The outflow includes various subsidies and transfer payments that do not directly support work, but are important in maintaining purchasing power. All flows involve some redistribution of income. They are beneficial to the extent that they efficiently contribute to a decent standard of living for the entire domestic population. Further spending becomes detrimental when it engages resources, including manpower, currently in demand by the private sector. But if the private sector is operating below its productive capacity for lack of sufficient purchasing power, additional government spending will be beneficial.
Deficit spending adds to the aggregate demand of the private sector.
People and business are likely to spend more when they hold government securities, than when all they have is receipts for payment of taxes. But a deficit is a real deficit only to the extent that it adds to the real value of the public s holding of government debt. Price inflation is effectively a tax on the holders of debt and thus reduces the real deficit. We do not know how large the national debt can grow before it has a net negative impact on the economy. In relation to national income it has been much higher than it is currently without acting as a drag on the economy.