See also
“Private” debt refers to borrowing by companies + consumers, whereas “Public” debt refers to borrowing by central government.
Q: Why do citizens worry about government debt?
A: I think a government in deep debt would charge more taxes (individual, corporate, or GST) and reduce spending on infrastructure investments, and public services (like public health, public education)
A: the U.S. discussions actually center on debt burden -> default risk -> treasury yield.
— https://www.mof.gov.sg/Newsroom/Media-Articles/askST-Why-does-Singapore-have-an-external-debt-of-US1-766-trillion- explains
This borrower (i.e. PAP government) borrows only to invest. Not allowed to SPEND the borrowed fund or use in the budget.
The income which this borrower earns from its investments is also more than sufficient to cover the debt servicing costs. In contrast, U.S. federal government allocates a portion of the budget on debt servicing.
Taking into account our assets, the PAP government have no net debt. This is similar to my balance sheet in 2013 — my 400k debt was much smaller than my assets including the #1173 flat.
In contrast, Japan, US, German,, central governments have non-zero net debt. I think the U.S. federal government owns rather low asset per capita (than PAP government). The wealth is in the private families or corporations. I think the fed gov asset is less than its liabilities.
— https://www.investopedia.com/articles/economics/10/national-debt.asp -and- https://www.investopedia.com/updates/usa-national-debt/ explain
Each year, the fed budget deficit is covered/bridged by new debts. Consequently, U.S. (federal) debt is simply the net accumulation of the federal government’s annual budget deficits. (On the opposite, SG past reserve is the accumulation of past budget surplus, whenever there is.)
When fed gov debt exceeds the Debt Ceiling (22T), and Congress doesn’t approve an increase, the government shuts down to avoid default.
U.S. fed budget allocates around 8% to debt servicing [1]. However, the biggest allocations are medicare and social security. Tax income is not enough to fund these allocations, so the fed government has to issue new debt to “borrow from future generations”. In general, When gov debt is used to fund economic expansion (investment), current and future generations stand to reap the rewards. However, debt used to fuel consumption only presents advantages to the current generation, similar to aged parents taking a loan under the name of their sons/daughters.
[1] In contrast, SG gov receives SGD 17 billion (more than 20% of the budget) from past reserve investment income. This contribution is more than personal income tax income — see SG rainy day reserve^other nations’