Lately we’ve heard a great deal about the aggregate level of Federal debt. At just north of $14,000,000,000,000 (yes, that’s trillion with a “T”) we’re lookin’ at a whole lot o’ zeros!

Concerns are plenty. Is the debt too high? Is it crowding out private investment? How will we afford the interest payments? Is it risky that so much is owned by the Chinese? Will taxes go up or Social Security be cut to pay for it? The list goes on.

To put these questions into context we must consider whether Uncle Sam uses his credit cards wisely and what happens when he approaches his credit limit.

When debt-fueled spending creates wealth the Federal government maintains its creditworthiness. The record is mixed. Negatives such as Social Security and Obamacare are shaping up as boondoggles. The Homestead Act of 1862 (aiding settlement of the West) and the GI Bill of Rights (promoting the world’s best university system) were clear positives.

A brief digression: Some suggest the government’s role is not to invest/spend but to incent the private sector to do so. Although it is true the “moneyed interests” – Thomas Jefferson’s disdainful term for capitalists – are theoretically better at allocating risk-based capital due to the profit motive results here are also mixed. Many high tech companies obtained start-up capital during the halcyon dot-com days (a positive) yet the recent housing bubble and failed LBO mania were clear negatives.

At the macro level the Federal government does not repay debt. It merely refinances and, more often than not, expands it. This method of operation may safely continue until unproductive uses of debt greatly outweigh productive uses and the world no longer sees the US as a safe haven for storing value. If and when these points are reached the Federal government will reach its “come to Jesus” moment. It is only then that questions about the level of debt, how it will be repaid and the impact on taxes and entitlements will become meaningful.