A reader posted some great questions the other day:

What do you think is going to happen with the “retired benefit” debate within the greater context of the DoD portion of the Federal Budget? Will it be another … slash and burn? What does your financial sense say?

The 1990s military drawdown was about the end of the Cold War. Remember the “peace dividend”?

Today it turns out that we don’t need to be military or political geniuses to figure out what’s going to happen next. We just have to remember what happened last time while we wait for DoD & Congressional staffs to dust off their archives. The Congressional Research Service, a nonpartisan arm of Congress, has already distributed a list of the cuts in veterans’ programs made from 1980-97.

I’m also pretty sure that platoons of Pentagon action officers are briefing their bosses on what worked last time– and what didn’t.

I think the drawdown will be another slash & burn. The 1990s drawdown reduced the military’s total strength by 27% (from 1.9 million to 1.4 million). This time there could be at least another 15% reduction in personnel along with a 15% cut in billets.  Re-enlistment applications will be scrutinized for good performance and any disciplinary or standards issues will be grounds for disapproval.  Re-enlistment bonuses will be cut to the bone.  Discharges will be accelerated and more senior personnel will face mandatory retirement screening boards. Personnel are always separated faster than billets can be eliminated, so most mid-rank enlisted and junior-officer non-combat billets will be gapped by 3-6 months. Some of the billet reductions will be controversial: the Navy may soon have more flag officers than ships,  and the military’s ratio of flag officers to enlisted has risen from 1:1742 to 1:1489.  The “good news” is that this time the service’s personnel departments have better computing tools and should be better able to execute the cuts without wasting as much money or overshooting the mark as much as previous drawdowns.

Although the deficit-reduction committee didn’t produce a plan, Congress will continue to propose other DoD cuts as part of the debate over the authorization & appropriations bills.

DoD doesn’t need Congress’ help to cut expenses– personnel costs will go first. Travel and personnel-transfer budgets will be slashed. Active-duty servicemembers will be encouraged to stay in one duty area for 2-3 tours instead of transferring all over the country (or being stationed all over the world). Reserve drills will be consolidated to quarterly or even semi-annual blocks instead of weekends. Reserve servicemembers won’t get paid to travel to active duty and might even lose pay for some drills. “Mature” weapons systems will be phased out prematurely. Current systems will have much less needed maintenance & spares. Operational readiness will drop. At least one new weapons system in each service will be canceled. Other designs will emphasize more automation, fewer operators, less survivability, and less maintenance.

The strategic drawdown challenge will be reducing “mission creep” and cutting back the current requirements. The debate will continue for years but as fuel becomes expensive, the mission priorities will quickly sort themselves out. Operations and exercises will be significantly cut. Ships will stay in port, flight hours will be cut, and troops will train in the classrooms instead of the field. Unfortunately proficiency will suffer as units cut back on operational training, but hopefully, video games combat simulators can take up the slack. The 1990s drawdown, coupled with the rise of the Web and computing power, spurred a dramatic improvement in training systems and networked battle simulators.

In a pleasant surprise from previous drawdowns, personal benefits seem to be surviving the scrutiny. The Marine Corps attempted to cut their 2012 Tuition Assistance budget but was quickly redirected by DoD as part of a larger program review.  The military’s largest spouse scholarship program, MyCAA, is not being cut as feared.  The GI Bill’s benefits (and their transfer to family members) are the best they’ve been in a generation. Veterans and their families are getting more employment support than ever before.

I think current retiree benefits will stay about the same. There will be brinkmanship over the $200 annual fee for Tricare For Life, but Senator McCain’s proposal to lock retirees out of Tricare Prime was rendered moot by the disbanding of the deficit reduction committee. The debate continues on how to adjust Tricare fees with rising healthcare inflation.  A popular proposal during previous drawdowns has been forcing bridge-career retirees to use their employer’s health insurance before Tricare. The good news? I think veteran’s medical benefits will only get better as society realizes that we need to take care of the decades of sacrifices to servicemember’s health and bodies. Modern combat has produced thousands of injured & disabled veterans who will not be ignored. “Thank you for your service” will not be an empty promise.

We’ll see extensive debate and experimentation with new retirement plans. For example, the Roth TSP begins in a few months and will be used as a model to suggest other retirement reforms.  I think the process will also go much better than previous changes. REDUX was implemented before the World Wide Web existed, and during the 1990s drawdown most Web users only had dial-up Internet access. This time the retirement-program development will be transparent and we’ll have a greater voice in shaping the results.

What actions could servicemembers and families take now? As always, financial independence gives you choices. This is the time to make sure your spending plans are aligned with your priorities, and to try to accelerate savings. Active-duty members will have months of warning of impending discharges, but if you’re within a year of the end of an obligation then it’s a good time to build up the emergency fund.

Take the time to learn your benefits and “use them or lose them”.  “The Military Advantage” is the best benefits guide I’ve ever seen. Work through the Military.com website benefits tools to figure out what’s available and what you need to do to use it. If you’re planning to separate then get on LinkedIn and Military.com’s job-search tools to learn about the networking offered by your service groups. Colleges (especially the service academies) are improving their alumni career-search seminars and job fairs. Many employers are beefing up their “hire a veteran” programs for the tax credits– plus the benefits of your leadership, management, and crisis-response skills. Even if you’re being separated, consider joining a Reserve or National Guard unit. You won’t have to deploy for at least two years, and if the funding is really tight then you might not deploy at all. Whether you drill or go inactive, you still tap into a valuable contact network for programs, jobs, and new careers.

If you’ve considered improving your education, then now is the time— before the program requirements are tightened. Even just a semester of college courses or progress toward an advanced certification could make a difference. If you’re not planning to use the GI Bill for yourself then make sure you know how to transfer the benefits to your family– especially your college-bound teens.