According to S&P

"Pursuant to our criteria, the fiscal autonomy, political independence, and generally strong credit cultures of U.S. states and local governments can support ratings above that of the U.S. sovereign,"

Now from a practical perspective I am happy to hear that as I advise some very well run state and local governments who are undoubtedly among those to keep the AAA.

Nonetheless, how does this make any sense? If the US defaults then do we really think all is well in Charlotte, NC. Somehow I am guessing not.