Military Pensions Slashed in Recently-Passed Budget Agreement

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Senator Roger Wicker (R – Mississippi) has been an outspoken critic of the pension adjustment. Photo courtesy of United States Congress, image by Tom.

Battle is an orgy of disorder — George S. Patton

After nearly ten years of simultaneous conflicts in theaters 1,400 miles apart, war-weary Americans have seen almost 100,000 troops return home over the past 30 months. Unlike in the immediate aftermath of Vietnam, veterans have been welcomed back with fanfare, appreciated for their many sacrifices.

That appreciation, however, has its limits when it comes to the federal budget. Under the recently-passed two-year spending agreement signed by President Obama on December 26, 2013, military pensions for individuals under the age of 62 will see their cost of living adjustments decreased.

A Summary of the Framework Budget Plan

Assuming a formal budget is finalized, the United States will be operating under an official budget for the first time since 2009.  Led by Republican Paul Ryan and Democrat Patty Murray, the two sides negotiated top-line spending limits at $1.012 trillion and $1.014 trillion over the next two fiscal years.

They reduced sequester impacts by $63 billion through a combination of shifted expense reductions, new airline fees and other adjustments. Furthermore, the lawmakers achieved $23 billion in cumulative deficit reduction over ten years with health care cuts.

The House voted 332-94 in favor of the agreement, which then went to the Senate for consideration. The Senate passed the compromise measure 64-36, and President Obama signed it. With a framework agreement in place, appropriators now need to figure out how to divvy up the spending provisions.

No New Taxes?

Congressional Republicans have been generally united in their opposition to new taxes in order to reduce federal budget deficits. That philosophy is largely borne from Grover Norquist’s Taxpayer Protection Plan, a pledge signed by 1,030 Legislators across the country, as well as fourteen Governors, four Lieutenant Governors, four Attorneys General, three Secretaries of State, three Treasurers, one Auditor and one Board of Equalization member. Simply put, the signors have promised to oppose ‘all efforts to increase taxes.’

That overarching philosophy has contributed to the difficulty both parties have had in negotiating budget agreements over the past few years. Republicans have remained firmly opposed to new taxes, whereas Democrats have been generally unwilling to make substantive budget cuts.

Tax: A Rose By Any Other Name

Grover Norquist's anti-tax pledge has cornered House Republicans. Credit: Gage Skidmore, via Wikimedia Commons

Grover Norquist’s anti-tax pledge has cornered House Republicans. Image courtesy Gage Skidmore.

In the two-year deal, Republicans compromised slightly on revenues without technically breaking the Taxpayer Protection Plan pledge. As mentioned above, airline fees will be increasing as much as $6.20 per flight. Other changes include a requirement that federal workers pay 1.3% more into their pension plans, deferring select sequester cuts to the back end of a ten-year time horizon, and capping contractor pay at $487,000. They realized billions more in savings through changes in pension guarantees, above-market savings accounts for energy companies, and changes to student loan company payments.

Oh yes, one more thing: They decreased military pension cost of living adjustments by 1%.

Small Pension Adjustment, Big Reaction

Needless to say, the pension COLA adjustment has not gone over well with military veterans or active-duty military members. Although the pension offered after 20 years of military service far exceeds those offered in the private sector, it serves as a major draw for enlistment purposes. Furthermore, it requires a full 20 years of service in order to vest.

Under the new budget, a Seargent First Class would see a drop in their overall pension by about $100,000. “When you put this issue out there in front of the American people, they’re outraged,” said Paul Rieckhoff, chief executive officer for Iraq and Afghanistan Veterans of America. Mark Begich, a Democrat Senator from Alaska, said he has received more calls about the pension COLA cut than Obamacare.

The pension COLA adjustment is scheduled to begin at the end of 2015. Members of the Senate Armed Service Committee have stated their intent to repeal that part of the new budget, which is estimated to save the Pentagon $500 million annually. The Pentagon is in the midst of a review of compensation and retirement benefits, and has asked that no changes be made until the report is completed in early 2015.

Mississippi Senator Roger Wicker disagreed with delaying fixing the problem, saying: “This is a wrong that should be fixed. It doesn’t make any sense if we’re all in agreement on this to wait, unless you want to hold out the possibility that we’ll stick with it.”

Military Pension Cuts and New Budget Woes

Appropriators have yet to finish wrangling over the details of how to spend the $1.012 trillion agreed to by Congress, with President Obama scheduled to submit his budget on March 4th. It seems the momentum is there to repeal the changes to military pensions, but the devil is in the details, as further cuts will likely be sought to offset the $500 million lost by the change.

As John Wooden once said, “It’s the little details that are vital. Little things make big things happen.”

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