- The Washington Times - Monday, May 17, 2010

President Obama placed a call to Prime Minister Jose Luis Rodriguez Zapatero last week to express his support for Spain’s effort “to strengthen its economy and build market confidence.” For once, Mr. Obama is exactly right.

It’s not every day that we draw inspiration from this president or European economic policy. In fact, it’s generally a good idea to do the exact opposite of what the International Monetary Fund and the White House recommend. Nonetheless, aspects of Spain’s reaction to the region’s economic disaster appear to be an exception to this rule.

Mr. Zapatero is taking action to address the root cause of his nation’s fiscal dilemma: excess spending. For years, Spain had doled money out of the public purse with such abandon that its deficit reached 11.2 percent of gross domestic product in 2009. Mr. Zapatero will now impose a 5-percent across-the-board reduction in government salaries. Ministers will take a more substantial, but mostly symbolic, 15-percent cut. More importantly, the government will freeze pension benefits and eliminate a number of non-essential benefits. A total of 13,000 unnecessary government employees will be cut loose.

Not surprisingly, Spain’s public-service unions care more about their personal pocketbooks than the economic survival of the country they purportedly serve and have announced a one-day strike to protest bureaucratic belt-tightening. Madrid’s stock market, on the other hand, rallied in approval.

If Mr. Obama really believes Spain is on the right track, he should implement Mr. Zapatero’s newly announced policies here. Given Washington’s reckless rate of spending growth, the U.S. deficit-to-GDP ratio, currently 10.6 percent, will equal Spain’s next year. To counter this, a modest 5-percent reduction in already generous federal salaries would save at least $7.5 billion up front. Over time, the savings would grow even greater in terms of reduced pension obligations, on which U.S. taxpayers currently spend $70 billion a year.

It makes sense to cut and freeze all federal salaries until our books return to balance. The larger cuts, of course, should be applied to those holding leadership positions. Mr. Obama would survive on a salary of $340,000 a year. His cabinet secretaries can make do with $169,745. House Speaker Nancy Pelosi will still live it up on $189,550. Members of Congress won’t need food stamps at $147,900. Most importantly, these moderate actions would help eliminate the mentality that public-sector employees are entitled to automatic pay hikes every year, regardless of the cost to America’s economic health and irrespective of the quality of their work.

While the savings from such cutbacks are not enough to make a large dent in America’s $12.9 trillion public debt, a few billion in cuts are a good start. If we can’t take the easy steps now, we certainly won’t be able to implement the more drastic measures that will be required when our growing debt triggers a European-style collapse.

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