US financial markets lifted today, possibly as it digested the new plan by top Republican Senator Mitch McConnell to prevent the US from defaulting next month by handing over Congress’s debt ceiling power to the White House — and with it any political fallout. Depending on who you ask, either Republicans have solved the debt ceiling crisis or Jar Jar Binks is about to hand absolute power to Chancellor Palpatine.

His fellow Republicans were lukewarm to the idea, and in many cases outright apoplectic. Utah congressman Jason Chaffetz tweeted a widespread reaction: “Don’t know what in the world McConnell in the Senate is thinking. Wow. Stupid idea.” Speaker John Boehner was more diplomatic, but quietly suggested it would not pass the House.

The White House was no more enthusiastic. Spokesman Jay Carney said the briefing today the McConnell option was at best a “back-up”. Later he tried to return focus to the stalled negotiations by suggesting there was no plan B.

The only group who actually liked the senator’s plan was congressional Democrats, who must have thought all their Christmasses had come at once. There remains much bitterness between the White House and House Democrat leader Nancy Pelosi over the size and scope of Barack Obama’s proposed $4 trillion cuts. But this afternoon she described the plan to put more power in his hands (and out of hers) “a move in the right direction”.

What happens now? Negotiations at the White House will continue as an exercise in fantasy play, as Senator McConnell has admitted there “won’t be a single Republican vote to raise the debt ceiling at the end of the day”. Why continue holding out against something they admit is essential for America’s economy? McConnell: “I refuse to help Barack Obama get re-elected by marching Republicans into a position where we have co-ownership of a bad economy.”

In reality they will debate the semantics of what is or is not a tax hike, thus allowing Republicans to keep their pledge not to vote for a tax increase. Likely candidates will be dropping government subsidies on corporate luxuries such as jets. That won’t be enough to balance the $4 billion in cuts, but it might sustain a smaller agreement pending a larger deal in September.

Obama and McConnell may not be winning any friends in their respective parties, but they are clearly angling for realistic solutions in an environment where nobody can budge.

As close to the August 2 deadline as possible, they will either reach a much smaller deal or the McConnell back-up plan will go ahead. Whatever the Tea Party’s big talk about facing down the default, as due punishment for Washington’s spending, leaders of both sides confirmed today they will not let that happen.

That sliver of hope may be enough for the rest of us, but for the ideologues holding world financial stability hostage it was merely an opportunity to tightened their obstruction and rattle their sabers. Republicans will continue to press for no tax increases at all along with the full spending cuts proposed by Obama. Democrats will pretend their votes matter at all. And the White House will put on a brave face.

Meanwhile, the Tea Party caucus, who should be celebrating the now mainstream debate about the size of the government, was instead realising it doesn’t hold much sway at all. Presumptive faction leader and presidential candidate Michele Bachmann failed in yet another attempt to repeal laws she calls attacks on personal freedoms, such as  the Bush-era energy-efficient light globe standards. The 233-193 vote yesterday failed to get the necessary two-thirds majority.

Freedom to waste energy will have to wait till next time.