Friday, July 22, 2011

The War on Military Benefits, Redux

During the current debt limit battle, we've heard several Democratic politicians vow that "any deal" will not come at the expense of the nation's seniors, or working families.

But military members, retirees and their dependents apparently don't fit in those categories, regardless of age or family status. As we noted in a recent post, there's a war on military benefits underway inside the Beltway, and the conflict has only begun.

Last week, we reported on a proposal to end subsidies to military commissaries, where most members of the armed forces buy their groceries. The subsidies (a little over $1 billion a year) allow military personnel and their dependents to buy food and other household staples at prices below civilian grocery stores. The benefit is particularly important for young enlisted members and their families who reside in high cost-of-living areas.

Without reduced prices at the commissary, more military personnel will wind up on food stamps, or other forms of assistance. While the number of troops who qualify for the federal programs remains relatively small, DoD officials reported a 25% jump in food stamp use at military commissaries between 2007 and 2009, an increase that out-paced the general population, even during dire economic times. A more recent survey by the Tulsa World found that food stamp purchases at the four base commissaries in Oklahoma climbed by 187% over the past two years.

Under various proposals now being discussed in Washington, military commissaries would be merged with base exchanges and prices would move closer to those in off-base stores. There has also been talk of providing a $400 yearly payment for military families (to compensate for rising grocery prices). Unfortunately, that subsidy won't come close to replacing the average $4,000 in yearly savings that most shoppers receive at the commissary.

But the eroding benefits don't end there. Earlier this week, Oklahoma Senator Tom Coburn unveiled a plan for $9 trillion in budget cuts, including $1 trillion from the military. While we've long admired Mr. Coburn's crusade against government waste, some of his proposed reductions make little sense, and will ultimately impact morale, welfare and military readiness. Among his suggestions:

-- Slash Military Tuition Assistance by 90%. Military members currently receive up to $4500 a year to fund their off-duty education, allowing many to earn their college degrees while in uniform. Senator Coburn says the TA program largely duplicates GI Bill benefits. Gutting TA would save almost $5 billion over a 10-year period.

Unfortunately, there are some serious drawbacks to Coburn's education plan. For starters, it would encourage more first and second-term troops to leave the service and enter college, since the GI Bill pays the highest benefits to veterans who have separated from the military.

Secondly, the Senator's assertion that TA is an ineffective recruiting and retention tool is simply wrong. Today's U.S. military is the best-educated in history and the tuition assistance program is one of the primary reasons. For example, over 90% of senior non-commissioned officers in the U.S. Air Force have at least an associate's degree, and the vast majority of those were earned while on active duty, using TA benefits.

And, you can make the case that tuition assistance is cost-effective as well. Since its inception in 2009, the Post-9-11 GI Bill has served more than 50,000 veterans, at a cost of $11.4 billion dollars. During the same period, the Pentagon spent just over $1 billion on TA, a program that benefited six times as many military members, at a fraction of the cost. To be fair, contrasting TA to the GI Bill is something of an apples-and-oranges comparison, but to dismiss the former program as inefficient and ineffective is simply mind-boggling.

Along with tuition assistance, Mr. Coburn also wants to slash these military programs:

-- Close on-base schools at DoD installations in the U.S. This proposal would save an estimated $10 billion over the next decade. At first, this proposal seems like a no-brainer; the 26,000 military dependents now enrolled in those schools would simply transfer to local public schools. But what if the local schools are lousy, and ill-prepared for a sudden influx of hundreds of new students? Are military parents supposed to simply sacrifice their childrens' education? Sadly, we know the answer to that one.

-- Overhaul military health care, and prevent retirees from signing up for TriCare Prime, the health insurance option with the lowest out-of-pocket costs. Coburn's proposal would save a projected $115 billion over 10 years, but retirees would pay an additional $3500 a year in additional medical expenses. That probably sounds like a bargain to many in the private sector, but it's worth remembering that the average military retiree is an E-6 with an average "take home" pension of just over $20,000 a year. Increased out-of-pocket costs will place a significant burden on the largest pool of military retirees.

Clearly, military spending must endure its share of cuts and Senator Coburn's plan is not without merit--just slightly mis-guided. Instead of merging commissary and BX functions, we'd simply shutter the exchanges, except at overseas locations. The BX's price advantage over civilian competitors has been largely erased in recent years, as the stores went upscale in their merchandising. Getting rid of the exchanges in the CONUS would more than cover the cost of subsidizing the commissaries, and providing savings that military members can really use.

In terms of education program, we'd put more emphasis on tuition assistance, encouraging more troops to earn degrees while on active duty. Even in an era of frequent deployments, it's quite possible to start--and finish--your degree in two tours (or less). At an average cost of $250-300 per credit hour, a degree earned using tuition assistance costs the taxpayer $30-40,000. Using the GI Bill (including housing allowance), the "price" for the same degree is $100,000--or more. Under our proposal, the GI Bill would stress degree completion for veterans, with elimination of the "transferability" clause for dependents.

For the Tri-Care issue, we recommend an even more radical solution: fully fund on-base health care. Many have forgotten that Tri-Care was created because Bill Clinton slashed the budget for base health care facilities and was promised illusory savings by sending dependents and retirees to off-base facilities. As a former Air Force Surgeon General later commented, the cost for many procedures in DoD hospitals was nominal, compared to civilian health care centers. He cited a simple appendectomy as a case-in-point. On-base, the tab for the surgery was (at the time) about $300--the cost for a surgical pack. If the military sends the patient downtown, the same appendectomy runs about $7,000. Multiply that by thousands of beneficiaries and procedures, and you can see why military health care costs have skyrocketed.

The Coburn plan is unlikely to pass anytime soon, but unfortunately, some of his proposals may endure. We first heard talk about gutting the TA program more than a year ago, long before the Senator raised that option publicly. It's almost certain that some of his "ideas" will eventually find their way into an eventual DoD down-sizing bill. Mr. Coburn's heart is in the right place, but he needs to adopt a smarter approach in cutting military spending.


ADDENDUM: And for what it's worth, we're still waiting for someone (other than Paul Ryan) to tackle the real budget-busters: Social Security, Medicare and Medicaid. From our perspective, it looks like military personnel (and retirees) are being asked to shoulder more cuts than the general population. But then again, the military community is a very small voting block. Go after the folks who can't hurt you at the ballot box. What a surprise.


F said...

Not only is the military a small voting bloc, there appears to be a concerted effort to disenfranchise many of them who are serving overseas. I find that more reprehensible than taking away TA or closing base schools.

SMSgt Mac said...

Great Post! I believe the assault on the Defense budget and military families are a handy diversion to keep our eyes off the real sucking drain on our economy: the social spending ('so-called' non-discretionary) sinkholes.