Military pay & benefits cuts

Two weeks ago the Department of Defense started discussing their plan for military pay changes, the force drawdown, and benefits cuts. It could be worse.

Don’t get me wrong– it’s bad enough, but the cuts are still less than the drawdown after the Cold War. Back then the military downsized over a quarter of its personnel. The submarine force, in particular, cut back too far in accessions in 1996, a decision which still echoes in today’s commanding officers. The REDUX retirement system was crippling recruitment. Fuel and maintenance budgets were so small that training and readiness suffered, and many commands limped along with a repair backlog that took years to remedy.

The good news is that today’s decision makers are old enough to remember the military’s “hollow force” cutbacks after Vietnam. Today DoD has a much better set of analysis tools, and they’re leading the problem (because otherwise, Congress will do it for them). Several think tanks and other study groups have been assessing the options for months and outlining the impacts of the choices, along with their projected savings. One of the more detailed studies is “Hard Choices” from the Center for a New American Security.  The trick is to keep the military strong enough to be an effective deterrent force, and funded enough to be able to operate and train with allies and “other” countries. However, it needs to revert to its role as an alternative to diplomacy, not the preferred instrument of foreign policy. The military should be small enough that Congress and the administration are less eager to use it.

SECDEF has discussed the outline of a five-year plan as well as next year’s budget. The full 2013 defense budget release is planned for 13 February when the President sends the national request to Congress. DoD’s funding is “only” $525B, smaller than last year and the first cutback in over a decade.


Much to my surprise, the Navy is keeping 11 aircraft carriers. (The USS ENTERPRISE, the first nuclear carrier, just celebrated her 50th birthday. Grandchildren could be serving on the same ship as Grandpa.) Even more to my surprise, all three F-35 variants are being pursued– including a vertical-landing version for amphibious ships. (Perhaps this aircraft will be very popular with foreign sales.) The Air Force is ending its Global Hawk Block 30 program and continuing with the venerable U-2, although the Navy’s Block 40 version of the drone will still be available to both services. Instead of recapitalizing the venerable HMMWV, the Army is pursuing the Joint Light Tactical Vehicle to share with the Marines. The Navy is retiring seven destroyers and two amphibious ships early instead of extending their life, the Air Force is eliminating six tactical air squadrons, and the Army will eliminate two heavy brigades in Europe.

The spending cuts are projected to save about $487B over the next decade. That’s a significant drawdown, of course, but it hopes to avoid another $600B of “sequester” reductions.


Personnel are part of the savings. The Army and Marines will shrink their forces by over 10%. The Army plans to reduce its size from a peak of nearly 570,000 soldiers to 490,000 while the Marines will discharge 20,000 to a final strength of 182,000. These are nearly 15% cuts but the resulting forces will still be larger than they were in 2001. This will be phased in over the next five to six years, mainly through attrition.


One way to encourage attrition, of course, is to reduce the payroll. DoD will seek a 2013 pay raise of 1.7%, in line with the private sector’s Employment Cost Index. However, by 2015 military pay may stop growing as fast as civilian pay. Although healthcare expenses for active-duty servicemembers will still be borne by DoD, they’ll continue to pursue higher fees for retirees. The logic is that retiree healthcare expenses will still be lower than the civilian sector. However, military retirees point out that many have no other health insurance, and that DoD is going to raise fees faster than retiree pension COLAs. The 2012 National Defense Authorization Act included a requirement for DoD to limit healthcare fee hikes to the same rate as the pension COLA, so this dispute will continue in next year’s budget debate.

DoD still wants to “establish a commission with authority to conduct a comprehensive review of military retirement,” but included a requirement that Congress could only vote “Yes” or “No” without changing the DoD plan. DoD lost a lot of credibility with the July 2011 Defense Business Board retirement proposal and Congress is understandably reluctant to give up the opportunity to influence any new retirement plan. The “good” news is that both DoD and Congress agree to continue the current system for all those currently in uniform. Any new retirement changes would only affect those who have not even joined the military yet.

By the way, if you’re Navy enlisted who’ll reach 15 years of service by 1 September and you’re being separated by the Enlisted Retention Board, then you might be eligible for the new Temporary Early Retirement Authority.  See this NAVADMIN.  TERA is not normally a good deal for voluntary separation, but when you don’t have a choice then it’s the best you’re going to see.


Another perpetually popular program is the Base Realignment and Closure process. The last BRAC decisions of 2005 have been carried out, including combining or closing several bases. The commission recommended a new BRAC review in 2015, and DoD is likely to start that process now. The military is already authorized to shut down overseas bases, and a new round of BRAC authority would allow them to close bases in the U.S. as personnel and hardware cuts take effect.


The downsizing will impose many hard choices over the next decade. However, as usual, there’s a silver lining to every gray cloud. After over 20 years in the arsenal, the military is finally getting rid of one of the most feared anti-personnel systems ever produced: its standard issue eyeglasses.

The Naval Medical Logistics Command claims that the new recruit-training models will have a “hipster, Buddy Holly vibe”. I’m not sure that’s a good thing, but six other models will be available to servicemembers. Unfortunately the remaining inventory of the old “birth-control glasses” won’t be donated to charity or destroyed– they’ll continue to be issued to retirees who can actually remember Buddy Holly.

WHAT I DO: I help you reach financial independence. For free. I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers, veterans, and families. All of my writing revenue is donated to military-friendly charities.

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