Un-knot your undies, at least on my behalf

The internet and my Facebook page are exploding with posts, memes, and articles apoplectic over the “cuts in military retirement and disability pay” in the appropriations bill on its way to the President for signature.

As a disabled veteran whose military pension is his primary source of income, I am fully qualified to tell all of the pundits to “just chill.”

First, NO ONE’S BENEFITS ARE BEING CUT.  That’s right, no one will be earning a single dollar less than what they are entitled to.  Not people already retired, not those who are on active duty and might someday retire (which, by the way, is only a small portion of those who actually serve in the military.

What the bill does is set a limit on the COST OF LIVING ADJUSTMENT effective in JANUARY 2016 (that’s two years from now).  Cost of living adjustments were never part of the entitlement, folks, just like they’re not guaranteed for the vast majority of defined-benefit pension plans, public or private, in the US (Great Britain, by law, guarantees inflation adjustments to pensions–but that’s socialism, so we don’t want to do that).  In most years, the DoD budget includes increases to pension benefits to adjust for inflation, and I’m glad they do, but retirees have never been “guaranteed” a COLA, and right now, it’s important for our nation to cut deficit spending.

What Congress just approved, was a bill that set the 2016 COLA  to 1% less than the inflation rate, and then only for retirees between the ages of 40 and 62 (like me).  The thought here is that many, but certainly not all, of these retirees go on to start second careers, so they are not solely surviving on their retirement checks.  I’m 48, so this change will affect me for 12 years, beginning two years from now (assuming Congress takes no further action in the next 14 years, which is not a valid assumption, as sooner or later, the political and economic winds will change, and Congress will adjust the appropriation to address this, if history is any indicator).  Let’s make this a little more concrete:  For simple calculation purposes, let’s say I receive a pension equal to $40k/year, and that inflation averages 3% per year.  ASSUMING (which isn’t valid, but we’ll do it, to make the point) that Congress were planning an annual COLA equal to inflation, my pension would increase 3% per year, but this bill changes that increase to only 2% per year.  Beginning in 2016, and through 2027 (when I will turn 62–man, I’m getting old), my real income would decrease slightly, although my nominal pension will continue go up.  How much?  In that 12 year period, I’ll receive a TOTAL of $10, 729 than if my COLA had matched inflation.  However, since there is no guarantee of inflation-proofing with military retirement, or most other defined-benefit pensions, for that matter, I’m NOT losing money, I’m just not receiving as much inflation protection as I would like.  The bill also provides for a one-time catchup when I turn 62, so that from that age on, when I’m less likely to be working, and more likely to truly need that pension to provide for myself, it will then maintain real spending power for the rest of my life.  I haven’t really taken the time to do the math, and I haven’t found the actual bill to read the details of the catchup provision, but I’m comfortable that my analysis is close enough for purposes of discussion, as well as for my long-term financial planning.

Most of our country has been up in arms about the runaway federal budget deficits.  We don’t typically want to pay more taxes, and most insist that the government should live within its means, which means cutting spending.  This budget deal cuts spending.  The problem seems to be that we are all for cutting government spending, unless it’s on something WE think is important!  Here’s the rub:  for every government dollar being spent, SOMEBODY thinks that expenditure is important.  In 2010, a bipartisan commission took a hard look at fiscal reform to address deficit spending and develop proposals to put the federal budget on track for long-term prosperity and economic health.  They did good work, and on page 45 of their final report they recommended the very actions established in this bill for reforming federal workforce retirement programs.

We’ve been demanding reform.  Now we’re getting it.  The pain is widespread; veterans should not be exempt.  I’ll leave you with some thoughts from the Preamble of the report cited above.  This is the collective work of some very smart people from across our political spectrum who devoted themselves to difficult, careful study of the problem, and what it’s going to take to solve it:

 The problem is real.  The solution will be painful.  There is no easy way out.  Everything must be on the table.  And Washington must lead….  we share a common belief that America’s long-term fiscal gap is unsustainable and, if left unchecked, will see our children and grandchildren living in a poorer, weaker nation…. None of us likes every element of our plan, and each of us had to tolerate provisions we previously or presently oppose in order to reach a principled compromise.  We were willing to put our differences aside to forge a plan because our nation will certainly be lost without one…. In the weeks and months to come, countless advocacy groups and special interests will try mightily through expensive, dramatic, and heart-wrenching media assaults to exempt themselves from shared sacrifice and common purpose.  The national interest, not special interests, must prevail. We urge leaders and citizens with principled concerns about any of our recommendations to follow what we call the Becerra Rule:  Don’t shoot down an idea without offering a better idea in its place.

Many of you probably have already forgotten about this commission or its report.  It didn’t catch on.  Seems everybody had some favorite program that was targeted in their recommendations, just as the authors predicted.  So we just abandoned it, and kept right on spending.  It’s too bad.  This was probably one of the best efforts put forward by our national leadership in quite some time.

It seems to me that what we really have is a terminal case of selfishness.  We demand sacrifice from all others, so that we can preserve what we have.  In the end, no one is really willing to sacrifice themselves, so we continue full speed ahead on the course we’re on.   I’m not playing that game.  If by reducing the amount of annual increase I will see in my pension, we can start reining in the spending that has resulted in a national debt which former Chairman of the Joint Chiefs of Staff Admiral Mike Mullen cited as the most significant threat to our national security (see cited report, page 20), then I’m willing to make a bit of sacrifice for the benefit of our nation.  Please don’t be offended on my behalf.

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