The government of Greece spent much more than it has taxed for many years, and built up a pile of debt. With the recent economic crisis, tax revenues plummeted, unemployment rose and government deficits soared.

That part of the Greek story is very similar to the United States. What is concerning many right now is what came next in Greece, and what could happen to us in the United States if we aren’t careful.

Greek debt in terms of GDP was already one of the highest in Europe before the crisis hit, and the deficit in 2009 ran up to 13.6 percent of GDP, leaving them a total debt-to-GDP ratio at around 125 percent.

That may just sound like a bunch of numbers, but the simple interpretation is Greece was in major shock, and because of the crisis, it left them no choice but to keep borrowing.

The result was a loss of faith by the credit markets. Investors started doubting Greece’s ability to pay it off, so they demanded higher payments on Greek bonds to account for that risk. This became a self-fulfilling prophecy – higher rates led to increased costs just to maintain debt, and the increased costs made it impossibly difficult for Greece to make its debt payments.

This is called a debt spiral, and one of the lessons from Greece is how alarmingly fast it occurs. Debt can be like a slippery slope that leads right off a cliff.

A few years ago, Greece was highly leveraged, but the markets had faith in their ability to pay. In 2007, credit default swaps (CDS, an instrument whose value indicates the market’s fear of default) on Greek debt were trading at nearly nothing.

Even in the midst of the economic crisis, people were buying Greek debt at a relatively low-risk premium. In September of 2008, CDS on Greek five-year debt indicated a low 0.5 percent chance of default, and in September of 2009, they were still at a meager 1 percent.

But early this year, the markets quickly turned on Greece, with CDS and bond rates shooting up. The country surely would have defaulted if the European Union and International Monetary Fund hadn’t come in with a massive bailout, and even with that, Greece isn’t out of the woods.

So the question is: Should we be concerned about the United States possibly falling into a debt spiral?

The answer is a bit complicated.

For longtime budget hawks and Tea Party-type conservatives who are mostly new to worrying about the budget, the answer is an unequivocal “yes.” They see our large outstanding federal debt, our large ongoing budget deficits and looming unfunded federal entitlement obligations, and see a country not far from where Greece is now.

Many partisans also seem to believe the threat of a U.S. government debt spiral is imminent. They imagine a government takeover that is quashing the free market, and assume runaway government spending is going to soon bankrupt the nation.

Every week, the fair-and-balanced Wall Street Journal publishes another story, editorial or Op-Ed suggesting that the markets are sending signals they are losing faith in U.S. recovery from debt, and we are about to step onto that slippery slope.

Fortunately, economic reality doesn’t exactly share this point of view. The yield on U.S. debt issues is actually low, indicating that capital markets have tremendous faith in our government’s ability to handle its debt right now.

You may have read stories in The Journal about recent yield increases, but notice how they all seem to ignore the fact we’ve only just bounced up from historically low rates to rates that are merely very low.

There are also low prevailing rates on other dollar assets, like a special kind of inflation-protected treasury called “TIPS,” and U.S. corporate debt in general, which show that the world generally regards dollar-denominated assets as a safe place to invest, and that concerns about inflation are low.

The reason for this faith is in the fundamentals. While the United States has unemployment and deficit-to-GDP ratios that are only slightly smaller than Greece’s, other factors are much different.

For one, the United States has monetary independence. Greece doesn’t, as it uses the Euro, which is controlled by the European Union as a whole.

We use the dollar, and it’s our dollar, so our Federal Reserve can tighten or loosen monetary policy as needed. What that means is the country can use inflation as a pressure release valve on debt, making debt repayments easier by deflating the real value of outstanding debt.

This prospect is alarming to some people, because they fear this power will be abused. They are concerned the government will just resort to inflating away debt rather than dealing with it, perhaps leading to damaging hyperinflation.

This fear is misguided, though, for a couple of reasons. First, realize the only thing worse than having the option to print money when debt builds up too much is not having the option to print money when debt builds up.

Second, the fear of hyperinflation is misguided because we simply aren’t there yet. While we have unemployment and deficits that are similar to Greece’s, our government doesn’t nearly have the debt load.

Greece is struggling with a 125 percent debt-to-GDP ratio, while the United States public debt sits at a relatively comfortable ratio of 67 percent of GDP.

More disconnecting than that is how much better the U.S. economy looks going forward. Greece has heavier debt that is forcing their government to take strict “austerity measures,” which, besides causing human pain, also serve to suppress the overall economy. They also, again, lack monetary independence, so they can’t use even mild inflation as a tool to rebalance their economy.

So Greece is projected to have stagnant growth in the near-future. By contrast, the United States is already experiencing economic growth, and should continue to do so.

That’s very important, because all else being equal, a growing economy runs smaller deficits and helps reduce the debt-to-GDP ratio. Economic growth is probably the easiest way to reduce that ratio to safe levels.

For that reason, we should be thankful to have the debt wiggle room – which Greece does not – to afford such significant government interventions in the economy right now.

The budding recovery we are having is thanks in no small part to the bank bailouts, the stimulus bill and the very loose monetary policy that many are complaining so loudly about.

But, while these vociferous complaints seem misguided in the short-run, they aren’t entirely wrong in the long-run.

We do have a serious entitlement problem on the horizon. Even right now, with the surge in discretionary spending on things like the stimulus bill, most government money is just spent on either the military, social security, Medicaid or Medicare.

This leaves us with two major budget challenges. The first is that none of these is easy to cut, for political and practical reasons, making it hard to get the budget in balance.

The second is that Medicare spending in particular is about to explode, as health care costs continue to rise and a huge demographic wave of Baby Boomers approaches the eligible age, meaning the deficit will eventually grow if we just coast on autopilot.

While we aren’t so much like Greece now, if we don’t make a change, in some number of years we will find ourselves in the same situation the Greeks now face.

It would be folly to derail the economic recovery by making cuts now, but at some point not far off, we will have to muster the resolve to make painful decisions about how much our government spends and how much we are willing to tax ourselves to pay for it.

Perhaps St. Augustine described the predicament best with his famous prayer: “Grant me chastity and continence … but not yet.”

– Sanjai Tripathi is an Oregon State U. graduate student in business administration.