Peter Orzag wants to sell you a bridge
Over at Bloomberg, Orzag assures us that stimulate now, cut later is a realistic strategy because it has worked well in the past.
The piece is titled, "History Shows the US can Stimulate Now, Cut Later"!
His examples? Well there's really only 1 given:
"From 2017 to 2022, Social Security’s normal retirement age is scheduled to gradually increase to 67. And I’ll bet that not only happens as planned, but does so with little fanfare -- which is pretty much what happened several years ago when the age rose from 65 to 66."
Oh, man. I stand corrected. A phased in over 5 years one year increase in the normal retirement age is going to happen? Well of course we can run a big stimulus now and pay for it with cuts later!
People, this is just so wrong in so many ways. First, this is a tiny "cut". Second, it wasn't part of a deal that included increased spending in the present. Third, as Krugman and others have pointed out recently, the US Congress is the most polarized it's been in recent history. Fourth, that example is a pretty thin reed on which to base "History Shows".
Orzag goes on to cite a 2009 study showing Medicare cuts were largely implemented. But they weren't implemented as part of a deal to allow increased current spending nor was there a long time delay between the legislation and the enactment.
Current Congresses cannot bind future ones. Sure the filibuster or veto threat can create some status quo bias, but a law saying let's spend a bunch more right now but don't worry, we'll cut in 10 years in basically just a con game.
I am not aware of any examples in peacetime (sorry I know we have "wars" going on vs. drugs and terror) US history where the Federal government rationalized an immediate spending increase of 500 billion to 1 trillion dollars in a time where the deficit was already over 1 trillion dollars by promising to cut spending 5 to 10 years in the future and actually did it.
I am pretty sure if Peter Orzag actually knew of such a case, he'd have mentioned it in his piece.