The US political landscape changed little with Tuesday’s election, and now both Democrats and Republicans will be tested by the immediate need for moderation if they are to reach an agreement to avoid the feared “fiscal cliff” of automatic tax increases and deep spending cuts that could send the country into a recession.
The Republican Party is entering a period of introspection after failing to prevent US President Barack Obama from winning a second term, even after a period of the worst financial pain for middle-class Americans since the Great Depression of the 1930.
The election was evidence that the majority of voters are no longer willing to accept the leadership of a Republican Party that has been pushed to the far right of the political spectrum by its small-government, low-tax “Tea Party” faction.
However, Obama and his Democrats also must be ready for compromise, with Americans yearning to see an end to the deep partisan divide and legislative gridlock that has gripped Washington in recent years.
Obama, who campaigned on a pledge to raise taxes on US households earning more than US$250,000 a year, was quiet on Wednesday, but returned to the White House from Chicago, where he held his victory celebration. He spoke by telephone with the four top leaders of the US House and Senate to talk about the lame-duck Congress that convenes just one week after Election Day. Little major action is expected.
Obama told the congressional leaders he believed “the American people sent a message in yesterday’s election that leaders in both parties need to put aside their partisan interests and work with common purpose to put the interests of the American people and the American economy first,” the White House said in a statement.
The immediate challenge for both parties is the fiscal cliff of across-the-board spending cuts and the end of former US president George W. Bush-era tax cuts that would hit at the beginning of next year and cost US$800 billion in that year alone. That could upend the slow economic recovery from the Great Recession and the near meltdown of the financial system that Obama was left to repair when he took office four years ago.
On the day after the election, Republicans signaled little readiness to give up their ideological opposition to raising taxes on high-income Americans.
US Speaker of the House of Representatives John Boehner said Republicans are willing to consider some form of higher tax revenue as part of the solution, but only “under the right conditions.”
There appears to be no quick solution ahead to the country’s skyrocketing debt and stubbornly high deficit that has the government now spending more than US$1 trillion a year more than it collects in taxes.
Wall Street had one of its worst days of the year on Wednesday as traders worried about the fiscal cliff and worsening news on the recession In Europe.