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Veteran =/= Retiree

November 30, 2011

I sincerely admire Stephen Colbert’s support to the military and I think that his heart is in the right place, but he is completely wrong in this video.

I don’t have the time (or energy frankly) to write a full takedown on this, but here is the bulleted version.

  • At no point does he actually talk about veterans benefits.  All the items he discusses are *retiree* benefits.
  • He’s not really talking about the 1% who served, he is talking about the 0.17% who receive retirement benefits (medical/pension)
  • Medical: Tricare annual enrollment fee for retiree families is $520/year.  Average civilian family health care cost is $13,375.
  • Pension: A 42-yo Lt Col (0-5) who retires in 2011 after 20 yrs of service and lives another 40 years will be paid an additional $1,920,000.00

It seems like if Stephen Colbert was really interested in defending veterans, he would mention that 83% of them receive none of the benefits mentioned above.

(h/t to @jasonmbro for bringing this video to my attention)

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15 Comments
  1. November 30, 2011 3:39 pm

    >”It seems like if Stephen Colbert was really interested in defending veterans, he would mention that 83% of them receive none of the benefits mentioned above.”

    Your framing of this implies that you think this arrangement is fundamentally unfair. Leaving aside for the moment that the concept of “fairness” is something of an artificial construct itself, I would submit that the current retirement system is fair enough. Not perfectly fair, but sufficiently so.

    Military compensation is a contract arrangement between the government and a volunteer: a person exchanges ‘x’ years of service for pay & benefits. The 17% that get retirement benefits chose to serve for a longer period in exchange for the promise of additional delayed compensation. The 83% that do not serve until retirement chose to part ways with the military and instead use that time to apply their talents elsewhere in the economy. Both decisions are presumably rational, generally speaking, and based on a person’s individual cost-benefit analysis. Everybody signs the same contract and has the same information about how the system is set up–so what’s unfair about that?

    Now, the sustainability of the current system is a somewhat separate issue. If it needs to change due to cost, fine: change it for that reason alone. But don’t dress it up as a “fairness” issue when the motivation is cost savings. I would say if we can’t afford the military we have, perhaps we need a smaller military.

    (I realize now that this comment may be better suited to the DBB post below. But I saw this one first, so here it is.)

    • jimmysky77 permalink
      December 1, 2011 7:22 am

      I sincerely believe that the military retirement system is flawed and I have written a longer post on that topic:

      http://gunpowderandlead.wordpress.com/2011/09/26/silent-majority/

      Please read that one and if you think I’m still think I’m incorrect than we can continue.

      I do agree with you that the sustainability of the system is a separate issue. The current system is clearly not sustainable, so it will require adjustment. My contention is that this adjustment should be substantial and include considerations other than time in service towards retirement benefits.

      • December 1, 2011 1:56 pm

        I did read your piece back in September, and upon re-reading I still disagree with your base argument that the current military retirement system is fundamentally unfair (if that’s not an accurate assessment of your point, please correct me).

        Let’s start with your statement that ["83% of veterans do not receive any retirement benefits and this percentage is almost entirely drawn from the junior ranks - the demographic that has done the vast majority of the fighting and dying over the last decade."]

        Of course this is undeniably true, but it also doesn’t tell us much–those who get out prior to retirement are by definition going to be mostly junior enlisted/junior officer. It’s also worth pointing out here that the more senior enlisted/officer personnel that DO stay until retirement all had to come up through those junior ranks in the same way as those who choose to leave. Their entire 20(+) years were not spent at their terminal rank, job, or specialty–they were at one point part of that demographic that does “most of the fighting and dying.”

        Next, you present ["a fictional, but completely plausible comparison between two military members"], in which you compare a USAF LtCol in acquisition against a U.S. Army SSG infantryman. That’s a little hyperbolic, but as a device to make your point, I don’t have a problem with it–except that it comes almost in the same breath as your criticism of Bacevich for being too exaggerated and appealing to emotion.

        A more apples-to-apples and less emotional comparison might involve an Army LTC/COL who commissioned in 1990, went to ODS as a platoon leader, did another couple deployments in the 90s (Somalia, Bosnia, Kosovo, etc; take your pick), as well as an unaccompanied year in Korea for good measure. In the 2000s, he spent a year in Afghanistan as a battalion S-3, a year in Iraq as a brigade S-3/XO, another year in Iraq as a battalion commander, and a year in Afghanistan as a brigade commander (or division staffer, whatever). Retires, gets the pay you describe (oh, but has to share it because he too has gotten divorced at least once along the way).

        Compare with that same Army SSG, who after 5 deployments is more realistically looking at a next assignment as a drill sergeant, TRADOC instructor, or recruiter. Probably promotion to SFC and school at ANCOC. Maybe even 2 or 3 years in an ROTC unit at some midwestern university. But regardless, he decides to punch out at the 10-11 year mark. But instead of settling for entry-level retail, he gets a job with a defense contractor making 2-3 times what he was before. Or he takes his post-9/11 GI Bill money and goes back to school, finishes his undergrad, gets an MBA and goes into the business world from there.

        The tl;dr version of my point: there are a multitude of potential scenarios, so comparing any two at random is probably going to give an incomplete or distorted view of the situation.

        More to the point, what I think you, Bacevich, and everyone including the DBB fails to address is the fact that any major re-structuring of the current retirement system will also necessitate an even more substantial revamping of the entire DOD personnel management system–promotion timelines, “up or out,” and so on.

        The current retirement policy serves the current structure and system: there are many jobs at the bottom of the hierarchy, and few at the top. Natural attrition is necessary and desirable to narrow the field. The benefit of additional delayed compensation is lucrative enough to retain a sufficient number to fill the top half of the pyramid. A significant reduction to that compensation might–might–have a negative impact on mid-grade NCO and officer retention. By how much, and would the trade-off be worth it to DOD? I don’t know, and I haven’t read anything that addresses that unknown in any detail.

        Flipping the question, in what way does a 3-5 year vesting 401K-style plan benefit the military with respect to recruiting or retention? From what I can tell, the military is doing just fine on both of those, so it strikes me as a solution in search of a problem.

        But the problem is fairness, you might say. We may just have to agree to disagree on that point. I don’t see fairness in military pay (to the extent beyond that which directly benefits recruiting and retention) as a vital national security issue, in and of itself.

  2. December 1, 2011 2:14 pm

    Real quick, on sustainability: it would be interesting to see the chart of rising retirement costs compared to the rate of increase of total personnel costs and overall DOD spending. That is, if it’s rising at a disproportionate rate, then retirement might be one of the first things to fix. If it’s a similar rate of increase, then overall force structure affordability might be the real problem.

    • jimmysky77 permalink
      December 1, 2011 3:38 pm

      Some good arguments that I don’t have the time to respond to right now. Thank you for taking the time to leave such cogent remarks.

    • jimmysky77 permalink
      December 2, 2011 12:35 am

      Putting together the chart you describe could easily be done, but it seems to me to be a largely academic exercise at this point. There are charts showing retirement liability vs. overall USG costs in this presentation, but nothing with cost vs. just DoD budget like you describe. http://goo.gl/yk5ja

      The consensus is that the dramatic growth that DoD budgets have seen over the last decade are flattening (in some scenario reducing in real dollars). Retirement costs must therefore flatten as well. The problem unique to these costs is that there is a substantial lag time to being able to level them. This is because you must factor in the 20+ years necessary to ‘grandfather’ people in and that there is very little likelihood of any kind of substantial changes to the benefits of current retirees.

      There really does not seem to be any way to argue that the current system is sustainable. The rub seems to be what is the best way to change it.

  3. jimmysky77 permalink
    December 2, 2011 8:18 am

    @forbesmm–

    You have correctly framed my position. I do believe that the current system is fundamentally unfair.

    We appear to agree (you say “undeniably true”) on the percentages who don’t receive benefits (83%), where they come from in the rank structure (lowest ranks) and where the majority of the casualties of the last ten years come from (also lowest ranks). However, this is the part where we seem to disagree. You say…

    “personnel that DO stay until retirement all had to come up through those junior ranks in the same way as those who choose to leave. Their entire 20(+) years were not spent at their terminal rank, job, or specialty–they were at one point part of that demographic that does “most of the fighting and dying.”

    This is also undeniably true…right up until the last phrase. For personnel retiring at their 20 year mark in 2011, they were literally never part of a demographic that was doing much “fighting and dying.” They joined the military in 1991 missing the Gulf War, and maybe supported the campaign in Bosnia starting in 1995, a few remotes to East Asia, and maybe some fairly routine actions such as Northern Watch.

    Equating the sacrifice of military personnel who served their first 10 years from 1991-2001 v. to those who did it in 2001-2011 seems impossible. These are, of course, macro level observations and there will be HUGE individual variations within these ranges of service, but this hypothetical Class of ’91 will have largely transitioned out of that demographic by the time Afghanistan and Iraq start. Over the next decade (2001-2011), this “Class” will continue to serve and transition into leadership roles. They will deploy and they will bear the burdens associated with their new leadership positions.

    I want to make clear that my intention is not to somehow frame this as a certain group (aka those eligible for retirement right now) were just lucky or in anyway unworthy of the retirement benefits they are now eligible to receive (this is an unfortunate implication in having this discussion). My only assertion is that Time in Service is simply not a sufficient measure upon award (or deny) these benefits.

    Moving on. My comparison of an Army Infantry SSG to a USAF Acq LTC was absolutely intended to demonstrate both ends of the spectrum. This is something I probably could have been more explicit in pointing out in my original piece. However, I do not agree that this is “hyperbolic” (which is defined as “not intended to be taken literally”) since both of these individuals are very well within the bounds of reality. There is certainly an appeal to emotion in my post (especially this portion), but I don’t think it even approaches the level in Bacevich’s article and I tried to be very explicit about the reasons I think the current system is unfair.

    I completely disagree with you that it needs to be more of an “apples-to-apples” comparison. I very much wanted to point out the disparities at the extremes of the scale to more clearly highlight the unfairness of the current system. The example you lay out is certainly also possible, but by turning the SSG into a Defense Contractor (at 2-3x the salary) or an MBA/business success story, you seem to be implying that it is ok that the system is unfair because people can still succede.

    A point I do agree with you on is that there is an organizational cost to restructuring the retirement system and part of that may be the “up or out” model. You are correct that no one has discussed it much and it would be beneficial for us to be cautious of 2nd and 3rd order effects.

    The effects of a 401(k) on recruitment/retention of 18-24 yo’s will probably be laughable. I disagree that it is a “solution in search of a problem” because in 10-15 years that same person will likely see that 401(k) differently. I do think that the military retirement system has an obligation to be mindful not just of what young military members want at the time and what will help with recruitment (signing bonuses), but what will be beneficial to the long-term health of service members and veterans (such as 401(k)s).

    Ok, now you made me write a comment that was 10x as long as my original post…

    • December 2, 2011 3:03 pm

      ["For personnel retiring at their 20 year mark in 2011, they were literally never part of a demographic that was doing much “fighting and dying.” … Equating the sacrifice of military personnel who served their first 10 years from 1991-2001 v. to those who did it in 2001-2011 seems impossible."]

      That’s right, it is impossible. As I also mentioned in my response to Andrea, making long-term policy decisions based on a snapshot of a single cohort year-group (or even a handful of year groups) is a terrible idea. And you acknowledge this too, so I think we agree here. You say that time in service isn’t a sufficient measure to determine retirement benefits — OK, that’s a valid position, but I think it depends largely on how one defines “sufficient.” Not to get all semantic on you, but “sufficient” to do what? Sufficient to recruit enough people to fill the ranks? Sufficient to prevent mass exodus after 1, 2, or 3 terms of service and retain enough to fill senior leadership? Sufficient to be fair to all? If it’s the latter–and I suspect it is–then exactly “how fair?”

      On the use of “hyperbolic”: I meant it the sense of “exaggerated to make a point,” and I don’t have a problem with that (you’re also right that the appeal to emotion is of a lesser degree than Bacevich). But I think that device and your example is a weak support for your argument about unfairness. In my mind, “unfair” is a different outcome for a similar situation (so, two SSGs, both around the 10-year mark, one gets some separation benefits, the other does not for whatever reason). You describe divergent outcomes for very different situations, which makes me think “Well, why shouldn’t they be paid differently? They did different jobs.” Emotionally, yeah, I want to root for the guy who was in the mud & taking fire for 10 years over the stereotypical office drone. But from the cold utilitarian perspective of economics, I understand that infantrymen are in higher supply than acquisitions specialists, so they get paid less, despite the clearly obvious difference in “suck factor.”

      ["by turning the SSG into a Defense Contractor (at 2-3x the salary) or an MBA/business success story, you seem to be implying that it is ok that the system is unfair because people can still succeed."] That’s one way of looking at it, but I was more trying to point out that the system isn’t as “unfair” as an examination of the far ends of the spectrum might lead one to believe.

      ["there is an organizational cost to restructuring the retirement system … it would be beneficial for us to be cautious of 2nd and 3rd order effects."] <== Yes. And not just in a "it would be nice if we considered this" sort of way, but more "we could severely damage the military if we don't." You touch on this in one of your previous comments, but the massive time lag inherent in modifying the retirement system makes this potentially treacherous. If there isn't some serious analysis put into this point, we might not know for decades how bad we screwed it up, at which point it might be too late for a quick fix.

      Agree that 18-24 year-olds probably won't consider the long-term calculus of a 401(k) plan in their decision to sign/not sign at the recruiter's office. But a 28-34 year-old might when it comes time to re-enlist (or the officer equivalent) or separate. So I guess I was speaking more to retention effects that recruiting, particularly for the enlisted side (officer recruits might look a little longer term, given their larger up-front investment in pre-commissioning education).

      Finally, here is where I think our opinions diverge the widest: ["I do think that the military retirement system has an obligation to be mindful not just of what young military members want at the time and what will help with recruitment (signing bonuses), but what will be beneficial to the long-term health of service members and veterans (such as 401(k)s)."]

      For veterans' benefits (like long-term health care for service-connected illnesses), yes, DOD has an obligation to do the right and fair thing for them. But for compensation, no. I think DOD's primary obligation is not to the individual, but to the nation. That is, to provide the best military at the most reasonable price (**important to note here: we're talking about personnel costs, not weapons systems acquisition; also, conscription is out of the question**). If contributing to a 401(k) plan for junior service members contributes to that goal, great, let's do that. If it's not necessary to do so, why spend the extra money? And if the 20-year retirement system is too expensive, then we'd better be damn careful about what we find to replace it, so a penny-wise-pound-foolish attitude today doesn't come back to bite us later on.

      • jimmysky77 permalink
        December 2, 2011 4:31 pm

        I’ve got nothing. You defended all your positions passionately but with logic. You fairly and respectfully restated my positions while clearly highlighting our points of disagreement. While you have not changed my perspective on this issue, I freely admit that I need to further consider some of the items that brought up.

        In closing, “WHY DO YOU HATE THE TROOPS!!”
        :-)

      • December 3, 2011 12:44 am

        Since this ^^^ is probably the most civil comment in the history of the Internet, I’ll refrain from doing this:

        Seriously, though: good talk. More than I expected from an America-despising, Troop-hating Communist. :-)

  4. Andrea permalink
    December 2, 2011 12:25 pm

    I maintain a great deal of respect for this argument and the two people making it because I feel that the points that are being discussed are not only relevant to the conditions we now face but presented it a manner that, I should hope, are being discussed at all levels. But I respectfully disagree with some of the points and would like to lay those out briefly:
    The 83% – This number is designated as the total number of personnel who serve on active duty but do not receive the benefit of retirement. It is identified as a major factor for changing the system and pointed to as a reason that the system itself is not equitable. But what is being omitted from this discussion is that these individuals are already eligible to enroll in the 401k program that the military is proposing replace the retirement system entirely. The 83%of personnel can contribute and leave the service at the time of their choosing to pursue any of the options that @forbesmm pointed out and maintain that TSP account, continue to contribute, take a loan on that account if they require funds or cash it out as a typical retirement when they come of age. Granted that this account is not the same as receiving a military retirement because it is subject to the rules regarding typical 401ks but it is certainly not “nothing”.

    The Class of ’91 – Based on your caveat regarding this argument I suspect that you realize that it may not be the most compelling, and you are right. We both agree that when a military member served is not a relevant reason to provide them with retirement benefits, because a service member is subject to national security conditions beyond their control. Is my grandfather’s service during WWII and in Korea worth more than mine under GWoT? He certainly had to face more physically and emotionally grueling conditions that I did, since he was an infantryman in the Army. So should we honor the service of those who physically sacrifice over those that jockey a desk all day? Personally, I feel these questions pose challenges in seeking a “right” answer because considerations along this line do not appeal to facts, but to moral and emotional considerations. I imagine we would both agree that these cannot and should not be deciding factors. Time in service, however, is not as debatable – a military member can choose to continue in their career field (or even cross train into another), progress in the up or out fashion, and achieve retirement after 20 years of honorable service and this works and fits in the existent system as @forbesmm articulated in his initial comments.

    Unfairness given civilian system: Many have argued that system of retirement is not in line with the civilian workforce and should be changed to meet those standards. These arguments clearly do not take into consideration that military life, itself, is not on par with civilian life with regards to the challenges it poses not only to the military member but also to the spouse and family of those serving. Stars and Stripes just released information (http://www.stripes.com/blogs/stripes-central/stripes-central-1.8040/military-spouse-unemployment-at-26-percent-1.162166) illustrating the severity of the issue – military spouse unemployment is 26%. In order to place this number into perspective, the November unemployment numbers for the US is listed at 8.6%. Additionally, the RAND corporation released a report outlining how children of service members deployed for extended periods of time face increased academic difficulties (http://www.rand.org/news/press/2011/04/04.html) The challenges facing military families, who often exists on one paycheck due to the high spouse unemployment rate has led many military families to seek support from food pantries, food stamps or other public services to survive (http://www.washingtonpost.com/local/troops-reach-out-for-help-feeding-their-families/2011/11/22/gIQAQDtXpN_story.html)

    I would like to return to the portion of the conversation which, I feel, there may be the most consensus.
    1. The cost of the military retirement system is growing beyond the ability to sustain it given the current allocation of funding within DoD.

    2. The cost of the benefits regarding retirement are higher at the most senior commissioned level than at the senior enlisted level.

    3. There is a desire to retain those service members who are performing and excelling and reward the service of those who remain in challenging and necessary career fields for the long haul.

    Perhaps taking these consensus points and developing suggestions can yield a more appropriate argument for maintaining a modified retirement system that falls within the budgetary limits but continues to retain the best personnel in order to maintain our status as a quality military, which I think we also agree is necessarily now more than ever, given the global environment.

    Personally (and finally!), I do not feel that the proposal offered by the DBB adequately addresses the complexity of the problem at hand. The DBB have concluded that Retirement = Unsustainable ∴ Eliminate retirement

    There has to be a better way.

    • jimmysky77 permalink
      December 2, 2011 4:32 pm

      I have more to digest in this thread. I’ll write more later this evening.

    • jimmysky77 permalink
      December 2, 2011 7:23 pm

      I’m with Mike on the TSP argument. Yes, TSP is currently available to troops, but in its current form its not really comparable to a traditional 401(k) or to what the DBB proposed. TSP for military members is, almost literally, “nothing.” Since there is not employer contribution, it is little more than a savings account that works with DFAS. From a strategic messaging perspective this may have been a mistake for the DBB to even reference TSP since it is an established program with currently non-advantageous rules [FTR, I've stated repeatedly that this is the aspect of the DBB proposal that concerns me the most]

      You have both stated (at length) that my ‘Class of 1991′ argument was poor. I disagree, because I think that it highlights the point that the sacrifices made by military personnel will vary over time. The disagrement is that I think this variation should figure into retirement benefits and you do not (aka Time in Service is only variable). I think that if your military career consists of 20 years of minimal sacrifice than you should receive lower retirement benefits than someone whose career had more. Regardless of whether that is caused by relative peace in the world, Service you joined, or career field. You ask, “So should we honor the service of those who physically sacrifice over those that jockey a desk all day?” -Yes, yes we should. This is why we compensate for hardship and hazardous duty pay. The question is not whether we should do it, but whether we should extend that to retirement consideration.

      Agreed that there are several aspects of military life that are recognized hardships. You point out spousal unemployment (check), hardships facing children of deployed parents (check) and that this unemployment causes military families to go on food stamps (which may be a causal stretch) but ok. The thing about this is none of these things have anything to do with retirement. These challenges are faced regardless of whether you stay in or get out.

      The portion you neglect to mention (and we are so far beyond the initial intent of this post) is that unemployment, food stamps and homelessness are challenges that predominantly face young veterans as well. These are the 83% that I’m referring to when I talk about the distribution of retirement benefits.

    • jimmysky77 permalink
      December 3, 2011 5:41 pm

      Ok, finishing my reply from the other day…to address your numbered points

      1. The cost of the military retirement system is growing beyond the ability to sustain it given the current allocation of funding within DoD.

      I would use the phrase “has grown” but other than that we agree.

      2. The cost of the benefits regarding retirement are higher at the most senior commissioned level than at the senior enlisted level.

      True on an individual level, but probably not at a macro-level; I haven’t looked at pension costs to see split between Os and Es to be able to tell for sure. I’m also not sure where you are going with this particular point. You don’t think retirement pension should be tied to rank? You think it should be an established amount regardless of rank? (Not trying to be snarky, I legitimately don’t understand where you are going with this)

      3. There is a desire to retain those service members who are performing and excelling and reward the service of those who remain in challenging and necessary career fields for the long haul.

      True, but I think that there is an implied assumption in those statements (as in all arguments to the retention effects of current retirement system). How do we know that the people who chose to stay in are the “best” people? The short answer is, we don’t. There is no information (to my knowledge) that shows that somehow only predominantly “good” people stay in while “bad” people get out.
      [IMO, this is probably the biggest implied assumption built into the current retirement system.]

      I also didn’t agree with your assertion on the DBB’s approach to retirement. It was not just them that concluded that retirement was unsustainable, and they didn’t recommend to “eliminate” retirement, though I will concede its fair to say they recommended to privatize it.

  5. December 2, 2011 2:02 pm

    Great points. A couple quick responses:

    Re: your first paragraph, yes, “the 83%” are all eligible to enroll in TSP now. But, all contributions to it come out of their paycheck; it doesn’t really cost DOD much of anything at all. The question is, should DOD kick in a significant employer contribution/match to that?

    Re: “class of ’91,” agree that making long-term policy decisions based on a snapshot of the cohort that becomes eligible to retire this year is a very bad idea.

    And your conclusion: ["Personally (and finally!), I do not feel that the proposal offered by the DBB adequately addresses the complexity of the problem at hand. The DBB have concluded that Retirement = Unsustainable ∴ Eliminate retirement. There has to be a better way."] <== Yes.

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