Both are often contradicted by the economic reality itself. Several economic theories are important in explaining how today's market economies work. Laissez-faire policies, however, have been unsuccessful in solving the problems associated with the business cycles in market economies. Keynesian theory holds that government fiscal and monetary policies can smooth out these business cycles, thus preventing economic depressions or raging inflation. Most democratic governments in the twentieth century have used some Keynesian techniques.
Monetarists question the political utility of Keynesian fiscal policies.
Fiscal spending to boost a depressed economy is generally untimely, and spending programs, once started, can rarely be stopped again. The monetarists recommend that the economy be regulated through monetary policies that are controlled by the politically independent board of governors of the Federal Reserve System. Policymakers rely on the budget as the tool by which decisions about policies are made. Since 1921, the president has been responsible for drafting and submitting the budget to Congress. Since the 1970s, however, Congress has regained some control over the budget process by creating new Budget Committees and the Congressional Budget Office.