Why is it that interest payments on government bonds are not included as income currently earned, particularly, when interest on the bonds of private firms is included in national income as earned income?

National income accounting is a method to measure the economic activity of a country. It includes various components such as consumption, investment, and net exports. The goal is to determine the total economic output and income generated in a given period, typically a year.

Government bonds are debt securities issued by the government to raise funds for public projects, while private firm bonds are debt securities issued by private companies to fund their operations and investments. The main difference between the two is the issuer - government bonds are issued by the government, while private firm bonds are issued by private companies.

Interest payments on private firm bonds represent a return on the investment made by the bondholders in the private firm. In this case, the interest payment is considered as income currently earned because it represents the income generated for the bondholders from their investment in the private firm. This income is included in national income accounting as it reflects the payments to individuals and institutions who have invested in these private sector bonds, as well as the economic activities generated by the private firms.

Interest payments on government bonds represent the cost of borrowing for the government. These payments are made by the government to the bondholders as compensation for lending their funds to the government. Though this can be seen as income for the bondholders, it is not included as income currently earned in national income accounting.

The primary reason for not including interest payments on government bonds as income currently earned in national income accounting is double counting. When the government borrows funds by issuing bonds, it spends this money on various public projects and programs such as infrastructure, education, healthcare, and social welfare, which are already included in the national income accounting as government spending. Consequently, including interest payments on government bonds as income currently earned would result in double counting the same income. In summary, interest payments on government bonds are not included as income currently earned in national income accounting to avoid double counting, while interest on the bonds of private firms is included in national income as earned income because it represents the income generated for the bondholders from their investment in the private firms.