Lessons From the Pentagon's Shameful Bonus Clawback

(Bloomberg View) -- The U.S. military has always prided itself on taking care of its own. But for 10,000 members of the California National Guard who are being made to repay their re-enlistment bonuses, that tradition rings hollow.

Needing forces for the Iraq and Afghan wars over the last decade, the guard took part in a nationwide effort to retain troops by offering bonuses of $15,000 or more. The program was supposed to be only for specialists in high demand, but the California Guard mistakenly extended the payments to basically anybody.

After the Pentagon caught the error, California officials began demanding payback of bonuses and college loans, sometimes with interest.

After the Los Angeles Times exposed this last weekend, lawmakers in Congress and California as well as high-ranking military officials cried foul. The California Guard insisted it had no legal recourse to forgive the loans, until Secretary of Defense Ashton Carter intervened on Wednesday, suspending all collections efforts. That's a good start, but Congress or the Pentagon should also forgive the debts -- and make whole those who have begun paying back the bonuses, many of whom have had to sell their cars or take out second mortgages.

This is not the only recent scandal involving military bonuses. In the late 2000s, the National Guard began paying some members $8,500 for every new enlistee they recruited. The program became rife with fraud, ultimately costing taxpayers about $100 million and resulting in more than 100 prosecutions in several states.

And in 2014, when members of the Pentagon's bomb-disposal team were ordered to repay up to $100,000 in undue bonuses, one of the men involved killed himself with his service revolver.

These shameful episodes raise larger questions: Why does the military give out bonuses in the first place? Is there a better way to reward valuable service?

Back when foreign wars were placing great stress on the military's manpower, widespread recruitment and retention bonuses were understandable. But by 2011, the Pentagon had accumulated more than 60 types of special pay, totaling more than $1 billion a year. Now that all services are trimming uniformed personnel -- the Army has eliminated 80,000 positions since 2012 and has put 40,000 more on the chopping block -- the bonus programs should be pared, then focused more tightly on the skills most in need.

Consider that today's recruits are eligible for up to $40,000 in cash bonuses. That’s a lot of money to spend on mostly young people with no actual military experience who may turn out to be duds in basic training. Instead, the Pentagon should emphasize retaining members at the end of their first or second enlistments, after they've served for six to 12 years. By then, it's clear what they're capable of and how much potential they have.

And the bonus money should be paid mainly to people with expertise that's considered critical: fluency in Chinese or Arabic, for example, or training in technology, engineering, health care or nuclear weapons. Bonuses could also be used to lure private-sector professionals to join up. A military that can spend more than $10 billion on a lumbering new aircraft carrier can certainly afford to keep people in hard-to-fill jobs. Bonuses are actually cheaper than pay raises, because they don't compound every year.

All branches face increasing challenges to re-enlistment. After the long wars, many service members are fatigued and want to spend more time with their families. Increasingly, those with skills valued in the private sector, including pilots, are opting out. And since last year, when the military decided to phase out its tradition that one had to serve 20 years to get a pension in favor of a 401(k)-style system that rewards those with less time served, it's more attractive than ever to leave the military in mid-career.

Carter did the right thing in halting the California clawbacks. His successor should recognize the need to reform the entire bonus system.

--Editors: Tobin Harshaw, Mary Duenwald.

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.