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US Never Defaulted On Its Debt? Not So Fast

Still, there are lessons in history:

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PLAYING WITH FIRE IS RISKY

Tea party Republicans weren't the first to make the debt limit a bargaining chip. Over the years, congressional Democrats and Republicans alike have held it up for strategic reasons.

In 1979, it was lawmakers determined to attach a strong balanced budget amendment to the bill. They finally relented, the day before Social Security checks were expected to start bouncing.

The tumult contributed to Treasury's failure to redeem $122 million in maturing T-bills, touted as one of the world's safest investments.

Some investors that April and May waited more than a week for their money. Treasury blamed problems with its newfangled word-processing equipment. The system was stressed, officials said, when the booming popularity of T-bills collided with the last-minute debt ceiling increase from Congress.

Investors called it a "default" and sued for interest to cover the gap. Treasury called it a "delay."

Most Americans didn't notice at all. But the bond market did.

T-bill interest ticked up 0.6 percent, a lasting bump that added about $12 billion to the cost of paying the national debt, according to a 1989 study in The Financial Review journal. It's title: "The Day the United States Defaulted on Treasury Bills."

That certainly counts as a default, even though it was unintentional, said Urban Institute economist Donald Marron, a former member of Obama's Council of Economic Advisers.

"History tells us that mistakes sometimes happen," Marron said. When Congress keeps Treasury waiting for an increase in its borrowing limit, he said, "the cushion against mistakes gets smaller and smaller."

___

IT COULD BE WORSE

Sure, it's tough dealing with bull-headed political foes. But at least Washington's not on fire.

The fall of 1814 was bleak. The British had burned the capital city, inspired "The Star-Spangled Banner" by bombarding Baltimore and blocked trade up and down the coast. Tax revenue plummeted, and the U.S. couldn't borrow all the money it needed. The War Department ran short of food and medicine.

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