The Associated Press distributed a story implying that default is no big deal. “You hear the same proud claim every time Washington wrestles with the debt limit: The United States has never defaulted. But the record’s not that clean. America has stiffed creditors on at least two occasions.” One was during the war of 1812. Another, it claims was in 1979, when “lawmakers determined to attach a strong balanced-budget amendment to the (budget) bill. They finally relented, the day before Social Security checks were expected to start bouncing.”
It’s a nice story, comforting, wrong. In 1814, the United States was a developing nation heavily dependent on trade with the country we were fighting, Great Britain. Even so, the economic consequences of the War of 1812 were catastrophic and took years from which to recover.
By the way, Andrew Jackson, a pre-tea partier, was obsessed about the national debt when he wasn’t stealing land that had been promised to native tribes in solemn treaties. As president he paid it off. This did not prevent the financial panic that ruined the administration of his chosen successor, Martin Van Buren. It arguably made it worse, choking off foreign investment.More