An example of why the U.S. government makes transfer payments is to provide economic support and income redistribution, especially during times of economic hardship or to assist vulnerable populations. Transfer payments like Social Security and unemployment benefits help redistribute wealth from higher earners to those in need, providing a safety net for those who cannot sufficiently earn money themselves. These payments are made not in exchange for goods or services, but to alleviate economic hardships, support family income stability, and stimulate the economy by putting money into people's hands during downturns or financial crises.
For instance, during economic recessions such as the Great Depression or the COVID-19 pandemic, the government increases transfer payments to support people affected by job losses or reduced income, helping maintain their purchasing power and stabilize aggregate demand in the economy.
