Nouriel Roubini warns us not to look at what is happening in Greece as a far-off event, but rather a lesson in what typically happens after a major financial crisis.  The pattern: Crisis brings recovery efforts.  Recovery efforts require government spending.  Government debt rises.  And "deficits grow to unsustainable levels that can lead to default or inflation if not corrected."  Roubini:

While the markets these days are worrying about Greece, it is only the tip of the iceberg, or the canary in the coal mine of a much broader range of fiscal crises. Today it is Greece. Tomorrow it will be Spain, Portugal, Ireland and Iceland. Sooner or later Japan and the US will be at the core of the problem, shaking the global economy.

We need to recognize that we are in the next stage of financial crisis. The coming issue is not private-sector liabilities, but public-sector liabilities.

Revived economic growth alone will not generate enough tax revenue to relieve this sovereign debt crisis. Fiscal deficits are huge and structural. They are not due solely to a cyclical downturn in growth but to long-term commitments such as pensions, social security and health care. To avoid default or high inflation, the advanced economies will require some combination of raising revenues through taxes and cutting government spending.

In Europe, where tax rates are already very high, the right adjustment is cutting spending instead of raising taxes further. In the US, the average tax burden as a share of GDP is much lower than in other advanced economies. The right adjustment for the US would be to phase in revenue increases gradually over time so that you don't kill the recovery while controlling the growth of government spending.

Read US faces inflation or default here.  (H/t Economist's View)