President Clinton has threatened to veto a Republican measure to give parents of children at private schools educational tax breaks.
Supporters of the scheme called it a revolutionary change. The President, however, said it "weakens our commitment to making America's schools the best they can be in the 21st century".
For years, it has been established policy in the US, as in Britain, that while parents can pay to send their children to private schools, they continue to be liable for taxes that fund state schools. The principle that schools are a shared need like roads or defence, was largely agreed by both parties in the US.
But it seems to have been breached, in a small but significant way, by the Republican proposal to establish so-called "education savings accounts". Under their plan, parents, grandparents, or even businesses or unions could put up to $2,000 (pound;1,250) a year into special accounts that could accrue interest tax-free.
The money could be used to spend on "education expenses", from school uniforms to home computers to private or church school fees.
Though the savings are small, Clinton and others believe that the ESAs threatened to use "tax expenditures", to siphon off money from regular education spending, shifting resources from public to private schools.
Education promises to be a priority issue in the state and local elections this November. With the economy strong and crime rates falling, attention is turning to America's troubled state schools. In California voters have named education as their number one concern.
The stand-off over the legislation is partly election-year posturing in Washington. The Republicans have already voted down the Clinton administration's own proposals to increase school construction spending and hire more teachers, and some compromise may be in order.
The "A-Plus Education Savings Accounts" bill passed both the US Senate and the House of Representatives with heavy support from the Republican majority plus a scattering of Democrat votes, but it did not achieve the two-thirds majority necessary to override a Presidential veto.
But several Democrats subsequently dropped their backing after Republicans criticised amendments that were sure to infuriate the White House, including an attack on President Clinton's proposed national testing programme.
Supporters included Senator Robert Torricelli, a Democrat described as a close Clinton ally. "The future of American politics may belong to whichever political party develops credibility on dealing with education," he said, and promised to ask Clinton to reconsider his veto threat.
ESAs are seen as part of the conservatives' broad-ranging attempt to reform public education systems in the name of "school choice" through privatisation schemes, ranging from vouchers to private management of state schools. But they would seem to have, potentially, a strong selfish appeal to parents, privately educating their children, who see their tax money going to state schools that critics say are failing badly.
While conservative school reformers have flirted with ESAs in the past year, this is the first time they have managed to push them through Congress.