From Hot Air:
Instead of providing a stimulating effect to the economy, government spending creates pressures on private industry to reduce staff and investment...
If this seems counterintuitive, it might be from marinating too long in Beltway conventional wisdom. When private entities (citizens or businesses) retain capital, it gets used in a more rational manner, mainly because the entity has competitive incentives to use capital wisely and efficiently. The private entity also has his own interests in mind, and can act quickly to use the capital to its best application. Private entities innovate and look to create and expand markets, creating more growth.
In comparison, government moves much slower with capital. It generally works to its own benefit and not that of private entities. Lacking competition, there is no incentive for efficiency. Most importantly, it rarely creates new markets or growth but instead creates a spoils system that ends up reorganizing the status quo to favor some and disfavor others.