At $14 trillion,US debt surges to all-time high

US debt surged to an all-time high,topping $14 trillion - $45,300 for each and everyone in country.

The United States just passed a dubious milestone: Government debt surged to an all-time high,topping $14 trillion – $45,300 for each and everyone in the country.

That means Congress soon will have to lift the legal debt limit to give the nearly maxed-out government an even higher credit limit or dramatically cut spending to stay within the current cap. Either way,a fight is ahead on Capitol Hill,inflamed by the passions of tea party activists and deficit hawks.

Already,both sides are blaming each other for an approaching economic train wreck as Washington wrestles over how to keep the government in business and avoid default on global financial obligations.

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Treasury Secretary Timothy Geithner says failure to increase borrowing authority would be “a catastrophe,” perhaps rivaling the financial meltdown of 2008-09.

Congressional Republicans say the election results show that people are weary of big government and deficit spending,and that it’s time to draw the line against more borrowing.

The national debt is the accumulation of years of deficit spending going back to the days of George Washington. The debt usually advances in times of war and retreats in peace.

Remarkably,nearly half of today’s national debt was run up in just the past six years. It soared from $7.6 trillion in January 2005 as President George W. Bush began his second term to $10.6 trillion the day Obama was inaugurated and to $14.02 trillion now. The period has seen two major wars and the deepest economic downturn since the 1930s.

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With a $1.7 trillion deficit in budget year 2010 alone,and the government on track to spend $1.3 trillion more this year than it takes in,annual budget deficits are adding roughly $4 billion a day to the national debt. Put another way,the government is borrowing 41 cents for every dollar it spends.

In a letter to Congress,Geithner said the current statutory debt ceiling of $14.3 trillion,set just last year,may be reached by the end of March – and hit no later than May 16. He warned that holding it hostage to skirmishes over spending could lead the country to default on its obligations.

Hitting the debt limit does not automatically mean a default on existing debt. It only stops the government from new borrowing,forcing it to rely on other ways to finance its activities.

In a 1995 debt-limit crisis,Treasury Secretary Robert Rubin borrowed $60 billion from federal pension funds to keep the government going. It wasn’t popular,but it helped get the job done. A decade earlier,James Baker delayed payments to the Social Security trust fund and used other bookkeeping tricks to keep money in the federal till.