Why We Must Reform Military Compensation
The Bipartisan Budget Act that Sen. Patty Murray, D-Wash., and I drafted will soon become law. We think it's a small step toward fiscal discipline in Washington. The non-partisan Congressional Budget Office estimates the bill will reduce the deficit over the next ten years by over $20 billion. And unlike current law, it will provide much-needed relief to our already strained defense budget.
One part of the bill has become particularly controversial: the reduction in cost-of-living adjustments (COLAs) for working-age military retirees. The federal government has no greater obligation than to keep the American people safe and we must take care of the men and women in uniform who put their lives on the line. For that reason, Congress is understandably hesitant to make changes to military compensation.
But even hesitance has a cost. The need for reform is undeniable. Since 2001, excluding the costs of the wars in Iraq and Afghanistan, the cost per service member in the active-duty force has risen by 41% in inflation-adjusted dollars.
Defense Secretary Chuck Hagel, a combat vet himself, has said "that we can no longer put off military compensation reform. DOD's leadership, Chairman Dempsey, the service chiefs, the service secretaries, and myself, we all know that we need to slow cost growth in military compensation. Otherwise, we'll have to make disproportionate cuts to military readiness and modernization."
Here's what the new law will do. We make no changes for those currently at or above age 62. This reform affects only younger military retirees. Right now, any person who has served 20 years can retire —regardless of age. That means a serviceman who enlists at 18 becomes eligible for retirement at 38. The late 30s and early 40s are prime working years, and most of these younger retirees go on to second careers.
All this reform does is make a small adjustment for those younger retirees. If they retire before age 62, the annual increase in their retired pay will be 1% less than the inflation rate. In other words, their benefits will grow every year — just at a slower rate. And when the retiree hits 62, DOD will recalculate the retired pay so that it will be where it would have been if he or she had received the full inflation adjustment every year since he or she retired.
Here's an example: If a serviceman enlisted at 18 and retired at 38, under this policy his lifetime benefit would be about $1.7 million instead of $1.8 million. For a service member who retired at the average military retirement age of 44, the difference would be smaller, about $30,000 over his or her lifetime. This is a far more modest reform than other bipartisan proposals, some of which would have fully eliminated the adjustments for inflation for working-age retirees.
And to be clear, the money we save from this reform will go right back to the military. Veterans aren't Washington's piggy bank. They deserve fair compensation. And we owe them a benefit structure they can count on.
That said, when Congress was considering the bill, many raised concerns that these reforms would affect the retired pay of service members who are medically retired and those receiving survivor's benefits. So Senator Murray and I have agreed to amend the law to exclude them well before the reform takes effect in December 2015.
But I stand behind the need for reform. In 2012, Congress established the Military Compensation and Retirement Modernization Commission to examine the entire military-compensation system from top to bottom. The commission's recommendations are due in May, and the leaders of the armed-services committees in Congress have agreed to consider their recommendations and look for other ways to reform the system. That's why this reform does not take effect until the end of 2015 — it gives Congress ample time to consider alternatives.
For me, there's simply no choice between responsible reforms of military compensation and making what our military leadership has called "disproportionate cuts to military readiness and modernization." Every time we kick the can down the road, we put our troops' combat readiness at risk. This agreement put forward one reform option, and I invite others to do the same.
Our troops have been willing to sacrifice everything for this country. We owe it to them to give them the best equipment on the battlefield and a secure retirement when they come home.
Paul Ryan, R-Wis., was the Republican vice-presidential nominee in 2012 and is chairman of the House Budget Committee.