Public spending

The public expenditure is the total expenditure made by the public sector of the State, in the acquisition of goods and services. In a market economy, the primary destination of public spending is the satisfaction of collective needs, while public spending intended to meet public consumption occurs only to remedy market deficiencies. Also of noteworthy importance are public transfer costs aimed at achieving a redistribution of income and wealth.^{[citation required]}

Expenditure authorization

The authorization of public spending is the legal instrument that allows the official to previously approve the expense that the administration must cancel and then be reflected in accounting, by virtue of which, the competent authority agrees to carry it out and manages an expense charged to a credit, determining its amount in a certain way or in the closest possible way, when it cannot be done in a certain way, reserving, for this purpose, all or part of the budgeted credit. This act does not yet imply a relationship without an interested party outside the entity, but it implies the start-up of the administrative process.^{[citation required]}

Public spending: includes those goods and services acquired by the Public Administration, either for consumption (office supplies, security and cleaning services...), or as an investment element (computers, road construction, hospitals...). It also includes the payment of salaries to officials.^{[citation required]}

It does not include, however, the expense of pensions: when you pay a salary to an official you buy a service, your work (there is an economic transaction), while when you pay a pension it is simply a transfer of income (not receives nothing in return), so it is not counted in GDP.^{[citation needed]}

Incidence of spending

Expenditures made by the government are diverse in nature. They range from meeting immediate obligations such as the purchase of a good or service to covering obligations incurred in previous fiscal years. However, many of them are directed at a certain part of the population to reduce the margin of inequality in income distribution.

Therefore, knowing what the money from the public budget is spent on is essential and healthy, because through this expense it is known who is helped directly and indirectly. In this section you will find various documents that shed light on how public money is spent. In addition, according to the Keynesian model, there is a mechanism known as the "spending multiplier" by which the economic returns of a certain amount of spending exceed the amount spent, via the reactivation of economic activity.

Economic classification of public spending

From an economic point of view, there are four types of public spending:

• Current expenditure: intended for the most basic operations of the State.
• Capital expenditure: destined to obtain assets.
• Transfer cost: intended for the help of families or companies.
• Investment expenditure: aims to create, increase, improve or replace existing public capital.

Classification from the macroeconomic point of view

• Current or consumption expenditure: It is the set of erogations that does not have as a counterpart the creation of assets, but is an act of consumption; that is, the expenses that are spent on the recruitment of human resources and the acquisition of the goods and services necessary for the proper development of government functions. They include those related to the production of market or non-market goods and services, expenses for the payment of interest for debts and loans, and transfers, allocations and donations of resources that do not involve an effective contracting of goods and services.

Current spending refers to the acquisition of goods and services by the public sector during the fiscal year without increasing the federal patrimony. This type of expense includes the expenditures necessary for government institutions to provide public health, education, electricity, potable water, and sewage services, among others, as well as to cover the payment of pensions and subsidies intended to raise the well-being of the low-income population. Also included here are subsidies for rural development programs, the purchase of medicines, and salaries for teachers, doctors, nurses, police officers, and military personnel. Current spending can be divided into two distinct categories. The former reflect collective consumption expenditures (justice, defense, police) which benefit society as a whole, or a good part of society, and are generally known as public goods and services. The latter refer to individual consumption expenditures (education, public health services, drinking water services, among others.), which reflect expenditures incurred by the government to increase the welfare of the population individually. Because the goods and services produced by the government do not have a market price, the value of the products is determined by the total costs necessary to produce these goods and services. These costs consist mainly of the payment of employee salaries, intermediate consumption and depreciation.

• Capital expenditure: Expenditure to maintain or improve the productive capacity of the country, especially infrastructures.
• Transfer expenditure: Capital that the state gives to companies and families that need it. It targets various social programs and aids such as unemployment insurance, social insurance, financing, scholarships, subsidies, etc.
• Investment expenditure: It can be defined as the state's erogation for the acquisition or production of instrumental or capital goods, which increase the fixed assets of the state and serve as instruments of production for the state itself, of public goods and services.

Magnitude of public spending

Depends on:

• Demographic factors: high population growth rates and the prolongation of the average life.
• Consumer demands: as people have access to higher levels of information, they demand good public services.
• Political nature: the role or participation of the state within the economic system will vary if we face a market economy, directed or mixed.

The exact mix of public and private sector participation in the economy is influenced by the political philosophy of each particular government.

Goals and objectives of public spending

They are:

• Preservation and maintenance of existing capital.
• Improved attention to certain productive needs, ensuring the supply of energy, steel and infrastructure in general.
• Application of social consumption.
• Expansion in agricultural development.
• Diversification in exports.
• Tourism promotion.