Economic Commentary. Because I am confused.

So earlier this morning, I get this breaking news alert from CNN:

Treasury Secretary Paulson says "hundreds of billions" of dollars are needed to resolve U.S. financial crisis.

I can't get my head around our giant ass economy. Here are the things I do understand:

• Our national debt is about $9.6 trillion.
• Part of the economic crisis is that a lot of people in the US borrowed a lot of money they could not afford to pay back.
• When people borrow money they can not pay back, that means they are in debt.

So tell me if I've got this straight:

PROBLEM: Too many people in the US in debt up to their eyeballs.
SOLUTION: Make US government in debt up to the top of its head.

Boy, I tell ya, the government is setting a GREAT example to all the citizens that got us into this mess.

I also saw on the news last night that we are going to loan a boatload of cash to a few countries--like, hundreds of billions or something? (Don't quote me on that figure.) And here is what I know about that:

• We as a country have almost $10 trillion in debt.
  
• If you're in debt, that means you don't have any positive cash flow to pay your debt off.
• We are loaning (or planning to loan) money to other countries.

What in the hell?

PROBLEM: US has so much debt it can't pay its own bills.
SOLUTION: US gives money to other countries.

This is why I got a D+ in Macro Economics in college. Because this crap makes absolutely NO SENSE.

Anyone with a firm grasp of how any of this actually works, please, do share. But in layman's terms, because economic mumbo jumbo will go straight over my head.