Obama, buoyed by reelection, faces stark fiscal battles with Congress in second term

Hours after Barack Obama’s soaring victory speech and a gracious concession by Mitt Romney, Republican leaders in Washington made clear Wednesday that whatever mandate the president won for his second term will be sharply limited by the losing party’s starkly different view of the nation’s challenges.

After an election in which the nation essentially ratified the status quo — keeping an embattled but broadly admired president, a Democrat-controlled Senate and a Republican-run House — Obama called for healing and cooperation on key issues such as the deficit, tax reform and immigration.

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But Senate Minority Leader Mitch McConnell (R-Ky.), who said during the president’s second year in office that his party’s chief objective was to make Obama a one-term president, quickly announced that “the voters have not endorsed the failures or excesses of the president’s first term.” He urged Obama “to propose solutions that actually have a chance of passing the Republican-controlled House.”

House Speaker John A. Boehner (R-Ohio) said Wednesday that Republicans are “willing to accept new revenue” to pull the nation back from the end-of-year fiscal cliff. He said the election was a plea from voters for both parties to step out of their corners and “do what’s best for our country,” adding, “That is the will of the people. And we answer to them.”

“For purposes of forging a bipartisan agreement that begins to solve the problem, we’re willing to accept new revenue, under the right conditions,” he said. But Boehner said Republicans would continue to oppose Obama’s plan to take “a larger share of what the American people earn through higher tax rates.”

It was not clear whether Boehner would acquiesce only to fresh revenues generated through economic growth, rather than actual tax increases. Republicans have long argued that reforming the tax code would produce new revenue by improving the economy, a claim budget analysts say is difficult to assess. Democrats have insisted that any deal include changes to the tax code that would guarantee additional income to the government.

Senate Majority Leader Harry M. Reid (D-Nev.) said he spoke to Boehner and that they agreed not to “draw lines in the sand” on taxes. Reid said he is ready to “dance” with the other party, but would “fight” if necessary, and he said he would counter obstructionism with an effort to change the Senate’s filibuster rules to limit the minority’s power to block legislation.

On Wall Street, a sell-off gained momentum at midday, with the Dow Jones industrial average falling below 13,000 for the first time since September, as investors focused on the coming showdown over the fiscal cliff, as well as gloomy projections about Europe’s economic growth. Many corporate leaders had supported Romney as the more business-friendly candidate.

Less than two months remain before the fiscal cliff, when big tax increases and draconian spending cuts kick in on Jan. 1 unless Obama and Congress forge a budget deal. The president and legislators enter those negotiations elbows out, with each side claiming support from a country that remains politically split in half.

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