Hayden also sees the tiered proposal as providing a disincentive for personnel to serve in long careers – say, 30 or 40 years – in the armed forces: “It basically makes it so that the higher you move up in rank, and the more you achieve, the more you’re going to have to pay, if you would, for your health care benefit. It’s a reverse incentive to stay in.”

Harrison of CSBA thinks the fee increases are unlikely to be a significant factor in determining the length of military careers. “These fee increases are very small compared to the compensation military retirees get from staying additional years,” he said. “So you will still get more compensation the longer you stay, even when you account for the fact that you’ll be paying more in fees for health care.”

 

What Happens Now?

Another interesting provision in the February budget overview was the request for Congress to establish a Military Retirement Modernization Commission whose authorities would be modeled after the Base Realignment and Closure (BRAC) Commission: Congress could give its recommendations an up or down vote, but would not be able to modify them.

The creation of such a commission is not tied to any budgeting changes in pensions or other retirement benefits. In other words, the Pentagon does not plan to save any money through whatever recommendations such a commission might submit – probably because the recommendation would likely include structural modifications to the military’s “cliff vesting” system, whereby retirees who have served 20 years receive a full pension, and those who serve anything less receive no pension at all. Though President Barack Obama and Panetta “strongly recommend that any recommended changes be fully grandfathered – that is, they would only apply to new recruits,” the decision will ultimately be up to Congress.

Like all budget proposals, the Feb. 13 overview is the beginning, rather than the culmination, of a protracted debate among the White House, the legislature, and the American public – especially those representing armed forces personnel. Interestingly, most of the debates so far ignore the fact that the 2013-2017 budgets outlined in the overview have been developed with the initial $487 billion in Budget Control Act cuts in mind, but not with the additional $1.2 trillion in across-the-board cuts now required by sequestration through 2021 – of which about $500 billion to $600 billion will be sliced from the defense budget.

In Washington, one of the few people who seems to be taking the threat of sequestration seriously is Obama, who has pledged to veto any attempt by Congress to legislate its way around its self-imposed cuts unless the proposal contains the $1.2 trillion of deficit reduction originally charged to the Super Committee. Panetta, who has warned about the damage sequestration would do to military readiness, publicly supports the president’s pledge.

White House and Pentagon budget planners, as well as members of Congress, are behaving as if sequestration couldn’t happen, at least to the programs they’re most interested in protecting. Most likely this willful oblivion is not frivolous; the effect of sequestration on military programs would be so stark that it may seem impossible, for now, to do anything other than put on blinders and go about one’s business – a business that could be aided by a huge loophole in the Budget Control Act: War funding is specifically exempted from sequestration. This creates an incentive for the Pentagon to simply move items from the base budget into a supplemental war appropriation – a practice that has been an issue throughout the wars in Iraq and Afghanistan.

The Pentagon’s February proposal for cuts to its personnel costs has struck a nerve, and if sequestration is somehow avoided, the cuts are likely to be moderated as they pass through the House and Senate. But much hangs in the balance: Congress has avoided self-imposed sequestration in the past and, if the political will holds this next time around – if the talk about spending cuts turns out to be something other than a sham – and the president’s veto threat is real, a spending plan may emerge with targeted, strategic cuts that will hurt less than they might otherwise.

If, on the other hand, Congress fails a second time, and the fact of sequestration remains, the failure is likely to hurt much worse for active-duty and retired service members.

This article was first published in Defense: Spring 2012 Edition.