Question

Why would a Monetarist advocate a balanced budget amendment to the constitution?

Answer 1

Monetarists are people in economics belonging to the school fo thought that monetary policy is the best policy to deal with business cycles or fluctuations in the economy and effectively manage it. They believe the money supply affect the demand in the economy. they advocate a balanced budget as necessary for maintaining economic stability. They blame the Keynesian school, which advocates for budget deficits as an effective tool of demand management as the reason for the stagflation in 1970s. Keynesian tools were followed for decades before the 1970s and Monetarists like Friedman believed that those deficits led to stagflation and the breaking down of the Phillips curve. the believe that too much debt can very soon become unsustainable and budget deficits are a burden on the future generations as they will have to pay for it through increased taxes or decreased expenditure. Thus, they would like the amendment advocating a balanced budget as it is perfectly in line with their modus operandi.