The government can always pay its nominal debt with interest. I didn't say they were not going to inflate the debt away or that this would be OK. But S&P did not make that assumption in its rating. S&P assumes a 2% inflation rate.
Whether S&P says it or not, then, we should consider part of the 'default' risk being that USGov intentionally, strategically breaks those stated inflation assumptions.
If there is a risk that the US will significantly inflate the currency, then that risk should be reflected in the ratings for all dollar-denominated bonds, not just Treasuries. But there are still AAA-rated corporate bonds. Heck, S&P still rates the bonds of 13 states as AAA, which makes no sense to me.
The meaning of the downgrade is, if the inflation rate is 2% then there's a risk that US doesn't pay its debts. Now, if US does pay the nominal debts as you assume, then you cannot assume the inflation rate is only 2%.
If paying the nominal debt guaranteed an AAA rate regardless of inflation, then every country in the world would have an AAA rate. Argentina would just print a lot of pesos and then buy US dollars with it. Europe would just print a ton of euros and Greece et. al. would have no problems.
If paying the nominal debt guaranteed an AAA rate regardless of inflation, then every country in the world would have an AAA rate
No, because creating peso inflation does not reduce Argentinas dollar debt. But dollar inflation does reduce the USA's dollar debt. Therefore it makes sense to rate the ability of Argentina to pay its nominal dollar denominated debt but it makes no sense at all to rate the ability of the US to pay its dollar denominated debt.
Perhaps I misunderstood your comment, but it read like "it doesn't matter because we can pay all debts."