U.S. Budget Experts: Military COLA Retreat Raises Deep Concerns

Published Feb 18, 2014. By John Shaw. In Market News International (MNI).

WASHINGTON (MNI) - This past Saturday afternoon, squarely in the middle of a long Presidents Day weekend, the White House press office released a brief statement announcing that President Barack Obama had signed two recently passed bills: legislation to suspend the statutory debt ceiling until March 15, 2005 and a bill to repeal a reduction in the cost-of-living adjustment to pensions for working age military retirees.

The debt ceiling showdown this winter attracted considerable public attention, both because of the consequences of an impasse and the dramatic reversal that congressional Republicans were forced to accept on the issue.

Just three years earlier, House Speaker John Boehner vowed to use the debt ceiling as leverage to demand that Obama and congressional Democrats to accept major entitlement reforms, demanding spending cuts as great as the debt ceiling increase.

However Republicans decided this year, in the aftermath of this last fall's 16-day government shutdown and debt ceiling stalemate, there was little to be gained by another debt ceiling battle with the president, so they agreed to allow a clean debt ceiling increase.

But some budget experts argue it was the legislation to repeal the COLA reduction for some military pensions that is fraught with the most consequence for the nation and raises hard questions about how the nation will reform its entitlement programs.

The military pension COLA reduction provision was part of the December budget agreement between House Budget Committee Chairman Paul Ryan and Senate Budget Committee Chairman Patty Murray.

That agreement set discretionary spending levels for fiscal year 2014 and FY2015, making slight upward adjustments from spending levels established in an earlier budget agreement. This upward adjustment was to be paid for by extending the sequester for mandatory programs for an additional two years through 2023, increasing aviation security fees, and adjusting both federal civilian and military retirement systems.

The military pension provision would have reduced by 1 percentage point the cost-of-living adjustment for veterans under 62.

However, the House voted 326 to 90 last Tuesday to repeal that provision and paid for it by extending the sequester for mandatory programs for another year, until 2024. The Senate approved the same bill Wednesday on a 95 to 3 vote, sending it to Obama for his signature.

During the congressional debate, most lawmakers from both parties argued that the military COLA reduction in the December agreement was unfair and needed to be repealed.

Ryan, chairman of the House Budget Committee, defended the military COLA reduction as sound public policy. Backtracking slightly, Ryan said he was open to adjusting it, but only with a credible deficit reduction alternative.

"I'm open to replacing this reform with a better alternative. But I cannot support kicking the can down the road," Ryan said.

Republican Senator Jeff Flake of Arizona was one of very few lawmakers who defended the initial COLA reduction provision and chided Congress for reversing itself within two months.

"How do we convey to the nation the seriousness about solving the debt crisis when at the first sign of political pressure we repeal one of the deficit reduction measures?" Flake asked last week.

Bob Bixby, executive director of the Concord Coalition, said the large bipartisan vote in both chambers last week to rescind the military pension COLA provision is troubling.

"This was the one hard choice that was made a few months ago in the Ryan-Murray budget agreement," Bixby said.

"Arguably, it was the only hard choice they made," he said, adding that while cost of the COLA repeal decision is not large in dollar amounts, the message it sends about fiscal policy is profound.

In its weekly budget report released Tuesday, the Concord Coalition called the military pension COLA reversal "a disappointing show of political panic."

It said: "The episode does not bode well for future reforms in military benefits - or perhaps in any 'mandatory' benefits, which are not subject to annual congressional appropriations. Yet mandatory spending is a key driver of the large federal deficits projected for the coming years."

The Committee for a Responsible Federal Budget said in a blog that the COLA repeal bill, although "technically offset over ten years" is a "step backward for fiscal responsibility. It partially repeals one of the few entitlement reforms in the budget deal and offsets it with an extension of a policy that cuts spending across the board in a ham-handed manner."

The budget group said the military pension COLA reversal "shows a lack of commitment to entitlement reform, and feeds the notion that similar reforms may not take effect."