“The Pentagon is not a jobs program.”

Reformers are rightly making this argument in the current debate over whether the Defense Department can handle $1 trillion in budget reductions over the next ten years. This would be imposed if sequestration, which accounts for $492 billion in additional defense cuts, takes effect on Jan. 1, 2013.

The above line is a helpful rejoinder to the defense industry and its friends in Congress who are trying to scare the rest of us into thinking that if defense contractors like Lockheed Martin (last year’s profits: $4 billion) and Northrop Grumman ($2.2 billion) get less of the federal pie (experts say down to 2005 or 2007 budget levels — the horror!) then some 1 million jobs will be lost and the economy torn asunder.

There are plenty of reasons to doubt the Chicken Littles. Some of them, like the above behemoths, stand to lose billions in annual profits, so they are employing any and every tactic to get Congress to reverse sequestration by the November election. This can only be done with new legislation and a signature from President Obama, so it’s not clear whether that will happen, but the defense lobby is doing its best to make it appear dire enough for lawmakers to act.

Lawrence Korb at the Center for American Progress and reformers like Winslow Wheeler have been casting doubt on the “one million” defense contracting jobs supposedly at risk.  These numbers were provided by National Association of Manufacturers and the Aerospace Industries Association, and they lobby on behalf of the contracting industry. Plus, as Korb wrote over the weekend:

“Defense spending is not a jobs program. It is a collective effort to address the threats facing the country, assure our national security, and secure our interests abroad,” he said, and should be set at a level dictated by “national strategy and fiscal capacity,” which right now “point towards a drawdown.”

Yet a quadrennial military review of its own personnel compensation finds that amidst recession and a private sector unemployment rate of 8.2 percent (14 percent for African Americans, 11 percent for Hispanics), the military itself may indeed be the best jobs program Americans have right now — with the benefits, the retirement and family support services that many of us seek but almost never find in the private sector.

The Department of Defense’s 11th Quadrennial Review of Military Compensation (.pdf) found that after 10 years of war, pay for enlisted personnel and officers is no longer lagging behind the civilian world. In fact, it is many times higher. As of 2009, enlisted personnel with a high school diploma, some college or an associate’s degree, make more than 90 percent of their peers with the same amount of education levels. On average, they make $50,747 a year — not counting health care packages — about $21,800 more than the median income of the comparable groups.

Officers, on the other hand, make more than 83 percent of their peers with a bachelor’s  or graduate level degree. Officers made an average $94,735 a year, 88 percent higher than civilians with bachelor’s degrees and 47 percent higher than private sector workers with graduate-level degrees. Officers with 20-years of service can make as much as  $118,000 a year, while the comparable peer will peak at about $63,700, according to the report.

The increases in pay follow a concerted effort in the late 90′s to better compensate military personnel and bring pay better in line with the private sector, according to the report.

After 9/11, the effort was ramped up even more after the 2002 quadrennial report found military pay still lagging behind. The wars brought improvements to base pay and bonuses and the federal TRICARE health care program for which personnel pay very little if anything in out-of-pocket costs. The increases, as noted in the report, were appropriate, especially during wartime:

Higher military earnings are necessary to compensate service personnel for the additional risks, hardships, and long work hours associated with military service. Setting military compensation above average civilian earnings also acknowledges the higher aptitude and achievements of military personnel.

The report does not recommend freezing pay to bring it closer to the private sector, and as these comments suggest, there are some strong emotional, even reasonable, arguments against that. However, with the wars overseas winding down, “multiple and extended deployments into dangerous environments” will be less of an issue, as will the high demand for quality recruits. The debate should not be off the table forever, and should include all Americans. The Department of Defense, even though it might seem like it, is not a planet onto its own. It is another government agency and the taxpayer is still paying for it.

What is more interesting and what truly needs to be addressed now, are the tax breaks and the extra Hazard Duty and Imminent Danger Pay (HDP/IDP) afforded to enlisted and officers even though they are far from any fighting or real danger. Between 1990 to 1999, the number of countries in which personnel could be eligible for such pay and tax exemptions expanded from 13 to 45, according to the report. HDP is for the real hot spots and IDP is for deployments less so, but the monthly payment — $225 — is the same, which makes no sense. Especially when you are talking a danger gap as wide as say, Afghanistan and Oman, or Bahrain, which are all on the list of combat zones qualifying for such compensation.

What’s worse is the Combat Zone Tax Exclusion (CZTE) program which exempts enlisted and officers from paying federal taxes in these 45 designated countries. Again, they get the tax break — which accounted for about $3.6 billion in tax savings for personnel in 2009 (the combat pay cost taxpayers $790 million in 2009)– whether they are really in danger or not. Furthermore, officers with higher incomes and more dependents stationed in non-hostile places ended up getting the better deal than single enlisted men and women who might be dodging bullets in an actual war zone.

Indeed, the highest combat benefits typically accrue to senior personnel who are often deployed to the safest regions within combat zones, while junior enlisted personnel serving in the most dangerous areas receive smaller benefits.

This was a point not lost:

In summary, as combat compensation is currently designed and administered, the degree of risk varies considerably within a combat zone, and there is no relationship between the risk to which personnel are exposed and the compensation they receive … As a result, service in hazardous environments is not being appropriately recognized, with many members who are far removed from combat receiving the same or often greater benefit as those who are actually in combat.

Recommendations include re-certifying the combat zones each year and bringing the pay and tax models better in line with the original goal of compensating people according to the risk they face in deployment.

What all this tells us is that the military may be an imperfect employer, but personnel enjoy benefits the private sector just cannot offer right now. Bigtime. So we end up supporting a super-expensive military machine looking, in essence, for the next mission to justify itself.

Back to sequestration. It’s clear that war escalated pay and profits for a lot of people and even more in the business world. As we move into more of a “peacetime” posture, not everyone is accepting their new fiscal realities without a fight. Time will tell if congress will cave to these invested interests, or remind them that sacrifice is a two-way street.