What causes the government's purchasing function to increase?

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mwestwood | College Teacher | (Level 3) Distinguished Educator

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Two major categories that involve government expenditures are (1) those that operate the government, and (2) those that provide public goods.

1. Operation of the government

Any expansion of any government agency or government need will result in greater expenditures. For instance, with the War on Drugs, federal drug control agencies grew, the federal judicial system expanded, and the Federal Bureau of Prisons was greatly expanded as new prisons were constructed to house the increase in federal inmates.

In June 1971, President Nixon declared a “war on drugs.” He dramatically increased the size and presence of federal drug control agencies, and pushed through measures such as mandatory sentencing and no-knock warrants.

In another example of the expansion of governement, after a release of a report in 1965 of highway deaths, President Lyndon Johnson signed the National Traffic and Motor Vehicle Safety Act. Subsequent to this, a new agency was created, the National Highway Traffic Safety Administration, which then needed funding.

With the expansion of current agencies such as the IRS because of its role in the Affordable Care Act, which was declared a tax by the Supreme Court, there have been more people employed, increasing the need for training, equipment, supervision, and so forth.

Of course, in times of war, there are tremendous expenditures with the increase in military deployment and the manufacture of military equipment, etc.

Government purchases increase in times of unemployment and inflation in order to stabilize the economy.

If the government sector buys more production, then the business sector produces more output, which entails more resource employment and household sector income. This can correct or prevent a general economic downturn.

Two examples of this function are the Government's having provided bail-outs for General Motor Corporation and Chrysler Corporation.

2. Provision of Public Goods

The government purchasing function includes many expenses such as the cost of procuring equipment, materials, and labor services. This includes a myriad of things such as something as common as buying paper or other simple products needed in the quotidian functions of government agencies. Or when new buildings are constructed, materials and labor are needed.

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