Is a Tea Party Triumph at Hand?

They were called “terrorists,” “fanatics” and “unpatriotic.”

Yet the principled resistance of the Tea Party Caucus in the House has put their leader right across the table from Barack Obama to negotiate the final terms of armistice in the debt-ceiling battle of 2011.

Today is July 22. On this day, it was said, either Congress will have voted to raise the debt ceiling, or the markets will have panicked and America will be on the road to default on Aug. 2.

House leaders John Boehner and Eric Cantor are, as of this writing, sitting with Obama negotiating terms. And yesterday, the stock market surged in anticipation they were close to an agreement. If Boehner and Cantor are dealing from strength, it is thanks to the Tea Party‘s rejection of previous deals.

The caucus held Boehner’s feet to the fire, and Boehner is the stronger for it.

And so, today, it is Democrats who are in rebellion. For Obama has reportedly signed on to specific and real reductions, $3 trillion worth, that include cuts in future costs of Social Security, Medicare and Medicaid.

America’s hirsute welfare state may be about to get a haircut.

“Who dares, wins,” is the motto of the Special Air Service, the Brits’ answer to America’s Navy SEALs. While no final deal has been cut, House Republicans have made significant gains.

They passed “Cut, Cap and Balance,” a Tea Party plan to cut federal spending to 20 percent of gross domestic product, cap federal programs and secure a vote on a Balanced Budget Amendment to the Constitution.

Second, Obama has offered to put budget cuts upfront to get a debt-ceiling increase. This would be insurance against what happened to Ronald Reagan, where tax hikes agreed to were enacted and the budget cuts lost somewhere along the trail.

Third, the president has apparently agreed to tax reform, whereby a host of deductions, exemptions and tax credits would be discarded from the code by the GOP in return for tax rate reductions for businesses and individuals.

This is Reaganism.

Indeed, this writer was with Reagan at the Tokyo Economic Summit of 1986 when word came that Sen. Bob Packwood and the finance committee were about to agree to cut the top tax rate to 28 percent, in return for eliminating tax deductions and tax breaks for business and individuals. The reaction of Air Force One, without seeing the precise terms of the deal, was, “Go for it!”

Obama’s proposal appears to contain a non-performance clause, however. If no deal on tax reform is reached, at the end of 2012, the Bush tax cuts will not be extended for high-end earners. That would be a defeat for the Tea Party, the GOP and the country.

Still, there remains no question which way America and Europe are going — indeed, are being forced to go by the irresponsibility of a generation of political leaders. Consider.

Obama has moved in months from an expansive budget that could not get a single vote in the Senate to negotiating with a Republican House whose leaders’ feet are being held to the fire by Tea Party true believers.

When the discussion is of $3 trillion in budget cuts and reducing tax rates, in return for giving up tax loopholes, Big Government is in retreat and a conservative hour may be at hand.

In Albany, Gov. Andrew Cuomo, son of liberal lion Mario, has just gotten an agreement from state employees to give up increases in pay raises and pension hikes they had already won, to save union jobs.

In Minnesota, Gov. Mark Dayton, a Democrat who shut down the government to force the GOP to agree to tax increases, has raised a white flag and accepted the Republican “no new taxes” position.

“Trust but verify” was Reagan’s watchword in negotiating arms control with the Soviet Union. The principle should surely apply to any deal that Boehner cuts.

We are 10 days from the day of reckoning. On Aug. 2, the U.S. Government, as of now, will have no legal authority to borrow, and tax revenue will fall sharply below what the U.S. Government needs to meet its obligations.

To avoid a partial shutdown of the government and a rattling of the stock and bond markets, for which the GOP will be blamed, the House should agree to a short-term extension of the debt ceiling.

And for every month increase in that debt ceiling, the House should impose a cost of $110 billion in hard budget cuts.

As we have seen from Obama’s repeated retreats, he needs an increase in the debt ceiling now, as does the country. He will have to accept any increase the House gives him, or veto it and risk a plunge in the markets, which would assume either a U.S. debt default or a U.S. debt downgrade.

This tournament is not over, but it was Tea Party hardball that got the GOP to the finals.