"Concerns arise during debt limit episodes that the lack of action to raise or suspend the debt limit could impede the U.S. Treasury's ability to meet federal obligations. In October 2015, the U.S. Treasury argued that allowing the debt limit to constrain the government's ability to meet its obligations 'would represent an irresponsible retreat from a core American value: we are a nation that honors all of its commitments'; and that '(f)ailing to increase the debt limit would have catastrophic economic consequences. It would cause the government to default on its legal obligations.' How the term 'default' would apply to Treasury's ability to pay federal bills, however, has been controversial. For instance, during a September 2015 House Ways and Means Committee markup of H.R. 692, some Members stated that a binding debt limit that would limit the Treasury Secretary's ability to meet federal obligations on a timely basis would be tantamount to default, while other Members stated that default would only encompass a failure to make principal and interest payments linked to U.S. Treasury securities. This report discusses the concept of default in the context of the federal government's financial obligations. The report then discusses past cases in which the federal government failed to make certain payments on time. During the War of 1812, the lack of a fiscal agent and the pressures of funding military operations at times left the U.S. Treasury without the means of meeting its obligations. The suspension of the gold standard in 1933-1934 has been considered by some to constitute default, even though the Supreme Court affirmed that taking that action was within the power of Congress to set monetary policy."
CRS Report for Congress, R44704
Federation of American Scientists: http://www.fas.org/sgp/crs/index.html