Thursday, May 24, 2007
  What's It Worth?
Cindy Williams is a principal research scientist in the Security Studies Program of theCenter for International Studies at the Massachusetts Institute of Technology. You may remember her for a piece she wrote in January, 2000 for the Washington Post titled "Our GIs Earn Enough" in which she criticized proposed military pay raises.

I just read a piece she wrote last summer for the Cato Institute's Regulation called "Paying Tomorrow's Military" in which she makes a great deal of sense regarding military pay, benefits, and particularly the value (or lack of value) of "noncash benefits." Ms. Williams makes the case that so-called "noncash benefits" such as commissaries, on-base housing and the military healthcare system are not worth what they actually cost taxpayers.
"The military’s most expensive case of overuse is the Defense Health Program (DHP). ... DOD’s subsidy of health care benefits for those beneficiaries significantly exceeds the subsidies civilian employers typicallyoffer their workers or what the DOD provides its civilian employees. ... One result is that beneficiaries of DHP use 40 to 50 percent more health care than people in comparable civilian programs. ... The result for taxpayers is expensive. Health costs come to about $33 billion—eight percent of DOD's budget—in 2006,and by 2015 they can be expected to rise to $64 billion—12 percent of dod’s budget—absent changes in policy. Taxpayers spend 55 cents on health care for every dollar of cash compensation offered to military personnel, compared with less than 10 percent among private-sector employees."
She does offer some recommendations to solve the problems she identifies.
Decision makers should consider the following recommendations:
  • Convert in-kind benefits to cash.
  • Increase the beneficiary share of costs for the defensehealth program.
  • Improve the cost-effectiveness and responsiveness ofgovernment-operated businesses providing goods andservices to military personnel and families.
  • Make the costs of in-kind benefits more transparent.
The most useful change would be to convert as many in-kind benefits as possible into cash benefits. Installation-centered benefits like family housing, subsidized military grocery stores, and on-base child care centers would be especially appropriate forsuch “cashing out.” Another area where a cash alternative would be appropriate is in the Defense Health Program. Giving active duty families a choice between DHP and a cash allowance would allow them to take advantage of less expensive plans while reaping a cash reward, saving taxpayers hundreds of millions of dollarsa year according to the Congressional Budget Office."

I have to agree with Ms. Williams on alot of what she is saying.

I was reading an article by Thomas Sowell today where he was decrying the uselessness of government price controls. One area he mentioned was socialist price controls on medical care.

He pointed out that when the government lowered the cost of medical care, hospitals were inundated with people who had minor issues like the sniffles, forcing those who had more serious problems like cancer, to have to wait longer to be seen.

I suspect that military clinics are inundated on a daily basis with people who aren't really sick enough to be there in the first place. Over the counter medicines would have done the trick.

Here, the military is going to start offering people in base housing the option to either leave and receive BAH, or stay and receive BAH. Those that stay would pay rent and utilities to a contractor who will oversee housing.

It's not so much a cash gain for the military member, as rent will be charged based on rank. The only possible area for cash benefit would be conservation of utilities use.
what would be the economic impact of the cities and towns that surround these bases? It could be quite beneficial. Or I could wrong. Just a question
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Retired from the US Air Force after more than 20 years of service. Now working as a contractor for various government agencies.

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