Federal Investment

The federal government pays for a wide range of goods and services that are expected to be useful some years in the future. Those purchases, called investment, fall into three categories: physical capital, research and development (R and D), and education and training. There are several economic rationales for federal investment. It can provide public goods that the private sector and state and local governments would not provide efficiently, such as national defense and basic scientific research. It can promote long-term economic growthas education spending does by developing a skilled workforce, as R and D spending does by prompting innovation, or as infrastructure spending does by facilitating commerce. And it can support the work of the federal government by, for instance, providing the structures and equipment necessary to perform federal activities.