The Defense Business Board is an advisory group inside the Department of Defense, but its members are from outside the bureaucracy and are mostly successful business leaders. The Board was tasked to study the economics of military retirement and last month made its recommendations. At a volatile time during a particularly contentious election cycle, these are unlikely to be implemented, but they will be very controversial when they are finally discussed.**
The founders of this country were, quite properly, averse to a large standing army, and so we haven't had one. At the end of 1940, while war was raging on two continents and it was clear that we would eventually be fighting, we still had only about 200,000 people in uniform. During the war, the ranks of the services swelled a hundredfold, only to shrink again when the conflict ended. Today, with a population of more than 300 million and in the midst of several military campaigns, only about 1/2 of 1% of our citizens are serving on active duty.
But even an undeployed force of small size is an expensive proposition. It has to be fed, clothed, housed and trained, and all of this costs big money. And it is particularly expensive when the majority eschews selfless service and demands instead a professional, volunteer armed force, one that has to be attracted by promises of substantial benefits to offset the anticipated unpleasantness of a martial life.
One of the magnets is the prospect of retirement after 20 years of service with an annuity of at least half of base pay at separation. When I entered the Army 45 years ago, a person at the high enlisted grade of E-8 earned about $500 per month, and so retiring brought him $250, not much money even then. An E-8 who retires today receives about $2300 per month, still no fortune but very expensive to a government strapped for finances and looking for any way to save a few dollars.
But the Defense Business Board concluded further that the current system is not just too expensive for our struggling government but that it is too generous when compared with civilian plans, to which employees contribute and which usually do not pay anything until age 60 or older.
For military people, who traditionally made far less money than they make today, the retirement annuity was essentially delayed compensation for work that was worth much more than was being paid for it. The Board says that it is still perceived that way, but that, because military pay is now higher than it was, the concept of a generous annuity as delayed compensation is superfluous. We must be paying people at least what they're worth, because they could be making the same money outside the service, and so we don't have to be as generous with retirement to attract them.
The reasons people join the armed forces are many and varied, but only one of them is the retirement scheme. Some people---many, in fact---serve because they feel an obligation to do so, and there are quite a few who would serve for free if they could afford to do it. If the issue were merely one of economics, then the right thing to do is to abolish the volunteer force and begin conscription.
Of course, we're not going to do that, and one of the reasons is that the issue is not just economics. It is one of politics as well. Quite frankly, it will be relatively easy to change the military retirement system because there are very few military people and there are other interests with much larger, more powerful constituencies. And in any case, the numbers are persuasive by themselves: the Board estimates that its scheme will save $250 Billion over a period of 20 years---not enough to make a big difference to a country that is on the hook for trillions of dollars, but not chicken feed either. Very tempting.
But when the Defense Business Board argues that military and civilian retirement plans should be similar for purely mathematical reasons, it is saying that military and civilian work are comparable. Being in the armed forces, even outside of combat, is nothing at all like being a civilian. The suggestion makes the Board sound like the phalanx of vapid number-crunchers with whom Robert McNamara surrounded himself and who propelled us into war that killed nearly 60,000 of our friends. There are good reasons why we need to reduce the cost of military retirement, but it is ignorant and shameful to use the argument that we should do so because we have been overpaying and they'll take what we give them anyway.
**SEE THE BOARD'S POWER POINT AT http://dbb.defense.gov/pdf/DBB_Military_Retirement_Final_Presentationpdf.pdf