The government makes two kinds of expenditures. The first purchase is goods and services. The second purchase is in the form of payments to disadvantaged Americans and other designated groups.
Goods and Services
The government buys many goods, such as tanks, planes, ships, and even space shuttles. It needs office buildings, land for parks, and capital for schools and labs. The government also needs to purchase supplies and hire people to work in agencies and staff the military. Payments for these services include the wages and salaries paid to these workers. The government uses goods, services, and other resources to provide the public goods and services that most Americans enjoy. In general, the more the government provides, the more goods and services it consumes in the first place.
Transfer payments to individual include Social Security, welfare, unemployment compensation, and aid for people with disabilities. People normally receive these payments solely because they need assistance. There are different kinds of payments. A transfer payment one level of government makes to another is known as a grant-in-aid (example: interstate highway construction programs). The federal government grants money to cover the major part of the cost, while the states in which the highways will be built pay the rest. The construction of new public schools also can be financed through grants-in-aid.