This has happened before.

[^_^ 5,021]

What big news do you remember from April 1979? That Iran voted to become an Islamic Republic? That a threatening swamp rabbit was stopped short of President Jimmy Carter's fishing boat? That Jane Byrne took office as Chicago's mayor?

How about the heated debt-ceiling debate on Capitol Hill up until the last minute, followed by some missed Treasury bill payments?

You're not alone if you missed it or don't recall. But the supposedly unprecedented default of the United States that's threatened by the stalemate in Washington has precedent.

...

Back in April 1979, then-Treasury Secretary W. Michael Blumenthal warned there would not be the funds to cover $8 billion in Social Security checks mailed to 35 million Americans if a new debt ceiling wasn't approved. But, after a Republican effort to tack on a balanced budget amendment was shot down, the measure to raise the cap to $830 billion passed.

All should have been peachy, but the 11th-hour debt-ceiling approval, a spike in demand for Treasury bills from small investors and, remarkably, a glitch in the word-processing equipment used to print and process checks conspired in the failure to redeem around $120 million in T-bills on time in late April and early May.

It was a relatively tiny amount, and some argue that shouldn't count as a default, but the effects were very, very real.

A study by Terry Zivney, now at Ball State University, and Richard Marcus, of the University of Wisconsin at Milwaukee, published a decade later in The Financial Review calculated that the government's lapse cost an extra 60 basis points on some federal debt.

That translates to billions more dollars the taxpayer had to cover because a sliver of doubt was cast inadvertently, and that was when federal debt was under $1 trillion. Today, the argument is over raising a debt ceiling that's $14.3 trillion, and any default, technical or not, would attract far more attention.

http://articles.chicagotribune.com/2011-07-27/business/ct-biz-0727-phil-20110727_1_debt-ceiling-debt-ceiling-talks-debt-limit

[luckytxn 2,265]

Oops.

[slim 1,533]

We've recovered so well since then.

[mawilson 2,133]

20 years from now someone will write a similar article about the debt ceiling debate of July 2011.

[slim 1,533]

20 years from now someone will write a similar article about the debt ceiling debate of July 2011.

If we still have electricity.

[dalegg 143]

20 years from now someone will write a similar article about the debt ceiling debate of July 2011.

I doubt it will be that long.