Quote Originally Posted by Lemur View Post
Um, government spending is supposed to be a "band-aid while the economy heals." That's the whole concept. Government spending doesn't create long-term wealth; everybody knows that, or ought to. But when demand dries up, the only entity that can temporarily soften the blow is the guvmint.
Do you think that still applies if all the additional government spending is borrowed money? Think about it- deficit spending means the government must sell bonds to spend the money. To sell bonds, someone has to be buying bonds. Buying treasury bonds ties up money that could otherwise have been invested elsewhere in the economy.

If the additional spending was coming from a government "rainy day" fund, I think what you say would be correct. But all the borrowing is bound to have a crowding out effect on private investments.