What big news do you remember from April 1979? That Iran voted to become an Islamic Republic? That a threatening swamp rabbit was stopped short of President Jimmy Carter's fishing boat? That Jane Byrne took office as Chicago's mayor?

How about the heated debt-ceiling debate on Capitol Hill up until the last minute, followed by some missed Treasury bill payments?

You're not alone if you missed it or don't recall. But the supposedly unprecedented default of the United States that's threatened by the stalemate in Washington has precedent.

The earlier misstep offers a hint of just what's at stake in the heated debt-ceiling talks this time around, and it's just one more reminder of how bizarre the process is that has brought us to this point yet again.

"Brinkmanship negotiations are things that rational human beings are often troubled by," said Donald Marron, director of the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution. "These things that say, 'If you don't address this by such and such a date, terrible things will happen,' are funky negotiations because whoever is willing to portray themselves as the craziest, most outlandish person has a lot of negotiating leverage."

Marron, who taught economics and finance at the University of Chicago's graduate school of business in the mid-1990s, knows from the inside. Between 2002 and 2009 he served in senior posts for the White House and Congress, including as a member of the President's Council of Economic Advisers and acting director of the Congressional Budget Office.

"I have said publicly we should get rid of the debt limit and come up with some other budget process because it's strange to have the wealthiest nation on Earth talking about default," he said. "Most other nations … if you vote for a spending bill, you are also authorizing whatever debt will result from that spending.

"We don't do it that way. This has given rise to a long-standing kind of political-posturing issue where each time we get close to hitting the debt limit, the party that's in power has the burden of increasing the debt limit, and the party that's in the minority gets to do a bit of grandstanding about the evils of debt."

The ritual dance of partisan bickering is always to the beat of some fancy pencil work at the Treasury Department to buy time. But at some point the known, sanctioned methods of avoiding the limit will be exhausted.

The deadline, in this case Aug. 2, is actually a moving target because it's tough to know exactly when money is coming into government coffers and how much.

Talk of prioritizing U.S. government payments if the politicians can't reconcile the debt-ceiling schism brings to mind deciding whether to defer mortgage payments or credit card bills, in that both have costly consequences.

"You have to find the cash somewhere, even if that means you don't send out checks to veterans or you don't pay the states the amount they feel they deserve for Medicaid," Marron said. "My view is, if they can technically do it … they will choose not to pay other people in order to pay the debt."

That's a scenario that likely would have ramifications at the polls in 2012, even if it forestalls ratcheting up the debt even further. But it also could be the leverage that forces Washington to buckle down and do something.

Back in April 1979, then-Treasury Secretary W. Michael Blumenthal warned there would not be the funds to cover $8 billion in Social Security checks mailed to 35 million Americans if a new debt ceiling wasn't approved. But, after a Republican effort to tack on a balanced budget amendment was shot down, the measure to raise the cap to $830 billion passed.

All should have been peachy, but the 11th-hour debt-ceiling approval, a spike in demand for Treasury bills from small investors and, remarkably, a glitch in the word-processing equipment used to print and process checks conspired in the failure to redeem around $120 million in T-bills on time in late April and early May.

It was a relatively tiny amount, and some argue that shouldn't count as a default, but the effects were very, very real.

A study by Terry Zivney, now at Ball State University, and Richard Marcus, of the University of Wisconsin at Milwaukee, published a decade later in The Financial Review calculated that the government's lapse cost an extra 60 basis points on some federal debt.

That translates to billions more dollars the taxpayer had to cover because a sliver of doubt was cast inadvertently, and that was when federal debt was under $1 trillion. Today, the argument is over raising a debt ceiling that's $14.3 trillion, and any default, technical or not, would attract far more attention.

"It would be bad to default, both because it would raise borrowing costs for the federal government and because a lot of the financial sector is built on the presumption that Treasury always pays off," Marron said. "It's a little hard from the outside to trace through the implications if we didn't, but it's hard to imagine it would be good. … You can be sure there are people at Treasury who spend much of their day (while the debate in D.C. continues) talking to people abroad and trying to reassure them and calm them down."

The markets' response to the ongoing stalemate reflects a consensus that the U.S. government will reach a compromise at some point and, if need be, make everyone whole … eventually.

But with tax revenue historically low vis a vis the economy as a whole and federal spending high, there's also likely the realization that whatever achieves a cease-fire now will not end what looks to be a hard-fought, ongoing struggle.

"Obviously, this is an onion, and you can start peeling it off and getting into the details of these things that people are throwing around, these ideas about spending versus revenues," Marron said. "Sometimes it's important, sometimes it's just inside-the-beltway madness that may or may not matter."

The thing about peeling an onion, though, is it often makes you cry.

philrosenthal@tribune.com