WASHINGTON (Reuters) - The toppling of Eric Cantor, the No. 2 Republican in the U.S. House of Representatives, left his political party in chaos on Wednesday, as financial markets worried the shakeup might renew messy budget fights that in the past have caused government shutdowns and near credit defaults.
Cantor, who has served as House majority leader since 2011, unexpectedly lost Tuesday's primary election to college economics professor David Brat, a Tea Party activist.
That brought an abrupt halt to the career of a rising star who had his eye on the top House job of Speaker. Cantor is expected to tell his fellow Republicans that he will resign from his leadership job at the end of July, just before the long summer break, according to congressional aides.
That sparked a fierce intra-party scramble for House leadership positions. But it was still unclear when party elections would be held.
Meanwhile, Capitol Hill was buzzing with speculation over whether the Tea Party victory in Cantor's Richmond, Virginia-area district could bring Washington back to the showdowns of 2011, 2012 and 2013 over Washington's budget deficits and the size of government.
Financial market analysts feared that the relative political calm that had prevailed since a December 2013 budget deal could now be disrupted.
"I just think it underscores the total political dysfunction" in U.S. politics, said Doug Kass, president of Seabreeze Partners Management in Palm Beach, Florida. Noting the need for fiscal and regulatory reform, he added, "this defeat suggests it may retard it."
The turmoil, however, has given Democrats a breather from a string of politically damaging events that were preoccupying Washington just five months before congressional elections.
As they try to hold onto their control of the Senate in November's elections, Democrats have been battered by a scandal over the failure to provide veterans with timely healthcare and President Barack Obama's decision to swap five Taliban prisoners for an American prisoner of war in Afghanistan.
More than a dozen House Democrats, gathered at a press conference to promote a manufacturing bill, were all smiles as they reveled in the Republican Party’s turmoil.
"We have seen over the last three years a (Republican) party that is deeply divided and dysfunctional. I think last night was evidence of that,” said Democrat Representative Steny Hoyer, the second-ranking House Democrat, as he was peppered with reporters' questions about Cantor and not a single question about manufacturing.
House Republicans scheduled an emergency closed-door meeting later on Wednesday to discuss a way forward and Cantor was set to talk to reporters at 4:30 p.m. EDT (2030 GMT).
Amid the party turmoil, House Speaker John Boehner is expected to remain in his position through this year and to seek re-election to the job next year if Republicans maintain their control of the chamber, as expected, in November elections.
But some conservative Republicans were speculating that whoever emerges as a Cantor replacement could also become a challenger to Boehner for the speakership next year.
Tea Party discontent with Republican leadership was at a boil level and activists were itching to flex their muscles after the win in Cantor's district.
Representative Tim Huelskamp of Kansas, a rebellious Tea Party activist who was kicked off of two committees 18 months ago, told Reuters that conservatives "have been frustrated over and over again for the last three and a half years about a team, not just Cantor, that rode the Tea party-conservative wave, (but) none of them with real conservative bona fides.”
Still unclear was whether Cantor's defeat could even resonate in the 2016 presidential campaigns, as the Republican Party battles over whether to put forward a nominee with Tea Party leanings or someone more mainstream, like former Florida Governor Jeb Bush, who could have the broader political appeal needed to win the White House.
In his campaign against Cantor, Brat accused Cantor of being too willing to compromise with Democrats on immigration and budget issues and of not fighting hard enough against Obama's signature healthcare law known as Obamacare.
That, despite Cantor's role in staging more than 40 votes in the House to repeal all or parts of Obamacare over the last few years.
Already, one leading House Republican, Representative Paul Ryan of Wisconsin, told reporters he was not interested in a party leadership job.
He is expected to take over the powerful House Ways and Means tax-writing panel next year. Ryan also has been mentioned as a possible 2016 presidential hopeful or as seeking the House Speaker job further down the line.
Representative Matt Salmon, a conservative Republican from Arizona, told Reuters there was a growing, large group of lawmakers getting behind Representative Jeb Hensarling of Texas, who chairs the House Financial Services Committee.
Salmon said he was part of this group of at least 50, even though Hensarling has not announced he would seek the majority leader job.
The shakeup left Republicans and Democrats in Congress wondering about the debate over future legislation, especially budget and debt limit measures later this year and in early 2015.
"My concern is that the Ted Cruz supporters, the Rand Paul supporters, are going to use this as an excuse to basically stop the government from functioning," Representative Peter King, Republican of New York, told MSNBC's Morning Joe on Wednesday, referring to the two influential conservative senators who could run for president in 2016.
By late March 2015 Congress will have to pass legislation increasing the federal government's borrowing authority or risk a default. Later this year, legislation to fund the government beyond Sept. 30 also will be necessary. Without it, federal agencies would have to shut most of their operations.
Last year, Boehner and Cantor tried and failed to talk fellow Republicans out of a strategy that ended up closing the government for more than two weeks in October in a bid to repeal Obamacare.
The defeat was an ironic turn for Cantor, who vaulted into the majority leader job in 2011 after he helped Republicans capture the chamber the previous November on a wave of Tea Party support.