It's bad, but not too bad. AA+ is still pretty good, and only Standard and Poor's downgraded. Moody and Fitch look to keep the AAA rating.
It will shake the market up, it might even push the US back into recession (which wouldn't be good for anyone), but it's not all doom-and-gloom. Besides, the US can regain the AAA rating if it works hard enough to regain it.
The US does have to cut spending and raise taxes. Much of this deficit has come about BECAUSE they cut taxes for corporations, without cutting spending as well. So they now have to do the reverse if they want to get out of deficit quickly - cut spending AND raise taxes, or hell, just close a few loop-holes! What's wrong with closing loop-holes?
Taxes in the US are very low and they cold be raised a little bit more. It's fallacy to assume that just because taxes are raised a bit, suddenly all the wealthy people will go "John Galt" on us and vanish - they'll just work harder to make more money to negate the effects of the Tax.
It was conservatives who wanted a war with Iraq over WMDs that didn't exist. It was the conservatives who pushed for more and more and more and more and more and more defence spending, crying out that the Democrats were "Yella-bellies" because they cut the massively unneeded F-22 raptor jet. It was the Conservatives who originally pushed for the bail out under G.W Bush in 07-08.
Then again, the Democrats have also done almost nothing to really stop spending or deal with this problem - instead they've just pushed it back and back and back, until the deadline has drawn nearer and nearer. They could have had talks about the debt ceiling and the debt problems in 08 or 09, when they controlled both the House and the Senate and when they could have done something about it. Instead they didn't. They twiddled their thumbs and decided that the problems would magically vanish because Obama got into power. They are just as much to blame.
Ultimately though, you can blame EVERYONE, not just Americans. Everyone in the developed countries demanded more government spending, yet shrieked and shrieked and shrieked whenever the prospect of even SLIGHTLY higher taxes (which they could easily afford) were raised. You all want the government to provide Medicare, yet you don't want to pay for it. You want your governments to wage wars and buy newer, shinier weapons, yet you don't want to pay for it.
Taxes are going to have to go up and spending has to either stay still or, better yet, go down. Then you can pay off your debt. If the taxes on the very wealthiest of Americans was raised EVEN SLIGHTLY that would go a long way to easing the debt problems - and they can afford it! They can! Oh so maybe if taxes are raised, they'll only be able to buy 1 ferrari a year instead of two! Boo hoo!
The wealthy benefit from State spending as well - they benefit from the state-funded police, they benefit from the US military buying the weapons they make, they benefit from the infrastructure that the US government builds, but they don't want to pay a cent to maintain it! They benefit just as much as anyone else from US government spending, yet they hate their own government with a passion I can't even describe, as well as their own fellow country men and women. They're plutocrats now.
But let's all calm down - AA+ is still good. The world economy has diversified a bit, so it's not so dependent on the USA. Will this result in another crisis? Maybe, maybe not. But things can get better, and remember, there's more than one rating agency than S&P.
