Elusive 'grand bargain' on military benefits.

• Author: Erwin, Sandra I.
• Position: Defense Watch

Few issues in Washington are as politically toxic as meddling with military pay and benefits.

That was clearly the lesson from the January 2014 Murray-Ryan budget deal that proposed to reduce the annual cost-of-living adjustment by one percentage point for military retirees under the age of 62. The proposal sparked more outrage than even seasoned beltway insiders had predicted, and the idea was quickly rejected.

The question now is whether the COLA flap effectively poisoned the well for any future change in how military service members are compensated.

The topic will be back on the agenda next year as an independent commission chartered by Congress prepares to deliver a proposal in February to reform military compensation. Proponents of change contend the status quo is financially unsustainable as the cost of pay and benefits grow and the Pentagon's overall budget declines.

As a result, the military services will have to keep cutting people. Making minor adjustments to retirement and health benefits--to future service members while grandfathering current ones--could relieve the financial pressure and allow the military to sustain an all-volunteer force, experts argue. Reformers also insist that the current retirement system, which rewards those who serve more than 20 years, is out of touch with the needs of most troops who don't stay in the service that long but still deserve some form of retirement benefit.

"The chickens have come home to roost on this issue," said Charlie Houy, former Democratic staff director of the Senate Appropriations Committee. The Murray-Ryan miscalculation could make it even more difficult to change the status quo than it has ever been, he said. "We've tried this in this past. ... We keep kicking the can down the road."

According to new data compiled by the Bipartisan Policy Center and the American Enterprise Institute, compensation per active duty member has increased by 42 percent--from $88,000 to $125,000--between 2001 and 2012, in 2012 dollars. Average per-troop annual compensation includes $76,000 for pay and other benefits received in cash, $21,000 for retirement, $21,000 for health care and $7,000 for education, commissaries and other perks. Most of the increase over the past decade was driven by retirement and health care costs.

Although personnel costs consume just one-third of the defense budget, that pot of money will be shrinking over time as the Pentagon cuts spending to comply with the Budget Control...