We’ve warned before that the federal government’s exploding appetite for debt was helping to create a Global Government Debt Bubble. The Obama Administration has even been trying to worsen the problem by lobbying other countries to borrow even more money, despite the fact that our own record borrowing makes their borrowing more expensive.

But national governments are not the only entities that issue debt. Nicole Gelinas writes in today’s Wall Street Journal:

[State and local governments] should use the remaining $229 billion they’re getting in stimulus money to put their fiscal houses in order. If they don’t, they risk burdening their constituents with devastating taxes in the near future.

Local and state governments face such peril in part because the federal government is about to saturate the market for U.S.-based debt — including debt issued by municipalities — as it props up failed financial institutions and distributes stimulus money. The federal government could overwhelm the credit markets. In the third quarter of 2008 alone, the amount of federal-government debt surged by 39%. This was “the largest quarterly growth rate recorded,” the Federal Reserve recently reported.

It likely will get worse. Treasury debt held by investors around the world is slated to surge by 98% between now and 2013. That’s overwhelming even in a growing market.

It’s easy to see how such issuance could engulf demand for other types of private and public borrowing here and around the world. Even if the appetite for total credit-market debt were to increase as dramatically as it did over the past five years — highly unlikely — the federal government would be on pace to soak up 22% of that new demand. (The federal government’s share before 2008 was just 10%.) In a stagnant or shrinking credit market, private and municipal borrowers would have to fight very hard with Uncle Sam to get attention.