If you wanted to make sure that the Stock Market was protected from failure, what might you do to make that happen? You would want to make sure that all Americans had an invested interest in keeping the Stock Market viable. You would want to make sure that everyone had investments of one type or another in Wall Street. Private Corporations have already started that process... pension plans for most private corporations are a thing of the past and 401(k) plans are de riguer.
But what if it wasn't enough? What if you had gathered all the new business you could find from those private corporations? How would you go about getting more business?
How about getting the United States Military involved?
What if every American soldier had investments in our private companies?
What if every single military man and women had their retirement pay locked up in the Stock Market and it looked like it was about to tank?
Well, if some Pentagon officials get there way, that is exactly what will happen.
Goodbye Military Retirement - hello Stock Dividends!
Last night, jimstaro wrote a diary about this very same subject. The news has finally hit the mainstream press. But even better, a couple of military wives are taking this to their Senator's desk. I am hoping more military families will do this. I am hoping civilians will join us - we need your help to fight this one. Below, I am providing some ammunition.
A group calling itself the Defense Business Board has sent a proposal to congress to completely change the military retirement system. According to their suggestions, those currently serving should not be grandfathered but should immediately start placing a portion of their hard earned pay into a 401K. The government would then match that payment. Even worse, the amount saved at the end of the day does not come close to the current 20 year-retirement plan. They are trying to replace our pot roast (tasty, but not filet mignon) with dog food. Not even an attempt to give us ground chuck somewhere in between.
To make things worse, the plan is built on half truths. A careful reading of the Power Point presentation (of course, it's the preferred way to brief Pentagon officials and Congress), makes a military community member's skin crawl. And not just my own.
Today, we're going to address three slides. The first is called Where We Are Today. The next two will be Findings of the Defense Business Board. I will present the slide and then commentary below.
Point #1 - We agree that the All Volunteer Force has been a success - outstanding we won't agree on. When the current force is stressed from increased deployment levels and not enough dwell time, the system is not outstanding. But whoever wrote this Power Point Presentation knew his audience - he got everyone thinking about OUTSTANDING and pushed up the patriotism level just enough to get people a little bit excited about supporting their country. Psychology in action, folks.
Point #2 - Congress has recently increased pay and compensation. However, Congress has also taken away benefits in the past, such as free health care from military retirees. Again, this phrase is aimed at making any Congressman or their staffer reading this slide feel pretty good about themselves and priming them to like what they are going to hear.
Point #3 - Here is where the real manure pile begins. Military compensation is higher than that of average civilians with similar education levels and a great graphic to show us how true it is:
There are multiple problems with this point.
First, compensation in the military includes all kinds of things that are not salary, like housing and dislocation allowances. Or, hazardous duty pay for serving in a war zone. Or what about being tax free while deployed to a desert? Those later two will disappear when we are no longer at war. Watch the compensation numbers drop then. Comparing military compensation to civilian compensation straight across the board is like comparing apples to oranges. They are both types of fruit.
Second, although military compensation is seen as raising, you'll notice that civilian wages follow a more rocky path and have dropped or stagnated in the recent past. While military members are seeing pay raise with the cost of living and from increased hazardous duty pay due to the wars, the rest of society is losing out. The Defense Business Board only wants military members to receive salary and compensation equivalent to or less than their civilian counterparts with no regards as to why the civilians are losing in their own salary battles in the first place.
Third - the age ranges in this graphic are those of military members who have entered the part of their career where the military needs to retain them. They have been in long enough to receive expensive training and losing them would be a waste of money to the government. I would be curious to see graphs comparing entry level salaries and end-of-career salaries. I don't believe they would look as pretty as these ones.
Finally, the numbers come from the Rand Corporation who choses not to interpret them in the same rosy fashion as the Defense Business Board (italics are mine):
First, throughout the history of the volunteer force it has been necessary to pay an above-average wage to attract enough high-quality recruits. So, as mentioned above, our analysis emphasizes not just levels of pay but changes in military and civilian pay over time and their relation to each other.
Second, since the military career represents wage growth within a single organization, perhaps wage comparisons should be made to civilian employees who also stay within the same organization. Our data do not track individual workers over time, and we are left with the earnings profile of the average full-time, full-year civilian worker, who can be expected to change employers several times by age 30. Nevertheless, job changes are often accompanied by wage increases; wage growth occurs not only within a firm but also by job change. Therefore, we doubt whether not having civilian wage data on within-firm wage growth leads to much bias.
Finally, workers who start out in production/craft with a high school education may not stay there—they may enroll in postsecondary education and may change occupations. We therefore also estimated the value of other career paths that require additional education beyond high school and possible change of occupation.
Whew. That was one slide. Do you get an idea of the kind of crap we're dealing with?
Onward to "Findings:"
Point #1 - it's kind of them to admit that retirement plans are important and then to offer a change that provides pennies where the original provides dollars.
Point #2 - Private sector plans have shifted - because our nation refuses to revamp our health care system, private companies have been forced to compete on a world market with companies that are better protected monetarily. Their own nations provide adequate health care services to all citizens so these companies are able to take those savings and better invest in their employees. This has nothing to do with longer life spans (this is the same argument for increasing the benefit age of social security and medicare). That is a red herring. Life expectancy has increased because more people survive birth and the averages reflect their survival. It does not mean the overall populace is living longer.
Point #3 - The military retirement system has not materially changed for over 100 years because it is essentially a good product. It works. Why is it failing now? It's not... the only thing failing is our government's ability to budget appropriately with the funds that it has. We go back to the same tired arguments - repeal the Bush Tax Cuts and end the Wars in Afghanistan and Iraq - and our nation can once again get back on track. Add some jobs to this suffering economy and that would make it even better. Or heaven forbid, collect a war tax from the richest Americans. Warren Buffet is practically begging to give more.
Point #4 - I would like to argue that if the government wanted to invest money in higher yielding equities and bonds that it is perfectly able to do so. Take the money you plan on paying us, invest it. If the investment looses money, the government finds a way to make up the difference. If the investment makes money, the government can apply those funds somewhere else. Wow... the whole point is my husband and I don't want to risk his retirement - we are not gamblers. We are very happy to take fair compensation and not get rich at the end of the day. For us, it's not about being rich. It's about being content. I don't think the people on the Defense Business Board get that concept. Of course, their plan for us wouldn't make us rich either... they would just like us to think that it would.
Onward to the slide three and the last slide for this diary:
Point #1 - Their comment about surveys doesn't come with a handy little back up appendix. I can only tell you this - the military recruitment system needs to retain a sufficient number of enlisted and officer after 10 years but does not need to retain everybody. The current system encourages enough intelligent and well proven men and women to stay - Militarytracy and I are married to two of them. We know the draw of that retirement because both of us tried to encourage our men to get out and both of our men reminded us of this great pension plan that was waiting for us in 10 more years. The proposed system would send many of us running in the opposite direction.
Point #2 - The current plan has found ways to release personnel before the 20 year point. If military members have served more than 15 years, they are unlikely to want to accept any compensation program over a pension plan. Point taken. It is one of the reason the pension plan is worthy as a retainment tool.
In the second sub-bullet, they claim that special pay increased costs. Basically, when we have needed to downsize (RIF, reduction in forces), we have offered money to those we need to leave yet are still under contract. That one time payment would have increased costs in that budget year. However, those payments should have been less than the cost of keeping those same people in continuing service. Expensive in the short term but cost saving in the long term. Government officials often have a hard time with this concept. I guess the Defense Business Board does as well.
Point # 3 - And, they save the best for last, The current system does not compensate for those in high risk situations. When they use the word system, they are referring to our current pension plan. No, the pension plan does not provide compensation for those things, our current salary and compensation plan does (remember above?). I don't want my husband's hazardous duty pay in the stock market. I certainly don't want to wait until he is 60 years old to claim it. That money helps families survive deployment. It pays for extra child care; it pays for extra help around the home; if we're lucky, it helps pay for a vacation when my husband gets back from deployment. And guaranteed, if they start providing compensation in a 401K account, it will be taken out of our paycheck in real time.
That's three slides... the actual report is due out sometime this month. I've asked for a personal copy and received no reply. I'm not holding my breath that the 'facts' will be presented any differently. We just need to make sure our congressional representatives know that they are dealing with half truths and red herrings.
If you want more background information on this subject, feel free to check out diaries by myself, Turning Up the Heat on Congress - An MCM Openthread, Will Congress Cut Military Pay and Benefits? You Betcha!, Calls to Privatize Military Retirement - with Action Update.
And my MilitaryTracy, Not Only No, but HELL F#%KING NO!.
And jimstaro: Now Looking at Major Military Retirement Plan Changes.