What are the limitations to governments role in the economy?

Technically, there are no direct limitations. The government can double the money supply, quadruple taxes, or even block international trade. The internal checks and balances comes from the bicameral system and the nature of multi-party politics. If one party suggests something absurd, like mentioned above, they can be balanced by the other party. Also there are external institutions such as the Federal Reserve (there are 12 banks across the country in NY, SF, etc.) and the Treasury that also play roles in economic policy. Most policy is reactive rather than proactive, which means that it can take up to 2 years to solve a problem, which is also a limitation.