SINCE the 2010 mid-term elections, “tea party” Republicans have enjoyed influence out of proportion to their numbers. They forced Barack Obama and congressional Democrats to accept spending cuts without any tax increases to keep the government from shutting down in April, 2011, and from defaulting on its bills in August.
This intransigence, however, backfired rather spectacularly just before Christmas when John Boehner, the speaker of the House of Representatives, was forced to reverse his earlier position and agree to an extension of a two-percentage-point cut in the payroll tax and to the payment of unemployment benefits for up to 99 weeks.
Both measures, previously agreed to as a form of temporary stimulus, were due to expire at the end of the year. Mr Obama and Republican leaders had earlier agreed to extend both for one more year, but not on how to pay for them. To buy more negotiating time, Democratic and Republican leaders in the Senate agreed to extend the two measures for two more months.
In the House, however, tea-party members revolted. Some said that setting tax policy for just two months was silly, others claimed that stimulus does not work anyway, and yet others warned of (non-existent) threats to pensions, which are funded by the payroll tax. Democrats wasted no time in claiming that the Republicans were holding 160m workers hostage to extremists. Under intense pressure from fellow Republicans in the Senate and in the presidential campaign, Mr Boehner finally relented. The measure passed on December 23rd without so much as a roll-call vote.
The deal lifts, if only for a couple of months, one shadow over the economy and thus Mr Obama’s re-election prospects. Recent data have shown the economy to be perking up notably in the fourth quarter; it may have grown 3.6% in the period, reckons Macroeconomic Advisers, a consultancy. That would be the fastest rate since mid-2010. If the two measures, worth roughly 1% of GDP, had expired, the economy could have relapsed in 2012.