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Sunday, August 30th, 2015


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Possible August Default on U.S. Debt Not Unprecedented

Possible August Default on U.S. Debt Not UnprecedentedThe ongoing issue of the United States’s potential to default on its debt has caused a considerable amount of political debate, uncertain speculation and fear among consumers. There have been no concrete predictions as to what such a default would cause due to the extreme rarity of the event. According to the Chattanooga Times Free Press, the last default occurred in 1979.

The default took place when the U.S. Treasury failed to make an interest payment of $120 million on several bills. Three deadlines were missed, one at the end of April and two in the beginning of May. Although the payments were eventually made in full and the event was characterized as a “delay” rather than a default, the event did have lasting after-effects.

A report on the incident co-written by Terry Zivney and Richard Marcus stated that the incident affected just one percent of the U.S. debt but caused short-term interest rates to rise by 60 basis points. The government’s borrowing costs also rose by approximately $6 billion each year afterwards.

Regarding the current debt crisis, Associated Press reported on July 20 that the administration of President Barack Obama will be unable to pay the government’s bills without a debt ceiling increase.

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