Forum for Innovation

American citizens love their soldiers, a phenomenon that sometimes mystifies people from other countries. Indeed, the level of admiration and support we have for our troops is unique to the United States. For those who offer their service and their life to defend and advance our interests, Americans are quick to offer thanks and praise, as they should. Our veterans and active duty troops deserve it. Yet, for a country that so clearly respects and appreciates its military, we sometimes forget that after the service is done, our veterans must have access to the opportunities, jobs and rewards they fought to protect.

When an economy turns south policymakers spring into action. For example, they will target fiscal policy in the form of tax cuts or stimulus spending to boost demand. Or the Federal Reserve might loosen monetary policy in an effort to combat rising unemployment. These are called countercyclical policy reforms because they are designed to counter the downturn in the business cycle. These responses to economic woe are so predictable that the only debate becomes about how large a fiscal or monetary stimulus is needed and in what form (e.g. should tax cuts be preferred to new spending?). Policymakers acknowledge that these steps will come with costs. Tax cuts might starve the government of revenues, thus exacerbating the deficit. New stimulus spending will add to the nation’s debt. Monetary easing risks inflation down the road. But curiously absent from the discussion over policy options is any mention of countercyclical regulatory reform to combat economic downturns. Regulations are like taxes in that they impose costs on economic activity.  And like taxes, they can be justifiable costs. But when an economy is struggling, it’s reasonable to ask if benefits of reforming or reducing regulations might outweigh the costs. The economist Scott Shane of Case Western Reserve University framed the issue well recently. In a review of the regulatory literature he noted: