other “analysts” (e.g., James Kitfield in the July 2012 National Journal). Is there any chance personnel costs will consume the entire defense budget by 2039? Of course not. Over the past 50 years, the defense budget has consumed a progressively smaller share of federal outlays. In 1962, defense consumed nearly 47 percent
of federal outlays. Today, it’s at its smallest share in 50 years and will drop further — below 12.5 percent — by 2017. Some argue that’s all the more reason to worry about the rising cost of military people programs. But let’s look at that data over time. The chart
below shows the share of the defense budget spent on military compensation and health care since 1980. DoD says military personnel and health
care costs comprise one-third of the FY 2013 defense budget.
Personnel Costs Aren’t Exploding
About one-third of the defense budget goes to personnel and health care costs — the same share it has been for more than 30 years. That’s no more unaffordable now than in the past.
40%
Health Care Personnel Costs
33% 30% 20%
What they don’t tell you is that’s the same
share it’s been for 30 years. Some might ask whether it’s good or bad if personnel costs comprise one-third of a big or- ganization’s annual budget. There’s no civilian counterpart to the military, but let’s consider organizations with big air fleets. For the United Parcel Service, for example, personnel costs make up 61 percent of the bud- get. For FedEx, it’s 43 percent. For Southwest Airlines — generally recognized as among the most cost-efficient air carriers — personnel costs comprise 31 percent of operating revenue (which includes profit, so the percentage of ex- penditures is higher).
“Cost growth since 2000 is out of control.” One trick used by Pentagon bean counters is to cite personnel and health care cost growth since 2000 or 2001. Have costs grown since then? Certainly, but using that baseline without appropriate context is misleading. First, it implies the turn of the century was an
appropriate benchmark for reasonable person- nel and health care spending. Nothing could be further from the truth. At that time, years of budget cutbacks had
10% 0% 1980 1985 1990 1995 2000 2005 2010
grossly depressed military pay, cut retirement value by 25 percent for post-1986 entrants, and booted beneficiaries over age 65 out of military health care. As a result, retention was on the ropes, and the Joint Chiefs of Staff were imploring Congress to fix the problems to prevent a readiness crisis. Congress has worked over the past decade
Defense Budget as a Share of All Federal Spending
The share of federal spending devoted to defense has been declining for 50 years (with temporary wartime bump-ups). Allocations for 2012-22 are estimated.
50% 40% 30% 20% 10% 0%
1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 2022 56 MILITARY OFFICER NOVEMBER 2012
to restore military pay comparability, repeal the retirement cuts, and restore promised health care coverage for older beneficiaries. In other words, the cost growth was essential to keep the previous cutbacks from breaking the career force. Most recent military compensation studies ig-
nore that essential context and leap to the erro- neous conclusion cost trends of the past decade will continue indefinitely. Not so. Now that pay comparability has been re-
stored, there won’t be any further need for extra pay plus-ups above private-sector pay
CHART SOURCE: OFFICE OF MANAGEMENT AND BUDGET
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