S&P Report Gives Boost to Tea Party Agenda

* S&P action strengthens Tea Party's hand

* Report seen as Tea Party vindication

* "Tea Party isn't a bunch of radical crazies"

By Thomas Ferraro

WASHINGTON (Reuters) - The powerful yet often criticized Tea Party movement found its fiscal conservatism strengthened Monday when Standard & Poor's threatened to downgrade the U.S. credit rating.

S&P's move changing its outlook on the U.S. rating to negative from stable comes as Republicans and Democrats spar over how to slash the deficit and debate whether to raise the limits on U.S. credit.

The influential Wall Street rating agency changed its credit outlook for the United States citing a "material risk" that Washington may not agree on how to trim the massive U.S. deficit, projected to reach $1.4 trillion this year.

"It (the S&P report) is a vindication of the Tea Party and its stance that we're spending too much," said Republican Blake Farenthold, one of more than 50 members of the House of Representatives' Tea Party Caucus.

"The Tea Party isn't a bunch of radical crazies. They are everyday folks who have enough common sense to realize that we are on an unsustainable path of 'spend, spend, spend,"' Farenthold told Reuters.

The Tea Party helped make deficit reduction a top issue in last year's election, and, in doing so, helped Republicans win control of the House of Representatives from President Barack Obama's Democrats.

Under pressure from the Tea Party, Congress last week approved what was billed as a historic deal to cut U.S. spending this fiscal year by $38 billion. But Tea Partiers, who favored at least $100 billion in cuts, complained it wasn't nearly enough.

House Republican Leader Eric Cantor, who along with other high-ranking members of his party have drawn Tea Party fire, reiterated his call for any increase in the $14.3 trillion debt limit to be accompanied by significant spending cuts.

"Today S&P sent a wake-up call to those in Washington asking Congress to blindly increase the debt limit," he said.

"As S&P made clear, getting spending and our deficit under control can no longer be put off for another day, which is why House Republicans will only move forward on the President's request to increase the debt limit if it is accompanied by serious reforms that immediately reduce federal spending."

The White House and Congress are now trying to find common ground on a fiscal 2012 budget along with more spending cuts in exchange for raising the U.S. debt limit by July 8.

'SIGNIFICANT CLOUT'

Ethan Siegal of The Washington Exchange, a private firm that tracks Washington for investors, said the Tea Party holds "significant clout within the House Republican caucus."

"The question is can the Tea Party wing of Republican House and the leadership in the Republican House, along with the leadership of the Democratic Senate and President Obama, all come to the middle to make a deal," Siegal said.

Republican Representative Ron Paul, a Tea Party favorite, said he did not think Congress will be able to take the fiscal steps needed to avoid a downgraded debt rating.

"They're not going to move toward an agreement, because they both agree to spend money," Paul told Reuters Insider, referring to Republicans and Democrats.

While the Tea Party has shaken up American politics, a recent survey found public support for the movement has waned.

But Mark Meckler of the Tea Party Patriots, one of the movement's leading groups, said polls still show that most Americans agree that spending needs to be cut.

Meckler said the S&P report "strengthens the hands of the majority of Americans who believe we are facing a financial crisis." (Additional reporting by Andy Sullivan; Editing by Deborah Charles)