The Myth of Untarnished U.S. Credit History

"History is the lie commonly agreed upon."  --Voltaire

"What you do in this world is a matter of no consequence. The question is what can you make people believe you have done."  --Arthur Conan Doyle, A Study in Scarlet

Every so often, I post about a topic that reaches far beyond the confines of Minooka CCSD 201 but nonetheless affects the district and the people that live in the district.  The current federal government shutdown, the debt ceiling debate and the trajectory of federal debt are issues that affect all of us.  No matter where a person stands on the issues, it is always a good idea to approach the issues without any myths or misconceptions about what has come before (i.e., the past).

Numerous leading political figures have been making statements about the untarnished credit history of the United States.  The following is a sample:

"There is no magic wand that allows us to wish away the chaos that could result if -- for the first time in our history -- we don't pay our bills on time."  --President Barack Obama

"No Congress in 224 years of American history has allowed our country to default, and it’s my sincere hope that this Congress will not be the first."  --Secretary of the Treasury Jack Lew

"There is precedent for a government shutdown.  There's no precedent for default."  --Lloyd Blankfein, CEO of Goldman Sachs

The facts, however, seem to intrude upon this narrative of an untarnished U.S. credit history.  The United States has defaulted on its obligations many times in its history (for a sampling of articles discussing previous defaults, see here, here, here, here, and here).

The list of U.S. defaults include the following:

1.  1814 - Under President James Madison, U.S. defaults on debt payments for a few months in the wake of the War of 1812.
2.  1862 - Under President Abraham Lincoln, U.S. defaults on "greenback" demand notes by refusing to redeem them in gold as promised.
3.  1933 - Under President Franklin Roosevelt, U.S. defaults on the "gold clause" in its debt contracts and pays in paper dollars rather than gold.
4.  1968 - Under President Lyndon Johnson, U.S. defaults on "silver certificates" by refusing to redeem them in silver as promised.
5.  1971 - Under President Richard Nixon, U.S. defaults on the Bretton Woods international currency arrangement and ceases to exchange dollars for gold.
6.  1979 - Under President Jimmy Carter, U.S. defaults on certain debt obligations due to back office "glitch" at Treasury.

So, let us debate the issues regarding the shutdown, debt ceiling and the trajectory of debt.  But, let us do so without the myth of a default being unprecedented in U.S. history.