- The Washington Times - Tuesday, July 17, 2001

Social Security benefits to disabled veterans and the families of service members killed on active duty would drop as much as 10 percent in a proposal being advanced by the Bush administration.
The provision, buried at the end of an $18.4 billion amendment to Mr. Bush's fiscal 2002 budget request, would save the Department of Defense from $300 million to $400 million a year by eliminating a $1,200 Social Security wage credit for uniformed service personnel.
The administration says the credit is inefficient and the money saved could be used to benefit all troops.
"While the wage credit is not a meaningless expense, the military members may be better served by eliminating the current credit and applying the funds to other programs," a Defense Department background paper on the matter concluded.
While opponents concede that most service members will not notice the credit's repeal, the relatively few it will hit, it will hit hard, particularly while America's military members are already underpaid.
"We are concerned," said Mark Olanoff, legislative director for the Retired Enlisted Association. "It's very important," Mr. Olanoff said of the wage credit.
"It's a bit frustrating," said Steve Strobridge of the Retired Officers Association. While the administration is talking about helping the military, those in charge of the budget are submitting a proposal like this, Mr. Strobridge said.
A House Ways and Means Committee aide said it is still reviewing the proposal.
The credit was created in 1968 because Congress felt "the Social Security protection of a worker may be impaired" during his military service because of relatively low earnings. The credit was intended to make up for the in-kind compensation such as room and board, for which service members were receiving no credit under Social Security.
The credit increases an active duty member's wages for purposes of calculating Social Security benefits by up to $1,200 a year. The credit was made retroactive to 1958, when a private earned about $1,200 a year or about $7,000 in 2000 dollars after adjusting for inflation.
If that credit were repealed, according to a Department of Defense study completed in 1992, the maximum benefit for disabled troops and surviving families under Social Security would drop by as much as 10 percent, or about $1,000 a year. "That's a lot of money," Mr. Olanoff said.
That same study found that nearly 709,000 retirement, disability and survivors claims would be reduced if the wage credit were repealed.
Federal agencies, including the Pentagon, must pay the employer portion of the Social Security payroll tax for their employees' wages. But the military must also pay from $300 million to $400 million in payroll taxes on the $1,200 credited to service members, according to Congressional Budget Office and DOD estimates.
Response to the proposal — sent to Congress in June — has been almost nonexistent, with most interest groups learning of its existence just yesterday.
Democrats have also held their tongues: President Clinton backed a similar repeal in 2000.
The Clinton administration wanted to repeal the credit, but increase retirement benefits and revise pay tables to "reward promotion instead of longevity," according to the Defense Department briefing paper.
Mr. Olanoff, Mr. Strobridge and others say they oppose the repeal, while conceding that most in the military would see little change if the credit were repealed. A career officer would see his monthly Social Security benefit drop by from $3 to $7 if the credit were repealed, according to the 1992 DOD study.
Those who leave the military after a short stint to pursue a job in the private sector will not be hurt by the change either. And the repeal would have no effect on retirement, disability or survivors benefits paid by the military.
But none of those caveats ease the cuts the repeal would leave for disability and survivor claims.
The House Ways and Means Committee passed in September 2000 a modified version of the proposal as a technical amendment to a Social Security bill.
The Ways and Means proposal would have repealed the credit for future retirees, while leaving in place that for all disabled troops and surviving families. The committee passed its bill by voice vote, but the measure died for lack of action by other committees with jurisdiction on the matter.
The Defense Department backed the Ways and Means Committee's version of the proposal and recommended it to the Bush administration, but the White House decided to again ask for the full repeal, according to an administration aide. The aide said that the costs of continuing to administer the credit outweighed its benefits, and that the White House wanted to make up for its loss with better basic pay.
Mr. Bush's $18.4 billion request includes $1.4 billion for a pay increase that he promised would add at least 5 percent to the salary of every service member a $700 pay raise for a private.
Midlevel officers and higher ranking enlisted members would see at least a 10 percent pay raise, according to the White House. That would be worth an extra $2,000 to a sergeant with more than six years of service and $4,600 to a captain with more than eight years of service.
Mr. Strobridge said the pay increases proposed are "wonderful" but should not be used as an excuse to cut other benefits.
Mr. Olanoff said Congress should be talking about indexing the credit for inflation, not repealing it.

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