When Tea Party candidates were elected in a raft of seats across the United States in the midterm elections last November, we wondered what the fallout would be. Now we're finding out.

At the state level, most notably in Wisconsin but in other states too, conservative governors are using the financial crisis – created by Wall Street bankers and the deregulation-mad politicians who serve them – to give the bankers even more power, in effect, by trying to crush the strongest countervailing force against them in our political system – unions.

The public employee union members have generous pension arrangements, and they generally contribute far less to their healthcare benefit plans than most private sector employees have to. But this latest development is a sad sign of the power imbalance in American politics that has accrued over the last 30 years – during which time overall union membership has gone from about 25% of the workforce to barely 11%, and the richest 1% have seen their pre-tax incomes nearly quadruple while median earners have stayed flat.

Were the Democrats cleverer and braver, citizens would broadly know these facts. But most Americans have no idea of the massive class war – stealing from the bottom and the middle and giving to the very top – that has been waged over the last three decades. Instead, they appear to know, or "know", that Barack Obama has governed from the hard left, that unions are piggy, and that an uprising of Tea Party patriots has been all that stands between the good old US of A and a kind of Muslim-Marxism state. In such an atmosphere, the right can move with impunity.

Or can it? We'll soon see. In Wisconsin, Governor Scott Walker may have overplayed his hand. One sees signs that regular Americans don't buy all the conservative spin. A poll out this week in USA Today finds that Americans support the collective bargaining rights of public employee unions by nearly two to one (61% to 33%). In addition, Walker is evidently lying through his teeth. It has become an important Walker (and overall conservative) claim that he campaigned on exactly what he's doing now, so what's the big shock? But Politifact, a respected and nonpartisan monitor, combed the record and found that he never said a word on the campaign trail about curtailing bargaining rights.

So maybe Walker is pushing it. Here in Washington, the same might be true. It appears increasingly likely that we are heading for a shutdown of the federal government come 4 March, when the current temporary spending bill that is keeping the agencies of the government funded runs out. The Republican-controlled House of Representatives – with 83 new Republican members, most of them extremely conservative – passed a budget cutting $60bn from domestic spending: a meat cleaver.

In the Democratic-controlled Senate, leader Harry Reid this week proposed another temporary spending bill that would keep government functioning for another month at current levels. That's how these things are done traditionally. But the new breed of Republicans isn't very wrapped up in tradition, so the party is portraying Reid's "current levels" as a head-in-the-sand cluelessness about the fiscal realities.

Reid and other Senate Democrats say they won't budge. House speaker John Boehner says that if the Senate sticks to this current-level nonsense, he will shut down the government. And even if the Senate does cave in, Obama vows that he'll veto the Republicans' budget. So a shutdown appears more likely by the day, in which all nonessential government workers and services would simply pause.

In 1995, the last time this happened, 800,000 federal workers stayed at home without pay. Many agencies of the government stopped work – though that's just gravy for the Republicans (they loathe agencies that protect the environment and enforce business regulations, for instance).

But more than that, it's a huge media event. In 1995 when the government actually did cease functioning for two brief periods in November and December, the media played it as a personal battle royale between President Clinton and Newt Gingrich, the House speaker. It was a tough match. Clinton was ahead on points when the watershed event happened. Gingrich complained to reporters that he shut down the government because, on a trip on Air Force One, Clinton had made him sit at the back. "Newt's tantrum" then drove the story.

Now we're in a new revolution, and some things are different – for one, Boehner does not seem to have quite such a combustible ego as Gingrich. Among Senate Democrats, I sense an overly sanguine "well, we beat 'em last time" attitude. It is true that most Americans quite like most of the specific operations of the federal government and don't want to see them stopped, even temporarily. But it is manifestly clear that last November Americans (the ones who showed up to vote, anyway) said they wanted spending cuts.

The biggest difference of all, though, is in the nature of the Republicans' legislative caucus. In 95, Republican legislators gave Gingrich a long leash to negotiate for them. That won't be the case now. Many are so extreme they're barely Republicans, and they don't care about finding a compromise. They are economic fundamentalists.

As the liberal commentator Jonathan Chait observed last year, America is in a new culture war, but "this culture war is not over social issues – it is over economic ones". As Chait says, this is absurd: an emotionally charged moral issue like abortion may not lend itself to compromise, but an argument over numbers and funding levels is inherently about splitting the difference, which Democrats and Republicans have done for decades. That's called governing.

Or used to be. Governor Walker has spurned a very reasonable compromise in Wisconsin under which the unions would accept virtually all his financial demands. The Tea Party congress in Washington seems to revel in the idea of walking the government off a cliff. One can only hope that they walk their party off the cliff with it; then the Democrats finally might be emboldened to start reversing the great 30-year theft.

• This article was amended on 24 February 2011. In the original Newt Gingrich was described as the Senate leader in 1995. This has been corrected.