Judiciously cutting cost-of-living increases in military pensions is the sort of tough budgeting Congress must do if it’s going to responsibly restrain government spending.
Cutting any benefit for the men and women in uniform is painful and politically perilous. But federal pensions can’t be off limits. Unsustainable retiree benefits are laying waste to state and municipal coffers across the country. Congress is right to make surgical cuts now, with one caveat: Veterans who retired for medical reasons should be exempted from the cut because their ability to earn in civilian jobs could be compromised. Other than that, Congress pared the benefit in a way that will conscientiously minimize the pain for service members.
It reduced the annual cost-of-living adjustment starting in 2016, from the rate of inflation to 1 percentage point less than that rate. Active-duty soldiers are eligible to retire after 20 years, no matter what their age, with a pension equal to about half their average pay during the last three years of service. But only retirees younger than 62 will see their cost-of-living adjustment cut. At 62, the pensions will be bumped up to the amount they would have been had the full cost-of-living adjustment been in effect for all the previous years. All retirees 62 or older will continue to receive the full adjustment each year.
The change was part of the budget deal Congress reached in December to avoid the possibility of another government shutdown and to eliminate $63 billion in destructive across-the-board spending cuts. The pension change will save $6 billion over 10 years, but there’s a lot of political pressure to reverse course.
Shaving cost-of-living adjustments during prime working years reduces the incentive for relatively young service members to quit without penalizing them once they reach a more customary retirement age. Retirees will still get routine pension hikes; they’ll just be a bit smaller.