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Continued: U.S. has never defaulted on its debts? Well, hardly ever

  • Article by: CONNIE CASS , Associated Press
  • Last update: October 14, 2013 - 9:31 PM

It was worse during early war

Sure, it’s tough dealing with bullheaded political foes. But at least Washington’s not on fire.

The fall of 1814 was bleak. The British had burned the capital city, inspired “The Star-Spangled Banner” by bombarding Baltimore and blocked trade up and down the coast. Tax revenue plummeted, and the U.S. couldn’t borrow all the money it needed. The War Department ran short of food and medicine as it couldn’t buy more — or pay the troops.

That November, the government didn’t have enough gold or silver in New England to pay bondholders their interest, as required by law.

But “the war ended about three months later,” Hickey said, “and so the financial crisis blew over.”

Compromise isn’t easy

Just like today, some politicians in the early 1800s believed their cause too crucial to negotiate.

“What you have at the time is a very bitter partisan divide between Federalists and Republicans that was, if anything, more bitter than the divide between the Tea Party and Democrats today,” said historian J.C.A. Stagg, editor of President James Madison’s papers at the University of Virginia.

 

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