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Wall Street Journal, January 25, 2005
As Benefits For Veterans Climb, Military Spending Feels Squeeze Congress's
Generosity May Hurt Weapons, Other Programs; Lobby Group's Power Grows
By Greg Jaffe, greg.jaffe@... Staff Reporter Of The Wall Street Journal
WASHINGTON -- With the wars in Iraq and Afghanistan badly straining its
forces, the Pentagon is facing an awkward problem: Military retirees and
their families are absorbing billions of dollars that military leaders would
rather use to help troops fighting today.
Congress, pressured by veterans groups, has in recent years boosted military
pensions, health insurance and benefits for widows of retirees. Internal
Pentagon documents forecast that the lawmakers' generosity since 1999 will
force the federal government to find about $100 billion over the next six
years to cover the new benefits.
"The amounts have gotten to the point where they are hurtful. They are
taking away from the nation's ability to defend itself," says David
Chu, the Pentagon's undersecretary for personnel and readiness.
Rising veterans' benefits are a big factor behind the billions of dollars in
weapons cuts to be proposed when President Bush unveils next year's budget
blueprint early next month. New retiree entitlements also are crimping the
Pentagon's ability to increase incentives for enlistment at a time of
dangerous, yearlong Iraq deployments.
The military's budget woes are similar to the broader problem facing the U.S. government, as spending on aging baby boomers -- in the form of Social
Security and Medicare -- squeezes out funds for other programs, from health
care for the poor to scientific research. The pinch is exacerbated by Mr.
Bush's campaign promise not to raise taxes. The private sector, particularly
auto makers and the steel industry, is being similarly squeezed. Many
companies are holding the line and in some cases cutting spending on
pensions and health care for future retirees.
The Pentagon, which faces an increasingly aggressive and effective veterans lobby, doesn't have that luxury. The main force among veterans groups has
been the Military Officers Association of America, an Alexandria, Va.-based
group boasting about 400,000 dues-paying members and a board packed with
retired generals and admirals.
MOAA has an ambitious agenda for 2005, listing on its Web site 16 goals for further expanding retiree and survivor benefits. Earlier this month, its
members flooded Capitol Hill with about 16,000 brown bags with hand-written
messages urging lawmakers to exempt World War II and Korean War retirees
from Medicare premium payments. The message: Veterans were being treated
like old paper bags to be discarded after use.
"We in the military have long had pay scales below our civilian counterparts," says retired Vice Adm. Norb Ryan, the MOAA's president. In
exchange, the military offered troops a generous retirement and health-care
package. "Now some in the Pentagon want to walk away from that. That is a
very dangerous thing," Adm. Ryan says.
The politics of veterans benefits, meanwhile, are roiling the Republican Congressional majority. Earlier this month, the House Republican leadership
took the unusual step of stripping New Jersey Rep. Christopher Smith of his
chairmanship of the Veterans Affairs Committee. Mr. Smith had irked House
leaders when he pushed so aggressively for veterans benefits that he at
times threatened to oppose their spending plans -- and President Bush's --
unless more retiree benefits were included.
Big Shift
The rise of the veterans lobby marks a dramatic shift in modern military spending. "If you look back to the history of the all-volunteer force going
back to 1973, the Congress has in general deferred to the executive branch
on major pay and benefit changes," says Dr. Chu.
That began to change in the late 1990s, when veterans groups charged that the federal government was reneging on promises made by recruiters in the
1940s and '50s to provide free cradle-to-grave medical care to military
retirees who served a 20-year career. They took out ads on the radio and
flooded newspapers with letters to the editor saying the military was
letting down the "Greatest Generation."
"There was tremendous emotion. These groups were highly organized," says retired Gen. Jack Keane, who was on active duty at the time. Senior military
officers worried the widespread allegations of broken promises from veterans
groups were hurting military recruiting, recalls Gen. Keane. Many officers,
including Gen. Keane himself, sympathized with the retirees.
Over the objections of the Clinton Pentagon, but with the support of then-Joint Chiefs Chairman Gen. Henry Shelton, Congress in 2000 opened the
military's generous health-care program to over-65 retirees who in the past
had been forced to rely solely on Medicare. The change will cost the federal
government more than $8 billion for this fiscal year ending Sept. 30, the
Pentagon says. Lawmakers also changed the military retirement system to
allow troops with 20 years of service to collect 50% military pay upon
retirement instead of 40%.
Almost every year since then Congress has pushed through billion-dollar increases in personnel benefits. The projected growth in retiree benefits of
the next six years dwarfs the $55 billion in cuts to new fighter jet, ship
and submarine programs proposed by the Bush administration in December and
spread out over the same six-year period.
The largesse has grown with the wars in Iraq and Afghanistan, which mark the
first time in the past century that the U.S. has had to wage sustained
combat with an all-volunteer force. Members of Congress use any opportunity
to see off soldiers or welcome them home. "The first question the lawmakers
ask is, 'What can we do for you?' Then they do it," says one senior Army
official.
The sharp reductions in the number of World War II, Korea and Vietnam veterans serving in Congress and in the top ranks of government may help
explain some of the veterans groups' influence. Lawmakers who didn't serve
in the military are more apt to be intimidated by veterans groups, says Tom
Philpott, an expert on military benefits who writes a syndicated column on
the subject for several military Web sites and newspapers. "I think there is
a guilty conscience among those who didn't serve. They say to themselves, 'I
didn't serve. But I am sure as heck not going to short-sheet those who
have,' " he says.
In each of the 2003, 2004, and 2005 budgets, Congress passed a series of laws allowing severely disabled retirees to collect both their retirement
and disability pay. In the past, retirement pay was reduced, dollar for
dollar, by disability compensation. The benefit change will cost about $700
million in 2006 and will rise to about $3 billion a year in 2013, the
Pentagon says.
In the 2005 budget passed last fall, lawmakers came to the aid of 250,000 military widows like 70-year-old Betty Wells, at a 10-year cost of about
$7.5 billion.
Because Ms. Wells's husband made regular payments into the Pentagon's survivor benefit program, she thought she would receive about 55% of his
retirement check after he died. Upon her husband's death in 2002 she was
shocked to learn that because she already received Social Security she was
entitled to a smaller share. Instead of $2,000 a month, she received about
$1,300. "My goodness, all of a sudden I had to get...back to work," says the
Ocala, Fla., real-estate agent. Other widows have testified before Congress
that they had to turn to local charities to make up the difference when
their checks were reduced.
Veterans claimed that participants in the program weren't adequately told about the Social Security offset when they signed up. Congress ordered the
Pentagon in the 2005 defense budget to pay widows the full 55% starting in
2008.
Also in the 2005 budget, lawmakers opened up the military health-care system
to reservists who recently served on active duty. For every 90 days deployed
overseas, reservists can now buy at a steep discount a year's worth of
health insurance, provided they remain in the reserves.
New Obligations
Beyond lawmakers' additions, the private sector's push to trim benefits for employees is in some cases forcing the Pentagon to assume new and unexpected
costs. As private-sector firms ask employees to pay larger health-care
premiums, a growing number of younger veterans are opting for military
health insurance.
The military's health-insurance system, Tricare, has charged families the same $38 monthly premium since 1995. Over the same period of time,
private-sector premiums for families who buy health insurance through an
employer have surged 70% to about $210 a month.
Michael Lynch retired as a Marine Corps lieutenant colonel earlier this month and took a job with a government contractor. He compared the cost of
buying health insurance through his employer with the cost of Tricare and
chose the government plan. "Tricare's benefits were very similar to my
employers. But the cost was much, much less," says Col. Lynch, who is
married with two daughters.
Today retirees account for about 50% of all Tricare beneficiaries, up from 40% in 2000. To cover the cost of these new enrollees, the Pentagon has had
to shift about $2 billion a year into its health-care accounts primarily
from new weapons-program accounts. "It is quite painful to reallocate that
money," says Dr. Chu.
Pentagon officials estimate that by decade's end, new legislation passed by Congress or pending on Capitol Hill will increase the amount of money going
to U.S. troops and military retirees by about $28.6 billion a year. By
comparison, new legislation added by Congress boosted the Pentagon's $100
billion personnel budget by less than $1 billion in each of the years 2001
and 2002.
Dr. Chu says the military could recruit more troops for less money if it slowed the growth of deferred benefits and paid more cash. About 60% of
military pay is tied up in noncash compensation, like pensions, generous
health-care benefits, subsidized food and housing.
"I'd like to believe 19-year-olds paid attention to their annuity package," says Dr.
Chu. But they don't. "Nineteen-year-olds want cash to buy a pickup
truck," he says.
To boost recruiting, the Defense Department recently tripled re-enlistment bonuses for reservists and national guardsmen to $15,000 from $5,000. It
also raised the amount of money that deployed troops get for serving away
from their family in a war zone to $475 a month from $125 a month.
As personnel benefits continue to grow, former Pentagon budget chief Dov
Zakheim, who stepped down last year, says the Pentagon increasingly finds
itself "caught in a vise." Congress won't allow the Pentagon to cut benefits
to retirees and deficit pressures make it unlikely that the Pentagon will
continue to see its overall budget grow.
Pentagon officials say that with the country at war, cutting maintenance and
training isn't an option either. "The only place you can cut is acquisition
and research and development," Dr. Zakheim says. Amid this standoff,
Pentagon officials say that further cuts to big-ticket weapons systems, like
ships, fighter jets and the replacement to the current Army battle tank, are
inevitable.
Meanwhile, the military is bracing for more fights in the coming Congress over benefits. There's the brown-bag push to exempt retirees from monthly
Medicare Part B premium payments. The payments, which amount to about $80 a
month, cover the cost primarily of doctor visits and are required even if
veterans are covered by the military health-care system. Veterans groups
insist these World War II and Korean War vets were promised free health care
for their service. "This is a matter of principle for these guys," says Adm.
Ryan.
MOAA is also pressing lawmakers to repeal a law that reduces the pensions of
widows who receive a $1,000-a-month check because their husbands died of a
service-related cause. The cost: about $400 million a year. And it's trying
to lower the age at which reservists can begin collecting their military
pensions to 55 from 60.
Reservists say that change is needed to compensate them for their time on active duty. Lt. Col. Doug
Trogstad, who pilots a cargo plane in the Air Force Reserve and also works for Northwest Airlines, has spent the past two
years flying missions into Iraq for the Air Force. "I have been deployed
more than most active-duty troops," he says. While on active duty he has
taken a substantial pay cut and has been unable to contribute to his retirement fund. "I never believed the government was fair. But it should at
least be equitable," he says.
Pentagon officials say that change comes with a $1 billion-a-year bill and will do little to help with recruiting or retention problems. In fact, Dr.
Chu says, the change would lead about 25,000 older reservists to retire
early. "We would pay $1 billion a year and get negative retention. It is a
caricature of what is going on," he says.
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