While US federal debt is growing at record levels, the debt of American households and private businesses is actually falling at almost an equally large rate.

The result is that total domestic debt grew only 3.7% for the one-year period ending June 2008, as clearly shown by the New York Times chart below. This is the slowest rate of debt growth since 1950. Hence it's wrong to think that America, as a whole, is leveraging itself to the hilt these days.

As shown by the growth-rates below, the private sector has begun reducing its debt. Unfortunately, Uncle Sam's debt has sky-rocketed at the same time.

Thus had the US government been more responsible with its balance sheet, we would have likely seen a historic decline in total domestic debt.

So what US economy does stimulus support? It has been preventing a national deleveraging process from taking place, and thereby extending America's old, broken, leveraged economic model. Worse yet, it has done this via a shell game of private debt turned into public debt.

By fearing the near-term deflation and GDP decline any rapid deleveraging could cause, the US is delaying much-needed readjustment towards a less-levered and more sustainable US economic growth path.

(Charts via The New York Times)