Committee for a Responsible Federal Budget

Don't Use Gimmicks To Undo Military Reforms

Jan 27, 2014

Last week, Senator Bernie Sanders (I-VT), chairman of the Senate Committee on Veterans’ Affairs, introduced legislation expanding many veterans' benefits and addressing long standing concerns of the veterans' community.  The expansions would cost approximately $30 billion, and could be debated in the Senate as early as this week. It would also undo a military retirement reform in the Ryan-Murray budget agreement. Senator Sanders has suggested that instead of identifying specific policies to offset the costs of the legislation, it could be funded using war savings in the overseas contingency operation category.

Repealing the military retirement provision in the Ryan-Murray agreement without putting any alternative reforms in its place is troubling, because it would reverse a small first step in needed reforms of an outdated military retirement system. Former top generals have been outspoken about the need to reform the growing military retirement system before it crowds out other defense spending. As they described, "Congress was wise to take the first step toward military retirement benefit reform...Much larger reforms must come in the near future." Even if Congress decides to restore the pension cut, they should take a hard look at broader reforms needed to the military pension system instead of relying on phony savings and avoiding the need to make choices and set priorities.

The debated provision will save $6 billion over 10 years by slightly reducing the cost-of-living increases received by military retirees under age 62.  These servicemembers can retire as early as age 38, often take high-paying jobs as defense contractors, and get 60 years of pay for 20 years of service. Payments after age 62 are unaffected, as are payments to those who medically retired, such as those wounded in the line of duty.

We've often called on legislators to abide by "pay-as-you-go" provisions, ensuring that policymakers do no harm to the deficit by paying for any change with savings or new revenue elsewhere in the budget. However, press reports suggest that the Sanders bill would rely on the war savings gimmick to offset its costs.  This gimmick would count savings from winding down the wars in Afghanistan and Iraq. However, as the Congressional Budget Office has noted, there is not an “overseas contingency operations fund” set aside in the Treasury that can be tapped to fund other programs but rather a category of spending exempted from budget caps that is already scheduled to decline. Since this decline is already scheduled, using these "savings" will increase the deficit. (See our infographic summarizing the war gimmick here.) Capping the amount spent on wars overseas is a responsible step forward by locking in already scheduled savings, but does not represent new savings that can be used to pay for other legislation. For example, the omnibus legislation in mid-January may have skirted the strict caps on defense spending by labeling extra money as uncapped war spending.

When the Senate debates this legislation later this week, they can consider the benefits of the proposed veterans' expansions. If Senators conclude that the improvements in veterans' programs and restoring full cost of living adjustments for working-age military retirees are worthwhile priorities, they should be willing to make tough choices to offset the costs of these benefits with other savings. It would be a mistake to avoid this tough choice about budget priorities by pretending to pay for the bill with a phony war savings gimmick. 

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Update: While the $30 billion cost estimate was provided by Sanders during a news conference, CBO later released an estimate of the portion of the bill dealing with direct (mandatory) spending.  The bill would increase direct spending by $7.6 billion over 10 years, along with requiring an additional "tens of billions of dollars over the 2014-2018 period, primarily to expand veterans’ healthcare benefits."

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