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Project on Government Oversight

Officer Inflation: Its Cost To The Taxpayer And To Military Effectiveness

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October 1, 1987

By: Thomas Lawson
June 1982
October 1987 (revised)

“To say that the military has too many officers is silly.
The fact is that we don’t have enough officers.”

--John F. Lehman, Jr.
Former Secretary of the Navy
March 1987

 

Table of Contents

Introduction

Manpower levels in the U.S. Armed Forces – 1945-1986

Ratio of Officer to Enlisted Personnel

Ratio of Officer Per Command and Its Effects

Comparing Peacetime Ratios

The Cost of Military Officer to the Taxpayer

The Cost of Military Personnel Versus Civilian Personnel

Cost of Benefits for Officers

Officer Retention

Bonus Pay

Damage of Excess Officers to Military Effectiveness

Conclusion

Tables and Figures

Appendix I, Appendix II, Appendix III


Introduction

In 1982, the Department of Defense proposed to the Senate Armed Services Committee the need for new legislation to manage the number of general and flag officers better. Specifically, the Department wanted to justify approximately 60 more positions for Generals and Admirals for the four services. In the “Department of Defense Manpower Requirements Report FY 1985,” the Pentagon reported the need to increase the number of officers in the Army by 9,599, in the Navy by 9,379 in the Marine Corps by 1,668, and in the Air Force by 9,053 in Fiscal Year 1985. In these times of budget deficits and low overall troop levels, the Project On Military Procurement questions the need for an increase in the number of officers in the Armed Forces. The Congress has also questioned the need for so many senior officers and recently ordered the Department of Defense to reduce its officer corps by six percent over the next three years. Such an order has met with strong protest from the Pentagon. In Mach 1987, Secretary of the Air Force Edward Aldridge said that such a reduction would be “very, very disruptive” of Air Force capabilities, and recently Secretary of Defense Caspar Weinberger reportedly wrote Congress that “grievous damage to the defense structure” would result from further officer reductions. At approximately the same period in March, Assistant Secretary of Defense for Force Management and Personnel Chapman Cox told a Senate Subcommittee on Manpower and Personnel that he could not explain the 12 percent increase in the number of officers that had occurred in the Armed Services since 1980.

In times of conflict, officers provide the leadership and develop the overall strategy of campaigns. We rely on their skills to defeat the enemy. But in times of peace, the demand for officers is much less. They have less of a mission to preform and fewer troops to command. By retaining or increasing the number of officers in times of peace, their existence needs to be justified. This results in assignments in procurement, public relations, and lobbying—all of which are debilitating to our defense capabilities and costly to the taxpayer.

This paper will review the number of officers in the U.S. Armed Forces, their effectiveness to our national defense, and their cost to the American Taxpayer. For purposes of this paper, an officer is any person at the rank of Second Lieutenant or Ensign and higher and a senior officer is a person at the rank of Major or Lieutenant Commander and higher. All other personnel in uniform are considered to be enlisted personnel, with our apologies to Warrant Officers.

I. Manpower Levels in the U.S. Armed Forces – 1945 to 1986

Ratio of Officers to Enlisted Personnel

On June 30, 1945, the war in the European theater had been over for one month. In the Pacific theater, the island of Okinawa had been captured by the Allies, two atomic bombs were about to be dropped on Japan, and full surrender of the Japanese forces would occur soon after. On this day, towards the end of World War II, there were 2,068 Generals and Admirals in command of the U.S. forces, with a ratio of 1 officer for every 11.6 enlisted men and women (Table I). Since World War II was such a large undertaking for our nation, we can well understand such a large number of officers after four years of combat.

However, the number of officers has increased substantially over the years from the level required to conquer the Axis forces. On June 30, 1951 and December 31, 1967 the U.S. was in the midst of the Korean and Vietnam conflicts, which may also justify high officer levels. But 1958, and 1976 through 1986 were years when America was not at war with any nation, and yet the percentage of uniformed personnel which were officers has grown to numbers far higher than the percentages during those times of war (see Figures 1 and 2 and Table II):

*In 1939, another time of peace for the U.S., there was 1 officer for every 11.7 enlisted men.
*In 1945, there was 1 officer for each 11.6 enlisted men and 1 General or Admiral per 5,829 servicemen.
*In 1986, there was 1 officer for each 5.9 enlisted personnel and 1 General or Admiral per 2, 055 servicemen. In 1986 we were not fighting a world war, and yet we had far more officers per enlisted personnel than ever before.

[Note: During World War II, the German Army had one officer for each 35 enlisted men. It is widely recognized that the German Army during that war had the better command leadership of all the nations involved in that global war.]

In fact, such an increase in the number of officers in relation to the total number of personnel in uniform has steadily been increasing since data of this sort has been taken. In 1789, 6.4 percent of those in uniform were officers, in 1812, 5.9 percent, in 1880, 10.4 percent, and by 1910 the level was down to 5.4 percent. During World War I, the level of officers remained around 5 to 7 percent, but as we see in Table II, since 1923 there has been an almost continual increase in the percentage of those in uniform who are officers.

In 1930, 1936, and 1939 the ratios of officers to enlisted men were comparable to the 1945 level (Table IV). However, at the end of World War II the services began to demobilize their troops as they had done after our previous wars. But the services were also concerned about the loss of so many men and women from their organizations and several bills were introduced in the Congress to allow the services to retain personnel. In September 1945, Senate bill S. 1438 was introduced to “encourage citizens of the United States to make the United States Navy a career.” This bill passed both houses of Congress by December 1945. Another bill, Public Law 281 approved on December 28, 1945, provided for the appointment of additional commissioned officers in the Regular Army. The law stipulated that the number of these newly appointed officers in the Army should not exceed 25,000. However, on June 27, 1946 General Dwight D. Eisenhower testified on behalf of Senate bill S. 2343, which amend P.L. 281 so that the number of officers allowed could be increased to 50,000. In just one year the number of commissioned officers that the Army wanted had doubled! According to General Eisenhower, “The prospects are that even in the reasonable long-term future, we will have need for at least 80,000 officers.” This prediction came true. The ratios of officers to enlisted personnel has grown smaller from 1958 to 1986 as we have retained more officers and fewer enlisted personnel. From 1982 to 1986 the number of enlisted personnel increased by 2.2 percent while the number of officers increased by 6.8 percent.

In the time period between 1945 and 1986, the reduction in officers has not been even for all ranks. First Lieutenants have been reduced by a factor of 8 and Captains by a factor of 3, but the senior officers came down the least (Table III). In 1986, there were essentially the same number of Colonels and Lt. Colonels as there were in 1945, while the number of enlisted personnel has been reduced by a factor of six.

Ratio Of Officers Per Command And Its Effects

An inflation in the number of senior officers causes an overabundance of leaders for each command opportunity available (Tables V, VI, and VII):

*In 1945, the Army had 14 Generals for each active division, 24 Generals per division in 1951, and 24 Generals per division in 1982 and 1986.

*The Navy had 1 Admiral per 130 ships in 1945, 1 Admiral per 10 ships in 1951, and 1 Admiral per 2 ships in 1982 and 1986.

*The air Force had 1 General per 244 airplanes in 1945. By 1986 that ratio had dropped to 1 General per 32 aircraft. Even though it will vary to some degree, a squadron is usually composed of 24 aircraft, which means there is one Air Force General for each squadron in the Air Force.

If we look at the number of fighting craft, we find that in 1986 there were 251 Admirals for 452 fighting ships (1:1.8) and 339 General for 3398 fighters and bombers (1:10).

[Note: The number of ships, aircraft, and divisions are taken from several sources—the Statistical Abstract, Public Affairs Office interviews, and Naval Institute publications. They are as accurate as possible, but since new craft are added to the Services often there can be slight discrepancies in the total numbers reported by all of these sources.]

While this may seem a dramatic way to view the overabundance of officers, there are some hidden effects we have a hard time seeing. When a person is a senior officer, he or she is entitled to a staff position. In wartime there are many slots for such people, but in peacetime the requirement for officers is much lower. As a result, we find senior officers filling positions of procurement, program, and financial management. This often takes them away from their mission of command and leadership in a combat role. Officers are expanded into nonmilitary programs such as blood banks, pension programs, and public relations. As the officer corps increases, Colonels become the “go-fors” and changers of vugraphs (overhead slides given to illustrate a lecture) for their numerous superiors. This is especially true in the Pentagon where Colonels are required to perform tasks that a Lieutenant or Captain performs at a base or port assignment in the States.

Another serious consequence is the effect the inflation of senior officers has on the decision making process. Since each officer has a command and each has its proper channel to communicate with each other (usually via memos), decisions are said to take much longer. Often it takes the flow of memos on what to build twice as long to settle as it takes to build the prototype. While this results in wasted time and money and undelivered weapons in peacetime, such a slow down during war will actually place our soldiers in jeopardy.

Comparing Peacetime Ratios

In a response to ratio comparison of these types, the Department of Defense (DoD) says that the use of 1945 as a standard of comparison is poor since the levels were a result of four long years of war and battlefield promotions. The DoD proposes a more realistic comparison would be between 1983 and a time several years after an armed conflict. (For a more complete discussion of this argument, see Apppendix I).

Using this advice, the year 1958 is appropriate for a standard for troop composition. At that time we were at peace and yet also engaged in the build-up of our defense capability due to the Cold War with the Soviet Union. In an overall comparison of rank to the numbers in 1958, there are 20,897 more senior officers in 1986 than at comparable levels in 1958, 18,498 more junior officers, and 39,395 less enlisted personnel. Using 1958 as the standard, there should only be 62 Admirals for our 555 ships in the Navy and 168 Air Force Generals for our 10,782 aircraft in September 1986.  To achieve this level, the DoD would need to retire 189 Admirals and 171 Air Force Generals. Of course, these Generals and Admirals are in charge of other programs such as missiles in the Air Force and aircraft in the Navy so strictly looking at the number of ships in relations to the number of Admirals is somewhat simplified. However, such comparisons point out the increase in the high ranking officers which has occurred over time, and are not as radical as they first appear since the officer inflation was well underway by 1958 when compared to 1939, another peacetime year.

While such a reduction of over 20,000 senior officers could make our defense organization more efficient, this could also create a problem in the promotion of the remaining officers.  If there are fewer Colonel slots available, Lt. Colonels and Majors are faced with less opportunity to be promoted. While this would be a problem in the short run, the benefits in the long run to the command structure of the military would be worth the sacrifice.

The retiring of senior officers would also cause a great savings to the American taxpayer. The reduction in the number of officers by rank could result in a large savings to the taxpayer—based on the average annual cost of officers in August 1980, we could save over $1.2 billion each year! The cost of an excessive officer corps is high when compared to similar costs for nonmilitary personnel (See Tables XIII, XIV, XV, and XVI).

II. The Cost of Military Officers To The Taxpayer

As proposed in it “Manpower Requirements Report FY 1983”, the Department of Defense budgeted $108 billion—almost 42 percent of its budget—to pay, shelter, feed, and support the military and civilian personnel who presently work for it or who have retired after working for the Department. The $43 billion requested for active duty personnel was an increase from the $37 billion appropriated for Fiscal Year 1981. However, an abundance of officers—particularly senior officers—requires an abundance of money for their support.

We should mention that this portion of the report is only examining the cost of those on active duty. The costs and benefits of the over 1.2 million retired servicemen could be the subject of an entire report of its own. Also, the cost of bonuses are not considered. We are only  considering the basic salary and benefit packages available to the uniformed and civilian employees of the Department of Defense.

In 1986, the basic pay for those in uniform ranged from $8,592 per year for Privates to $68,700 per year for Generals and Admirals (Table VIII). From 1982 to 1986, those in uniform received a pay increase of approximately 11 percent, except for the very top Generals who received an increase of approximately 20 percent. During that time, Federal General Schedule employees received an increase of approximately 8 percent. In comparison to the basic rate in 1986, Table IX details the Annual Composite Standard Rates by rank that were effective on October 1, 1981. These rates are the sum of the basic pay, basic allowance for quarters, permanent change of station expenses (for moving from base to base), incentive and special pay, and miscellaneous expenses. In effect, these are the “salaries” of the officers.

But such figures do not tell the whole story of military pay and benefits. While these “salaries” are part of the compensation for service, they do not reflect the complete cost to the taxpayer. The Assistant Secretary’s office has a report which shows more complete cost figures: “Average Cost of Military and Civilian Manpower In the Department of Defense.” Table X presents the average cost to the U.S. Government for officers in the U.S. Armed Forces in 1980.

These costs consist of the pay and benefits awarded to the officers. The pay components are basic pay, basic allowance for quarters, variable allowance for subsistence, and permanent change of station expenses. Benefits include such items as training or educational expenses, dependency, indemnity, and unemployment compensation, retirement plan costs, and such support costs as medical, commissary, recreational, welfare, morale, and feeding operations. So, while a Colonel in the Air Force did not receive a check for $63,811 at the end of the fiscal year, the taxpayer will have paid that much for his or her service, and the Colonel will have received benefits worth that amount. An Air Force General would have received $92,236.

Not all of these benefits are taxable. As shown in Table XI, the basic allowance for quarters, basic allowance for subsistence, variable housing allowance, change of station, training, and support expenses can add up to a fair amount of money which is not reported to the IRS.

Since these figures are in 1980 dollars, the cost of these officers may seem reasonable. But when we adjust their costs to 1987 dollars (Table XII), the average annual cost for each of the 1,055 Generals or Admirals ranges from $120,541 to $125,441. The number of senior officers effects more than just organizational structures. (The calculation of the inflation factor is explained in Appendix II.)

The Cost Of Military Personnel Versus Civilian Personnel

To maintain an objective analysis of military pay, it is important to compare the pay and benefits of a civilian civil servant in the Department of Defense to that of those in uniform who often work in the same office and at the same level of responsibility. Such cost comparisons are in Tables XIII, XIV, XV, and XVI, and are derived from the “Average Cost” report of August 1980. While civilians also receive benefits which are not taxable, their total cost to the taxpayer is much less—especially at the senior levels.

While cost comparisons of this type can be subjective, most people in the government agree that the Congressional Budget Office (CBO) has produced the most objective comparison of civilian and military income. This comparison is shown in Table XVII, which was presented by the CBO at the March 12, 1981 hearings on Military Pay and Retirement Reform before the House Committee on the Budget. In 1980, in terms of disposable income, it was financially more rewarding to be a Lt. Colonel in the Army than to be the Secretary of the Army or a member of Congress. And a Colonel made more money than the Secretary of State.

Cost Of Benefits For Officers

The cost of military personnel and their disposable income are two very separate items. Benefits available to those in the military add much to the annual compensation for service in the military. All too often it is said that the basic pay for military personnel is too low for competition in the free market. The usually-proposed solution to this problem is an across-the-board raise to all in uniform. These raises have amounted to 11.7 percent in October 1980 and 14.3 percent for officers and 10 to 17 percent for enlisted personnel in October 1981. The Reagan Administration originally requested an 8 percent across-the-board raise for October 1982, but that was lowered to 4 percent.  When we add all the benefits military personnel receive, their compensation – particularly for officers above the rank of Major – can be better than the benefits in the civilian sector.

Some hidden benefits that military officers receive are understated. One example is the allowance for quarters, which is tax free income. The government spends around $5,800 to maintain each of the large and luxuriant manor homes that Navy Admirals and Generals in the Marine Corps and Air Force live in rent free. This amount does not even approach the mortgage payment one would have to pay for such a residence.

Another example is the free health care they receive. In a recent Rand Corporation study, “A Description of Officers and Enlisted Personnel in the U.S. Armed Forces, “ it was reported that 60 percent of the officers interviewed thought that the complete medical benefits they receive could be replaced by a policy costing between $50 and $200 a month. Fiver percent of those interviewed came closer to the mark by putting the value on that benefit at $750 a month.

Officer Retention

A straight comparison of pay differences between civilian and military personnel is difficult, mainly due to these “hidden” benefits that cannot be applied to civilians. In the House hearings mentioned previously, it was claimed that a manager in the private sector at the level of authority as a General would make twice the money that a General in the service will make. Such comparisons are much too speculative and tenuous to be valid. Much more to the point is the observation that there is no shortage of Generals or of candidates for promotion to the rank of General or Admiral. In its Manpower Report for FY 1985, the DoD reveals that the retention of officers in the Army has increased significantly. Occasionally there have been problems with the retention of specialists of lower rank, but there has never been a problem with retention of Generals and Admirals—and most certainly not because of pay and benefits.  Just so a General does not feel too badly, a comparison of Congressional and military pay and benefits done by Representative Les Aspen’s office in November 1980 placed a value of $78,925 for a year as a member of Congress, and a value of $98,227 for a year spent as a General.

Bonus Pay

While we recognize the need to provide monetary incentive to retain those with special skills in the military, those incentives must be provided effectively. Bonuses to retain doctors, electronics technicians, and others with specialized skills are needed. However, the attitude of raising pay and awarding bonuses across-the-board can lead to a large waste of a taxpayer’s money.

In hearings before the Senate Appropriations Committee, Subcommittee on Defense on May 19, 1982, an example of spending abuses of a special bonus program were revealed. The Aviation Officer Continuation Bonus Program, a program designed to provide incentive for military pilots to remain in the service as long as possible, was offered for the first time in Fiscal Year 1981. This bonus was to be used as a retention incentive, selectively applied to areas where officer shortages in critical aviation specialties existed, and to be applied at times in a military career when a bonus can be expected to influence the decision to remain in the service. Despite a DoD policy directive which followed the Congressional intent of the program, the General Accounting Office (GAO) found that the Navy and the Marine Corps treated their share of the bonus money as long-term career pay, designated their entire aviation community as a critical shortage area, and allowed all within that community with 6 to 16 years of service to be eligible for the bonus. The GAO calculated that as a result of this across-the-board approach $81.6 million of the $102.9 million committed in Fiscal Year 1981 was not spent correctly.

As an extreme example of how this across-the-board approach was not in the spirit of the directive, two pilots—one with 15 years and the other with 16 years of active duty service—were given a bonus of $24,633 and $38,990 respectively as an incentive to remain in the service another 5 and 4 years. It seems doubtful that those pilots needed any incentive to stay in the service to their 20 year mark, at which time they could retire with good benefits. Also, at that time there were very few job openings for pilots in commercial airlines, so little incentive was needed to keep the pilots. It comes as little surprise that the Navy did not lose a single pilot to retirement that year.

The cost to the Government of these senior officers can be lowered by reducing their participation in bonus programs and by abandoning the across-the-board approach to pay increases. Those above the rank of major or Lt. Commander need little monetary incentive to remain in the service.

 III. Damage of Excess Officers to Military Effectiveness

The damage of an excessive officer corps to the taxpayer’s checkbook is obvious and can be measured rather accurately. However, a hidden casualty to this problem may be our own military effectiveness. An overabundance of officers often means an underabundance of commands. This forces our military personnel into areas far removed from military missions—often encouraging them to neglect their original mission of leadership and strategy to win the next war.

In a recent article, Fred Downs, a former Army officer, told of some problems with the way Army officers are being trained at West Point. After telling an audience of cadets that their job is “to kill the enemy and take ground,” Downs was admonished by a high-ranking officer that at West Point they do not call it killing the enemy, but rather “servicing the target.” Downs concludes that the “official Army policy has resulted in an MBA-style approach to management” and warns that:

“The Army these days is teaching management, not leadership. This may be appropriate for all of the administrative jobs the Army does, but it is not appropriate for the combat units: infantry, artillery and armour. You cannot manage men in combat. You must lead men in combat. And we do not have enough officers today who are ready for that job.”

In a similar article, Richard Harwood writes:

“A field-grade Marine officer recently assigned to duty in Washington is disturbed by how ‘bureaucratic’ the leadership of the Corps has become: ‘There is a real dearth of people wearing three stars (lieutenant general) and above who think very often or very seriously about fighting wars. They think, almost obsessively, about fighting inter-service battles or battles with Congress or battles with other bureaucracies.’”

We need to re-examine what we want to require of our officer corps. Do we want our officers to work on winning wars, teaching leadership, creating new strategies, or do we want them preparing budgets, lobbying for programs on Capitol Hill, and wrangling with government contractors? Right now we place our overabundance of Generals and Admirals and other officers in commands of dubious military value, which threatens to make being an officer just another job.

Encouraging officers to get advanced managerial and business degrees to fill these slots could backfire on us if a real war beckons. In a war we need military people and warriors, not business executives and public relations people. In the procurement process we need our officer corps input as the user of the equipment, not as the manager of the program. If we allow our excess of officers to continue, we will find commands for these officer outside the traditional military areas and inevitably encourage a drift away from their original mission—war.

Edward Luttwak, a well known military analyst, states the problem well:

The military has become civilized in the sense of emulating, at higher cost, things the civilians can do better—but does not concentrate on the things the civilians cannot do, which are to train combat leaders, to study tactics, and prepare strategies.

Reduction of the current officer corps will encourage the right type of officer to emerge and be promoted—those intent on fighting and winning real battles, rather than bureaucratic, business, and political ones.

Conclusion

Since the end of World War II, our military services have become increasingly “top heavy.” The senior officer corps has been reduced only slightly, and in some instances not at all, over time, while for the most part the number of enlisted personnel has steadily declined. Even though this condition results in a large expense in terms of pay and benefits, the more important expense is the cost to the organization in terms of effectiveness. Decisions are slowed down as all officers involved have to communicate the possibilities of a program and the needs for that program as they see them.  Senior officers are less likely to be given meaningful military leadership roles.  As a nation, we divert them from their original mission—fighting and winning wars.

The Project On Military Procurement concludes that the U.S. Armed Forces are too “top heavy” to provide an effective defense of our country. The retiring of many officers and the placing of our officer corps back to their original tasks are the best ways to help reduce the burden of federal spending on the American Taxpayer, while at the same time encouraging a more realistic and effective defense of the United States of America.