the debt crisis, a “perfect storm … with extreme implications for every American,” and which a bitterly divided Congress seems unable to address.

Suspicions and partisanship resulted last year in a mindless “sequestration” tool being inserted in the 2011 Budget Control Act. So if Congress fails to reach a fresh compromise on spending cuts and tax increases by Jan. 1, sequestration would be triggered automatically and begin to lop nearly $600 billion from all defense programs over the next decade. Witnesses agreed with Wilson that that would be “catastrophic.”

The fresh cuts would be atop $487 billion in defense cuts over 10 years that Republicans and Democrats agreed on as part of last year’s budget deal. So far commissaries would be fully funded under both the Obama administration plan to implement the first wave of cuts and both the House and Senate versions of the fiscal 2013 defense authorization bill.

If sequestration occurs, however, every major program could be cut 8 percent to 12 percent, according to one estimate of the complex sequestration formula. And whether sequestration occurs, or some alternative deficit reduction package is adopted, lawmakers might be tempted to use the CBO proposals to protect more favored or vital defense programs.

Joseph H. Jeu, director of the Defense Commissary Agency, testified that although commissaries are a highly prized benefit for service families, and provide taxpayers a 2-for-1 return on their investment, critics still raise the notion they’ve become “antiquated.” They have not, Jeu said.

“Last fiscal year the commissary provided direct savings to customers of $2.8 billion for a taxpayer cost of $1.34 billion. … With 260,000 patrons visiting a commissary every day, buying $16 million in goods, there is no doubt that the commissary remains relevant and an invaluable element of the non-pay compensation package.”

Robert L. Gordon, deputy assistant secretary of defense for military community and family policy, assured Wilson that the Defense Department “has no plan at this point to examine exchange consolidation.” He said seven past studies “have basically shown that consolidation of our exchanges actually can do more harm than good in terms of cost savings and innovation.”

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