All 435 seats in the House of Representatives, 37 of 100 senators, 37 out of 50 governors and all but four state legislatures have been elected on November 2. It was not just an election, but a referendum on Barack Obama’s two years in office. Neither Obama nor Sarah Palin were on the ballot, but the results could determine their political futures.

A malaise hangs over America with its optimism subdued. Sixty per cent of Americans think their country is on the wrong track, 70 per cent disapprove of Congress, 50 per cent disapprove of Obama. For more than a year, the official unemployment rate has been 9.6 per cent and in reality much higher. Interest rates are so low that retirees cannot live on savings. The rate of growth cannot create jobs on the scale required. Foreclosure and bankruptcy rates are high, and the majority of homes have negative equity. Anti-incumbency sentiments are riding very high. People are looking for change and for a different breed of politicians to deliver it. Ultraconservatives have now become mainstream.

Rick Santelli of CNBC, ranting about mortgage owners bailed out by the taxpayer, invoked the 18th century Boston Tea Party against the British and wanted to throw mortgage documents into the Chicago River. He started a movement that unified disparate elements against high taxes, large deficits, big government, federal spending, bailouts of bankers, healthcare and Obama himself. Populist movements are common in the United States of America — the civil rights movement, the anti-Vietnam war movement, and Ross Perot who challenged the two-party system in the 1990s. It will be seen if the Tea Party movement is ephemeral or a fundamental shift to the right in US politics, but at the heart of the present Republican revival is the Tea Party.

The US is built on the power of ideas, and politicians were perceived to have undermined the cherished idea that Americans leave to the next generation a legacy more prosperous than the one they inherited. The Tea Party includes a spectrum of extreme religious, cultural and social beliefs with a merited reputation for weirdness and eccentricity. Virulent rightists are their heroes; rightwing thinktanks and pressure groups the storm troopers. Huge funding has poured in from supporters of the Right, including corporate America.

There is racism in the hostility to Obama’s policies that are seen as ‘European’ and ‘socialist’ — both damning epithets in the US. Obama is vilified as a communist, Muslim and born outside the US. The combination of grassroots populism, political conservatism and big money is seizing on the despair of economic distress: “We need a new set of people to return the country to the ideas it was founded on. Since we have not been able to change the politics of people in Washington, we have to change the faces.” The Tea Party objective was to send conservatives to Congress, to abolish the energy and education departments and the Environmental Protection Agency. They also wish to abolish the United Nations.

The Tea Party did not run under its own name and is not a normal political party. It may turn into a third party with its candidate — perhaps Sarah Palin, who has made a career out of her abysmal ignorance — for the 2012 presidential campaign. Among its core beliefs are downsizing of the government, a cut in income tax, the national budget balanced, a crackdown on illegal immigrants, and the sanctity of gun ownership. It is in revolt against political establishments, including Republicans; its success can be described as a hostile takeover of the Republican Party. The adherents call themselves ordinary citizens who could not stand by while the basic foundations of the US were being eroded. They want fiscal responsibility, limited government and free markets: “We cannot spend our way out of debt; we will be owned by the Chinese if we don’t stop it.”

The Tea Party is Yankee poujadism. It is a protest movement, a cause, a social networking site, a cultural phenomenon, amorphous, decentralized, a loose confederation of local associations springing from the grassroots with no leader and no hierarchy. The membership is white, middle-aged, relatively affluent and well-educated. The Tea Party built on the anxieties of people who felt the American dream under challenge — a job, a home, secure old age, a car, the right to live without undue interference from the government. Such people feel angered that while they struggle to make both ends meet, bankers, insurance companies and car manufacturers have been rescued with taxpayers’ money. Afghanistan is not an issue; individual liberty is what the Tea Party constituency wants, along with a return to a mythical and unattainable age. They invoke the putative values of the American Revolution. They believe in liberty but not equality; the rich can look after themselves and the poor can suffer in silence. A collection of mavericks determined to take the US back to imagined 18th century roots may influence whether Obama is a one- or two-term president.

The results have been the worst election rout for an incumbent party in six decades. Republicans increased their tally by 60 extra seats in the House, six in the Senate and 10 governorships. 62 Tea Party- supported candidates are a new influence in the land, though the Senate Democratic majority leader, Harry Reid, edged out the Tea Party novice, Sharron Angle, in the closest, nastiest and highest profile race. The Democrats have taken a hammering and the president is faced with a choice of legislative paralysis or having to compromise with opponents who are in no mood to compromise.

It is a far cry from Obama’s euphoria days and his message of optimism. Obama’s achievements are in restored dignity of the US in the world, education reform, the stimulus package, withdrawal from Iraq, healthcare, student loans, Wall Street regulation, clean energy and a little noticed tax rebate for 95 per cent of taxpayers. His handling of the BP oil spill in the Gulf of Mexico compares favourably with George W. Bush’s inertia over the tidal wave that destroyed New Orleans. On the explosive packages from Yemen, Obama reacted quickly and appeared decisive and in control — but national security is always a strong card for the Republicans.

Obama raised hopes of a different type of politics, but his timidity and inability to get things done have been his undoing. Obama embodied hope for change but did not deliver. He inherited an economic mess but did not tackle it vigorously. Most of the money Obama spent has been in plugging budgets of states like California that has a higher deficit than Greece, but the public does not see that. The stimulus did not create enough jobs. Democrats are disgruntled, while Obama’s personal following is unimpressed, feeling that he is influenced by Wall Street and the unions. The working class thought Obama a failure even when he had the support of both houses. His authority is gravely diminished.

Obama has relied on his wife, Chicago associates, and Bush hold-overs, and failed to connect with independent voters. The health and finance reforms did not go far enough for liberals and were anathema for the Right; and the liberals are as unforgiving as the right wing. Guantanamo was not closed, the climate change bill has been abandoned. Obama suffered from too much hype, the Nobel peace prize was an absurdity, and his wry, dry, intellectual style is out of touch. Obama must realize that logic can win arguments but only emotion can motivate his followers. The great orator has failed to communicate.

What will emerge? Hyper-partisanship and the inability to compromise bedevils US politics. So gridlock and crisis loom. The government’s ability to raise money for healthcare and elsewhere will be wrecked by Republicans. Even with Democrats in charge of Congress, it was a battle to get legislation through; now it will be impossible. Few major legislations are envisaged by Obama, but he will have no choice but to do very little. Republicans are past masters at strangling Democrat ambitions in Congress and will ensure the blocking of any major bill. But the Republicans will also do little: Obama will use his veto and Republicans will be needled by unruly Tea Party members. The odd coupling of extremists from the religious Right and libertarians can hardly be a model of disciplined unity. The election result may propel Sarah Palin, who represents everything loathed by American liberals, into pole position for the Republican candidature in 2012.

On the other hand, Reagan in 1982 lost the House majority like Clinton in 1994 and Truman earlier. But Truman and Clinton had great political skills, and the last two years of Clinton’s first term were very fruitful. Both Truman and Clinton won a second term, so Obama will derive some comfort from that. To use a typically American expression, it isn’t over till the fat lady sings.