How does one justify a new regulation, even one that creates significant benefits, when the proposed regulation would likely harm job growth in a slowly recovering economy?
The Obama Administration faced this situation in 2011 when its proposal to strengthen the regulation of ozone in the air was met with the criticism that it would cut hundreds of thousands of jobs at a time of low economic growth. The Administration ultimately chose to delay the rule. Congress made an even blunter choice in 2011, passing the Regulation Moratorium and Jobs Preservation Act to bar significant regulatory activity until the unemployment rate fell below 7.7 percent.
These choices reflect an approach to regulation known as countercyclical regulation. Countercyclical regulation is a method to cut back regulation during times of economic downturn and high unemployment. The countercyclical approach is primarily in response to the argument that regulation has a negative impact on employment.
In a recent paper, Professors Jonathan Masur and Eric Posner of the University of Chicago Law School examine the arguments behind countercyclical regulation, the conditions under which it makes practical sense, and its viability as a regulatory framework.
Read more at The Regulatory Review