Wednesday, September 01, 2010

The War on (Military) Benefits

We've noticed a rather curious trend among budgetary reform efforts in Washington. While they're eating a hole in the nation's finances, no is willing to tackle the entitlement problem-- with the notable exception of military and veterans' benefits.

Defense Secretary Robert Gates has been particularly outspoken on the issue. In recent months, he's complained openly about the Pentagon's rising health care costs; Dr. Gates says the military's HMO-style system for dependents and retirees, known as Tricare, now has an annual price tag of $50 billion. That expenditure, which represents about 9% of the DoD budget is "eating us alive" according to Gates.

The SecDef is also concerned about those generous military pensions, which allow some retirees to begin receiving benefits in the late 30s, after 20 years of active duty service. The Defense Business Board, tasked with finding ways to reduce defense spending, says the current military pension system is "unsustainable." Retired Marine Corps Major General Arnold Punaro, the board chairman, says if the program isn't reformed, payments to military retirees (including pensions and medical care) will top $60 billion by 2020.

General Punaro and his group are suggesting fundamental changes to the system, including delayed payments for retirees, in exchange for earlier vesting in the program. Under that proposal, military personnel with 20 years of service wouldn't receive their retirement checks until age 57--almost two decades after they leave active duty. It's a sure bet that Defense Department actuaries have already calculated the number of retirees who will die before reaching the revised retirement age, and the amount of money that could be saved.

And, military retirees aren't the only ones in the budgetary cross-hairs. Former Senator Alan Simpson of Wyoming, co-chairman of President Obama's deficit reduction commission, suggested that some costs associated with aging vets is a "concern." As the AP reports:

The system that automatically awards disability benefits to some veterans because of concerns about Agent Orange seems contrary to efforts to control federal spending, the Republican co-chairman of President Barack Obama’s deficit commission said Tuesday.

Former Wyoming Sen. Alan Simpson’s comments came a day after The Associated Press reported that diabetes has become the most frequently compensated ailment among Vietnam veterans, even though decades of research has failed to find more than a possible link between the defoliant Agent Orange and diabetes.

“The irony (is) that the veterans who saved this country are now, in a way, not helping us to save the country in this fiscal mess,” said Simpson, an Army veteran who was once chairman of the Senate Veterans’ Affairs Committee.

The Department of Veterans Affairs has also allowed Vietnam veterans to get money for ailments such as lung cancer and prostate cancer, and the agency finalized a proposal Tuesday to grant payments for heart disease — the nation’s leading cause of death.

Amid concerns about the defoliant's long-term health impacts, Congress established automatic benefits for any veteran who served in Vietnam during a 13-year period and later contracted an illness linked to Agent Orange. The original list of conditions was largely limited to various forms of cancer including Hodgkin's Disease, Non-Hodgkin's Lymphoma and various soft-tissue cancers.

Since then, the Veterans' Administration has expanded the list of covered illness to include prostate cancer, heart disease and diabetes. With more vets now entitled to benefits, the agency estimates the Agent Orange program will cost up to $67 billion over the next decade.

“It’s the kind of thing that’s just driving us to this $1 trillion, $400 billion deficit this year,” Simpson said. “It’s not that I’m an uncaring person, but common sense is the most uncommon thing in Washington.”

To be fair, Senator Simpson has a point. Unchecked federal spending has produced $13 trillion in federal debt, which has been accumulated under Democratic and Republican administrations. Getting our fiscal house in order will require cuts across the board--and that includes entitlement programs.

But it's a little bit odd (read: hypocritical) to focus on military and veterans' benefits while ignoring the gargantuan programs in the room, Social Security and Medicare. Projected outlays for those entitlements dwarf anything we'll spend on military retirees and veterans programs. According to the Heritage Foundation, Social Security and Medicare will consume roughly 14% of GDP by 2050. Sustaining those benefits will mean mammoth tax increases, the elimination of almost all other federal programs, or both.

As a group, veterans and military retirees are willing to do their part to help the nation get back on its fiscal track. But most are wondering why leaders like Robert Gates and Alan Simpson want to balance the budget on the backs of those who serve. The answer is rather simple; military retirees and veterans represent an ever-shrinking segment of our society.

As members of the World War II generation pass on (and vets from Korea and Vietnam enter old age), the number of those who served continues to decline. The pool of military retirees is also projected to decline. Given those numbers, it's easier (politically) to go after programs that benefit veterans and retired members of the armed forces. And, it gives politicians--and their appointees--a little more time before they must confront the problems created by the "third rail" of American politics, Social Security and Medicare.

One more thing: the war on military benefits won't end with a revamped retirement system and compensation for Agent Orange. If you're drawing a military pension, get ready for a "means test" for your social security benefits, and much higher Tricare co-pays in the very near future. In today's budgetary environment, they are virtually assured.


Paul G. said...

You are right that the pain should be shared.

Unfortunately, means testing is the fairest way to go and should be applied uniformly over Social Security, Medicare, and Military Pensions, as well as state pensions.

It's analogous to people who earn over the Social Security max salary no longer have to paying into the system.

Then again, 60% of working people today don't think Social Security will be there for them anyways:

SMSgt Mac said...

Strongly recommend you rephrase the title to read 'Benefits' instead of 'Entitlements'. Not as clear a tie-in to the current 'Entitlement' issue but no one promised us an entitlement for 20+ years of service.
Benefits tend to be thought of as what comes as a result from some action or choice made. Entitlement is something that is 'given' or 'conveyed' in my dictionary, without reference to being earned or achieved through contract.
Words have power. 'Entitlement' now has negative connotations that should never be tied to what Veterans have earned. When they break the faith in the future, let's make them admit it as they did for the retiree medical benefits for post WWII era retirees. Fortunately for financial planning purposes (and a few others), I always assume the Government is lying.

Unknown said...

Such a small amount of individuals have gone (and go) in harms way for this country. Especially a country of 300 million. They have given such an undeniable sacrifice. I'm serving on active duty with four injured limbs. My life will never be the same. It's such a small amount of money when placed in the proper context.

Most people will lock their doors in a bad neighborhood or avoid it altogether. Most people won't even do basic physical activity to help stem healtcare issues and costs.

Imagine leaving your home for over a year at a time and living with the knowledge of experiencing the worst possible death everyday of your deployment.

Twenty years of service 24/7 and committed to offering up the ultimate sacrifice is worth this country paying for a lifetime of these heroes benefits. Especially when so many choose to not do this.

Make cuts, freeze benefits, but never act like this country is some how powerful and safe by accident.