James Hamilton asks What could America be good at? and considers the impact of regulations:
… if new regulations cause someone to lose their job or kill a new project that would have been hiring, the regulations are making a direct contribution to our cyclical problems, and are significantly more costly than if the same regulations had been implemented when the economy was operating at full employment.
Hamilton’s major concern is regulations that affect our ability to take advantage of natural resources, but it applies to all regulations. He then goes on to say:
Obviously what we need to do is weigh the costs of regulation against the benefits. Just because the costs are higher in a recession, that does not mean that new regulations during a recession are always a bad idea. But I do believe Americans need to acknowledge that, both because of the current economic weakness, and because of the longer-run challenge in finding a basis for future economic growth and current-account balance, we are poorer than we used to be. A challenge of this magnitude needs to be approached with some humility about just what we should be willing to do to get back on track.
Just the argument that I have made for countercyclical regulatory policy (see here and here). In periods of economic weakness, we have learned how to change our monetary and fiscal policy in order to stimulate the economy, cutting interest rates and running deficits that would be unthinkable in normal times. We should consider using the very powerful regulatory apparatus of the government in the same way.