Posted by Dale Carpenter:
More Details on the Financial Cost of DADT:
http://volokh.com/archives/archive_2006_02_12-2006_02_18.shtml#1140153198
I�ve now gone through [1]the recent University of California study of
�Don�t Ask, Don�t Tell,� which estimates the costs of the policy in
its first ten years (1994 through 2003). The commission that produced
the report includes several experts in military and national security
policy. Notable among them are former Secretary of Defense William
Perry under President Clinton; former Assistant Secretary of Defense
Lawrence Korb under President Reagan; retired Admiral John D. Hutson;
Professors Donald Campbell and Kathleen Campbell of the U.S. Military
Academy at West Point; and Professors Frank Barrett and Mark Eitelberg
of the Naval Postgraduate School. Experts in economics, cost
accounting, management control systems, and other fields assisted the
commission. The Williams Project of the UCLA Law School, which studies
gay legal issues and works for gay equality, loaned out the time of
Dr. Gary Gates, who provided extensive statistical and conceptual
analysis as Senior Project Consultant. While some of those who
produced the study may personally oppose DADT, the study itself cannot
be dismissed on this basis. It is a serious effort to weigh some of
the financial consequences of DADT.
The report breaks down the financial cost of firing service members
for homosexuality under DADT into four discrete categories: (1)
recruiting costs for enlisted service members; (2) training costs for
enlisted service members; (3) training costs for officers; and (4)
separation travel costs. Let�s take a look at each of these:
(1) Recruiting costs for enlisted service members fired for
homosexuality (1994-2003): $79.2 million
The military spends a lot of money to recruit. Some of this money is
spent to recruit service members who are eventually fired for
homosexuality. In a February 2005 report tellingly entitled �Financial
Costs and Loss of Critical Skills Due to DOD�s Homosexual Conduct
Policy Cannot Be Completely Estimated,� the congressional General
Accounting Office estimated these costs attributable to DADT at $95.4
million.
The UC Commission believes this overstates the actual cost:
The critical value for estimating this cost, we would argue, is not
how much the military spent to replace service members fired for
homosexuality. Rather, the appropriate consideration is how much
value the military lost as a result of each homosexual discharge.
For example, in [an] extreme hypothetical situation [], in which
the service member served for almost 30 years in uniform prior to
discharge, we suggest that the military barely lost any value from
the premature discharge for homosexuality.
To correct this type of error, the UC Commission took the GAO cost for
enlisted recruiting of DADT-discharged service members ($95.4 million)
as a lodestar and subtracted from that an estimate of the value of
this cost the military recovered from the service members� time in
service, as follows:
To determine the military�s monthly return on investment, we
divided the average cost of recruiting each enlisted service member
($10,193) by the number of months during which the military could
have recovered its investment in that individual�s recruiting. . .
. For each enlisted service member, we credited the military with a
monthly return on its investment in recruiting for each month
served, except for those months spent in initial and mid-career
training. The cost of enlisted recruiting was determined by GAO to
be $95,393,000. Total recovery on investment . . . is calculated as
$16,113,715. The total spent on recruiting, $95,393,000, minus the
recovery on investment, $16,113,715 yields a total of $79,279,285.
(2) Training costs for enlisted service members fired for
homosexuality (1994-2003): $252.3 million
Once the military recruits a person for service, it invests even more
heavily in both basic and initial skills training. The GAO estimated
the cost of training recruits fired for homosexuality to be $95.1
million.
This is almost certainly a large underestimate of the cost of training
these recruits, for a couple of reasons. First, the GAO number does
not reflect training costs for Marines discharged for homosexuality
(since the Marines apparently did not provide GAO with training
estimates). Second, even the GAO�s training cost figures for the other
services are substantially lower than the GAO�s own previous estimates
of training costs and estimates available in other public sources. The
UC Commission corrected the GAO figures by relying on the Defense
Department�s and GAO�s own previous figures for both basic and initial
skills training for each of the branches. After that, the UC
Commission again credited the military for recovering at least a part
of this cost through the member�s service before discharge. Here�s the
calculation:
Spending on enlisted training, prior to any recovery of costs, is
$331,866,779. Total recovery on investment . . . is calculated as
$79,492,728. The total spent on training, $331,866,779, minus the
recovery on investment, $79,492,728, yields a total cost to the
military of $252,374,051.
(3) Training costs for officers (1994-2003): $17.7 million
The GAO report did not factor the cost of training officers into its
report. In the period 1994-2003, 137 officers were discharged for
homosexuality.
To quantify the losses associated with firing officers for
homosexuality, we estimated the cost of training to commission as
well as post-commission training. Then, as was the case with our
estimates of recruiting and enlisted training costs, we reduced our
estimates by crediting the military with any recovered value on its
initial investment in officer training for those officers who
served after the completion of their training. Unlike enlisted
service members, however, in the case of officers we did not
include mid-career training costs in our estimates.
The UC Commission then estimated the cost of training for officers who
go through one of five different routes: service academies (like West
Point), ROTC, Officer Candidate School, direct appointment, and other
paths. Since the UC Commission was unable to get cost estimates for
the latter two, it assumed these costs to be zero. This approach
yielded these numbers:
Spending on officer training, prior to any recovery of costs, is
$27,553,701, of which $15,752,353 is for pre-commission training,
and $11,801,348 is for post-commission training. Total recovery on
investment . . . is calculated as $9,781,631. The total spent on
training, $27,553,701, minus the recovery on investment,
$9,781,631, yields a total loss to the military of $17,772,070.
(4) Separation travel costs (1994-2003): $14.3 million
Recruiting and training costs are front-end: they occur at the
beginning of a military career. There are also costs associated with
separation from the military, the back-end of service. These
�out-processing� costs are numerous and are also investments the
military must make when it discharges a member. One such cost is
travel expense. Using the Army�s own lower-range estimates for such
travel costs, and deducting for recovery of costs through time served,
the UC Commission found as follows:
Spending on enlisted and officer separation travel, prior to any
recovery of costs, is $16,633,308 and $638,381, respectively. Total
recovery on investment . . . is calculated as $2,926,816. The total
spent on separation travel, $17,271,689 minus the recovery on
investment, $2,926,816, yields a total of $14,344,873.
Putting all these numbers together, we arrive at a total cost of $363,
770, 279 to implement DADT during its first ten years.
How accurate is this number? I am not an economist and can�t vouch for
the inputs the UC Commission used to calculate costs. Several factors,
however, suggest that the UC Commission estimate � while an
improvement over the GAO figure � is still a substantial underestimate
of the financial cost of expelling gay service members. The Commission
itself points to five ways in which its analysis may underestimate
costs:
First, we were unable to obtain reliable data for some costs that
were omitted from GAO�s original report. For example, we were
unable to obtain reliable data for the costs of discharge review
boards, security clearances, out-processing costs, investigations
into service members� sexual orientation, re-enlistment bonuses,
and officer recruiting.
...
Second, as noted above, our use of the training costs for a surface
warfare officer as a proxy for the cost of training all officers
reflects a conservative assumption that probably reduced our
overall cost estimate. The cost to train a surface warfare officer
is $92,924, while the cost to train one jet pilot (T-45 line) is
$1,439,754. The list of officers fired for homosexuality includes
physicians, pilots, dentists, and other individuals with highly
technical training.
Third, many gays and lesbians do not re-enlist after fulfilling
their service obligations because they are unwilling to continue to
conceal their identity. According to a new survey of 445 gay,
lesbian, bisexual and transgendered veterans, 19.6 percent of
respondents left the armed forces �voluntarily because they could
not be open about being LGBT while in the military.� . . . [T]he
military may be losing some of its investment in recruiting and
training individuals who would remain in uniform if the ban were
repealed.
Fourth, we assumed that the benefits of a service member to the
Defense Department accrue evenly over the cost recovery period. . .
. This is a conservative assumption given that, as is the case in
most industries, service members� value to the military increases
with experience.
...
Fifth, we did not include the costs of marriage benefits for gays
and lesbians who get married to opposite-sex individuals to avoid
military scrutiny of their sexual orientation, and who then file
claims for military benefits for their spouses. According to the
new survey of 445 gay, lesbian, bisexual and transgendered veterans
mentioned above, 18 percent of respondents (80 individuals) got
married to avoid military scrutiny of their sexual orientation.
Of these, the first (additional separation costs) and the third
(premature loss of non-discharged gay personnel) seem most likely to
add considerably to the real cost of DADT.
There are a few more reasons, in addition to these, that the UC
Commission may be underestimating the cost of DADT. At just about
every turn, the Commission used very conservative estimates of costs.
For example, the UC Commission used a low-ball estimate of the number
of service members fired for homosexuality in the ten-year period,
putting the number at 9,359 enlisted, active-duty members. But this
number, as the Commission notes (fn. 14), does not include some
members of the Coast Guard and reserve forces. Including them would
add about another 300 discharged under DADT. Further, the UC
Commission�s estimate of training costs, though more reasonable than
GAO�s, may still be too low. The Commission cites a �senior level
military operations research analyst� who estimates that actual
training costs are much higher than even the Commission accepts as the
basis for its calculations (p. 13). Since enlisted training costs are
by far the largest fraction of the overall cost of DADT, under the UC
Commission�s own calculation, even small error in per capita costs
could have a big effect on the final calculation.
On the other hand, there are a few ways in which the UC Commission may
have overestimated the total cost of DADT. First, as the Commission
acknowledges, it did not calculate the cost of paying same-sex partner
benefits if the ban is lifted. Experience in other countries so far
shows this cost is very low. Potentially more significantly, the UC
Commission does not attempt to calculate the cost of recruiting and
training service members who might disdain military service if the ban
is lifted. Nobody can know what this cost would be, though it would
surely be greater than zero. I doubt it would be a large cost, since
open homosexuals would be such a tiny portion of the military
services, and whatever the initial cost it could be expected to
dwindle as military culture adjusted. The experience of other
countries does not indicate any recruitment and retention difficulties
attributable to allowing service by openly gay service members. But
perhaps the experience of other countries cannot be fully extrapolated
to the United States. Finally, as a reader and former service member
helpfully noted in a private message to me, the Commission assumes
that gay service members discharged under DADT would have served just
as long as straight service members if not for DADT. The assumption
seems reasonable, and the Commission makes no attempt to defend it.
But I do not really know. The difference between the expected length
of service and actual service forms the basis for some of the
Commission�s cost estimates. If, contrary to the Commission�s
assumption, service members expelled under DADT would, on average,
serve shorter periods of time than their peers even in the absence of
DADT then the �loss� the military suffers because of early discharge
would be correspondingly smaller.
Finally, whatever the accuracy of the numbers in the UC Commission
report, the financial costs alone do not resolve the debate over DADT,
just as financial cost does not resolve a debate over any policy that
might be worthwhile. The military exists to deter wars and, when that
fails, to win them. If allowing homosexuals to serve openly would
likely hinder that mission to any substantial degree, then the
financial cost of expelling them would have to be just one more item
in the Defense Department�s budget. Nor do �financial costs� alone
measure all the costs � in broken careers, broken lives, broken
families, in the dignitary loss to gay Americans in general and to
those who want to serve their country with integrity in particular �
of having a policy that expels American service members simply because
we learn they�re gay. But we cannot have a debate over the overall
costs and benefits of DADT without at least a reasonable baseline
estimate of the financial costs. For that reason, the UC Commission
has made what appears to be a useful and important contribution to the
debate.
I am interested in readers� views on the specifics of this study. I am
especially interested in hearing from readers who have expertise in
economics, accounting, and military-cost analysis.
References
1. http://www.gaymilitary.ucsb.edu/Publications/2006-02BlueRibbonFinalRpt.pdf
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