Miller time: Federal default happened once before, and it was not good

In recent days, CapitolBeatOK has sought to capture, for the state and local level, what the initial effects of a federal default might be.

This has included a story summarizing an exchange with state Finance Preston Doerflinger and his staff.

Also illuminating was the response of Laura Johnson, Oklahoma City Finance Director.
 
In public comments and in recent writings, Treasurer Ken Miller’s perspective has also shed light on the possible impact on Oklahomans if default takes place and consequences begin to unfold.

His most recent monthly newsletter included a nugget on the sole precedent for federal default.

Miller, an economist with a sense of time, place and history, sketched in a note titled “Little known fact,” a sequence of events that took place late in the presidency of Jimmy Carter, a set of facts that seem to have fallen into a cultural or historical memory hole:

“If the federal government fails to raise the debt ceiling and defaults on some of its debt, it would not be the first time but it would be unprecedented in its scope and impact. Under-reported is the fact that a technical default occurred in 1979, when $120 million in Treasury bills were not timely paid.

“Although the payments were eventually made, and despite the fact that the $120 million represented just .015 percent of the total $800 billion in Treasury debt at the time, the default resulted in higher interest rates being applied to all government securities – an expense of about $6 billion a year.”