The Congressional Budget Office (CBO) warns budget deficits will reach 100 percent of Gross Domestic Product (GDP) by 2038, if current policies are not changed. There is a “substantial imbalance in the federal budget over the long run, with annual revenues consistently falling short of annual Outlays,” according to CBO.
CBO acknowledges that current deficits are falling due the success of changes to tax and spending policies. However, it cautions that deficits will rise again as spending for social security and health care increase and interest on the debt rises as interest rates rebound.
In its report “Options for Reducing the Deficit: 2014 to 2023,” CBO identifies 103 options to reduce the deficit, including spending cuts and revenue increases. Some of these options would significantly affect DoD programs, servicemembers, and retired personnel.
One option would reduce the size of the military through 2021 to bring it in line with the spending levels called for in the Budget Control Act. CBO concedes that cutting forces would reduce the duration and number of military operations that could be conducted. However, the report stresses this action could produce $560 billion in savings through 2023.
Another option would replace 70,000 military personnel performing “commercial” jobs with 47,000 civilians, saving $20 billion. CBO says fewer civilians would be needed in these jobs because “civilians have fewer collateral duties and do not generally rotate among positions as rapidly as military personnel.”
CBO options would also affect specific DoD programs. One option would cancel the F-35 (Joint Strike Fighter) program and buy the most advanced current versions of F-16 (Air Force) and F/A-18 (Navy and Marine Corps), saving $37 billion from 2015 to 2023. Other program specific CBO options would: cancel the Army’s Ground Combat Vehicle Program and acquire upgrades for the Bradley Infantry Fighting Vehicle (-$15 billion); stop building Ford Class Aircraft Carriers after the U.S.S. John F. Kennedy (-$18 billion); cut the ballistic missile submarine force to eight in 2010 by retiring one submarine per year from 2015-2020 (-$16 billion); limit the buy of the Littoral Combat Ship to 24 already built or under contract and then cancel the program (-$18 billion); and defer development of a new long-range bomber until after 2023 (-$32 billion).
Regarding military compensation, a CBO option would cap increases in military basic pay at .5 percent below the increase in the Employment Cost Index (ECI), saving $25 billion from 2015 to 2023. Current law requires military pay increases to be set at the projected full increase in the ECI, unless adjusted by the president or the Congress.
Another CBO option would reduce the annual pay raise for federal civilian employees. Current law sets annual civilian pay raises at .5 percent below the increase in the ECI, unless adjusted by the president or the Congress. The CBO option would reduce the pay raise called for under law by .5 percent from 2015 through 2023, saving $53 billion for the entire government.
DoD military and civilian retirees would also be affected by some CBO options. Under one option, beginning in January 2015, benefits for new military retirees would be computed on a 60-month average (vs 36 months currently). Civilian retirees’ benefits would be calculated on a 5-year average (vs 3-years currently). Together this would save about $6 billion through 2023. Another option would eliminate the payment of concurrent receipt of retirement pay and disability compensation to military retirees, saving $108 billion during 2015-2018.
CBO options also affect military retiree health care programs. One option would introduce a minimum out-of-pocket amount paid by military retirees and their family members under TRICARE for Life. Under this option, covered retirees and family members would have to pay the first $550 of the cost-sharing payments under Medicare and 50 percent of the next $4,950, capping total out-of-pocket costs at $3,025. This option would save the government a total of $31 billion through 2023.
Another CBO option has two alternatives that would require working-age military retirees to pay more for TRICARE. Under one alternative, enrollment fees, deductibles, and co-payments would increase for working-age retirees enrolled in TRICARE, saving about $20 billion through 2023. Under the second alternative, working age military retirees and their families would be ineligible for TRICARE Prime. They would be required to enroll in TRICARE Standard or TRICARE Extra, with higher premiums and caps for maximum out-of-pocket catastrophic costs. This alternative would save the government $75 billion through 2023.