Does Government Spending Expand the Economy?

Expand government and you’ll grow the economy? Dr. Roy Cordato examines the flaws in this view an concludes:

The point here is that, while public sector spending adds to GDP in official government statistics, it can only increase spending at the expense of the private sector because of the way that the government obtains its revenues, that is, by decreasing private consumption and private investment. When government spends money, it is simply substituting the resource allocation decisions of politicians and bureaucrats for the those of private sector consumers and investors.

For a more in-depth explanation of this conclusion, be sure to read Dr. Cordato’s full piece on government spending and the economy.