President Barack Obama's victory positions him to claim a mandate for pushing a proposal through Congress that would let tax cuts expire for top earners and avert $1.2 trillion in automatic spending reductions.
Obama now must decide how to contend with opposition from congressional Republicans who demand a tax-cut extension for all income levels.
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Obama defeated Republican Mitt Romney to win a second term that will begin with the same balance of power in Congress: Democrats controlling the Senate and Republicans holding the majority in the House. Republicans were counting on a Romney victory or a Senate takeover to improve their negotiating posture.
Emboldened by the election results, Obama "will offer a brand-new plan of his own," Steve Bell, senior director of the Economic Policy Project at the Bipartisan Policy Center, said in an interview.
Bell said one option the Obama administration is considering is pushing anew for a "balanced" plan to cut as much as $100 billion in spending as a deficit-reduction down payment while letting the George W. Bush-era tax cuts expire for top earners.
"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," Obama said in his victory speech early Wednesday.
Obama spoke by telephone with the Democratic and Republican leaders of the House and Senate after his victory. He told them the "message" sent by voters Tuesday was that both parties "need to put aside their partisan interests and work with common purpose," according to a White House statement.
Senate Majority Leader Harry Reid said Wednesday that asking wealthier people to pay higher taxes needs to be part of any solution to the government's budget woes.
But House Speaker John Boehner, one of the leaders Obama spoke with, said, "For two years, our majority in the House has been the primary line of defense for the American people against a government that spends too much, taxes too much and borrows too much when left unchecked.
"The American people re-elected the president, and re-elected our majority in the House," Boehner, of Ohio, said in a statement. "If there is a mandate, it is a mandate for both parties to find common ground and take steps together to help our economy grow and create jobs, which is critical to solving our debt."
Senate Finance Committee Chairman Max Baucus, a Montana Democrat, said this week that he expected Obama to call on Congress soon after the election to pass a deficit-reduction plan that includes revenue increases and spending cuts.
Unless Congress acts, automatic spending cuts, known as sequestration, will begin in January and the Bush tax cuts will expire Dec. 31. Obama and congressional Democrats want to let the tax cuts expire for top earners, while Republicans advocate extending them for all income levels. The spending reductions and tax increases, amounting to $607 billion in 2013, are known as the "fiscal cliff."
Eric Ueland, chief of staff to former Senator Bill Frist when the Tennessee Republican was majority leader, said Obama "has a responsibility to step forward quickly and express his specific interest in what he wants to see happen in December and then let Congress react to that." Ueland said Obama's victory increases pressure on him to reach across the aisle.
"While he'll have the ability to argue that he received an endorsement of his positions, he also has the responsibility of working with the Republicans in the House and Senate," Ueland said.
Some congressional Republicans, especially in the Senate, have said they may be willing to consider eliminating some tax breaks to help pay for eliminating automatic cuts to defense programs.
To the extent that Obama "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 halfway," Senate Minority Leader Mitch McConnell, a Kentucky Republican, said in a statement. "That begins by proposing a way for both parties to work together in avoiding the 'fiscal cliff' without harming a weak and fragile economy." McConnell also was telephoned by Obama about the agenda for the rest of the yea.
Obama wants to boost top income tax rates to the levels they reached when President Bill Clinton left office in 2001 -- at 36 percent and 39.6 percent. He also wants higher taxes on capital gains and dividends than now and a smaller estate tax exemption and higher rate.
In July, the Senate, which Democrats now control 53-47, passed legislation to extend through 2013 the tax cuts for individual income up to $200,000 a year and income of married couples up to $250,000. Above those thresholds, taxpayers would face higher rates for ordinary income, capital gains and dividends.
In his victory speech Tuesday night, Obama held out an olive branch to Republicans, asking to meet with Romney and promising, "I am looking forward to reaching out and and working with leaders of both parties to meet the challenges we can only solve together."
Romney, conceding in a gracious speech, said, "At a time like this, we can't risk partisan bickering. Our leaders have to reach across the aisle to do the people's work."
Obama returns to work with a solid victory from a divided electorate, overcoming a harsh campaign that was the most expensive ever with the rise of super PACs and unending fundraising by both candidates.
Obama won 59.6 million votes, or 50 percent of the total, and 303 electoral votes by turning out his coalition of women, minorities and youth and defending his majority in all but two or three of the states that helped him make history four years ago as the first African-American president.
He swept Ohio, Virginia and all the other eight key battleground states, with the exception of Florida - it's outcome is yet to be called, and led Romney 303-206 in electoral votes. A total of 270 electoral votes is needed for victory.
With 99 percent of Florida precincts reporting just after 3:30 a.m., Obama had 4,122,789 votes (50 percent) to Romney's 4,079,589 (49 percent).
Nationally, with 97 percent of the precincts reporting, Obama had won 59,574,491 votes, 50 percent of the total, The Associated Press reported. Romney had won 56,950,714 votes, or 48 percent -- or about 2.6 million fewer than Obama out of 116.5 million cast.
Romney's election hopes fell like dominoes as one swing state after another was called for Obama -- Pennsylvania, New Hampshire, Iowa, Michigan, Wisconsin and, most devastatingly for the Republican, Ohio. Colorado, Nevada and Virginia also broke Obama's way.
Romney took North Carolina and still has a shot at Florida, but if he does win that state, it will be too little and too late. Of the states Obama won in 2008, only Indiana and North Carolina went to the Republican.
"We are an American family and we rise and fall together," Obama told an exultant, flag-waving crowd of 10,000 at Chicago's McCormick Place as he and his family took the stage at 1:36 a.m. New York time.
The president, first lady Michelle Obama and their daughters, Malia and Sasha, took the stage more than two hours after the TV networks called him the winner. Bruce Springsteen's "We Take Care of Our Own" and Stevie Wonder's "Signed, Sealed, Delivered" blared over the loudspeakers.
"Tonight, in this election, you, the American people, reminded us that though our road has been hard, our journey has been long, we have picked ourselves up, we have fought our way back and we know in our heart, for the United States of America, the best is yet to come."
Looking to a second term, Obama said, "Our economy is recovering. A decade of war is ending. A long campaign is now over. And whether I earned your vote or not, I have listened to you. I have learned from you. And you made me a better president."
He said he would work with both parties in the coming months to try to fix the tax code and immigration system and to free the country from dependence on foreign oil.
"I have never been more hopeful about our future. I have never been more hopeful about America's future, and I ask you to sustain that hope," he said.
Harking back to the 2004 Democratic convention speech that launched his ascent, Obama said, "We are not as divided as our politics suggest.
"We remain more than a collection of red states and blue states. We are -- and forever will be -- the United States of America."
Romney, a wealthy businessman and former Massachusetts governor, conceded in a postmidnight phone call to Obama. About 12:55 a.m., the defeated challenger, who had run for president since 2007, took the stage at his Boston headquarters for a five-minute speech.
"I have just called President Obama to congratulate him on his victory," Romney said. "This is a time of great challenges to America, and I pray the president will be successful in guiding our nation."
He thanked his wife, Ann - "She would have been a wonderful first lady" -- his five sons who did "tireless work" for his campaign, and said, "At a time like this we can't risk partisan bickering and posturing."
On Tuesday, the Republican nominee had written a 1,118-word victory speech that he thought would conclude his years-long quest for the presidency. His concession speech took five minutes.
Romney's running mate, Rep. Paul Ryan (R-Wis.), received a consolation prize -- re-election to his House seat.
Acknowledging Romney's hard-fought race, Obama said he looked forward to sitting with Romney within the next few weeks to talk about "how to move the country forward."
Obama's victory was celebrated by Democrats in New York, where the president appeared headed to a roughly 3-2 victory margin.
"Obama's win is a vindication of four years of real progress in this country that was discounted by the Romney campaign," said Jay Jacobs, chairman of the Nassau Democratic Party.
"Republicans stood in his way," said Ron Law of the Bronx, part of a cheering crowd at a state Democratic committee party at a midtown Manhattan hotel. "Now we can start working together rather than dividing the country."
The election emerged as a choice between two very different visions of government -- whether it occupies a major, front-row place in American lives or is in the background as a less-obtrusive facilitator for private enterprise and entrepreneurship.
The economy was rated the top issue by about 60 percent of voters surveyed as they left their polling places. But more said Bush bore responsibility for current circumstances than Obama did after nearly four years in office.
With Tom Brune, William Goldschlag, Sid Cassese, Ellen Yan, The Associated Press and The Washington Post