Another kind of expenditure is the interest payments that governments
make every year on their outstanding stock of public debt. In 2017, these
interest payments amounted to over $60 billion, just under 3 percent of
GDP.
Government Purchases and Transfers
The government purchases goods and services and provides them to the
public, as when the government pays for physicians’ services, highway
repair, primary and secondary education, and so on. Included in this
category of expenditures are the salaries that the government pays to its
employees. Also included is the interest that governments pay on their
outstanding stock of debt. (A government’s stock of debt is equal to the
accumulation of its past budget deficits, where the deficit is the excess of
spending over revenues.)
The government also makes transfer payments. These are payments to
individuals, firms, organizations, or other levels of government that are
not made in exchange for a good or a service. For example, when the
federal government pays employment-insurance benefits to an
unemployed individual, the government is not getting any good or service
in return. Similarly, when provincial governments give money to
universities to finance part of their operating costs, it is getting nothing in
return. Table 18-3 shows total government transfers to individuals,
which totalled $238 billion in 2017, about 28 percent of total government
spending and roughly 10 percent of national income.