President Obama is heading back to the White House after a hard fought race. His second term will be focused on the economy, job growth and heading off the looming fiscal crisis.
President Obama won re-election in the USA's costliest and perhaps most bitterly contested national campaign in recent memory.
A second term should guarantee Obama's signature legislative achievement, health care reform and coverage for millions of uninsured Americans. Yet four more years will not be smooth sailing. Obama faces a still anemic economic recovery, stubbornly high unemployment and a looming fiscal crisis.
With Republicans retaining control of the House and Democrats adding to their advantage in the Senate, Obama also may be plagued by the same political gridlock that has sharply divided the electorate and hampered the president's agenda for solving the country's woes. And gridlock could thwart his efforts to negotiate a new fiscal plan.
Obama and Congress have been unable to find common ground on tax and spending cuts. Obama wants to preserve low income tax rates for all except high-income Americans, spending more on public works and giving targeted tax breaks to businesses.
If no agreement is reached by year's end, massive cuts in defense and domestic spending will kick in, as will sharp, across-the-board tax increases. Economists warn that could push the economy off a fiscal cliff and back into recession.
A throng of supporters of President Barack Obama hugged and cheered outside the White House when Obama won re-election to a second term. (Nov. 7) AP
Francis Lun, managing director of Lyncean Holdings in Hong Kong, said an Obama victory means an extension of the status quo.
"Nothing will change. We will have ultra-low interest rates, a $1 trillion deficit and quantitative easing," Lun said. (Federal Reserve Chief Ben) Bernanke "will keep his job as Fed chairman. As for the fiscal cliff, the president will do something to minimize the effect of tax increases and spending cuts."
Tuesday exit polls of voters in key states showed the economy remains a top issue among voters.
INTERACTIVE: Exit polls provide voter insight
"Business is rough. Everybody wants someone to blame," said Frank Robles, 45, who employs 15 at his North Las Vegas shoe store. Yet Robles supported Obama, saying he's not responsible for the worst of the economic crisis: "People need to give him a chance."
Signs point to an improving economy. While the unemployment rate ticked up to 7.9% in October, employers added 171,000 jobs in October. Hiring also was stronger in August and September than first thought. Yet a separate Labor Department report issued Tuesday said job openings dropped by 100,000 in September to 3.56 million, lowest in five months, data that suggest hiring will remain modest.
Gasoline prices have been dropping sharply — now $3.46 a gallon — a drop of 35 cents from a month ago. Cheaper gas typically spurs consumer spending, although prices typically fall in the fall.
Stocks — which historically perform better with a Democrat in the White House — rose Tuesday and U.S. stock futures were up heading into Wednesday's market opening. Overseas markets also were up in early Wednesday trading.
Yet overall economic policy needs to change, experts say. And that starts with bipartisan agreement in Washington.
Senate and House leaders seemed conciliatory. Senate Minority Leader Mitch McConnell said Tuesday's vote showed that the electorate had neither endorsed the "failures or excesses of the president's first term," but rather have given him more time to finish the job. "To the extent he wants to move to the political center, which is where the work gets done in a divided government, we'll be there to meet him half way," McConnell said.
Said Senate Majority Leader Harry Reid: "Now that the election is over, it's time to put politics aside and work together to find solutions."
In his victory speech early Wednesday morning from Chicago, Obama said he was willing to work across party lines to tackle problems. "Tonight you voted for action, not politics as usual,'' he told a partisan crowd. "You elected us to focus on your jobs, not ours. And in the coming weeks and months, 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. We've got more work to do."
Contributing: Julie Schmit, Associated Press.