Something strange has happened in America in the nine months since Barack Obama was elected. It has best been summarised by the comedian Bill Maher: "The Democrats have moved to the right, and the Republicans have moved to a mental hospital."

The election of Obama – a black man with an anti-conservative message – as a successor to George W. Bush has scrambled the core American right's view of their country. In their gut, they saw the US as a white-skinned, right-wing nation forever shaped like Sarah Palin.

When this image was repudiated by a majority of Americans in a massive landslide, it simply didn't compute. How could this have happened? How could the cry of "Drill, baby, drill" have been beaten by a supposedly big government black guy? So a streak that has always been there in the American right's world-view – to deny reality, and argue against a demonic phantasm of their own creation – has swollen. Now it is all they can see.

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Since Obama's rise, the US right has been skipping frantically from one fantasy to another, like a person in the throes of a mental breakdown. It started when they claimed he was a secret Muslim, and – at the same time – that he was a member of a black nationalist church that hated white people. Then, once these arguments were rejected and Obama won, they began to argue that he was born in Kenya and secretly smuggled into the United States as a baby, and the Hawaiian authorities conspired to fake his US birth certificate. So he is ineligible to rule and the office of President should pass to... the Republican runner-up, John McCain.

These aren't fringe phenomena: a Research 200 poll found that a majority of Republicans and Southerners say Obama wasn't born in the US, or aren't sure. A steady steam of Republican congressmen have been jabbering that Obama has "questions to answer". No amount of hard evidence – here's his birth certificate, here's a picture of his mother heavily pregnant in Hawaii, here's the announcement of his birth in the local Hawaiian paper – can pierce this conviction.

This trend has reached its apotheosis this summer with the Republican Party now claiming en masse that Obama wants to set up "death panels" to euthanise the old and disabled. Yes: Sarah Palin really has claimed – with a straight face – that Barack Obama wants to kill her baby.

You have to admire the audacity of the right. Here's what's actually happening. The US is the only major industrialised country that does not provide regular healthcare to all its citizens. Instead, they are required to provide for themselves – and 50 million people can't afford the insurance. As a result, 18,000 US citizens die every year needlessly, because they can't access the care they require. That's equivalent to six 9/11s, every year, year on year. Yet the Republicans have accused the Democrats who are trying to stop all this death by extending healthcare of being "killers" – and they have successfully managed to put them on the defensive.

The Republicans want to defend the existing system, not least because they are given massive sums of money by the private medical firms who benefit from the deadly status quo. But they can't do so honestly: some 70 per cent of Americans say it is "immoral" to retain a medical system that doesn't cover all citizens. So they have to invent lies to make any life-saving extension of healthcare sound depraved.

A few months ago, a recent board member for several private health corporations called Betsy McCaughey reportedly noticed a clause in the proposed healthcare legislation that would pay for old people to see a doctor and write a living will. They could stipulate when (if at all) they would like care to be withdrawn. It's totally voluntary. Many people want it: I know I wouldn't want to be kept alive for a few extra months if I was only going to be in agony and unable to speak. But McCaughey started the rumour that this was a form of euthanasia, where old people would be forced to agree to death. This was then stretched to include the disabled, like Palin's youngest child, who she claimed would have to "justify" his existence. It was flatly untrue – but the right had their talking-point, Palin declared the non-existent proposals "downright evil", and they were off.

It's been amazingly successful. Now, every conversation about healthcare has to begin with a Democrat explaining at great length that, no, they are not in favour of killing the elderly – while Republicans get away with defending a status quo that kills 18,000 people a year. The hypocrisy was startling: when Sarah Palin was Governor of Alaska, she encouraged citizens there to take out living wills. Almost all the Republicans leading the charge against "death panels" have voted for living wills in the past. But the lie has done its work: a confetti of distractions has been thrown up, and support is leaking away from the plan that would save lives.

These increasingly frenzied claims have become so detached from reality that they often seem like black comedy. The right-wing magazine US Investors' Daily claimed that if Stephen Hawking had been British, he would have been allowed to die at birth by its "socialist" healthcare system. Hawking responded with a polite cough that he is British, and "I wouldn't be here without the NHS".

This tendency to simply deny inconvenient facts and invent a fantasy world isn't new; it's only becoming more heightened. It ran through the Bush years like a dash of bourbon in water. When it became clear that Saddam Hussein had no weapons of mass destruction, the US right simply claimed they had been shipped to Syria. When the scientific evidence for man-made global warming became unanswerable, they claimed – as one Republican congressman put it – that it was "the greatest hoax in human history", and that all the world's climatologists were "liars". The American media then presents itself as an umpire between "the rival sides", as if they both had evidence behind them.

It's a shame, because there are some areas in which a conservative philosophy – reminding us of the limits of grand human schemes, and advising caution – could be a useful corrective. But that's not what these so-called "conservatives" are providing: instead, they are pumping up a hysterical fantasy that serves as a thin skin covering some raw economic interests and base prejudices.

For many of the people at the top of the party, this is merely cynical manipulation. One of Bush's former advisers, David Kuo, has said the President and Karl Rove would mock evangelicals as "nuts" as soon as they left the Oval Office. But the ordinary Republican base believe this stuff. They are being tricked into opposing their own interests through false fears and invented demons. Last week, one of the Republicans sent to disrupt a healthcare town hall started a fight and was injured – and then complained he had no health insurance. I didn't laugh; I wanted to weep.

How do they train themselves to be so impervious to reality? It begins, I suspect, with religion. They are taught from a young age that it is good to have "faith" – which is, by definition, a belief without any evidence to back it up. You don't have "faith" that Australia exists, or that fire burns: you have evidence. You only need "faith" to believe the untrue or unprovable. Indeed, they are taught that faith is the highest aspiration and most noble cause. Is it any surprise this then percolates into their political views? Faith-based thinking spreads and contaminates the rational.

Up to now, Obama has not responded well to this onslaught of unreason. He has had a two-pronged strategy: conciliate the elite economic interests, and joke about the fanatical fringe they are stirring up. He has (shamefully) assured the pharmaceutical companies that an expanded healthcare system will not use the power of government as a purchaser to bargain down drug prices, while wryly saying in public that he "doesn't want to kill Grandma". Rather than challenging these hard interests and bizarre fantasies aggressively, he has tried to flatter and soothe them.

This kind of mania can't be co-opted: it can only be overruled. Sometimes in politics you will have enemies, and they must be democratically defeated. The political system cannot be gummed up by a need to reach out to the maddest people or the greediest constituencies. There is no way to expand healthcare without angering Big Pharma and the Republicaloons. So be it. As Arianna Huffington put it, "It is as though, at the height of the civil rights movement, you thought you had to bring together Martin Luther King and George Wallace and make them agree. It's not how change happens."

However strange it seems, the Republican Party really is spinning off into a bizarre cult who believe Barack Obama is a baby-killer plotting to build death panels for the grannies of America. Their new slogan could be – shrill, baby, shrill.

j.hari@independent.co.uk