NEW YORK ( TheStreet) - S&P has downgraded Japan's long-term debt from AA to AA-, indicating the U.S. AAA rating should be taken down several notches to less than AA-.National economies must generate foreign currency for their governments to pay foreign creditors, and national governments must be able to tax, sell bonds or print money, without causing inflation, to cover operating expenses and pay interest. Japan's ability to pay is simply much stronger than the United States. Japan has a strong current account surplus -- thanks to a powerful manufacturing export machine -- and the Bank of Japan sits on $1 trillion in foreign currency reserves. It has more than enough cash flow and adequate reserves to service the claims of foreign creditors. The United States can hardly make such a claim. Domestically, Japan, which does suffer from deflation and slow growth, maintains a large budget deficit to prop up domestic demand, because Japanese citizens save so much. With prices falling, even in the face of global commodity inflation, the Japanese government has adequate latitude to sell bonds to its savers, and the BoJ has more than enough flexibility to purchase those bonds as needed -- monetarize debt--without instigating domestic inflation or creating other adverse macroeconomic consequences. The United States is a wholly different situation. The U.S. has a gapping current account deficit -- on oil and with China -- and policies pursued by the Bush and Obama administrations are worsening those conditions. Owing to the large current account deficit, the United States must run a huge budget deficit, close to 10 percent of GDP, just to sustain growth at 3.5 percent and keep unemployment from flying out of control. The large U.S. current account deficit indicates the U.S. economy as a whole is not generating adequate revenues to pay foreign creditors interest due on U.S. debt, and Washington must service the interest on externally held debt by printing more bonds and selling those abroad, but foreign private demand for those bonds is satiated. Consequently, the United States is much too dependent on the government of China to print yuan to buy dollars, and in turn, to use those dollars to buy Treasuries to finance the U.S. private economy's current account deficit and the federal budget deficit.