Lead the way in budget negotiations, GOP tells Obama

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A newly re-elected President Barack Obama faced an immediate challenge from the top Republican in Congress to take a bold, bipartisan lead in crucial budget negotiations, but was warned to lay off of his election promise to raise taxes on wealthy Americans.

"Mr. President, this is your moment. We're ready to be led," House of Representatives Speaker John Boehner said on Wednesday, after Americans handed Mr. Obama a second term and investors sent stocks spiralling downward on fears of gridlock. "We want you to lead, not as a liberal or a conservative, but as President of the United States of America."

Fresh off his victory – but facing a renewed Republican majority in the House and anxious investors on Wall Street – Mr. Obama has a precarious choice to make about the second-term path he charts. Will he anger elements of his own party in order to reach a budget deal with Republicans, or risk gridlock in the name of Democratic principles?

How Mr. Obama interprets the mandate he received from American voters will determine whether he presses forward with an ambitious progressive agenda – at the risk of seeing it flop in Congress – or seeks broad compromises with Republicans that are unpopular with the coalition of voters that ensured his win.

With his narrow popular-vote victory over Mitt Romney, Mr. Obama will likely need to build public support for his positions in order to increase his leverage with Republicans, and even his own party. The Democratic base is dead set against entitlement cuts.

The President's first order of business remains reaching a long-term budget deal that averts massive spending cuts and tax hikes set to take effect in 2013. That imperative was underscored by the stock market's postelection doubts about the likelihood of a deal, as major U.S. indexes fell more than 2 per cent Wednesday.

Mr. Obama gave few indications during the campaign of his top postelection priorities. But he must settle on a few goals – immigration reform is likely to be one of them – while his postelection leverage is highest. Presidents typically lose their sway over domestic policy midway through their second term.

Mr. Obama could also emulate other presidents who have focused on foreign policy in their second terms to cement a legacy – and minimize their interaction with Congress.

While Mr. Obama laid out a broad vision of activist government during the campaign, he offered few policy specifics. And while that may free him to pick his priorities now, it might also deprive him of a popular mandate to realize them.

"I don't think he campaigned on any one particular issue where he can now go to the public and say: 'I won, so we need to do X, Y and Z,' " said Jeffrey Engel, director of the Center for Presidential History at Southern Methodist University.

Mr. Obama, who returned to Washington but made no public appearances on Wednesday, devoted part of his victory speech on Tuesday to calling for compromise.

"I am looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together – reducing our deficit, reforming our tax code, fixing our immigration system, freeing ourselves from foreign oil," he said. "We are not as divided as our politics suggests."

Time will tell.

Speaking to reporters in Washington, Mr. Boehner expressed openness to reforming the tax code to raise the amount of revenue the government takes in, a position some in his own party suggest is tantamount to a tax increase. But the Speaker also refused to consider outright tax increases on the wealthy and insisted on cuts to social programs.

"The President has signalled a willingness to do tax reform and lower rates. Republicans have signalled a willingness to accept new revenue if it comes from growth and reform," Mr. Boehner said. "So let's start the discussion there."

Whether Mr. Obama takes up that specific offer, analysts suggest he will need to use the presidential "bully pulpit" more effectively than he did during his first term to bring voters to his side during his inevitable battles with Congress.

"He could use the bully pulpit to greater effect. His rhetoric is often on too high a plane," said Paul Beck, a political science professor at Ohio State University. "What he has to sell now is some kind of deal that involves a package of things to deal with the debt."

Prof. Engel predicted Mr. Obama would also seek to build a foreign-policy legacy during his second term, starting with a solution to Iran's nuclear ambitions. Pursuing his "reset" of U.S.-Russia relations might also occupy Mr. Obama's final mandate. In March, he told then-president Dmitry Medvedev he would have "more flexibility" after the election.

"History suggests Obama is more likely to find traction in foreign policy," Prof. Engel said. "By your second term, you're an established global statement with a lot of gravitas. And working with Congress is tiring."