thinner wheels????

MY friend and I were discussing new tires for my car.. now I dont need tires yet.. and I probabily wont till next year.. however....
I want to know the what would happen if you put thinner tires on a car...
For example if if the car had 20inch outer diameter on the entire wheel tread and all.. what would happen if the wheel size was reduced by 2 inches... bringing the outer diameter to 18 inches... assuming the width of the tread did not change.
I drive a 99 pontiac grand am with the stock 15 inch rims... I know what it would look like.. but I am also concerned with handeling/ as well as what it would do to the engine.??? because there is less wheel to spin and if I am right that would heat the engine up more....... so let me know if I am wrong... as well as what the possible outcome would be
thanks

I am a little unclear as to what you mean, diameter or width. Either way it doesn't really matter, neither will damage your engine, but your handling will suffer. Reducing the width of your tire will make the contact patch smaller and therefor reduce the vehicles handling. Reducing the wheel diameter will mean you will have to install tires with larger sidewalls in order to keep the same overall diameter, and larger sidewalls are more flexible than smaller ones meaning there will be more sidewall flex in corners and your handling will be reduced. Either way, the worst that will happen is that you will not be able to take corners as fast.

Tire diameter, and thereby rolling distance should always stay the same, or within a few percent. If you buy larger diameter rims you should also buy lower profile tires and vice versa. If you don't need new tires now, sell the tires with the rims or wait to buy the wheels until you need the tires.

A change in wheel diameter affects the handling of the car, if also affects the electronics of the car as newer cars take the speed of the car from the ABS sensors, this can also be used to for example calculate the distance travelled, the gear used, speed limits. The gear ratios can also become "wrong" affecting the top speed of the car, acceleration and engine rpm at certain speeds. The wheels can also become so big that they might hit anything in the wheelhouse or so small that the car hits the ground.

Depending on where you live it might also be illegal to change the wheel diameter.

Smaller diameter tires with the same width would improve the handling.
They would also improve accelleration by lowering the overall gearing.

Sidewalls would be shorter, and stiffer, and the CG would drop. Not to
mention reducing unsprung weight.

However, the engine would spin faster at the same highway speed, so
you should use more gas (less mpg).

Smaller tires may also dissipate heat less, and have a lower load rating
if you are not careful to match these to stock specs.