Last week, Moody’s Investors Service warned that the increase in U.S. debt caused by the ‘Economic Stimulus’ Act could hurt the country’s AAA credit rating. According to Moody’s the public debt as a percentage of the total economy (GDP) will jump 21.6 percent, up to 62.4 percent of GDP by 2010. That’s bad. But Britain’s even worse off. Its peril is a warning that the U.S. should heed.

Yesterday, ratings agency Standard & Poor’s warned that it might have to review the top-notch score it gave to Britain’s credit only last month. The reason: S&P had assumed that only about 20 percent of Britain’s GDP was at risk from bad bank assets. But the latest reports suggest that the government’s guarantee of toxic assets may cost as much as 30 percent of GDP.

Economists now forecast that Britain’s total debt as a percentage of GDP will reach 70 percent by 2011. And that’s the official figure: the real level of Britain’s debt is much higher. A credit downgrade for Britain – as for the U.S. – would only increase the price of the immense sums both nations plan to borrow in the coming years. Call it their latest contribution to the Global Government Debt Bubble.

What do the markets have to say about this? The Credit default swap (CDS) spread – a measure of the likelihood of default – on British debt has now reached 165. That’s up 38 basis points in a week. When the CDS spread approached 100, respected British commentator Ambrose Evans-Pritchard described it as “frightening.” The markets are telling us that Britain is more than twice as likely to default as Germany (at 73) or France (at 79), and only slightly better off than Italy (at 192).

Yes, the sum total of the Labour government’s achievements is to have spent so much money, and to be on the hook for so much more, that Britain is now being mentioned in the same breath as Italy, Spain, and Greece. The latter two have already been downgraded. And yet the parade of borrow and spend economics continues unabated around the world, topped off by the U.S.’s own Stimulus Act.

It’s a perfect illustration of Einstein’s definition of insanity: “Doing the same thing over and over again and expecting different results.