What’s the Difference Between Public and Private Debt?

I publish this blog post as a sincere question. I do not know the answer to the question; and I am hoping that some of my readers know the answer. What is the essential difference between public and private debt? Could it be that public debt is really a beneficial effect of our governmental system? It seems to me that government debt serves a good purpose in that it provides us, Americans who save money and buy treasury bonds, with a steady and safe source of income.

I know that private debt needs to be paid back with interest in order to establish a stable and safe family economy and to nurture a healthy banking system. One needs to save and budget the money one has in order to pay back his personal debts. It seems to me, however, that the government does not feel constrained to do these things, and I am wondering why. I am even wondering if it is good thing for the government to pay back its debts.

One might think of government pay-back money in the form of interest a sort of other “entitlement” program. We already have several entitlement programs, i.e., Medicare, Medicaid, Social Security, government pensions, and now, Obamacare. We might now think of the interest being paid out to service the debt as another “entitlement” program. The main difference between this “entitlement” and the other entitlement programs is that this new “entitlement” is totally deserved by the recipients. In the case of this new “entitlement,” the people and agencies who receive the interest money are the ones who have saved and scrimped to save their money for a rainy day. The other, more traditional entitlements go to people who may or may not have saved money for a rainy day fund for themselves. These conventional entitlement moneys act more like a traditional insurance fund that only seeks to share risk so that everyone gets cared for, even though they may not have saved the requisite money, themselves.

If we think of government interest pay-back money as an “entitlement,” we should know that it is the very largest of all the entitlements—it is flowing out of the Federal Government at the rate of $1.13 billion daily. I know that the Federal government was never meant to be a wealth producer for the people. But I also know that many of us older citizens are using Federal treasuries as buffer money against an insecure economy. We always thought of government bonds as the most secure of all investments. These days, I am not so sure about the safety of government bonds. Nevertheless, many of us American citizens hold these securities, and we know that we are entitled to the interest that the government promised to pay us for the use of our dollars.

Governmental programs have a funny way of not producing the exact thing for which they were intended. For instance, the Medicaid program was intended to pay health care costs for the poor. As it turns out, however, about 70% of Medicaid dollars are used to pay for nursing home costs for all of our people. Medicaid dollars are doled out to any of us Americans who need nursing home care without a means test of our relatives. It can be seen, then, that Medicaid nursing home money is not necessarily reserved for the poor.

Government bonds were sold to the people in order to pay the costs of the government. However, it seems to me that they are now serving another purpose. They are paying for the financial support of many older persons who have saved money, invested it in a secure place, and now hope that the returns on that money will help them pay their way in their old age.

Am I thinking correctly or wrongly about this issue? I hope to hear from many of you about this question.