Political halftime for the GOP?

'Knives are drawn."

This isn't a line from a police blotter. It's the way a leader of the Minnesota Republican Party describes the GOP establishment's intensifying battle with grass-roots insurgents on the right.

Before the 2014 election contests heat up between Democrats and Republicans, the GOP faces a ferocious and momentous internal battle, according to my chats with a number of party insiders.

The stakes are huge. Will the party's nominees for governor and U.S. Senate in 2014 hold firm to the right's pure principle of severely limited government? Or will the party, as a national GOP fundraiser put it, "organize beyond the convention process to appeal to a broader scope of people" — voters who want government to shoulder a larger, if still restrained, range of responsibilities? Should the party select candidates who will take office willing to accept compromises that advance conservative policy ideas, or who will stay committed to staunchly defending principle even if it produces government shutdowns?

Today's Republican civil war arises from longstanding tensions. Barry Goldwater inspired a libertarian backlash against the New Deal on his way to wresting the 1964 Republican presidential nomination away from the party's moderate wing, led in those days by New York Gov. Nelson Rockefeller. Goldwater lost the general election in a landslide to Lyndon Johnson but ignited a lasting movement on the right that transformed the GOP and cleared the way for Ronald Reagan's election nearly two decades later.

Although these strains have remained within the party throughout the past half century, 2014 may witness an eruption fueled by two recently rising forces on the right.

Texas Congressman Ron Paul revitalized libertarians behind a program to pull the United States back from international entanglements and to severely retrench government to restore individual autonomy — from abolishing the Department of Education, to legalizing marijuana and gay marriage, to prohibiting surveillance. Some of this "Liberty Movement" is gravitating in Minnesota toward state Sen. Julianne Ortman's candidacy to take on Democratic U.S. Sen. Al Franken next year.

The Tea Party, meanwhile, formed in reaction to what some conservatives saw as President George W. Bush's moderate Republican brand of "big government" — increased spending, a major new prescription drug benefit in Medicare, and his widening of national authority to conduct surveillance and intercede in education. President Obama's economic stimulus spending and health care legislation ignited the Tea Party as an electoral force, propelling Republicans to victories in the 2010 elections for state offices and Congress.

In Minnesota, U.S. Rep. Michele Bachmann has embodied Tea Party zeal. Its new local "rock star," according to some activists, is state Sen. David Thompson, who is mounting a 2014 challenge to Gov. Mark Dayton.

These two factions are distinct — the right is not monolithic. The Liberty Movement's isolationist instincts on foreign affairs and laissez-faire social policies are not embraced by the Tea Party. But one leader of the right's grass-roots insurgency in Minnesota describes an increasingly "comfortable alliance" between the two.

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Republican strategists initially believed, in 2008 and 2010, that the new right's energy could be tapped to help defeat Democrats without disrupting the GOP. Wrong. They now bitterly complain about the insurgency's "takeover" and its tendency to be "conservative first, Republican when it suits their purposes." The right mocks moderates as RINOs ("Republicans In Name Only"), but the establishment retorts that "they are the RINOs" and that "it is time to stand up and welcome the debate with the right."

Far from shrinking from a fight, the Tea Party and the Liberty Movement, according to one insurgent leader, are "ready to fight for the heart of the party." Many on the right voice disdain for the mainstream GOP and the thirst of the business community to "buy government and the politicians they can control."

Budget crises and government shutdowns in Washington and Minnesota in recent years (and near federal defaults in 2011 and again this fall) have brought the simmering tensions to a boil heading into 2014. These confrontations, in the view of the right's insurgents (as one explained), were necessary to "act on the principle of liberty" and against crony capitalism that is turning Americans into "tax slaves."

But the GOP establishment was taken aback by the right's brinkmanship. One well-placed national Republican described it as "bad policy" and "bad for America" because it feeds growing doubts about U.S. leadership and reliability. A leader in the Minnesota business community found it "deeply troubling that some Republican lawmakers treated default as feasible — it would have devastated American businesses and consumers." Mitt Romney, a former adviser regretted, "made a mistake by not taking on the right" during his battle to win the 2012 presidential nomination.

"What bothers me most about the right," an influential Republican confided after surveying the right's record over the past few years, "is its lack of optimism about the future of America and lack of confidence in the power of its ideas to make America more successful, win over the country and build a majority party."

The welfare status quo was toppled, this observer recalled, because "we won the intellectual debate about reducing dependency and increasing self-reliance by increasing earned income tax credits." Engaging policy led to good politics — drawing not only Republicans but also some Democrats and even more independents. By contrast, the right's embrace of default and isolationism, according to this longtime Republican, results from "intellectual laziness" that exalts principle but relies on fear and conspiracy theories about "imagined villains."

The last straw for the GOP establishment and business is what it sees as the right's political ineptness. Opposition to reaching a fiscal cliff deal early in 2013 produced more spending and taxes than if House right-wingers had allowed Speaker John Boehner to bargain — instead of leaving the dealmaking to Obama and the Democrat-controlled Senate. Default threats in 2011 led to the sequester process that cut discretionary spending but left untouched long-term commitments to Medicare and Social Security.

In Minnesota, hard-edged Republicans forced a 2011 shutdown to avoid any tax increases and pushed through a proposed constitutional amendment to ban gay marriage; voters punished them by sweeping in Democratic legislative majorities, which promptly passed the steepest tax hikes in recent history (and legalized same-sex marriage).

The core of the problem, according to GOP strategists, is that the Tea Party and Liberty Movement now control Minnesota's endorsing process. By storming the caucuses that select delegates for the GOP's endorsing conventions, they nominated Tom Emmer in the 2010 gubernatorial race. He lost to Dayton in what was a banner year for Republicans across the country and in Minnesota, where the GOP seized control of both legislative chambers for the first time in decades. The establishment also blamed the right for anointing Kurt Bills in the 2012 U.S. Senate race. Bills suffered the worst Senate defeat in state history as even Republicans and GOP-leaning independents chose Amy Klobuchar. The insurgent right's promotion of unelectable purists has become a familiar story across the country over the past two election cycles — costing the GOP control of the U.S. Senate.

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So the battle is on. The Republican establishment and the business community are now gearing up to launch primary campaigns in 2014 to topple the party's once sacrosanct endorsing process in Minnesota, the better to nominate pragmatic conservatives for the U.S. Senate and governor.

My conversations with Republicans, traditional party allies and grass-roots insurgents spotlight three questions that may animate the battles in 2014 and perhaps beyond:

1) Whose economic ideas hold out the best opportunity for jobs and growth?

Attacks on an increasingly unpopular President Obama are expected, but Republicans also are looking for attractive ideas to move America forward. The right's recipe is strong leaders who will pull back government's tentacles that are holding back individuals' natural entrepreneurial spirits. The establishment yearns, as a business leader put it, for "Republican candidates who come from business or know about business to support policies that yield growth — not precipitate the next recession."

2) Who can be most effective in the process of governing?

Establishment Republicans hunger for leaders in the mold of Ronald Reagan, who struck compromises with Democrats that advanced conservative principles. He was ferocious in cutting spending and taxes but also produced reforms that strengthened Social Security and Medicare for decades and increased taxes when necessary.

The right recoils at compromise — getting a seat at the negotiating table, they say, invariably produces more government. A Liberty Movement activist confided: "Some of us don't want governing at all" and get "heartburn from working in the trenches to elect Republicans who refuse to roll back government."

3) Who can win general elections in Minnesota?

The Republican establishment is convinced that the right can't win. "The stakes are too high," a leader in the business community tartly observed, to be "nominating candidates who soothe the souls of the far right but can't compete with Dayton or Franken in 2014."

Faced with the threat of business-backed primary challengers, one leader of the Liberty Movement in Minnesota had a confident comeback: "Bring it on." This person counts two-thirds of GOP activists as libertarian and Tea Partiers. Business and its allies may "flood the airwaves and buy some support, but do they have the votes to win a primary?" Realists in the Republican establishment privately concede that a mid-August primary battle (when turnout is low and dominated by ardent activists) is "horrible for us."

The rebellious right may also find its endorsees backed by a Republican Party ready to defend its internal process. A party leader counsels business and its allies to "think long and hard before taking on the party." The difference between their candidate and the party's endorsee may be "only marginal." He also warned the establishment and business against alienating party activists: "If the Tea Party is untethered to have its way, it would bulldoze the buildings."

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Who will win?

Optimists within the Republican establishment hope for a synthesis in which the new right is "integrated" into the Republican Party "just as the social conservatives were in the 1990s." Optimists among the new insurgency hope for the old guard to yield to the grass roots.

But the odds favor a prolonged battle. The right's mobilization appears to have gained a tight grip on the nomination. And it is on guard, as one activist put it, against the establishment's strategies of "recruitment and pacification" and is ready to bolt, pointing to the Libertarian candidate's part in defeating the GOP in Virginia's recent gubernatorial race: "the Liberty Movement made a huge statement that it is not willing to go along with the GOP establishment."

For its part, the establishment is talking tough so far, viewing a fight as the "best chance for growing the GOP."

"Escalating the argument with the right on carefully selected issues and not retreating," a party strategist calculates, is an opportunity to rebrand the party and win independents back.

A prominent national Republican fundraiser warned the right against its risks of "fighting on an island by itself with no legitimate shot at moving their agenda." Kurt Bills won the nomination but found himself abandoned by many independents, by some Republicans and by traditional Party donors — he raised less than $1 million compared with Klobuchar's $7.7 million. A leader in the Minnesota business community swore off "standing next to another candidate who's not immediately credible to independent voters."

The left often assumes that grass-roots organizing favors its agenda and candidates. But the Liberty Movement and Tea Party originate in local organizing. While progressives may cheer the attacks on the right, the resurgent Republican establishment is peddling political remedies — from using the power of money to reining in populist control over nominations — that may threaten the left's own grass-roots strategies if Democratic elites mimic them.

Lawrence R. Jacobs is director of the Center for the Study of Politics and Governance at the University of Minnesota's Humphrey School of Public Affairs.