Friday, August 5, 2011

Budget deal, Military retirement, Factoid

AFA Members, Congressional Staff members, Civic leaders, DOCA members, this week the good news is we finally got a budget deal to offset increasing the borrowing limit with spending cuts. The bad news is Defense spending could be impacted in a way never seen in our country. First it’s important to review the facts as we know them. President Obama has tasked DOD (in April) to come up with $400B over 10 years, taken out of the base budget. The Air Force share of that is $49B over the Future Years Defense Plan (five years). To do so, the AF will have to get smaller, and, as stated by a senior AF official, “won’t be able to be in two places at once.” The budget deal may make these cuts much worse – perhaps twice as much or more. To our knowledge, never before has the United States cut defense spending to such an extent in a time of war.

We argue, in our briefings on the Hill, that we need to focus on what really counts. The US has many interests around the globe, but a select set are fundamentally existential in nature:

• Stemming nuclear proliferation

• Managing the rise of near-peer competitors

• Ensuring access to key resources

• Maintaining strategic alliances

• Protecting open access to the global commons

• Defending the homeland

The familiar missions of deterring … and defeating aggression through large-scale power-projection operations have not diminished in importance. These are not obsolete Cold War missions. States have had competing objectives throughout history, and nothing has changed to diminish such dynamics. The force of the future is one that is focused on fundamental objectives, is flexible, limits the loss of life (both adversaries and friendlies), does not project vulnerability, and is capable of operating throughout the threat spectrum. Occupation—based strategies are risky. They impose tremendous costs upon our nation—huge resources are required, both military personnel and civilians are thrust into tremendous points of vulnerability, and it takes a significant period of time to secure the strategic objective of a stable society. Any budget cuts must take into account a strategy which protects our interests, accomplishes the key missions above, and takes advantage of American strengths. Cuts should not be “salami-sliced” across the Services. They must be strategy driven. In a zero-sum budget environment, any funding directed against lower priority missions will come at the cost of addressing fundamental interests. We can no longer afford that approach.

Secondly, the Defense Business Board is reviewing major changes to the military retirement system. They have a draft briefing which transitions it from a defined benefit plan to a defined contribution plan (much like a 401k). The brief can be found here:  One of our most thoughtful members and a former AFA leader has offered his comments to the brief. They are below my name.

Finally, I came across a piece of data on the C-17. The highest-time C-17 has over 18,000 hours on it … and is 22 years old. Compare that with the average Southwest Airlines aircraft of 11 years old and less time.

For your consideration.


Michael M. Dunn
Air Force Association

Comments on Modernizing the Military Retirement System

Defense Business Board Task Group

July 21, 2011

The problem with the DBB Task Group’s work on the military retirement system begins with the Terms of Reference for the study. No problem statement is given – the Task Group is to support the SECDEF’s “efficiency initiatives” (whatever they are) and to “Begin with a review of the current reform thinking on military retirement benefits.” What “reform thinking”? The Task Group is to “provide recommendations for optimizing…the…retirement system” – against what criteria? I have read the TOR several times, and I still do not know what problem the DBB is trying to solve.

Chart 4. The Task Force points out that military pay, healthcare benefits, and retirement benefits exceed that of the private sector today. No data was presented to back up that claim, but even if it is true, it is irrelevant. I know of no company in the private sector that asks its employees to sign a piece of paper saying that, if called upon to do so, they will give their lives in the defense of the parent corporation. Comparisons with the private sector are interesting, but they do not dictate what is appropriate for military members.

Charts 5-8. Interesting information in the Findings charts, but they do not lead to the conclusion in the Assessment chart that the current retirement plan is “Unfair.” Unfair to whom? By what definition of fairness? In over 45 years of my association with the military, I have never heard a member say that they thought the retirement system was unfair.

Charts 9-10. The Task Force may believe that the current retirement system is unaffordable, but that has nothing to do with the TOR for the study. What they may be saying is that the “volunteer force” concept for the defense of our country is not a viable concept. That may be true or untrue, but it is beyond the scope of this study. The cost curve in Chart 10 is useless, because the reader is not told whether the amounts are in constant-year or then-year dollars – big difference. Also, I could not find a payment line, although that is what is implied by the chart title.

Chart 11. The Task Force asserts that a modified retirement system would “create an effective force shaping tool” without any substantiating evidence that this would be the case. It is a conclusion without benefit of supporting data.

Charts 12-14. The Task Force presents its recommendations for a retirement system based on a defined contribution plan without demonstrating that the recommended plan would address the shortcomings it asserts exist with the current retirement system. It also touts the “good” features of such a plan without pointing out its negatives. It also fails to address the mitigation of the negatives or any unintended consequences of the recommended plan.

Concluding thought. There may be good reasons why the current retirement system should be scrapped and replaced with something else. If there are, they certainly are not presented in this study. The study also lacks a compelling argument for why its recommended solution would be an improvement over what exists now…it is not clear what has been “optimized.” This is a very shoddy piece of work, in my view.


Uncle John said...

Thank you for your comments. I agree. I have already sent letters to my Congressman and Senator expressing my view that the proposed plan will result in a return to the Universal Draft . This is particularly true if our civilian leaders at the highest level maintain their course of preemptive war (preempting the will of the people).

The federal budget issue is indeed a tangled mess with as many unintended consequences embedded in it as intended ones. We must convince Congess that their main goal of being reelected must for once be lowered in favor of the long term good of the country, in all of their budget decisions. All in all not an easy task.

Anonymous said...


First let me say, I normally agree with your editorials, but in the case of the DBB Task Group review of retirement benefits I have a couple of observations. I The TOR was relevant to the study especially in terms of the SecDef efficiencies. Should we not look for efficiencies in one of the largest portions of our budget? Personnel costs (salaries, health care, and benefits) were consuming a third of our budget in 2007 (when I last had working knowledge of the system). The system is not unfair, but it is out of balance with today's economic realities as slide 4 points out. Any changes should not break the faith with those already serving, but we need to start having a dialogue. I would like to see an AFA piece on a recommendation for changes that has your blessing as a way to continue the dialogue.


Joe D.

Anonymous said...

Interesting that the private sector is used as a basis of comparison. What about other sectors of government, like state and local government or maybe even members of Congress?

JMike said...

The All Volunteer U.S. military is the best trained, most effective fighting force in the world. To keep it that way costs money in the form of attractive retirement and medical benefits. Tinkering with the retirement system has been tried before with diasterous results. If you want a professional force you have to pay for it. If you don't, there is always the Universal Draft option.

How do you balance "economic realities" against asking people to serve their country in high stress, high ops tempo environments? You can't.

pat hines said...

If the military retirement plan goes to a 401(k) like plan, consider the following. Assume a ten year vet who has been deployed to a combat zone multiple times and therefore receives most pay and benefits tax free. He then has the defined contribution deducted and put into the new retirement plan. The unintended consequence is that he ends up paying taxes on withdrawals from his plan at retirement age or before. Whoops Catch -22.
CCMsgt Hines USAF (R)

Edward said...

How much should we raise our taxes to support the military?

USA 2011 federal spending is about $3.6 Trillion and federal taxes are about $2.4T. SS and Medicare STILL pay for themselves at $1T taxes and $1T spending. Without SS and Medicare,one is left with spending of $2.6T and tax income of 1.4T. Defense, if one includes CIA, VA and Atomic Energy Commission spends about $1T.
P Bush spent $5.5T more than he took in in taxes! Reinstating his taxes would raise taxes by $400B/year. A $1/gallon tax on gasoline would raise $150B/year.

How much should we raise our taxes to support the military?

Terry 01 said...

From this retired senior NCO's perspective, this plan will result in only the less than the best and brightest enlisted staying for career. First, it doesn't address several important issues. The career's of most military spouses suffer due to frequent relocation. Home ownership is a gamble at best for career military. Although most of my 22 years in service was "good" time, I was tempted to leave on several occasions. AF SNCO's give more bang for the buck than other service NCOs, as I will dare to speculate that if most AF SNCOs were in the other services, we would have quickly found ourselves in the Warrant Officer ranks. This proposed program will be the end of the AF SNCO corps the AF has come to rely on.

USAFRETE6 said...

I left the briefing slides with much of the same thoughts that you had. I found myself wondering what they were doing and saying. While the idea of a new retirement system is novel, it does not address the so called "problem" in a fact driven way. I liked the ideas of increased contributions for those in high hazard duties, family seperation, and combat tours. I agree we could find a way to help these folks. But, don't we already make light of those situations with hazardous duty, overseas, and other special pay? Should we pay them twice? A very confusing piece.

ole Ed said...

This plan has more holes in it than a tea sieve. I do not know of a police dept. anywhere that works for the paltry wages the military folks are paid.Most have BETTER retirement systems. Terry is spot on about AF SNCO's. All are doing w-grade and O1 thru O5 grades positions for 1/2 the money. I can remember my boss saying to re enlist.I do then I tell my subs to reenlist. Gotta keep the skilled etc but then listen to the gripeing on how much retirement is costing. Well DUUUUh What do they not understand.All are use to eating the cake and having it too.

Anonymous said...

The members of the study group were devoid of military experience save one. All were multi-millionaires. Something tells me that their recommendations are for others but not for themselves. Hence, I would have but one question for them, would they be willing to forego their current financial position and recalculate along the lines they suggest in the recommendation. JOV

Ross Lampert said...

The fundamental flaw in the "thoughtful" analysis of the DBB presentation is that it criticizes the briefing for not including everything--ALL of the background data, prior research, etc.--that went into this DRAFT product! No "briefing" ever does this, so the critique is based on an unreasonable expectation as well as a significant lack of knowledge, or perhaps I should say "information."

Regarding the assertion that no "company in the private sector" asks its employees to risk their lives, not only is this statement incorrect, it's incomplete. Private security firms, from local "rent-a-cop" companies to multinational firms like XE (the former Blackwater)do this, to say nothing of government-funded law-enforcement and firefighting agencies. The military is somewhat unusual in what it asks of its members but it is not as unique as many of us would like to believe.

The "analyst" concludes that he knows of no "good" reason "why the current retirement system should be scrapped." The impetus for looking at this set of POSSIBLE changes is quite simple: M O N E Y. According to the Office of Management and Budget, spending on "military personnel" (which includes pensions) is the second largest expenditure category in the DOD budget--larger than procurement, larger than R&D--and the delta is only going to get larger as procurement is slashed while military pay and benefits are treated as entitlements (to say nothing of the impact of rising health care costs).

We may not like the idea of the retirement system for FUTURE military retirees MAY change, but we need to face the financial facts. Without changes (which must also include how we develop, build, and field new weapons), the day will come when our leaders will be deciding which weapons systems to NOT put in the hands of our soldiers, sailors, airmen, and marines, in order to pay your pension and mine. (In fact, I could argue that's already happening.) That's a risk this nation must not take even more than it already is.

Anonymous said...

Will that same group please now do an analysis of the retirement programs for members of congress and the program for those receiving social security. After all that level of selective factiods and mistakes should be applied uniformly.

Richard P. Moffa said...

R.P. Moffa
I am not a military retiree. I did my 4 yrs. and quite happily left. I've had to explain to more than one colleague who didn't serve, that, no, I don't get "retirement". I did get, and did use the GI Bill, and a VA home loan, and my small "pension" is a VA disability payment for an injury incurred while serving. Likewise the medical care that I receive at the VA. And you could have had those benefits, too. Just sign away 4 years of your life. This Task Force report reminds me of so many plans in the private sector touted to "improve", or make whatever "more flexible", "responsive", "fair", balanced", etc. They are usually "fair" to them, and "balanced" on your back. One of the few things that I saw that makes some sense is to provide a means for those who leave prior to 20 years to take some retirement savings with them, i.e., "transferrable" similar to an IRA rollover. Otherwise, I would simply paraphrase the most telling comment: In no other profession, do you sign a blank check to your employer, payable in full up to and including your very life. That, in my humble opinion, makes most direct comparisons to the civilian sector found in this report meaningless.

Anonymous said...

According to slide 17, regular military compensation has soared since 9/11. Hence, military retirement pensions are going to increase rapidly. The dirty little secret is that the nation is bribing less than one percent of us to bear the risks, hardships, and family separation of fighting two wars. These are the first wars since the Revolution for which America has not raised taxes, at least partially, to prosecute. Perhaps the Board could make a comparison with the retirement plan of another "high-risk" profession, the US Congress.

Anonymous said...

I am a retired physician who enjoyed my career in the Air Force. Without the medical benefits, residency training and "early retirement plan" (20 years of active duty) I don't think I would have made the AF a career. Civilian medical facilities generally provide more comprehensive and efficient care, and the pay is much better than in the AF. BUT the AF offers much less bureaucratic B.S. such as from insurance companies, Medicare and Medicaid. Most importantly I could deliver the best care I knew how to give without worrying if the patient or the parents could afford the care.

I don't think we will see a retirement plan with vesting, which should be allowed as it is mandatory in the private sector to have vesting of the retirement plan. Too many people would leave when they have to make the 4th tour to Iraq, Afghanistan or Vietnam. Working for a lousy boss is another reason to leave the service early. And the kind of nonsensical things written up by the I.G. amounts to gross incompetence. I have sat through an IG medical facility outbrief when it was stated that the care was good to excellent, but the facility failed the inspection because of X, Y and Z. How can this be? Most of the medical inspectors no longer practiced medicine and wouldn't know good care from bad unless there were a lot of deaths. JCAHO inspections are usually more reasonable. When I was at Blank AFB, the medical inspector was telling the JCAHO inspector (both inspections done simultaneously)of all the things the AF found bad at our facility. This was done to FAIL the commander. AF needed a reason to kick a good man out because we had a psychologist who wore his Yamaka on duty and we had a gay physician. This was underhanded and grossly unfair to the commander who inherited these problems but had to be blamed and eased out. AF was afraid to fire him because he belonged to a minority. In civilian life there would have been successful lawsuits against the I.G. in my opinion. These kind of actions drive people out of the AF, and this is made easier if we have a defined contribution plan with vesting after 5 years.

Anonymous said...

A more direct comparison of all our other Federal Government Agencies including the legislative brances, (non elected) at and above 20 years of federal professional service with its associated retirement and benefit costs would help to make all this a more logical comparision of where our Federal outlays are being spent and what there futures look like, in comparision to the DOD Military. Have not heard one word about the administration requesting any other Government Branch or Agency to reduce or change their systems of retirement and benefit cost for its employees. This would enable a more direct, balanced cost assessment of "career professionals" after setting aside the associated military career hardships taken for granted by many in the private and government sectors who are highly compensated for any of their associated career hardships, ie; working more than 8 hrs or weekends or holidays!

Big Mick said...

This the the SAME briefing given to the USAF troops in 1974! An MPC crew came to brief everybody and were routinely hooted off the stage. Try something original for a change!

Anonymous said...

Like so many other proposed solutions, this is a quick-fix band-aid that show no sense of long-term thought. Sure, this may help satiate some people's concern with the cost of our military, but at what long-term cost to the future of our nation as a whole?

Anonymous said...

It would take volumes to describe the inaccuracies in this fictional analysis. Please compare my current responsibilities to my civilian counterpart then compare my pay. Are corporate executives expected to live like celibate monks for 12 months every 12 months? If the government decides to renege on the promises it has made to serving members do I get my knees back? If we are going to be required to contribute to our retirement to I get a pay increase or am I expected to sacrifice my standard of living?

Wish I had more time to discredit this analysis but I have to get back to accomplishing my duties for which I am "overpaid." I am going home after 8 hours today. I hope the families of those that perished this weekend in Afghanistan get a copy of this briefing.

Anonymous said...

Can we please apply this same logic to retired senators and congressman? Don't they draw a full 100% retirement after only 4-6 years?

Chris said...

This is bs. I just went over 18 years and i read this plan has NO grandfather clause!!! That means i get a whopping year to contribute to my retirement! I knew i screwed up by wasting my skills on the Air Force! If you thought the late 80s early 90s were a bad time for the millitary, get ready for the DRAFT! Another thing i think is bs is the UNFAIR portion. If you dont searve 20, you dont get paid... How hard is that. 20 years is a long time to serve, but no in the grand theme of you lifetime. Most have to start a second carear. If you CHOOSE to get out before 20..... The you made your bed... Sleep in it! I sure hope congress gets an earfull!

Anonymous said...

I have to agree with the others who have said you cannot compare the military to the private sector. Private sector personnel are not on call 24/7 and if they are called to work during their off time, they are well compensated. Not so with the military. And why DO they not throw state, local and federal government, to include congress in with the comparisons. It is my understanding Congressmen receive a generous pension plan after serving only a few years, PLUS, they get FREE medical care, and other such perks. Of coures, they will NEVER tighten their belts to help out because they make the rules.