I noticed this from following Tim Harford's tweets on the econ101b Twitter feed - it's about how the UK is rated internationally. Apparently the BBC and Reuters got the opposite ends of the stick: See Ben Goldacre's links.
Regardless, this credit rating reflects the percieved ability of a firm or country to pay back its debt. The triple-A rating, AAA, is the best possible rating: Any money you lend to this government or firm, you will see back in your account once the loan matures.
People (firms, agents) thinking about lending to a firm or government will take note of these ratings when deciding whether to lend, and at what rate of interest. A better rating means, all other things being equal, that the interest rate the lender charges will be lower.
Hence if the US or UK lost that AAA rating, it would likely face higher rates of interest on future borrowing. That would give a very sharp incentive to cut the deficit...
This blog accompanies the econ101ab Principles of Economics course given at the University of Birmingham. The lecturers for both parts of the course (101a, microeconomics and 101b, macroeconomics) will occasionally post here on matters related to lecture material. We hope to show the relevance of the concepts we are teaching at each stage of the course for helping understand how the world works...
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