The sweeping changes to the US military announced recently by Defense Secretary Chuck Hagel are the most public recognition yet of the painful financial legacy left by Iraq and Afghanistan. The wartime culture of “endless money” as his predecessor Robert Gates dubbed it, with its endless “emergency” funding from Congress, is finally over.
Hagel proposes to cut the size of the armed forces, overhaul the military retirement system, mothball expensive traditional weapons such as the A-10 attack aircraft, and shutter some military installations around the world. Instead, the Pentagon plans to expand “special operations” forces and invest in higher-tech weaponry. All this is part of a strategy to stabilize the military budget, which has expanded by over $1.4 trillion since 2001.
The difficulty is that years of conflict have left a legacy of heavy costs that will extend far into the future. Chief among them is personnel costs, which already consume one-third of the defense budget and are still on an upward path. The generous increases in personnel costs approved during the war are gobbling up an ever-larger slice of the Pentagon’s budget. When the Army and the Marines faced recruiting difficulties in 2004, Congress authorized annual pay raises much higher than the Pentagon requested. It has been politically untenable to repeal them. Recruitment bonuses were increased and parental and housing benefits hiked for the more than 670,000 troops drawn from the Reserves and Guards, who are typically older and have families. All this has baked higher costs into the base defense budget.
TRICARE, the military health care system for active duty service members, retirees, and their families, has become the fastest-growing federal health program — growing even faster than Medicare, Medicaid, or veterans’ health care. It now serves 8 million active duty and retired military and their families. During the flush wartime years the Pentagon kept copays, enrollment fees, and deductibles artificially low. Today, a family of four can purchase excellent health insurance for less than $500 per year, compared with $2,200 or more for a comparable plan in the private sector. Unsurprisingly, the participation rate among eligible active duty military and family members has almost doubled. TRICARE was also extended to the National Guards and Reserves, while “TRICARE for Life” was added to supplement medical coverage for military retirees.
Military pensions are also growing. The Defense Department already spends $100 billion annually in military retirement benefits for those who have served for at least 20 years. But there is mounting pressure to revise this system to cover those who served for fewer than 20 years, which accounts for more than 85 percent of the troops who served in Iraq and Afghanistan. New proposals announced last week will almost certainly increase long-term costs for the Pentagon.
All this comes on top of exploding costs in the Department of Veterans Affairs; its budget has ballooned from $61 billion to $160 billion since 2001. Nearly half of the 2 million Americans who served in Iraq and Afghanistan have already been awarded permanent disability benefits.
Congress is scrutinizing Hagel’s defense budget, trying to understand his strategy. The problem is that we are trying to cut the future budget to compensate for mistakes of the past. The US military is reeling from the legacy of Iraq and Afghanistan, which has weakened the Department of Defense by increasing structural costs, using up basic military equipment, and financing the entire conflict with debt. This has led to pressure on overall discretionary funding. It does not make sense to cut military end-strength simply because we cannot summon the political will to pare benefits enacted during wartime. A much bolder approach would be to put all of our military spending on the table and then decide on priorities. The first step should be to replace MS-DOS-based computer systems so the department can actually see where it spends money.
Hagel recognizes that the Pentagon is facing “tough, tough choices.” But he is shying away from some of the biggest.
Linda Bilmes is coauthor of “The Three Trillion Dollar War: The True Cost of the Iraq Conflict,” and a senior lecturer at Harvard Kennedy School.