This paper analyzes the effect of fiscal expenditure on economic growth and social welfare through both theoretical and empirical studies. In the theoretical study,the paper derives the optimal fiscal production expenditures to achieve the objectives of economic growth maximization and social welfare maximization,respectively,by establishing an endogenous economic model with government fiscal consumption expenditure and production expenditure,and analyzes the different optimal fiscal production expenditures,as well as the reasons for the differences,with the two objectives respectively. The empirical findings show that the optimal fiscal production expenditure for social welfare maximization is smaller than that for economic growth maximization in all of the three economic belts of China from 2004 to 2012. Moreover,the government fiscal production expenditure has been insufficient since it was below the optimal amounts with either of the objectives from 2004 to 2008; but it has been sufficient or even exceeded the optimal amounts from 2009 to 2012,hence increasing production expenditures will harm the economic growth and social welfare,especially in the East and Middle economic belts of China. Accordingly,the government needs to correctly assess the situation and optimize fiscal expenditures to maximize economic growth and social welfare in the new normal state of China's economy.