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U.S. President Barack Obama speaks at his final campaign rally on a cold night in Des Moines, Iowa, Nov. 5, 2012. (Jason Reed/REUTERS)
U.S. President Barack Obama speaks at his final campaign rally on a cold night in Des Moines, Iowa, Nov. 5, 2012. (Jason Reed/REUTERS)

Re-election

In first 100 days of second term, Obama will stare down a cliff Add to ...

Barack Obama will spend the first 100 days after his re-election grappling with a budget mess that is partly of his own making.

Avoiding the $500-billion (U.S.) “fiscal cliff” of tax increases and spending cuts will consume Mr. Obama’s time and energy for much of the next few months. Whether he can hammer out a deal with Congress before his second inauguration will determine how much political capital he has left to pursue bigger projects during his final term.

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Immigration reform, which he promised but failed to deliver in his first mandate, will be a priority for the President. Mr. Obama recently argued that Republicans will be eager to address the status of the country’s 11 million illegal immigrants to boost their miserable performance among Hispanic voters.

Mr. Obama’s re-election also frees him to implement the next phases of his health-care law, including the collection of new taxes on investment income that kick in on Jan. 1. The President will also have to negotiate an expansion of Medicaid included in his health-care law, but which the Supreme Court said states could opt out of without penalty.

Many in Mr. Obama’s party will also be pushing him to take up climate-change legislation during his second term, a demand that has grown more insistent since Hurricane Sandy ravaged parts of the eastern U.S. coast last week.

But how much Mr. Obama achieves during his second mandate could depend on how successfully he steers the country away from the fiscal cliff.

Bush-era tax cuts that were extended by Mr. Obama in 2010 are set to expire on Dec. 31, leading to a potential $423-billion tax increase for all Americans in 2013. At the same time, automatic 2013 cuts of $109-billion – agreed to as a stop-gap solution to last year’s debt-ceiling standoff – will kick in on Jan. 1 if there is no deal with Congress to avoid them.

Experts suggest the combined $500-billion wallop of tax increases and spending cuts could be enough to thrust the U.S. economy back into a recession. But Mr. Obama and Republicans in the House of Representatives have been unable to reach a budget deal that would extend most of the Bush tax cuts while phasing in spending cuts over a decade.

Mr. Obama wants to extend the Bush tax cuts for everyone but households earning more than $250,000 annually. But House Republicans, who were expected to remain in the majority after Tuesday’s election, oppose all tax increases.

“We’re not raising taxes on small-business people,” House of Representatives Speaker John Boehner said this week. “We’ll have as much of a mandate … to not raise taxes.”

Follow on Twitter: @konradyakabuski

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