A debt trap is about to snap shut. The interest on the national debt is now so threatening that there may be no way out. The first credit rating agency has just issued a warning on America’s debt situation. But is it too late? The lure of deficit spending has caught America and it can’t seem to get out.

Standard & Poor’s Ratings Service downgraded its outlook on America’s ability to pay its debt from “stable” to “negative” on April 18. It expressed unprecedented doubts about the massive federal budget deficit and whether or not America would be able to get control of it.

In one sense, the announcement from S&P doesn’t mean much. S&P was the same corrupt organization that rated Enron AAA-gold right up until the time it collapsed. It was also the same organization that rated liar-loan-backed toxic subprime mortgage securities as triple-A safe. And all those too-big-to-fail Wall Street mega banks that needed taxpayer bailouts—yep, it conveniently missed them too.

But the downgrading of America is something that smart people have been expecting for a long time. Those in the know have been dumping dollars in favor of other currencies, commodities and precious metals for more than a decade.

Yet in another sense, the announcement from S&P is very important. In the lead-up to S&P’s press release, the Obama administration exerted incredible pressure on the firm to quash its findings. For S&P to go ahead and downgrade America anyway, and risk the wrath of the U.S. government, you know things must be pretty bad—as in past-the-point-of-no-return bad.

And here is another reason the S&P announcement is important. Far from sinking into obscurity and irrelevance, as discredited organizations should, the ratings agencies have if anything become more influential. In today’s climate of uncertainty, investors around the world look to these ratings agencies in a desperate attempt to safeguard their finances and predict herd movement. Consequently, the borrowing ability and thus the economic fate of many indebted countries rests on the assessments of these agencies. They are courted by governments, lobbied by finance ministers—and cursed by those who feel the wrath of a downgrade.

Meanwhile, what does America’s treasury secretary have to say? Does he tell America to get its house in order? That it is time to tighten its belt? To stop spending so much of other people’s money?

Nope! According to Timothy Geithner, everything is A-okay.

When asked about the warning from S&P, Mr. Geithner said there was absolutely “no risk” that the United States would ever lose its AAA-rating. He said Congress would exercise discipline.

“There is no reason Congress won’t raise [the debt ceiling], they always raise it,” said the treasury secretary (emphasis mine throughout). “They have to decide how often they want to raise it. There is no reason why they have to put their members through the torture of having to do it frequently.”

The secretary then went on to say that “If it were up to me … you would do it for as long as possible.”

Raise the debt ceiling as much as possible? Take on more debt at a time when the ratings agencies are warning that they are about to cut America’s credit rating? That doesn’t sound too smart.

It’s as if the highest-ranking economic official in the country has just lost all sense of reality. The country is addicted to debt, the cost of servicing the debt may be about to skyrocket, and foreign lenders may be about to cut up America’s credit card—and the treasury secretary talks as if he thinks America will be able to borrow forever.

Somebody needs to tell the secretary that the debt trap is about to snap. So far this year, the federal government has wasted $215 billion in interest payments. The total is projected to exceed $420 billion by the end of fiscal year 2011.

$420 billion in interest payments! Think of what that money could have been spent on. That was America’s total military budget in 2006—and America spent more than the world combined.

This year America is expected to borrow around $1.6 trillion to pay its budget bills. That means that one out of every four dollars America is borrowing is going to pay just the interest on the debt.

I repeat: We are borrowing money just to pay the interest!

If that doesn’t scare you, perhaps the fact that both Paul Ryan’s and President Obama’s budget proposals will add trillions of dollars of more debt before the budget somehow gets balanced due to hoped-for future economic growth.

But what if the economy doesn’t magically begin growing at above-average rates?

The fact is that America is spending $420 billion per year on interest alone—and under the most ideal interest rate conditions in the history of America! In case you didn’t know, the Federal Reserve has artificially manipulated interest rates down to close to zero, but it will not be able to hold them there indefinitely.

And as interest rates rise, America’s interest payments will skyrocket—and the debt trap will slam shut. This is reality, and it is coming soon to America. Sub-5 percent mortgages are a thing of the past. And what do you think that will do to the housing market and the economy?

America owes so much money that according to economic analyst Gonzo Lira, each 0.01 percent hike in the Fed fund’s interest rate translates into an additional $1.25 billion per year in extra interest payments.

Pause here and read slowly: If interest rates rise just 1 percent, America’s interest payments will soar by $125 billion per year! If interest rates were to rise to 5 percent (back up to where they were as recently as 2007), America would be forced to pay over $1 trillion per year in interest! And if rates were forced back to where they were in the 1970s and 1980s, interest payments would consume $2 trillion per year.

America is onlyprojected to collect $2.1 trillion in taxes this year.

And each and every year that the debt continues to grow (as it will under both plans currently before Congress), the debt payments will get higher and higher.

This is the point where America is at today. It is nibbling at the cheese and the metal bar is already crashing down on its head. Yet the whole country is so addicted to debt that it is blind to the looming catastrophe.

The debt trap is slamming shut and you don’t have much time to get out of the way.

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