Dubai: Many were taken by surprise at the impact the Dubai debt crisis had on world markets. They shouldn't have been. Debt — and its misuse — has been the No. 1 economic issue of our time.

What's the big deal, some wonder? After all, Dubai's total debt of $60 billion or so is but a rounding error on the U.S. deficit of $1.4 trillion in fiscal 2009. Yet world markets plunged sharply when Dubai announced that its debt-fueled building boom had left it unable to pay its bills — despite a tripling in the price of oil.

True, Dubai no longer has much, if any, oil under its sand. But it's one of seven emirates that make up the United Arab Emirates, and the others do still have oil. The fact that the Dubai government refused to step in and guarantee the payments of the Dubai World group — which, by the way, is 100% government-owned — was seen as a bad omen for the world economy.

What if other countries followed suit?

Maybe this is another recognition of just how leveraged the world economy has become. Many nations today seem to have bet their entire futures on mountains of debt — and the U.S., long a holdout from the trend, seems ready to join their ranks.

As recently as 1989, the countries that make up the Organization of Economic Cooperation and Development, the so-called rich nations' club, had public debt averaging 59% of GDP — which at the time was thought to be excessive.

As of 2008, that had jumped to 79% — and total government indebtedness will possibly soar above 90% this year.

As the OECD itself has said, "These proportions are likely to increase significantly in the coming few years," due largely to stimulus packages put in place to fight the economic recession.

That governments, owing trillions of dollars in debt, might start opting one by one to not pay them is a scary idea to investors. It would cause a global collapse.

And even some countries we don't think of as highly indebted in fact are. Take Japan. Granted, it has a high savings rate. But during the 1990s, it financed a dozen "fiscal stimulus" packages to get its economy moving again.

Today, its debt is a whopping 170% of GDP — the most in the developed world. Those "stimulus" packages did nothing, except stimulate debt. And the U.S. is about to duplicate that mistake.

And what about China, which we always hear is sitting on $1.2 trillion in U.S. debt? Aren't the Chinese pretty much debt-free?

Hardly. As China expert Gordon Chang says, that country's banking system is essentially insolvent. Writing in Forbes, he notes that when Beijing's bank regulator announced two weeks ago that it might force banks to raise long-term capital, the nation's stock markets plunged sharply on record high volume. Why? Investors, though dazzled by China's 1.2 billion consumers, also know that much of China's "miracle" has been funded by bad debt.

All this should be a warning to the U.S. Congress, which continues to fiddle as its fiscal house burns. If not careful, Congress' plans for nationalizing the health care system, its $700 billion TARP bailout program, its $787 billion "stimulus" package, cap-and-trade and a host of other new spending programs will push the U.S. to the same brink as Dubai. Only it will be bigger. Much bigger.

Just a year ago, total U.S. public debt stood at $5.8 trillion. This year, it's $7.6 trillion, on its way to $10 trillion by 2012. Service on the debt is $200 billion now; in 10 years, it'll be at least $700 billion.

A stagnant economy with double-digit employment and massive debt greater than our annual output are no legacy for our children and their children.

At some point, American voters will have to wake up to the reality of what their representatives have created — a Republic of Debt.