Technically, any government that has sovereign control over its currency does have unlimited money. We have examples of governments utilizing this fact to disastrous results, but that doesn't make it less true.
> These people don't know that it is literal wealth transfer from one person to another
This isn't necessarily true. For state governments or governments that don't have a sovereign, fiat currency, it is true, but not for a national government like the USA federal government. If it were true, all wealth would be a "zero sum game."
You're correct about people's misguided perceptions about government spending and insurance companies, but it's also harmful when the pendulum swings too far the other way, and we don't want the government to spend any money because we think it only obtains that money via taxes.
My aunt for example really doesn't understand that the government has any limits on their funds at all. She proposed to me that shopaholics should be given money by the government to found their addiction.
It's the same mentality that leads people to believe that insurance companies should pay for everything until they realize that it is other insurance company customers (including thenselves) that actually foot the bill for it.