BEA's national accounts measure government spending in three ways:
- Government consumption expenditures and gross investment: This is a measure of government spending on goods and services that are included in GDP. Consumption expenditures include what government spends on its work force and for goods and services, such as fuel for military jets and rent for government buildings and other structures. Gross investment includes what government spends on structures, equipment, and software, such as new highways, schools, and computers.
- Government current expenditures: Total spending by government is much larger than the spending included in GDP. Current expenditures measures all spending by government on current-period activities, and consists not only of government consumption expenditures, but also current transfer payments, interest payments, and subsidies (and removes wage accruals less disbursements). Payments such as transfer payments and interest payments are excluded from the calculation of GDP because these payments do not represent purchases of goods and services, though income from transfer and interest payments may fund consumption expenditures or investment in other sectors of the economy.
- Total government expenditures: In addition to the transactions that are included in current expenditures, this measure includes gross investment (as defined earlier), and other capital-type expenditures that affect future-period activities, such as capital transfer payments and net purchases of nonproduced assets (for example, land). Total expenditures exclude consumption of fixed capital (CFC), which is a noncash charge.
For more detailed information on government expenditures, please see "A Primer on BEA's Government Accounts."
In addition to these NIPA measures of government spending, other data on government spending include federal budget data and Census Government Finances data from the Census Bureau. These other measures use different concepts that result in differences in level, timing, and the composition of spending than the statistics shown in the NIPAs. The NIPA measures are often used by macroeconomists and others because of the consistency of concepts and definitions in the national accounts, which aid in forecasting the economy, taxes, and budgets. To facilitate such uses, the Office of Management and Budget and BEA each publish an annual reconciliation of the federal budget with the NIPA measures of federal spending (NIPA Table 3.18B).