Tea Party holds US – and the world – to ransom

Despite backing a two-stage debt deal last night, a rump of far-right Republicans is blocking progress on the budget deficit

Just four days away from the country running out of the means to honour its bills, Congress and the White House were being held to ransom by the Tea Party wing in the House of Representatives, as it became more emboldened in its mission to radically curtail spending and the functions of government.

A gigantic effort is unfolding on Capitol Hill to forge a final deal to allow the United States to raise its debt ceiling before the Tuesday deadline. Last night the Republican majority managed, by 218 to 210 votes, to adopt a bill to cut costs and raise the debt ceiling in two stages. However, there is still a lot of wrangling to go before the crisis can be declared over and the problems that remain are all to do with the rump of Republican conservatives.

The Tea Party's clout first became apparent when an attempt on Thursday night by the Republican leadership to pass its two-step plan that would initially raise the ceiling and cut spending by roughly $1 trillion each had to be shelved. As many as 25 conservatives in the party, mainly Tea Party-backed, refused to fall in line, making passage at that point impossible.

Its passage last night came with an additional concession to the Tea Party. It stipulates that a second stage for further raising the debt ceiling in six months and making more cuts would only start if Congress embarks on seeking a constitutional amendment obliging the federal government strictly to balance its budget in perpetuity, a step that will be anathema to most economists.

Making success even more urgent was news yesterday that America's economy had only increased by 1.3 per cent in the second quarter, a GDP rate that was worse than expected.

The Boehner blueprint will not survive as passed. Mr Obama has said he could not countenance the constitutional amendment idea and that the two-stage model was also unacceptable because it would ensure that the crisis would only return at year's end.

"It's like a form of economic terrorism," the Wall Street financier Steve Rattner said. "These Tea Party guys are like strapped with dynamite standing in the middle of Times Square at rush hour and saying either you do it my way or we are going to blow you up, ourselves up and the whole country with us."

Hovering also is the threat of a downgrade of America's triple A credit rating by the ratings agencies. Even if numbers emerge close to what Mr Boehner has proposed, few people seem to know where the cuts would come.

Mr Obama himself said it is a mess born of sabotaged politics on Capitol Hill. If the US defaults, he said, it will be "because we didn't have a triple A political rating to match our triple A credit rating".

The revised Boehner plan will be voted down in the Democrat-controlled Senate this weekend. Then the really hard part begins. The Democratic leader there, Senator Harry Reid, must now negotiate with the Republican leader, Mitch McConnell, to craft a new package. We will see how much of the House version it retains. They then face negotiations with Mr Boehner to settle a final deal that they can sell to both chambers before submitting it to Mr Obama for his signature. It will be tough.

It looks as if the only path through will require new compromises from the Democrats and Mr Obama, who have already been forced to give up demands for moderate tax increases. The words "Tea Party" and "compromise" don't go together and Mr Boehner has shown how quickly he can roll over for the right.

If the two-step solution does emerge as the formula it will ensure, meanwhile, that debt and spending will eclipse all other issues in the 2012 American elections. It also spells what could become a protracted period of political gridlock in Washington where compromise would become the stuff of nostalgia.

The Awkward Squad

Jeff Flake, Arizona

Mr Flake tweeted his opposition to the Boehner bill on Wednesday, saying it would increase spending in the current year. "Give me sobriety, but not yet," he added. The independent-minded congressman has split from his party on issues including Cuban policy and immigration. He made his name – and irritated some colleagues – by opposing earmarks, provisions in legislation to direct money into specific projects.

Louie Gohmert, Texas

The Texan congressman accused Barack Obama of using "scare tactics" when the President warned that welfare payments could not be guaranteed if the debt ceiling was not raised. He faced the same charge last year when he warned in Congress of a plot by terrorist organisations to bring pregnant women into the US to obtain passports for the babies in anticipation of a return when their trained offspring was ready to wreak havoc on the country.

Trent Franks, Arizona

The stalwart conservative has staked out hardline views on abortion rights and same-sex marriage. He has also sponsored bills to ban online gambling and expressed scepticism about climate change. He has previously accused President Obama of being an "enemy of humanity", later clarifying his remarks to say that the President was in fact an "enemy of unborn humanity" because of his stance on abortion.