Hey, so "Greece is paying the price for past fiscal irresponsibility," says New York Times econo-politics columnist Paul Krugman, and among the takeaways for the U.S. is that "Of course, we should be fiscally responsible." Further, "What that means ... is taking on the big long-term issues, above all health costs[.]"
Great! So we're cutting back on long-term entitlements, right? Not quite:
Equally important, however, we need to steer clear of deflation, or even excessively low inflation. Unlike Greece, we're not stuck with someone else's currency. But as Japan has demonstrated, even countries with their own currencies can get stuck in a deflationary trap.
What worries me most about the U.S. situation right now is the rising clamor from inflation hawks, who want the Fed to raise rates (and the federal government to pull back from stimulus) even though employment has barely started to recover. If they get their way, they'll perpetuate mass unemployment. But that's not all. America's public debt will be manageable if we eventually return to vigorous growth and moderate inflation. But if the tight-money people prevail, that won't happen — and all bets will be off.