A downgrade from AAA to AA is simple realism, rather than a collapse. The US doesn't really deserve its AAA rating, with such big deficits and debt as a percentage of GDP.
That said, it is true that the US government is painting itself into a corner. The budget deficit will need to get reduced, and that will cause a negative impact to the economy which reduces tax revenue, a double whammy which makes the deficit and debt bigger as a percentage of GDP. So the needed cuts are probably bigger than they seem, and both parties are not even making the cuts which seem necessary...
The real "fun" part starts if the debt ceiling is not raised, that will force an immediately balanced budget where the US treasury will need to decide which of its bills it pays. Since the US treasury borrows 40 cents out of every dollar it spends, it's a huge 40% immediate cut in the budget, that would leave a mark in many ways...
My Mario Kart Wii friend code: 2707-1866-0957
