FROM ISSUE NUMBER 16 ~ SUMMER 2013 GO TO TABLE OF CONTENTS

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A Better Way to Help Veterans

DANIEL M. GADE

In the years since the United States was drawn into a global war on terrorism by the attacks of September 11, 2001, Americans have made significant commitments to support the men and women who have served on the front lines of the conflict. Tens of thousands of charities have contributed billions of dollars — and millions of volunteers have spent countless hours — assisting veterans and their families. The federal government has made an even larger investment, providing a host of services — including health care, education and job-training programs, and home loans — to those returning from war. Of the 2.4 million troops who have deployed to Iraq and Afghanistan, an estimated 1.9 million are now eligible for benefits from the Department of Veterans Affairs, including health care and disability compensation, on which the agency spends billions of dollars every year.

Few Americans question the propriety of these efforts to aid our nation's men and women in uniform. The desire to help veterans in need reflects a fitting gratitude for service rendered and sacrifices shouldered. But precisely because we know we owe our veterans a great debt, we tend not to question the particular ways in which our government goes about helping them. We therefore pay far too little attention to whether these efforts might actually be doing more harm than good. And there is reason to believe that, in many cases, well-intentioned programs to support veterans are instead preventing them from enjoying healthy, productive civilian lives after they return from war.

This is particularly true of federal policies intended to help wounded and disabled veterans. A shocking 45% of veterans from the wars in Iraq and Afghanistan are currently seeking compensation for service-connected disabilities — more than twice the application rate of troops who served in the Gulf War. There are many reasons for this increase, but a major factor is surely the design of VA benefit policies, which distort incentives and encourage veterans to live off of government support instead of working to their full capability. Adding to the problem is a culture of low expectations, fostered by the misguided understanding of "disability" upon which both federal policy and private philanthropy are often based. The result is that, for many veterans, a state of dependency that should be temporary instead becomes permanent.

America's veterans — particularly those with disabilities related to their service — deserve better. Because of the debt the nation owes these men and women, and because of the talent and experience they can contribute to our economy and society, both lawmakers and citizens should ensure that our efforts to support veterans do not undermine their recovery. By looking at the experiences of today's veterans, and by examining the perverse incentives created by current policies and charitable practices, we can develop a support system more helpful to, and more worthy of, America's defenders.

A NEW GENERATION OF VETERANS

To better understand the choices facing today's veterans, it makes sense to look at just who these men and women are and what distinguishes them from their predecessors. In the particular case of wounded veterans, it is worth examining what types of injuries and conditions they are dealing with — and how prevalent those conditions truly are — to gain a more complete understanding of the problem of "disability" that government policies and private charity must address.

First, the modern military is composed entirely of volunteers, and, as a self-selected group, they are not a representative cross-section of society. As a statistical matter, they are more educated than the typical American: With very few exceptions, they are high-school graduates or have GEDs. Many even in the enlisted ranks have some college education. More than 80% of officers have bachelor's degrees, and many have graduate degrees. Moreover, because the military's current medical and physical-fitness standards are relatively rigorous, veterans of Iraq and Afghanistan are both physically and mentally healthier than the population at large. (For reference, consider that only 25% of the civilian population of suitable age can clear the mental and physical thresholds, as well as meet the requirement to be free of any serious criminal record, demanded for service in the armed forces.) It is also worth noting that the conflicts in Iraq and Afghanistan have involved record levels of Reserve and National Guard forces, who are typically somewhat older and even more educated than the active force. These men and women are also more fully integrated into civilian life.

Second, the combat experience of today's veterans is markedly different from that of veterans of most previous wars. With a few exceptions — the initial invasion of Iraq, the first and second battles of Fallujah, Baghdad during the "surge," isolated pockets of the fighting in Afghanistan, and a few other episodes — today's veterans have faced conflicts characterized by chronic, low-to-moderate levels of violence rather than by dramatic, high-intensity battles. At the same time, they have operated chiefly in theaters with no front lines and where civilians have been mixed in with combatants. This means today's veterans have often been more exposed to civilian suffering and less sure of their adversaries, which has produced distinctive psychological effects.

Third, the social environment that has awaited veterans after their service is different today than it was for some previous generations of veterans. By and large, the civilian population is now accepting of veterans and thankful for their service. This "Sea of Goodwill," as former chairman of the Joint Chiefs of Staff Michael Mullen labeled it, encompasses employers, community leaders, government officials at all levels, academics, health-care professionals, and other grateful citizens. In contrast with the experience of Vietnam veterans, today's returning soldiers and recently discharged veterans have received a warm welcome home.

Fourth, although the number of veterans to be re-integrated is high, it is still dramatically lower than in previous wars. As of last year, fewer than 2.5 million troops had served in Iraq or Afghanistan since 9 / 11. This figure is significantly smaller (especially as a percentage of the population) than the 3.4 million who served in the Vietnam theater, and is only a fraction of the 16 million Americans who served in the military during World War II.

Finally, returning troops also tend to be better off financially than their civilian peers. Both the earnings and overall incomes of veterans are higher than those of non-veterans. Among men in 2009, for instance, year-round workers averaged $51,230 in earnings if they were veterans and $45,811 if they were non-veterans. Among women, the advantage for veterans was even greater. When the measure is income — not only earnings, but also pensions and entitlements — veterans fare comparatively better still.

Thus, contrary to some conventional wisdom, most veterans are not "victims" or members of a problem class. Given their educational and health advantages, those returning from the wars in Iraq and Afghanistan are likely to be a particularly valuable asset to America's economy and society in the years ahead. It is therefore important, from a purely economic point of view, to ensure that as many of them as possible are working to their full capacity. This means targeting assistance to those veterans who are genuinely struggling with the transition back to civilian life, while avoiding giving more capable veterans reason to work below their potential (or to not work at all). And from a moral point of view, the argument for veterans' full re-integration through employment is even stronger.

Yet evidence suggests that our aid to veterans is overly broad, creating exactly the perverse incentives that encourage returning soldiers who are capable of work to instead have themselves classified as "disabled." As noted above, 45% of Iraq and Afghanistan veterans are currently seeking compensation for service-connected disabilities, and about one-third of all new veterans are being granted some level of disability benefits. The number of disabling medical conditions claimed by the average applicant has soared — from one or two among World War II and Korean War veterans, to around three or four among Vietnam veterans, to more than eight medical conditions per claimant among veterans who served in Afghanistan and Iraq.

One reason for this dramatic increase is a happy one: Thanks to improved trauma care, some servicemembers are collecting disability benefits for injuries that in past wars would have killed them. It should be noted, however, that this is a minor factor: Of the more than 2.4 million servicemembers who have served in Iraq and Afghanistan, fewer than 15,000 were wounded in action seriously enough to merit evacuation from the theater.

A bigger reason for the increase is surely VA classification procedures. The definition of "disability" in the VA system is such that most of these veterans are not in fact "disabled" in the way that most Americans understand the term. It would be far more accurate to describe these veterans as simply "having a service-connected condition."

What kinds of service-connected conditions are qualifying veterans as "disabled"? The most common condition for which veterans receive disability ratings is tinnitus, or ringing in the ears; the second most prevalent is partial hearing loss; other common conditions include afflictions like arthritis and lower-back strain. It is worth noting that, while all of these conditions can be associated with the rigors of military service, most are also caused by the normal progression of time and age. In any event, they are hardly the catastrophic injuries that capture the public's attention.

One service-related condition that captures an enormous amount of public attention is post-traumatic stress disorder. PTSD encompasses a very wide range of complaints, including intrusive memories of the traumatic event (flashbacks and dreams), avoidance and emotional numbing, and anxiety and depression. Typically, in order to receive compensation for PTSD, a veteran must experience some level of social or occupational impairment (the most serious disability rating, of 100%, is reserved for total occupational and social impairment, persistent delusions, and symptoms of comparable severity).

Assessing the true prevalence of PTSD can be difficult, and the task has been made even more complicated by two changes implemented in 2010 to VA policies regarding diagnosis and treatment. First, the VA no longer requires proof that the veteran actually experienced a specific traumatic incident (because PTSD can arise from an accumulation of stress, particularly the persistent fear of enemy or terrorist activity that characterizes service in a combat zone). Second, rather than simply observing PTSD in patients who come to clinics seeking treatment, the VA now actively pursues patients who might have the condition, using public-awareness campaigns such as "PTSD Awareness Month" (June). One result of this change is that more veterans with legitimate diagnoses of PTSD are receiving the treatment they need; another is that the claims for PTSD-related benefits, and the figures for veteran disability, have skyrocketed. Among Iraq and Afghanistan veterans, the Department of Veterans Affairs reported 261,998 cases of diagnosed PTSD as of the first quarter of 2013 — a prevalence much greater than that among previous generations of combat veterans.

The Department of Veterans Affairs is also making it easier to qualify for benefits on the basis of traumatic brain injury, or TBI. In December 2012, the agency unveiled new regulations that will allow thousands of veterans to receive benefits for five diseases not previously covered by the VA, basing the expansion on a 2008 Institute of Medicine study that found "limited or suggestive" evidence that these diseases may sometimes be linked to TBI. Incidentally, only a small fraction of the 250,000 cases of TBI diagnosed among servicemembers since 2000 are combat related: The vast majority stem from vehicle crashes, training accidents, or sports injuries.

Thankfully, relatively few of the conditions for which veterans seek compensation are caused by catastrophic injuries. Among post-9 / 11 veterans, fewer than 2,000 have undergone major amputations. Serious burns, spinal-cord injuries, and cases of complete blindness number in the hundreds.

Given the variety of service-connected conditions, there is a wide range in the extent to which veterans claiming benefits are considered "disabled." The process of applying for disability is relatively straightforward: The veteran assembles, with the help of either the VA or a veterans' service organization, a packet of medical and service records and a disability application. The claim is adjudicated by the claims staff at a VA processing center, and benefits are awarded, typically within nine months or so. Disabilities in the VA system are rated in increments of 10%, from 0% to 100%. Of the nearly half-million post-9 / 11 veterans receiving disability compensation in 2011, 28% had between 0% and 20% disability, 26% had between 30% and 40% disability, 21% had between 50% and 60% disability, 17% had between 70% and 80% disability, and 8% had more than 80% disability (including 4% who were compensated for being 100% disabled).

It is thus crucial to recognize that many veterans classified as "disabled" are in fact largely capable of enjoying active lives and performing some remunerative work. While those veterans whose injuries permanently preclude a return to the labor force deserve whatever support they require, it is just as important to ensure that veterans who can provide for themselves are not robbed of their independence by policies that incentivize unemployment. Unfortunately, however, the way our system currently provides benefits is rooted in a flawed understanding of disability — one that keeps veterans unfairly trapped in a state of needless victimhood.

UNDERSTANDING DISABILITY

Broadly speaking, a returning soldier or recent veteran benefits from assistance in three major areas: medical care, education and job training, and employment. Which services a returning soldier or veteran uses depends largely on his circumstances — whether he is redeploying with his unit, being re-integrated into civilian life, or undergoing rehabilitation for significant trauma.

For those soldiers who are returning with injuries, a rich network of service providers exists to help with recovery and transition back to civilian life — a network made up of federal programs, assistance from state and local governments, non-profit groups, church congregants, neighbors, friends, and family. Ideally, this network would treat acute and chronic medical needs, then provide rehabilitation services, and finally help veterans gain and maintain useful employment.

But many veterans never make it to the last step, in part because of the dangers lurking in the good intentions of their support networks. This is particularly true of federal programs to aid veterans, as these government benefits and support services play a dominant role in returning troops' rehabilitation. It is therefore worth examining the understanding of "disability" that drives federal policies governing benefits for wounded soldiers in order to see how those policies end up undermining the recovery process for many veterans.

There are at least two major models of disability, the first of which is the so-called "medical model." The medical model attempts to classify an impairment as a disease and to control its effects as one would treat an illness, taking a thoroughly clinical approach. The medical model of disability says that an amputee is automatically "disabled" by virtue of his limb loss — even if he is capable of leading a largely independent, normal life — and is devoted strictly to restoring, to the extent possible, the lost functionality of the limb. Support under this model focuses almost exclusively on the patient's infirmity, and in some ways defines the patient by his impairment; the disabled person is viewed as a victim, and the purpose of the disability system is seen as providing benefits, rather than encouraging a return to functionality.

A more modern approach is the broader "social model" of disability, which assumes that a physical ailment is only one component of determining whether a person is truly "disabled." The social model adds environmental and personal factors to the physical diagnosis. It takes account of the fact that a wheelchair user, for example, is much more "disabled" in an environment in which his movement is constrained by obstacles — curbs, stairs, and so forth — than he is in an environment in which he can easily get around using lifts, elevators, and ramps. Moreover, personal factors at the individual and family levels strongly affect the degree of disablement that a person will experience at the completion of his medical treatment. Many families are able to find a "new normal" after a family member becomes disabled; some are not. Some individuals are resilient in the face of daunting challenges; some crumble. The social model acknowledges these differences.

As a society, the United States has begun to move beyond the medical model of disability, preferring the social model instead. The passage of the Americans with Disabilities Act in 1990 eliminated many physical barriers to wheelchair mobility and required reasonable accommodation of disabilities in the workplace. And attitudes are changing: Because of the revolutionary effects of new prosthetic, computer, and drug technologies, we've become accustomed to seeing amputees pass us on the ski slopes. Children with disabilities are often put into "mainstream" classrooms. Adults with disabilities flourish in many kinds of jobs. Even people with serious intellectual disabilities and developmental delays can be fully employed in creative ways, and they gain both financial and social benefits from their work. Our views of what is possible for the "disabled" have been altered dramatically over the past generation.

Some government programs acknowledge the social model of disability. For example, most state-level employment programs for persons with disabilities require some version of an Individualized Education Plan as part of the re-employment process. These plans take into account the particular strengths and weaknesses of the job candidate before placing him into a tailored program of rehabilitation, education, or training in independent living.

Unfortunately, several major federal-government programs rely on the medical model rather than on the social model. The Department of Veterans Affairs disability-compensation program is one. The VA's statutory requirement (found in Title 38 of the U.S. Code) is to compensate for disabilities based on "average loss of earnings" that would be expected for a worker with a particular diagnosis. The VA's compensatory scheme thus relies on two abstractions: a diagnosis, and an estimate of the average loss of earnings of a person with that diagnosis, based on data from people in the system who have had the same diagnosis. This assessment does not take account of circumstances unique to the veteran in question — personal qualities, family support, educational potential, or other factors affecting the degree to which his injury will result in real disablement.

This means, in essence, that the VA doesn't base its compensation on "disability" — how incapacitated a veteran really is — at all. Rather, VA disability benefits are based purely on a diagnosis, regardless of what that diagnosis actually means for a particular veteran's ability to resume a normal life. By this definition, many of the athletes we see sprinting and swimming at the Paralympics — and the wounded veterans now working profitably in Wall Street banks — are "totally disabled." Indeed, some wounded troops who remain on active duty and return to the roles they had before sustaining their injuries will be labeled "totally disabled" once they leave the service.

Such a model of disability classification can have a harmful effect on veterans seeking benefits. The process of applying and proving that one is "disabled" can negatively influence the way the veteran, his family, and his community view his own capabilities. Applicants for benefits can start to rely routinely on others; personal aspiration can diminish; passivity can become normal. Having been defined by his impairment, he may no longer believe that he is responsible for his own outcomes in life. Similarly, the community may — consciously or not — begin to view the disabled person as an object of pity rather than as a citizen in full standing. Government benefits and charitable giving — to the extent that they supplant income from work — can deny the veteran the pride of self-provision and exacerbate the sense that the veteran's life is beyond his own control.

In designing government policies and private philanthropic initiatives to help veterans, then, it is crucial to keep in mind an important distinction: the difference between capacity and performance. Capacity is the best an individual can be expected to do in a particular aspect of his life. Performance is what that individual actually does. The goal of any policy intended to help ill or injured veterans should be to narrow the capacity-performance gap.

The Department of Defense offers a useful example of how this goal should be pursued. The Pentagon has its own separate disability-rating system, one based more on the "social model" of disability. The department rates disability based on whether the person in question can still perform his assigned military duties or can be re-assigned to a role better suited to his remaining capacity. By eliminating barriers and restructuring work requirements, the Department of Defense is bringing disabled servicemembers' performance more in line with their capacity. Under this model, dozens of amputees have returned to service after rehabilitation, and at least one completely blind soldier continued his Army career after losing his sight in 2005.

Unfortunately, the VA does a poor job of assessing the capacity of wounded soldiers and maximizing their performance. Private charity, too, is often more focused on what an injured soldier is not able to do than on increasing what he is able to do. These practices can seriously hinder a disabled veteran's re-entry into society — undermining the very purpose of philanthropic and government aid to injured troops.

INCENTIVES AND TRADEOFFS

To see how this flawed understanding of disability — and the policies that flow from it — can sabotage veterans' long-term success, it is useful to consider the experiences of three different hypothetical soldiers returning from war.

Soldier A was a sergeant in the infantry serving proudly in Afghanistan when he was hit by an improvised explosive device. He suffered penetrating trauma to his head, leaving him severely disabled. He has crippling headaches, poor mobility, and poor cognition. He depends on others to carry out daily activities like cooking, transportation, and many elements of self-care. He needs all the government and charitable assistance he can get to support extensive ongoing treatment, and indisputably requires life-long disability payments.

Soldier B is a member of the U.S. Army Special Forces. When he was hurt by small-arms fire in Iraq in 2006, his injuries were serious, and his leg was amputated below the knee. But Soldier B has many advantages. He is happily married with children; he had completed a bachelor's degree before entering the military; and he has an ambitious, resilient personality. Soldier B is thus able to put his injury behind him and remain on active duty; he even returns to combat. While this soldier will need some assistance from his friends, family, and community, he should not be perceived or treated as "disabled."

Soldier C is a college drop-out from a small town. He still has nightmares from his first tour of duty, reliving the danger of fighting the insurgency in Iraq. Four months into his second tour, in Afghanistan, an improvised explosive device killed two other soldiers and seriously injured him. He woke up at Walter Reed after two weeks of unconsciousness to find that he had suffered a mild traumatic brain injury, the amputation of his lower right leg, and minor shrapnel wounds to his arms, face, and remaining leg.

This soldier benefits from superb medical treatment and the care of his girlfriend and mother, who help nurse him back to health. He initially suffers from headaches because of the brain injury, and the shrapnel wounds take some time to heal, but after six months he can run again on his new prosthetic leg. A year after his injury, Soldier C starts his medical-board process so that he can separate from military service. Eight months later, he is a civilian. He goes to an advocacy group for disabled veterans to seek help filing his disability claim; they push him to apply for disability not only for the amputation of his lower leg but also for the shrapnel wounds, for the mild TBI, and for his nightmares, which they say is PTSD. Fortunately, the soldier's claim is handled quickly, and the government gives him a disability rating of 40% for the leg, an additional 10% for the shrapnel scarring, and 30% for the PTSD.

Soldier C has the opportunity to pursue vocational rehabilitation or to go back to college on the greatly expanded G.I. Bill and complete his degree. But his counselor from the Department of Veterans Affairs tells him that he qualifies for something called "Individual Unemployability" (IU). Through this program, a soldier whose impairments don't add up to 100% disability can receive compensation at the 100% rate, as long as he doesn't work. This soldier feels like he could work, but the difference between VA compensation at the 80% rate and at the 100% rate is significant — well over $1,000 a month. By taking IU payments, he also avoids having to make the adjustments to his life that going to work every day would entail. So he applies for, and receives, the IU benefits.

While there are some stories of wounded troops like A and B — extreme cases of need or independence — their outcomes are, by and large, exceptions. Public policy and private charity should instead be built around the far more common case: that of Soldier C, who faces real decisions and tradeoffs, which are influenced by the design of both public and private benefits.

And what incentives do today's policies provide someone like Soldier C? Consider what he gains by being dubbed "disabled." Because of his injury, this soldier receives $50,000 from the Servicemembers' Group Life Insurance Traumatic Injury Protection Program, which is intended to serve as a bridge to rehabilitation. During his recovery, this veteran enjoys free lodging; he can eat for free at the hospital or any other Army dining facility. He receives his full military salary and other benefits.

Upon leaving the Army, this soldier will receive a portion of his military retirement pay and all of his disability benefits from the Department of Veterans Affairs. Because he chose to apply for IU, he will receive compensation from the VA at the 100% disability rate — around $2,800 per month. Depending on where and when he applies, he may also qualify for Social Security Disability Insurance (SSDI) — which, for someone in his situation, is worth around $800 a month. All told, his benefits package from the government may easily exceed $4,000 per month, most of it tax free. Given that the national median monthly earnings figure for 20- to 24-year-old males who work full time is $1,976 (before taxes), Soldier C has a good reason to accept the "disability" label. Because he loses his IU benefit and his SSDI if he begins to earn above a minimal amount, he faces a stiff financial penalty for taking a job. And since he lacks a college degree, it will be very difficult for him to replace that lost income — let alone exceed it — through wages for full-time work.

Once a veteran like Soldier C chooses disability over work, he faces further harmful consequences. From a psychological standpoint, this soldier should be confident: Despite having lost a leg, he walks with only a slight limp; he has only occasional headaches or sleepless nights because of the TBI and the PTSD. But he has just spent more than two years proving to the federal government that he is "disabled," and two different federal programs have classified him as "disabled." It is easy to see how a veteran who might otherwise have a relatively bright outlook on his future could come to see himself as "disabled" as well. Moreover, a person's work is a key part of how he relates to society and is crucial to his identity. When a veteran like Soldier C chooses not to work, he is isolated at home, meets fewer people, and has a much smaller social network than does someone who goes to work every day. He is likely to be involved in fewer social activities and thus more likely to become depressed and experience other social dysfunction. More fundamentally, he lacks the meaning and sense of purpose that come from work.

Regrettably, there has not been a concerted, empirical study of the precise effects that the incentives created by these VA benefits and policies have had on this generation of veterans' work choices and rehabilitation. Most of the indicators we have are anecdotal, or inferred from other data. The fact that the VA has not undertaken a rigorous evaluation of the degree to which its policies discourage returning soldiers from working to their full capacity is itself revealing. Given what is at stake, it is a subject that cries out for further study.

In the meantime, however, there is other evidence to support the argument that someone like Soldier C is undermined by the way our government treats disabled veterans. In particular, other federal disability programs offer valuable lessons in how such efforts can be counterproductive. For example, in their recent book, The Declining Work and Welfare of People with Disabilities, economists Richard Burkhauser and Mary Daly study two massive federal programs, Social Security Disability Insurance and Supplemental Security Income (SSI). The authors find that, despite the many new legal protections and forms of assistance for the disabled that have arisen over the past generation, employment rates among disabled Americans are at an all-time low, and household incomes have been stagnant. The design of these disability programs, Burkhauser and Daly find, makes work both "less attractive and less profitable" than passively receiving benefits. The positive effects of the Americans with Disabilities Act and other efforts to mainstream people with disabilities have thus been considerably undermined by carelessly designed entitlements.

This trend is visible in the dramatic growth of disability programs of all types over the past several decades. Through our Social Security system alone, cash payments to individuals classified as "disabled" totaled $135 billion in the latest fiscal year. After reviewing the 19-fold increase in federal disability claimants since 1960, Washington Post columnist George Will warned that "gaming...of disability entitlements" has made work "neither a duty nor a necessity" — which is one major reason why the male labor-force participation rate has plummeted from 89% in 1948 to 73% today. As the American Enterprise Institute's Nicholas Eberstadt has noted, there are now more Americans of working age receiving government disability checks (more than 12 million) than there are paid workers in our entire manufacturing sector.

Disability programs for returning soldiers are no exception to this problem. Indeed, some of the best evidence to suggest that our assistance to disabled soldiers may hinder their re-entry into the labor force comes from a study of a past generation of veterans: those who served in Vietnam. In a 2007 paper, economists David Autor and Mark Duggan looked at the question of why, precisely, disability-compensation programs discourage work. Part of the reason why programs like SSDI and SSI suppress employment among recipients is a "substitution effect": As the authors explain, "because a return to work ultimately means sacrificing benefits," recipients of these disability benefits "face a financial incentive to remain non-employed." This amounts to an "implicit tax" on work. But the authors were particularly interested in the question of "income effects" — of the choices the disabled make when working carries no financial penalty in terms of reduced benefits, and when the tradeoff is between simply having more money from work and having more leisure time.

To study these effects, Autor and Duggan looked at a 2001 change in eligibility policies for veterans' disability compensation. Because an Institute of Medicine study linked exposure to Agent Orange to diabetes, the authors explained, the VA added diabetes to the list of conditions for which a Vietnam veteran would be eligible to receive disability benefits. A large number of veterans nearing retirement age suddenly had access to greater cash benefits and improved medical care. Crucially, however, they did not need to be unemployed to receive these benefits. Nor were the benefits means-tested. This disability compensation thus imposed no "implicit tax" on work. To the extent the Vietnam veterans with diabetes reduced their work in response to the new eligibility policy, the authors explained, it would be "plausibly attributable to the pure ‘income effect' of receiving an unconditional, lifetime grant of monthly income and healthcare." Such a policy change, Autor and Duggan observed, provided "an opportunity to study the income effect of receipt of disability benefits on the labor supply and retirement decisions of a relevant population of near-elderly individuals, the majority of whom were work-capable at the time of benefit receipt though not necessarily in good health."

And what did the study reveal? While the authors noted that their conclusions were preliminary, they found that the increase in unearned income resulting from the VA's 2001 policy change "substantially lowered labor supply among Vietnam era veterans." The mere availability of extra income as a result of being disabled — even when unemployment was not a condition of receiving those benefits — was enough to encourage work-capable veterans to claim disability and drop out of the labor force.

If such behavior exists among Vietnam veterans, with their long history of attachment to the labor force, it stands to reason that it is affecting the decisions of post-9 / 11 veterans, too, especially those whose only job has been their military service. To a large degree, this is common sense: Compensating individuals for their disabilities will result in more people lining up to be declared disabled, just as unemployment programs invariably increase the time that people receiving unemployment benefits remain jobless.

To be sure, this danger is not limited to government entitlements. Some charitable programs designed to honor veterans can also have negative effects. One troubling trend in charitable giving has been the growth of programs offering large gifts to veterans based on service-connected disabilities. Several programs, for example, offer free homes to veterans who have been identified as "disabled" by the government — providing extra reason for veterans to seek a disability classification, even if they might be better off thinking of themselves as able-bodied and working a full- or part-time job. Though such charitable programs have heart-warming stories to tell, they may ultimately decrease a veteran's desire to participate in the labor force and fully re-integrate into civilian society. It isn't particularly difficult to balance out the harmful incentives in such gifts — through sweat-equity requirements like those used by Habitat for Humanity, or through financial co-pays or concrete expectations that the veteran will be employed after he and his family move into their donated home. Unfortunately, however, these important details are overlooked in the design of most charitable programs.

Ultimately, volunteers, donors, policymakers, and taxpayers don't like to think that programs designed to aid veterans can instead harm them if incentives are misaligned. But a great deal of evidence indicates that poorly designed government compensation programs and charitable services are creating major hurdles for recovering veterans.

TOWARD SELF-SUFFICIENCY

Obviously not every veteran responds to these incentives in the same way. Some people will take their disability payments and job-retraining opportunities and make dramatic successes of themselves. Congresswoman Tammy Duckworth, Wounded Warrior Project board president Dawn Halfaker, Senator John McCain, and many other former soldiers have done just that. It is important to realize, though, that the men and women who are able to resist the siren song of gifts, charity, and disability payments are the exceptions. The system should be designed around the vast majority likely to make the very understandable choice to forgo a fully independent lifestyle in exchange for the generous benefits that come with being "disabled."

It is also important to note that neither today's federal programs for veterans nor their charitable counterparts are intended to harm veterans. The negative effects of these programs are certainly unintended consequences. The question, then, is how best to mitigate these effects. Policymakers and donors would be wise to keep a few helpful principles in mind when designing benefits and services.

First, they should always take incentives into account — even negative ones. Veterans are simply people, and they respond as rationally as anyone else to the incentives they are offered. The old lesson about giving a man a fish versus teaching him to fish applies to wounded soldiers. Policymakers and charities should ask whether their benefits and services provide for veterans directly, or instead help veterans integrate into society and provide for themselves. Under this principle, it may make more sense to offer benefits to work-capable veterans only when they take jobs instead of subsidizing them in unemployment. Even though an unemployed veteran is more financially vulnerable in the immediate term, his long-term interests may best be served by policies that encourage him to find employment as quickly as possible.

Second, veterans should be viewed as resources, not as damaged goods. The percentage of veterans who leave military service totally and permanently disabled is tiny. The percentage who need or could use some help is moderate. The majority of veterans need no special help at all. Efforts to help veterans should begin by recognizing their abilities, rather than focusing exclusively on their disabilities, and should serve the ultimate aim of moving wounded soldiers from the category of "needing some help" to real self-sufficiency.

Third, lawmakers, philanthropists, the press, and the general public should be more willing to have an open, honest discussion about this question. The warnings issued here are rarely articulated, in part because they can so easily be exploited for demagogic purposes. But these are hard realities, and it does our veterans no good to deny them. Many of these observations and conclusions come from my years of academic specialization in this area. Most come from personal experience. I was wounded twice in Iraq; the second time I nearly lost my life, and did lose my entire right leg. I needed more than 40 operations before I could return to self-supporting work and family life.

During my year at Walter Reed Army Medical Center, I saw a great many servicemembers like Soldier C get sidetracked on the road to recovery by overly generous or poorly targeted assistance programs. I myself was offered forms of help that could have hindered my quest to regain independence. Fortunately, I was blessed with wiser offers from generous helpers at hundreds of points along the way, and with a supportive and loving family. Many veterans, however, are not as lucky.

A great deal of government and charitable activity surrounding veterans does wonderful things for men and women who deserve the utmost support. The challenge is to improve our distribution of benefits and services by designing policies that are smart and honest about the degree to which they discourage veterans from living the active, productive lives of which they are capable. To the extent that we can eliminate these pitfalls from our current support system, we will dramatically increase the opportunities for today's veterans to participate fully in the American Dream.

Daniel M. Gade, a lieutenant colonel in the United States Army, teaches in the Department of Social Sciences at the United States Military Academy. He served as a company commander in Iraq in 2004 and 2005. He was wounded in action twice and decorated for valor. This essay is adapted from Serving Those Who Served, published in May by the Philanthropy Roundtable. The views expressed in this article are solely those of the author, and do not represent those of the Army or the Department of Defense.