It is often thought that the U.S. has never defaulted on its debt obligations but this is not quite true. There was a technical default on U.S. Treasury Bills maturing on 26 April 1979. The Treasury was subsequently late to make payments on Treasury bills maturing on 3 May and 10 May of that year as well. Investors eventually got all of the money owed to them although it did take a class action to compensate them fully for lost interest. Even though the amounts were small at USD$122 million (in nominal terms) the repercussions were quite significant.
What happened?
The default was caused by a combination of: a stalemate in Congress over the debt limit; a very large number of small investors holding T-Bills; and a failure in word processing equipment that failed to prepare cheques in time.
Investors in Treasury bills set to mature on 26 April 1979, received notice that the United States Treasury would not make its payments on maturing securities to individual investors. It was only a temporary default as the government soon repaid the money but according to some academic research it cost the government billions. There was a one-off increase in yields of around 60bps (or 0.60%). While the increase in yields did not affect the government on its existing debt (although it clearly cost the holders of U.S. debt money), it was the effect on new government debt, where the full cost of the default was realised. As older maturities of US debt was refinanced with newer debt the higher cost of borrowing was felt sharply. Some estimates ranged as high as $12 billion.
Given the debt ceiling is now over USD$16 trillion and the complexity of the US financial system has risen dramatically since 1979 a default, even a small technical one, could have catastrophic consequences.