Regulation and fiscal stimulus

Cowen on fiscal stimulus: 

neither monetary nor fiscal policy will set right the basic problems from negative real shocks and indeed the U.S. economy is undergoing a series of massive sectoral shifts. That includes a move out of construction, a move out of finance, a move out of debt-financed consumption, a move out of luxury goods, the collapse of GM, and a move out of industries which cannot compete with the internet (newspapers, Borders, etc.)

I've never seen a stimulus proponent deny this point about real shocks but I don't see them emphasizing it either. It should be the starting point for any analysis of fiscal policy but so far it is being swept under the proverbial rug.

Maybe a big enough push to aggregate demand could stimulate useful, productive employment (as opposed to merely boosting measured gdp) right now, but since the U.S. savings rate must rise sooner or later, that would only mean a steeper decline for aggregate demand some time in the future. My discount rate isn't that high.

The alternative to a huge fiscal stimulus is simple: enough pro-active fiscal policy to ensure that cuts in state and local spending do not bring additional contractionary pressure to bear on the economy.

Here’s another suggestion: instead of (or at least in addition to) fiscal stimulus or fiscal policy generally, how about deregulation? What we need to counteract sectoral shifts like the ones Cowen mentions are brand new technologies.

What are they? How should I know? The impact of the personal computer, the Internet or Google couldn't been predicted twenty years ago. Forty years ago, the crazy ideas I was hearing and laughing about included a company that was going to have its own fleet of planes and compete with the post office; and another one that was going to compete with the phone company.

Unless whacky ideas like these can get financed, it's going to take a long time to get a new sectoral shift toward greater productivity.  And this financing depends on regulatory attitudes towards, e.g., new forms of financing (how about disintermediated public offerings?); whether Sarbanes-Oxley and its spawn continue to task risky firms (see my article with Butler in the current Forbes); and whether products liability law serves the economy as a whole rather than trial lawyers.

You're not sure this will work?  Do you honestly think dumping zillions of dollars into the hands of bureaucrats and politicians to be spent willy-nilly on God knows what in the hope of a savings-depleting short-term demand shift has a better chance?  Maybe you deserve a Nobel Prize.