“Insanity” is the word an aide of President Obama, Austan Goolsbee, is using to characterize a move in Congress to block the heretofore routine raising of the ceiling on the national debt. Members of the Tea Party, among others, are urging the Congress to refuse to authorize an increase in federal borrowing and instead to concentrate on keeping outlays within what we can cover with tax revenues. The debt ceiling, after all, is already north of $14 trillion dollars. “If we hit the debt ceiling,” Mr. Goolsbee, who is chairman of the Council of Economic Advisers, warned on ABC television, “that’s essentially defaulting on our obligations, which is totally unprecedented in American history.”

Totally?

Certainly it is possible to see America as a “sovereign default virgin,” in the language of two economists, Kenneth Rogoff and Carmen Reinhart, who wrote a famous paper on the history of defaults. The paper was cited, on the eve of President Obama’s accession, by Greg Ip in a dispatch in the Washington Post warning of the danger of America’s growing debt. But if one wants to be particular about it, the picture is more ambiguous. Professors Reinhart and Rogoff make a point of noting that America counts as a sovereign default virgin only because they are excluding “events such as the lowering of the gold content of the currency in 1933, or the suspension of convertibility in the nineteenth-century Civil War.”*

In other words, a default by the federal government on its obligations isn’t entirely unprecedented. It starts to depend on one’s definitions. Did we default on our obligations when President Nixon closed the gold window, ending Bretton Woods? After all, the Constitution establishes that treaties — and Bretton Woods was one — are the supreme law of the land. Yet Nixon acted without consulting our treaty partners, which is why the default became known as the “Nixon shock.” Has America defaulted on its obligations by permitting the dollar to plunge in value, albeit in a free market and over time, to less than a 1,400^th of an ounce of gold?

Our own view is that the answer to that question is yes. Allowing the dollar to collapse to but a 1,400^th of an ounce of gold is a default. A rising gold price may not fit the economists’ definition of inflation, which they tend to measure in terms of the Consumer Price Index. And one may try to argue that inflation itself is not a default. One can still get scrip for a treasury bond. But our own world view reckons that the American people are not stupid. They know that what the law of legal tender requires them to accept in payment of a debt is not what they hoped or expected it to be — or what it used to be.

This is what we are starting to hear in the Congress. The Tea Party might not be able to halt a new raising of the debt ceiling. The Republicans’ own leadership was plumping for a debt ceiling increase within hours after the election, with the speaker-to-be, John Boehner, famously remarking, “We’re going to have to deal with it as adults.” Explained he: “Whether we like it or not, the federal government has obligations and we have obligations on our part.” Yet clearly the ground has shifted, and people are starting to see that there is also an obligation in respect of the dollar.

So it would not be surprising to see the rumblings in the Congress, by the Tea Party or others, grow harder to ignore. For honoring the obligation to pay one’s debts by dishonoring the obligation to maintain a sound currency is a default by any other name. Eventually the default that Messrs. Obama and Goolsbee insist would be an “insanity” is going to look less insane than what is happening to the rest of Americans at the cash registers of grocery stories and at gasoline pumps. They are plenty capable of looking into their wallets and comprehending that the default that the government insists would be “unprecedented” has already happened.

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* The phrase “American default ” was current in the City of London after the gold devaluation of 1933, we are informed by a wire from a reader.