Defense Secretary suggest changes in military compensation

Defense Secretary Robert Gates suggested last week that politicians show courage in the fiscal crisis by making the military compensation system more efficient.

Gates has his department preparing a set of recommendations he believes will do just than as part of a $400 billion defense savings

package over the next 12 years.

Specifically, he criticized a one-size-fits-all approach to basic pay and retirement, suggesting “tiered and targeted” methods could cost less but pay more to service members in high demand and dangerous specialties.

He implied pay levels overall are set too high as evidenced by the services’ continuous ability to meet recruiting and retention targets, except for the Army and only “during the worst years of Iraq.”

Gates again asked that health care fees be raised, particularly for working-age retirees. And he eyes replacing the all-or-nothing 20-year retirement plan with a more flexible system that would allow earlier vesting in benefits but also encourage more members to serve longer careers.

Some of these ideas are decades old. Over the past 40 years other defense secretaries have made similar or even more unpopular proclamations to curb military benefits, from closing discount stores on base to ending tax-free allowances and shifting the military to fully taxable salaries.

Gates had softened some of the impact of his remarks to the conservative think-tank American Enterprise Institute May 24 by reassuring Marines at Camp Lejeune just weeks earlier that any change to retirement should not affect the current force. “So don’t get nervous,” he said.

The reality is that sharp changes to pay or benefits typically don’t occur as a result of policy speeches or even in-depth studies written over months by commissions created for that task. Dramatic changes usually occur during fiscal emergencies, real or perceived.

The House Armed Services Committee, for example, thought it necessary in 1984-85 to move military retirement to an accrual accounting system to ensure funding of benefits to future members stopped encroaching on money for other defense programs.

Lawmakers then set a target for the accrual account and told Defense officials to design a retirement plan to produce the required result. That turned out to be Redux, a plan that cut the value of 20-year retirement by roughly 25 percent for new members. As time passed and retention fell among the Redux generation, Congress repealed the plan. To preserve some cost savings, however, a $30,000 lump sum bonus was offered to any member who agreed to opt back into Redux during their 15th year of service.

Redux was fruit of a crisis tied to rising retirement obligations. The current debt crisis is far more threatening. Total national debt is nearing $15 trillion. Unless the debt ceiling is raised by Aug. 2, the U.S. Treasury says it will default on some obligations, likely triggering a worldwide financial crisis.

Republicans vow not to raise the ceiling unless an agreement is reached with the White House to cut federal spending deeply, to include Medicare and other prized entitlements. Vice President Joe Biden is hosting closed-door meetings with Republicans and Democrats. He promises to bring forth at least $1 trillion in spending cuts over the next 10 years.

It’s during such closed-door deals that popular programs, even military benefits, can become tempting targets. Gates’ remarks encourage that military compensation be part of planned defense cuts, suggesting excess dollars going today into compensation can be diverted over time to help replace aging fleets of aircraft, ships, submarines and land warfare vehicles.

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