You cannot use your retired military rank to advance a political statement, period. It's a violation of both the UCMJ and the Hatch act. And yes, they can withhold pay and take other punitive actions, and I wish they would. There were various issues in the 2004 campaign with both sides trotting out wounded soldiers, vets, etc. in uniform. Everyone got a quick reminder about the Hatch act, and no further action was taken, as usual.

Had he not used the rank, I almost guarantee Obama's campaign wouldn't have made that mailing.