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.

Notes on the State of our Nation

I have received the following facts from Capt, Woddie Sprouse, USN/RET, a personal friend of Nancy and me. Capt. Sprouse is an experienced officer of the USN; and I deeply respect his understanding of our national condition. Please read the following and consider the significance of this information.
* 14.5 million Americans are unemployed, or 9.1% of the population this number equals the entire populations of Wyoming, Arkansas, Alaska, Delaware, Hawaii, Indiana, Maine, New Mexico, Nebraska, Rhode Island, and Vermont.
* The 7/1/2011 Gallup underemployment rate is an additional 9.2% of the population over 18 years of age.
* The national debt is over 14.5 trillion dollars.
* The interest that must be paid on this debt will equal 414 billion dollars in 2011, this amounts to 1.13 billion dollars in accumulated interest per day. Nothing is being paid on the principle.
* There has not been a national budget approved by Congress for the past two fiscal years.
* The current 2011 Federal deficit, income - expense, is in excess of 1.3 trillion dollars, the Federal fiscal year ends on September 31, 201. This1.3 trillion deficit must be financed by seeking addition credit, adding to the total national debt.
* The nation is engaged in three wars, or something that resembles war to this old warrior.
* None of the three wars were declared by Congress. And, I submit that had they never would have been declared had the Congress been asked to do so.
* The nation has no defined foreign policy, or doctrine, to deal with Iran's nuclear development.
* The Mediterranean Muslim region has undergone a significant, yet to be understood, transformation.
* The wealthy, Muslim Gulf and Arabic, states have deferred taking an active role in the Mediterranean transformation.
* The nation has no defined foreign policy to deal with the diverse aspects of the above transformation.
* With the exception of Germany, the major European economies are in financial, debt, distress.
* The European Central Bank is struggling to cope with the wide spread, Southern European National Debit crisis and protect the Euro common currency.
* The nation has permitted the value of the US currency to decline with respect to the Euro.
* With the exception of the Secretary of the Treasury, all the original, key, members of The Administration's Economic team have left the administration.
* The Chinese national defense expenditure is estimated to be in the range of 20% of their annual budget.
* China is expected surpass the US as the number one world economy in the next 10 years.
* The Japanese economy has been stagnate for the past decade.
* There is no regional economic or military power to counter, or balance, Chinese growth.
* Significant quantities of oil and gas reside in the South China Sea, a region of increased Chinese attention.
* Russia has proven not to be a predictable world player.
* Much of central Europe is now dependent on oil and gas supplies by Russia.
* There are 12-14 million undocumented aliens residing in the nation.
* There is no effective method(s) to control undocumented alien access to the nation.
* There is no comprehensive plan to address the status of the 12-14 million undocumented aliens currently in the nation.
* Currently, only four States: Alaska, Montana, Arkansas and North Dakota, will not have a state budget deficit in 2011. 46 States will have deficits and the majority of these will require significant cuts in their services and/or increases in state revenues to abide by their state constitutions to have a balanced budget.
* All aspects of the US housing industry continue to experience a prolonged decline.
* Over 50% of US families pay no income taxes.
* US College tuition is increasing at a rate exceeding the national inflation rate.
* US Medical care expense is increasing at a rate exceeding the national inflation rate.
* The future national supply of energy is in question.

These facts are not just so much dross and Republican haranguing at an objectionable government administration; these are REAL facts, and we, Americans absolutely must do something about them!