Can Municipalities Out-Rate The Federal Government?

Standard & Poor’s says they can: “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.”

This doesn’t make sense to Karl Smith, and it doesn’t make sense to me either. What sort of conditions in the world are going to lead the United States to repudiate its debt while New Canaan, Connecticut just chugs along without problems?