September 23, 2013
As the Defense Department maps out plans to absorb long-term budget cuts, military compensation and troop levels are among the primary targets, the Pentagon’s top financial officer said.
“I think we will go after military compensation aggressively,” DoD Comptroller Robert Hale said during public remarks at a recent meeting of the Reserve Forces Policy Board.
Hale said annual military pay raises likely will fall below the rise in inflation next year, and that may be the first of many similar reductions.
Congress is battling over whether to give troops a raise to match the official Employment Cost Index — a measure of private-sector wage growth — of 1.8 percent, or to limit the pay bump to 1 percent. Hale and other top DoD officials are advocating for the lower raise as a way to slow the long-term growth of personnel costs.
“I think we will prevail in that,” Hale said.
That would be the first time military pay would fall below the ECI since 1998. For much of the 2000s, Congress approved hefty raises above the ECI in an effort to close a purported “gap” between military and private-sector pay that peaked at about 13.5 percent in the 1990s. But those days are over. DoD argues that any pay gap has disappeared when the total military compensation package — including tax-free housing and food allowances — is considered.
“I would not be surprised to see us propose continued limits on military pay raises,” Hale said, adding that officials do not believe limiting the growth of military pay will significantly affect recruiting and retention.
“As we look out right now — even in a period when unemployment improves — it appears to us that our compensation package is sufficient to let us do that and we could slow the growth … not cut pay, but slow the growth.”
Hale is central to the Pentagon’s internal discussions on how to absorb the sweeping budget cuts known as sequestration that began in March. Current federal law requires the Defense Department to crop about 10 percent from 2012 spending levels and face similar spending caps for the next 10 years.
Reducing troop levels will be another way to meet those budget targets, Hale said.
“We just need to push for force structure cuts and some slowing of compensation,” Hale said. “The United States military has got to get smaller.”
The current national security strategy calls for a “rebalance” in the Asia-Pacific region and avoiding costly boots-on-the-ground stability operations. That will tend to hit the Army and Marine Corps most directly, but all four services likely will face troop cuts, he said.
“That strategy will tend to lead to disproportionate cuts to the ground forces but the Navy and the Air Force are going to have to get smaller too,” Hale said.
Reducing force levels likely will begin next year and continue steadily for the next several years, Hale said.
“It is very difficult for us to quickly cut our own forces because we would prefer not to go to involuntary separations where we can avoid them,” he said. “So it just takes time to get the units out… not to mention all the political problems.”
Initially, the strategy likely will require deep reductions in modernization programs, which are easier to cut on short notice. But over time, personnel cuts will account for more savings.
“We need to make cuts in [fiscal 2014] in military personnel aimed at helping in  or we will be in exactly the same situation,” Hale said.
DoD needs to cut force size to avoid a so-called hollow force, he said. “We could have a force that is too large, that is neither ready nor perhaps properly equipped. We need to try to avoid that.”
Hale did not cite specific targets for troop cuts. Defense Secretary Chuck Hagel in July said today’s Army of about 535,000 could fall to 420,000 or even 380,000 and the Marine Corps may drop from today’s 194,000 to 150,000. Hagel did not suggest that the Navy and Air Force would also face cuts.
For many months, Pentagon officials refused to plan for sequestration cuts, hoping that Congress would reach a broad budget agreement that would allow defense spending to rise by raising taxes and cutting Social Security and Medicare benefits.
But Hale said he sees no deal on the horizon. “Everyone agrees that it is highly desirable. It’s also highly unlikely. I’d say it requires a political miracle. In fact, at this point, I’d say it probably requires consecutive political miracles,” Hale said.
“Perhaps a bit more likely is a mini-budget deal,” Hale said, describing a hypothetical agreement that would lift some, but not all, of the defense spending caps.
“How likely is a mini deal?” Hale asked rhetorically. “I would say we’re still talking a political miracle.”