Reducing the Deficit

Congressional Budget Office Recommends Trimming a Trillion from Defense

After 12 years of war, Pentagon leadership, think tanks and military analysts and perhaps even Congress look to serving personnel, veterans, and retirees to continue their sacrifice by giving up benefits to help pay the outstanding bills for defense, and help reduce the deficit. The latest report to make such recommendations comes from the Congressional Budget Office (CBO), which addresses both personnel and equipment cuts.

The CBO report coincides with the conference being held between the leadership of the Senate and House budget committees. This group is tasked to set up budget limits that will permit Congress to pass a budget (or Continuing Resolution) beyond Jan. 15, 2014 and avoid a debt ceiling cliff on Feb. 7.  

In its reports, the CBO suggests 100 options for reducing the budget deficits. It covers a span of options including education, transportation, and tax revenue as well as defense.  Sixteen out of 100 of these recommendations are focused on military, retirees, and veterans. Another eight suggest changes to Social Security.

Many in Washington, D.C. discount payments to military retirees, as it is assumed that they no longer contribute to national security. CBO has suggested that Congress can eliminate concurrent receipt of retirement pay and disability compensation if a military retiree is disabled as early as October 2014, in order to save $108 billion by 2023.

The CBO also focused on TRICARE enrollment fees, nearly doubling TRICARE prime enrollment for families to $1100 per year (adjusting the 1995 rate for inflation). CBO also suggests that TRICARE Standard deductible would also be increased from $300 to $700, and to also add an annual enrollment fee of $100. Note: single user costs would remain half of family fees. All new fees would be indexed to match increases in per capita spending for healthcare. With these changes, CBO expects to save $19 billion, but they also suggest making military retirees ineligible for TRICARE Prime to save another $71 billion over nine years.

Additional savings were found by CBO by introducing out-of-pocket requirements for TRICARE for Life (TFL). When introduced in 2002 as a supplement to Medicare, beneficiaries don’t pay anything more than Medicare Part “B” with TFL paying nearly all the costs not covered by Medicare. CBO’s recommendation would not cover the first $550, and would setup a cost share of 50 percent for the next $4950, increasing the costs in Fiscal Year 2015 from zero to $3,025. Under CBO’s recommendation, Military Treatment Facilities would charge copayments to seniors seeking treatment on bases. The calculated savings would be $31 billion.

If TFL fees were established retirees would still have to pay Medicare Part “B.” Ironically, CBO has recommended increasing the Part “B” and “D” premiums as well. CBO suggests that Part “B” premiums increase by 5 percent and that means testing thresholds, not be adjusted for inflation, shifting more seniors into higher premium levels. CBO expects the savings to be $287 billion – although this affects the general population, not just military retirees.

Veterans also would see change. The CBO suggests narrowing eligibility for veterans disability by changing qualifying disabilities to be from line of service, rather than line of duty.  “Qualifying injuries can be something that occurs at home or on leave, or a qualifying medical condition can be something, such as diabetes, that developed independently of military activities.” By ceasing disability compensation for seven medical conditions that have been identified by the Government Accountability Office, CBO estimates a savings of $20 billion by 2023.

Another target is veterans receiving unemployability benefits. More than 3.4 million disabled veterans receive compensation as they have been rated as being unable to work. The CBO suggests ending such payments if a veteran is past the Social Security full retirement age, typically between 65-and-67-years-old, because they wouldn’t be part of the labor force if not disabled. This would be a savings of $15 billion.

The CBO would also end enrollment in VA Medical care for Priority Groups 7 and 8. These two groups of veterans don’t suffer any service-connected disability, with Priority 7 enrollment based on means testing. While these two priority groups pay co-payments, copayments and private-plan billing only cover 18 percent of the VA’s cost, but cancelling enrollments, the CBO calculates a savings of $48 billion.

Personnel benefits aren’t the only military cuts recommended by the CBO. It suggests capping pay increase for serving military members to half of a percent below the percentage increase of the employment cost index (ECI - a measure of inflation). This is intended to offset the period between 2000 and 2010 when lawmakers approved raises that were often higher that ½ percent over ECI. By limiting pay raises, the CBO calculates a reduction of discretionary outlay of $25 billion.

The CBO also recommends cutting the size of the military. CBO would eliminate 10 Army brigade combat teams (out of a planned force off 66 BCT’s in 2017); 34 warships (out of 244 in 2017); 170 fighters (out of 1,100 in combat squadrons in 2017); and two Marine regiments (out of 11 in 2017). In comparison, in 2013, the Army had 73 BCTs; the Navy had 214 warships, the Marines 11 regiments, and the Air Force 1100 fighter aircraft. The force cuts would reduce the need for budget authority by $552 billion through 2023, but the force could remain unchanged thereafter.

Another suggestion is to replace some military personnel with civilian employees, at a projected savings of $39 billion. This suggestion can be challenged, as part of the personnel cost increase over the last decade is the Department of Defense (DoD) hiring 128,000 additional civilians, and also replacing military personnel with contractors who can cost almost three times as much. Also overlooked by the CBO, is that often the desk jobs of the military are their ashore rotation, assignments during their dwell time at home.

Replacing the Joint Strike Fighter program with F-16s and F/A-18s is another recommendation. While many think tanks have suggested reducing the F-35 buy size, the CBO suggests cancelling the whole program, and upgrading the radar, precision weapons, and digital communications in the F-16 and F/A-18 fighters. CBO calculates a saving of 85.6 billion.

Another program that gets a stamp of disapproval is the Army’s Ground Combat Vehicle (GCV) program. Since 2004, the Army has invested $14 billion to upgrade its Bradley fighting vehicles and Abrams tanks. By keeping the Bradleys, and cancelling the GCV, $26.3 billion in savings is possible.

The Navy is also targeted, with the cancellation of the Littoral Combat Ship program, limiting the build at 24 (rather than the planed 52) for a savings of $30.5 billion; a reduction of ballistic missile submarines from 14 to 8 when replacing the Ohio class submarines with the replacement class at an estimated savings of $26.2 billion. The Ford Class Aircraft carriers would be cancelled after the Ford and the Kennedy were completed, saving $28 billion dollars.

These defense cuts would lead to a cost reduction over a trillion dollars, but would lead to a radical change in force structure and manning. While saving dollars, could national security afford the costs?