The Spanish deficit situation is getting real:
Elena Salgado, Spain’s finance minister, said after a cabinet meeting in Madrid that spending cuts, tax rises and a return to economic growth would cut the deficit from a higher-than-predicted 11.4 per cent of gross domestic product in 2009 to 3 per cent in 2013, in line with Spain’s promises to meet EU budget rules.
To protect the long-term health of the social security system, which is currently in surplus, Spain also increased the retirement age from 65 to 67, a measure that will be introduced gradually from 2013.
Think about this when you read David Brooks say that Barack Obama should run around the country making deficit reduction his top priority. Does Brooks think that cutting Medicare is popular? That raising taxes is popular? That fighting with generals about defense cuts would be popular? A higher retirement age? All this stuff is unpopular and doing it all simultaneously is super-unpopular. Spain appears to have reached the crisis point where there’s genuinely no choice, so away they go. We should consider ourselves lucky that we’re not there yet and focus on trying to get as much economic growth as we can in the short-term. With luck, we’ll be able to tackle the deficit in a post-recession environment and avoid the sort of catastrophic depression that Spain’s going to be looking at.