We've Broken Bond Promises Before
Letter to the Editor

It happens every time the federal debt ceiling gets debated: some senior government officer makes the same claim that Austan Goolsbee now has--that "defaulting on our obligations . . . is totally unprecedented in American history" ("A Price for Raising the Debt Ceiling" by Arthur B. Laffer, op-ed, Jan. 13).

The problem with this claim is that as a matter of history, it is wrong. The United States overtly defaulted on its obligations in the 1930s, when the U.S. government refused to pay its gold bonds in gold, in violation of its clear promise to do so. This action was upheld by the Supreme Court in a 5-4 vote, reflecting the argument, among others, that the sovereign can default if it wants to. And so it can and has. I do not suggest that it should, but we ought to get the history right.

Alex J. Pollock is a resident fellow at AEI.

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