Time magazine decided to troll economically literate Americans this week with an alarmist cover story about the national debt:

New TIME cover addresses the national debt. pic.twitter.com/Ty4wyCBbdV — Joe Perticone (@JoePerticone) April 14, 2016

The good news is there's a lot wrong with this analysis.

Ignoring inequality

One problem here is that because of inequality, the national average wealth and income is much higher than the national median wealth and income.

So when you divide the national debt evenly across every man, woman, and child in the United States, you get a number that is very high relative to the typical family's income.

According to the Federal Reserve's 2013 Survey of Consumer Finances (this happens every three years, and the 2016 edition hasn't come out yet), 3 percent of American households own about 25 percent of all wealth, and the bottom 90 percent of the population owns less than 25 percent of all wealth.

Under the circumstances, it's true that dividing up the debt burden evenly among all households would be an enormous burden on many Americans. But there is no reason to divide the burden up this way. The way the federal government finances things is it collects more money from the people who have more money.

Ignoring assets

Another problem is that assessing any institution's financial position in terms of gross debt is ridiculous. My wife and I have hundreds of thousands of dollars' worth of debt — not because we're desperately poor but because we bought a condo in Logan Circle in Washington, DC.

What you're supposed to do in this situation is look at net assets, where you subtract the mortgage debt from the value of the house. If you do this, you will reach the correct conclusion that American homeowners are generally substantially richer than American renters, even though homeowners have more gross debt.

The meaning of solvency is that you have more assets than you have debt. Apple, for example, owes more than $45 billion to various people, which is a ton of money. But it also owns more than $150 billion in various financial assets, to say nothing of the value of its brand, intellectual property, real estate, factories, etc.

By the same token, when the federal government borrows money to build an aircraft carrier it ends up with both more debt and more aircraft carriers than it previously had. The same applies to schools, highways, office buildings, and the other physical assets of the American public sector. A few years ago, I made a chart based on Thomas Piketty's data that shows the American public sector has consistently been solvent in a balance sheet sense.

The United States of America is not a business enterprise, so there is no particular reason to think about it in solvency terms anyway, but if you want to do this we are clearly solvent.

Ignoring the economy

A business enterprise tries to make money or improve its balance sheet. The federal government is not a business enterprise. What it tries to create is prosperity for its citizens through competent economic management.

Right now in the United States, just like in other stable rich countries, interest rates on government debt are incredibly low due to massive investor demand for government debt.

The responsibility of the government is to help make the economy function smoothly by ensuring that there is adequate supply of debt to meet this massive demand. Ideally, one would use this debt to finance spending on something useful, like great transportation projects or high-quality preschool programs or removing toxic lead from American cities. But if you think there's nothing useful the government can or should spend money on, then it could at least do American households a favor by collecting less tax revenue.

Any of these moves would increase the volume of gross per capita federal debt outstanding, but for both inequality and balance sheet reasons that's irrelevant. The important issue is that these ideas would make America a more prosperous society, with more ability to produce goods and services and meet the needs of its people. That, at the end of the day, is the only thing that matters.