Past federal defaults offer lessons for present

The government is shut down, and the U.S. is on the verge of defaulting on its debt obligations, but what difference would that make?

One needs look no farther than your credit card statement to find out.

Miss a payment or two, and you may find yourself paying a higher rate of interest, and required make a larger minimum payment.

The same is true for the U.S. government, which eventually will find itself paying higher interest rates if Congress fails to raise the $16.7 trillion debt limit by the Thursday deadline.

But the U.S. has always paid its debts on time, we hear our leaders say repeatedly.

Well, not exactly, according to an Associated Press story.

One, during the War of 1812, came after the British burned the White House and Capitol, and the young U.S. government was unable to physically move the gold and silver to New England in order to pay the interest on time.

Another came in 1979, when Congress dawdled until the last minute in an impasse over a balanced budget amendment.

In the first instance, the war was over about three months later, and bondholders forgot about the lapse.

In the second, the Treasury failed to redeem $133 million in maturing T-bills in time, interest went up 0.6 percent and the government had to pay an extra $12 billion in interest.

Once touted as the safest investment in the world, the status of U.S. T-bills helps determine the financial state of the world.

The debt limit, of course, and the government shutdown are separate issues stemming from the same conflict over national policy. Let's hope and pray the conflict is resolved, well enough, soon enough, at least, to avoid an economic disaster.