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Bush Threatens Veto of Defense Bill
President Wants Costly New Disabled Military Pension Benefits Eliminated

By Vernon Loeb
Washington Post Staff Writer
Monday, October 7, 2002; Page A02

Alarmed by the cost of expanding military entitlement programs, President Bush has threatened to veto the $355 billion defense authorization bill for the new fiscal year if House and Senate conferees do not eliminate new pension benefits for disabled military retirees that could cost from $18.5 billion to $58 billion over the next decade.

"We simply cannot continue to add ever-expansive obligations to the defense budget," Defense Secretary Donald H. Rumsfeld said in a letter to the conferees, who could decide the issue this week. "This would divert critical resources away from the war on terrorism, the transformation of our military capabilities and important personnel programs such as pay raises and facilities improvements."

The Pentagon spends in excess of $35 billion a year -- approximately the military budget of France -- on military pension and health care entitlements that are among the most generous in the country for public- or private-sector employees. With the new pension program, the defense budget would become one of the federal government's fastest-growing entitlements.

The pension provision would for the first time allow military retirees to collect retirement benefits from the Pentagon and disability benefits from the Veterans Administration at the same time. Proponents call this "concurrent receipt." Some critics use another term -- "double dipping." Under the law, a military retiree's pension benefits must be reduced, dollar for dollar, by the amount of disability benefits received from the VA.

The House-passed version applies only to military retirees who are considered 60 percent disabled or more by the VA, and it would cost $18.5 billion over the next 10 years. The Senate version applied to virtually all military retirees receiving VA disability compensation and would cost $58 billion over the same period.

Sen. John McCain (R-Ariz.), one of the conferees, said Friday that overwhelming majorities in both houses passed a version of the "concurrent receipt" provision out of basic fairness. Disabled veterans should be able to receive military retirement benefits and VA disability benefits without an offset, he said, because retirement pay is for length of service and disability compensation is for pain and suffering incurred in uniform.

Although McCain supports the Senate's expansive version, one compromise discussed by conferees to get around a presidential veto, he said, would be to limit "concurrent receipt" only to combat-injured military retirees, greatly reducing the cost of either House or Senate version.

"No other category of federal employee," said Bob Manhan, assistant director of the Veterans of Foreign Wars legislative office, "is required to relinquish a portion of their earned retirement pay simply because they are also receiving VA disability compensation."

But David S.C. Chu, undersecretary of defense for personnel and readiness, said VA disability compensation is intended, not to supplement military pensions, but to compensate disabled veterans who leave the military after a few years' service and do not qualify for full military pensions.

Military retirees with disabilities who qualify for pensions, Chu said, are more than adequately compensated without VA benefits. Their pension benefits are already among the most generous in the United States and fully indexed annually for inflation. Military retirees also receive lifetime health care and other benefits, he said.

"The bottom line is, we don't see the problem for which $58 billion of the taxpayers' money over the next 10 years is required to solve," Chu said.

There is no question, he added, that allowing disabled veterans to concurrently receive retirement and disability pay will take money from weapons procurement and other accounts intended to benefit active-duty personnel.

"We're going to rob Peter to pay Paul," he said, "and the question is, should Peter really lose here?"

Enactment of a "concurrent receipt" provision would come on top of legislation Congress passed in 2000 extending lifetime health and prescription benefits under the military's Tricare health insurance system to 1.4 million uniformed service retirees age 65 and older and family members and survivors.

The new benefits, which set military retirees well apart from other senior citizens, cost $3.9 billion last fiscal year. This year, the cost jumps to $8 billion in Pentagon contributions to a fund designed to pay for the added health benefits on an accrual basis.

In testimony in May before the Senate Armed Services Committee, Rumsfeld said the total cost of military health care, including the new lifetime health and prescription benefits for the elderly, would be a "breathtaking" $22.8 billion this year, more than Italy's defense budget.

"The hard truth is that this line item promises to grow and put pressure on all other categories of the budget -- research and development, modernization, transformation, pay and the like," Rumsfeld said. "We need to face up to it."

A year before passing lifetime health care and prescription benefits for military retirees, Congress repealed a pension reform act passed in 1986 that reduced pension benefits for those entering military service after Aug. 1, 1986, from 50 percent to 40 percent of final pay after 20 years. The cost of that repeal adds an additional $1.1 billion to this year's defense budget.

Robert L. Bixby, executive director of the Concord Coalition, a nonpartisan organization that advocates fiscal responsibility and lobbies for Social Security, said Congress's willingness to increase benefits for disabled veterans is "part of a pattern" that began with the pension reform repeal and continued with passage of lifetime health care and prescription benefits.

"When the budget surpluses started happening, politicians stopped thinking in terms of hard choices and started expanding entitlements," Bixby said. "Now we're back into deficits, but nobody has scaled back their desire to expand entitlements they developed in the days of surpluses."

This is particularly true when it comes to the military, he said. "The military is in a favored environment right now because we're in a war setting," he said. "Anything in the military gets a pass, whether it's related to the war or not."

In a report last month, the General Accounting Office concluded in a study on Pentagon benefits that military personnel get all the retirement, health and employment benefits as private-sector employees -- and more, particularly after a series of recent enhancements designed to improve retention rates.

"These include free health care for members, free housing or housing allowances and discount shopping at commissaries and exchanges," the GAO said. "Major enhancements to benefits included the restoration of retirement benefits that had been cut for military service members who entered military service on or after August 1, 1986, and increases in the basic housing allowance to reduce out-of-pocket housing expenses for service members not living in military housing."

Pay has also been substantially improved. "Congress approved across-the-board pay raises of 4.8 percent for fiscal year 2000 and 3.7 percent for fiscal year 2001, along with targeted pay raises to mid-level officers and enlisted personnel," the GAO said. "For fiscal year 2002, Congress approved pay raises ranging between 5 and 10 percent, depending on pay grade and years of service."