Final answer:
Balanced budget amendments are intended to prevent large deficits by requiring states to balance their operating budgets. However, they may serve as an automatic destabilizer, limiting the government's ability to use fiscal policy responsively during economic downturns and unexpected events.
Step-by-step explanation:
Balanced budget amendments in many state constitutions are intended to restrict the ability of the government to spend more than its income. These amendments are designed to prevent persistent, large budget deficits by requiring a state to balance its operating budget.
However, they may also act as an automatic destabilizer because they limit the government's ability to engage in fiscal policy that is responsive to economic conditions. During a recession or unforeseen events like wars, the ability to incur deficits can be vital for economic stability.
By mandating a balanced budget, such amendments could force spending cuts or tax increases at times when the economy might actually benefit from increased government spending or tax breaks as part of automatic stabilizer programs.