Americans hand Obama a second term, challenges await

1 of 14. REFILE - CORRECTING HEADLINE U.S. President Barack Obama and Vice President Joe Biden (R) celebrate at their election night victory rally in Chicago November 6, 2012.

Credit: Reuters/Jim Bourg

By Steve Holland and John Whitesides

WASHINGTON | Wed Nov 7, 2012 4:21am EST

WASHINGTON (Reuters) - President Barack Obama won a second term in the White House on Tuesday, overcoming deep doubts among voters about his handling of the U.S. economy to score a clear victory over Republican challenger Mitt Romney.

Americans chose to stick with a divided government in Washington, however, by leaving the U.S. Congress as it is, with Obama's fellow Democrats controlling the Senate and Republicans keeping the House of Representatives.

After a long, bitter and expensive campaign, the 51-year-old Obama began trying to bring Americans together in a victory speech before thousands of cheering supporters in Chicago. Accused by Romney throughout the campaign of taking a partisan tone, Obama vowed to reach out to Republicans in his new, four-year term.

"You voted for action, not politics as usual," Obama said, calling for compromise and pledging to work with leaders of both parties to reduce the deficit, to reform the tax code and immigration laws, and to cut dependence on foreign oil.

The nationwide popular vote remained extremely close with Obama taking about 50 percent to 49 percent for Romney after a campaign in which the candidates and their party allies spent a combined $2 billion. But Obama comfortably won the electoral votes needed in the state-by-state system used to choose U.S. presidents.

Obama scored impressive victories across the country, so much so that the big build-up over Ohio, Virginia and Florida fizzled. Obama reached the 270 electoral votes needed for election even without those three states, rolling up wins in Democratic strongholds and carrying Nevada, Iowa and Colorado.

In the end, he also won Ohio and Virginia and was ahead in Florida, where votes were still being counted.

Romney, the multimillionaire former private equity executive, came back from a series of campaign stumbles to make it close after besting the president in the first of three presidential debates.

The 65-year-old former Massachusetts governor conceded in a gracious speech delivered to disappointed supporters at the Boston convention center.

"This is a time of great challenge for our nation," Romney told the crowd. "I pray that the president will be successful in guiding our nation."

He warned against partisan bickering and urged politicians on both sides to "put the people before the politics."

Obama told his crowd he hoped to sit down with Romney in the weeks ahead and examine ways to meet the challenges ahead.

The same problems that dogged Obama in his first term are still there to confront him again. He faces a difficult task of tackling $1 trillion annual deficits, reducing a $16 trillion national debt, overhauling expensive social programs and dealing with a gridlocked Congress that kept the same partisan makeup.

'FAILURES OR EXCESSES'

Senate Republican leader Mitch McConnell did not sound like he was willing to concede his conservative principles, in a sign of potential confrontations ahead.

"The voters have not endorsed the failures or excesses of the president's first term, they have simply given him more time to finish the job they asked him to do together with a Congress that restored balance to Washington after two years of one-party control," McConnell said.

The result eliminates the prospect of wholesale repeal of Obama's 2010 healthcare reform law but it still leaves questions about how much of his signature domestic policy achievement will be implemented.

The immediate focus for the president and Congress will be to confront the "fiscal cliff," a mix of tax increases and spending cuts due to extract some $600 billion from the economy barring a deal with Congress.

Obama, America's first black president, won a new term by convincing voters to stick with him as he tries to reignite strong economic growth and recover from the worst recession since the Great Depression of the 1930s. An uneven recovery has been showing some signs of strength but the country's 7.9 percent jobless rate remains stubbornly high.

A DIVIDED CONGRESS

Democrats kept control of the 100-member Senate, seizing Republican-held seats in Massachusetts and Indiana while keeping most of those they already had, including in Virginia and Missouri.

Republicans remained in control of the 435-member House, ensuring Congress still faces a deep partisan divide as it turns to the year-end "fiscal cliff" and other issues.

"That means the same dynamic. That means the same people who couldn't figure out how to cut deals for the past three years," said Ethan Siegel, an analyst who tracks Washington politics for institutional investors.

While the Senate result was no surprise, Republicans had given themselves an even chance of winning a majority, so the night represented a disappointment for them and was in part the self-inflicted result of internal battles.

Had Republican Richard Mourdock - a favorite of the conservative Tea Party movement - not defeated veteran moderate Senator Richard Lugar in Indiana's primary, for example, that seat might have stayed in Republican hands instead of being won by Democrat Joe Donnelly. Mourdock drew criticism for calling pregnancy from rape something God intended.

Missouri Senator Claire McCaskill, who also won on Tuesday, had been considered a vulnerable Democrat until another Tea Party favorite, Todd Akin, won the Republican primary. Akin stirred controversy by saying women's bodies could ward off pregnancy in cases of "legitimate rape.

Democrat Elizabeth Warren, a law professor who headed the watchdog panel that oversaw the government's financial sector bailout, defeated incumbent Massachusetts Republican Senator Scott Brown.

Former Maine Governor Angus King won a three-way contest for the Senate seat of retiring Republican Olympia Snowe. King ran as an independent, but he is expected to caucus with Democrats in what would amount to a Democratic pick-up.

Democrats were also cheered by several state referendums: Maryland voters approved same-sex marriage and a similar measure in Maine and Washington State appeared on track to pass as well - marking the first time marriage rights have been extended to same-sex couples by popular vote.

In addition, Wisconsin Democratic congresswoman Tammy Baldwin became the first openly gay U.S. Senator, defeating Republican former governor Tommy Thompson.

U.S. stock futures slipped, the dollar fell and benchmark Treasuries rose after Obama's victory, which investors took to mean no dramatic shift in U.S. economic policy.

Markets had generally expected Obama to win, with the general view that a victory for the Democrat would favor bonds, as he is perceived to favor low interest rates, while Republican challenger Mitt Romney was broadly seen as more business-friendly and supportive for equities.

International leaders offered their congratulations. Israeli Prime Minister Benjamin Netanyahu, who has a testy relationship with the U.S. leader, vowed to work with Obama "to ensure the interests that are vital for the security of Israel's citizens.

A spokesman for Mohamed Mursi, an Islamist who is Egypt's first freely elected president, said "we hope the newly elected U.S. administration will work to achieve the interests of both the American and Egyptian people.

British Prime Minister David Cameron said Britain and the United States should make finding a way to solve the Syrian crisis a priority following Obama's re-election.

(Additional reporting by Jeff Mason in Chicago, Patricia Zengerle in Boston, Edith Honan in New York, Brendan O'Brien in Milwaukee, Dave Warner in Philadelphia, Philip Barbara in New Jersey, Matt Spetalnick, Lisa Lambert, Susan Heavey, Thomas Ferraro, Susan Cornwell, Anna Yukhananov and Roberta Rampton in Washington; Writing by Steve Holland and John Whitesides; Editing by Claudia Parsons and Will Dunham)

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Harsher energy regulations coming in Obama's second term

n">(Reuters) - Energy companies likely will see more regulation in President Barack Obama's second term, with less access to federal lands and water even as the administration promotes energy independence.

With a pledge to cut oil imports by half by 2020, Obama during the campaign advocated what he called an "all of the above" approach to developing a range of domestic energy sources. He said, however, that he would roll back subsidies for oil companies and reduce the nation's reliance on oil by mandating production of more fuel-efficient vehicles.

"You are going to have less access to federal lands and tougher government agencies," said Dan Pickering, chief investment officer at TPH Asset Management in Houston.

Obama's energy strategy over the last four years has shifted away from focusing on climate change after a bill establishing a cap-and-trade system to curb carbon emissions died in the Senate in 2010 after a bitter partisan fight. The president's green policies also suffered a major setback when solar power company Solyndra collapsed last year after receiving a $535 million loan guarantee, unleashing a political firestorm.

Obama's team of energy advisers include Energy Secretary Steven Chu, a Nobel prize-winning scientist who specializes in alternative and renewable energy technologies but who regularly talks up the government's role in developing hydraulic fracturing technology. His top White House energy adviser is Heather Zichal, who has been an advocate for creating green jobs and tackling climate change by reducing dependence on oil.

Obama has pledged more support for development of renewable energy technologies like solar and wind, but he will need the support of Congress to extend or renew tax breaks that have underpinned the growth of those industries.

"Obama can love solar as much as he wants, but I don't know that a whole lot more is going to happen in terms of new, constructive policy," said Morningstar energy analyst Stephen Simko.

Perhaps most importantly, however, renewable energy faces major obstacles unrelated to policy, such as stiff competition from low-priced natural gas, a lack of infrastructure to connect large projects to the grid, and a global glut of solar panels that is putting their manufacturers out of business.

Here are more details on how companies in various energy sectors will fare under President Obama's second term:

HEAT TO RISE ON OIL AND GAS

Obama is expected to tighten rules and regulations governing energy exploration, actions that may add billions in costs for oil and gas companies.

ClearView Energy Partners analysts, in Washington, expect the president to "continue prosecuting energy policy through regulation and administrative action, with only the courts as a check on that agenda," according to a note sent to clients last week.

Tougher restrictions are expected for companies drilling on federal lands as well as more rules governing water management and methane emissions. Any new rules related to hydraulic fracturing may drive up costs for active drillers including Chesapeake Energy Corp and Exxon Mobil Corp.

Still, throughout the campaign and during the debates, Obama has touted the benefits of increasing production of cleaner burning natural gas, winning him praise from America's Natural Gas Alliance, an industry lobby group.

Obama has also pledged to eliminate more than $46 billion in subsidies for fossil fuel companies, a plan the industry has vigorously protested.

While the Obama Administration has put approval of TransCanada's Keystone XL pipeline on hold, eventual approval is expected, an action that will increase the flow of cheaper crude oil from Canada to refineries on the Gulf Coast at Port Arthur, Texas.

Companies with refineries in Port Arthur or in nearby Beaumont include Valero Energy Corp, Shell, France's Total and Exxon Mobil Corp.

"WAR ON COAL" - PART II

Obama is deemed by opponents to have waged a "war on coal" over the past four years, particularly through stricter Environmental Protection Agency regulation.

Hal Quinn, president of the National Mining Association, criticized Obama for not living up to a 2008 promise to develop clean coal technology. "Current administration policies virtually preclude the construction of new, cleaner coal-based plants that are the necessary platform for the technology the president advocated," Quinn said. "These same policies have skewed the market against coal."

The U.S. Chamber of Commerce pointed to estimates of up to 33 gigawatts of coal-fired electricity generation due to be retired - about 3 percent of total U.S. power capacity. While tougher regulation has played a part, cheap natural gas as an alternative power source is also driving that change.

CHEMICALS BRACE FOR HIT

Obama is likely to implement several long-delayed, controversial emissions regulations for industrial boilers that are commonly used by chemical producers.

The centerpiece provision, known as Boiler MACT (Maximum Achievable Control Technology), had been first proposed in 2004 but was effectively shot down by courts before being revived by the Environmental Protection Agency in 2011.

It has been winding its way through courts again, and the EPA is due to issue new rules by December.

Obama's victory could embolden EPA Administrator Lisa Jackson to further tighten Boiler MACT regulations next month on limits for dioxin, mercury and carbon monoxide emissions. It is not clear if Jackson will stay at the agency in Obama's second term.

"While we don't agree with some of the provisions (of Boiler MACT), we think that it will be pushed through more readily than if Romney had won," said Lawrence Sloan, president of the Society of Chemical Manufacturers and Affiliates, an industry trade group.

(Reporting by Anna Driver, Ernest Scheyder, Braden Reddall and Nichola Groom; Writing by Nichola Groom; Editing by Patricia Kranz and Richard Chang)

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Americans hand Obama a second term, challenges await

1 of 14. REFILE - CORRECTING HEADLINE U.S. President Barack Obama and Vice President Joe Biden (R) celebrate at their election night victory rally in Chicago November 6, 2012.

Credit: Reuters/Jim Bourg

By Steve Holland and John Whitesides

WASHINGTON | Wed Nov 7, 2012 4:21am EST

WASHINGTON (Reuters) - President Barack Obama won a second term in the White House on Tuesday, overcoming deep doubts among voters about his handling of the U.S. economy to score a clear victory over Republican challenger Mitt Romney.

Americans chose to stick with a divided government in Washington, however, by leaving the U.S. Congress as it is, with Obama's fellow Democrats controlling the Senate and Republicans keeping the House of Representatives.

After a long, bitter and expensive campaign, the 51-year-old Obama began trying to bring Americans together in a victory speech before thousands of cheering supporters in Chicago. Accused by Romney throughout the campaign of taking a partisan tone, Obama vowed to reach out to Republicans in his new, four-year term.

"You voted for action, not politics as usual," Obama said, calling for compromise and pledging to work with leaders of both parties to reduce the deficit, to reform the tax code and immigration laws, and to cut dependence on foreign oil.

The nationwide popular vote remained extremely close with Obama taking about 50 percent to 49 percent for Romney after a campaign in which the candidates and their party allies spent a combined $2 billion. But Obama comfortably won the electoral votes needed in the state-by-state system used to choose U.S. presidents.

Obama scored impressive victories across the country, so much so that the big build-up over Ohio, Virginia and Florida fizzled. Obama reached the 270 electoral votes needed for election even without those three states, rolling up wins in Democratic strongholds and carrying Nevada, Iowa and Colorado.

In the end, he also won Ohio and Virginia and was ahead in Florida, where votes were still being counted.

Romney, the multimillionaire former private equity executive, came back from a series of campaign stumbles to make it close after besting the president in the first of three presidential debates.

The 65-year-old former Massachusetts governor conceded in a gracious speech delivered to disappointed supporters at the Boston convention center.

"This is a time of great challenge for our nation," Romney told the crowd. "I pray that the president will be successful in guiding our nation."

He warned against partisan bickering and urged politicians on both sides to "put the people before the politics."

Obama told his crowd he hoped to sit down with Romney in the weeks ahead and examine ways to meet the challenges ahead.

The same problems that dogged Obama in his first term are still there to confront him again. He faces a difficult task of tackling $1 trillion annual deficits, reducing a $16 trillion national debt, overhauling expensive social programs and dealing with a gridlocked Congress that kept the same partisan makeup.

'FAILURES OR EXCESSES'

Senate Republican leader Mitch McConnell did not sound like he was willing to concede his conservative principles, in a sign of potential confrontations ahead.

"The voters have not endorsed the failures or excesses of the president's first term, they have simply given him more time to finish the job they asked him to do together with a Congress that restored balance to Washington after two years of one-party control," McConnell said.

The result eliminates the prospect of wholesale repeal of Obama's 2010 healthcare reform law but it still leaves questions about how much of his signature domestic policy achievement will be implemented.

The immediate focus for the president and Congress will be to confront the "fiscal cliff," a mix of tax increases and spending cuts due to extract some $600 billion from the economy barring a deal with Congress.

Obama, America's first black president, won a new term by convincing voters to stick with him as he tries to reignite strong economic growth and recover from the worst recession since the Great Depression of the 1930s. An uneven recovery has been showing some signs of strength but the country's 7.9 percent jobless rate remains stubbornly high.

A DIVIDED CONGRESS

Democrats kept control of the 100-member Senate, seizing Republican-held seats in Massachusetts and Indiana while keeping most of those they already had, including in Virginia and Missouri.

Republicans remained in control of the 435-member House, ensuring Congress still faces a deep partisan divide as it turns to the year-end "fiscal cliff" and other issues.

"That means the same dynamic. That means the same people who couldn't figure out how to cut deals for the past three years," said Ethan Siegel, an analyst who tracks Washington politics for institutional investors.

While the Senate result was no surprise, Republicans had given themselves an even chance of winning a majority, so the night represented a disappointment for them and was in part the self-inflicted result of internal battles.

Had Republican Richard Mourdock - a favorite of the conservative Tea Party movement - not defeated veteran moderate Senator Richard Lugar in Indiana's primary, for example, that seat might have stayed in Republican hands instead of being won by Democrat Joe Donnelly. Mourdock drew criticism for calling pregnancy from rape something God intended.

Missouri Senator Claire McCaskill, who also won on Tuesday, had been considered a vulnerable Democrat until another Tea Party favorite, Todd Akin, won the Republican primary. Akin stirred controversy by saying women's bodies could ward off pregnancy in cases of "legitimate rape.

Democrat Elizabeth Warren, a law professor who headed the watchdog panel that oversaw the government's financial sector bailout, defeated incumbent Massachusetts Republican Senator Scott Brown.

Former Maine Governor Angus King won a three-way contest for the Senate seat of retiring Republican Olympia Snowe. King ran as an independent, but he is expected to caucus with Democrats in what would amount to a Democratic pick-up.

Democrats were also cheered by several state referendums: Maryland voters approved same-sex marriage and a similar measure in Maine and Washington State appeared on track to pass as well - marking the first time marriage rights have been extended to same-sex couples by popular vote.

In addition, Wisconsin Democratic congresswoman Tammy Baldwin became the first openly gay U.S. Senator, defeating Republican former governor Tommy Thompson.

U.S. stock futures slipped, the dollar fell and benchmark Treasuries rose after Obama's victory, which investors took to mean no dramatic shift in U.S. economic policy.

Markets had generally expected Obama to win, with the general view that a victory for the Democrat would favor bonds, as he is perceived to favor low interest rates, while Republican challenger Mitt Romney was broadly seen as more business-friendly and supportive for equities.

International leaders offered their congratulations. Israeli Prime Minister Benjamin Netanyahu, who has a testy relationship with the U.S. leader, vowed to work with Obama "to ensure the interests that are vital for the security of Israel's citizens.

A spokesman for Mohamed Mursi, an Islamist who is Egypt's first freely elected president, said "we hope the newly elected U.S. administration will work to achieve the interests of both the American and Egyptian people.

British Prime Minister David Cameron said Britain and the United States should make finding a way to solve the Syrian crisis a priority following Obama's re-election.

(Additional reporting by Jeff Mason in Chicago, Patricia Zengerle in Boston, Edith Honan in New York, Brendan O'Brien in Milwaukee, Dave Warner in Philadelphia, Philip Barbara in New Jersey, Matt Spetalnick, Lisa Lambert, Susan Heavey, Thomas Ferraro, Susan Cornwell, Anna Yukhananov and Roberta Rampton in Washington; Writing by Steve Holland and John Whitesides; Editing by Claudia Parsons and Will Dunham)

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With the help of women, Obama wins a second term

U.S. President Barack Obama is hugged by first lady Michelle Obama and his daughters Sasha and Malia (R) before his victory speech at his election night rally in Chicago, November 7, 2012.

Credit: Reuters/Larry Downing

By Samuel P. Jacobs

WASHINGTON | Wed Nov 7, 2012 4:34am EST

WASHINGTON (Reuters) - In the final week of the U.S. presidential campaign, one advertisement was on heavy rotation in the swing state of Wisconsin. It featured three women named Connie, Kim, and Anita who told viewers the reasons they were switching their support from President Barack Obama to Mitt Romney.

The Republican campaign hoped that women throughout America would follow the lead of that trio, but Obama was able to preserve his coalition of female voters en route to winning a second term on Tuesday.

Obama beat Romney 55 percent to 43 points among women, according to Reuters/Ipsos Election Day polling. That 12-point victory nearly matched Obama's 13-point win among female voters over Republican John McCain in 2008.

Romney did no better among women, who outvoted their male counterparts by 6 percent, than McCain did four years ago.

One key to Obama's success: social issues. Nearly two times as many women as men rank matters like abortion and same-sex marriage as the most important issue that determined their vote, according to polling data.

From the Democrats' convention to Obama's stump speeches to the campaign's commercials, the president's team put issues like pay equality and women's healthcare at the center of its argument for his reelection.

They denounced Romney for shifting positions on abortion and contraceptive rights since his 2002 election as governor of Democratic-leaning Massachusetts and for failing to support Obama-backed legislation easing the way for women to sue over workplace pay discrimination.

At the polls in Maplewood, New Jersey, on Tuesday, Rose Rios, 40, a registered Republican who twice voted for George W. Bush, said she was voting for Obama because she thought Romney held extreme social views.

"The Republicans now are so far right. They do not represent the views of ... independent women," Rios said.

Women ranked healthcare as among their top concerns, according to Reuters/Ipsos polling data, a view shared by Brandi Bettinghouse, a 26-year-old nurse from Reno, Nevada, who said she switched her vote to Obama in part because of her support of his healthcare policies.

"I didn't vote for him the last time, but I just looked at the issues and felt like I agreed more with him," she said.

While Democrats charged that the Republicans were waging a "war on women," Romney replied that the true attack on female voters was an economic one, citing the difficult economic conditions that hit all voters.

Reuters/Ipsos polling found that the economy was the most important issue among women.

In Coral Gables, Florida, Mariel Nolasco, a 56-year-old part-time FedEx worker who voted for Obama in 2008, said she backed Romney on the strength of his business record and fear of rising taxes on businesses.

"Business leaders are the ones who create wealth," she said.

More women, however, were forgiving of the economic conditions that confronted Obama when he entered office and were willing to give him a shot at a second term.

"I think there was so much damage done before he got into office," said Brandon Fox, a 48-year-old Democrat, voting in Richmond, Virginia. "Of course it's going to be a long process to rebuild."

(Additional reporting by Barbara Goldberg in New Jersey; Thomas Browne in Florida; Editing by Karey Wutkowski and Paul Simao)

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For Barack Obama, a second chance

U.S. President Barack Obama, who won a second term in office by defeating Republican presidential nominee Mitt Romney, waves with his daughters Malia (R) and Sasha and wife Michelle (L) before addressing supporters during his election night victory rally in Chicago, November 7, 2012.

Credit: Reuters/Jeff Haynes

By Andy Sullivan

WASHINGTON | Wed Nov 7, 2012 1:57am EST

WASHINGTON (Reuters) - Barack Obama swept into the White House four years ago as an agent of change. The nation's first black president won re-election on Tuesday as a steady-as-she-goes defender of a new status quo.

With a second term, Obama also wins a second chance.

Obama may never become the unifying figure he promised to be in the 2008 race, but he will have four more years to try to enact sweeping changes that could affect the United States for decades.

It won't be easy. Obama has been blocked in Congress ever since the 2010 elections, when Republicans took control of the House of Representatives, and that's not likely to change. Breaking through the gridlock will be just as difficult.

Obama's modest second-term agenda so far illustrates his diminished clout in Washington. Republicans retained their hold on the House of Representatives and they have a large enough presence in the Senate to tie that chamber in knots. His narrow victory is likely to leave them unimpressed.

Right off the bat, he faces a potential crisis known as the "fiscal cliff" - tax increases and automatic spending cuts that threaten to throw the country into another recession.

While he brought U.S. combat in Iraq to a close and is drawing down in Afghanistan, he will have to rein in Iran's nuclear ambitions, along with the chance of an Israeli counterstrike.

Inevitably, the president may bring to his second term the hard lessons of his first.

"He was a figure who promised to transform the way politics worked," said Julian Zelizer, a presidential historian at Princeton University. "I don't think people think that anymore. It's not just less faith in him, it's less faith in what the political system can do."

If Obama did not change Washington the way many hoped, he can build on many notable successes.

He won a historic expansion of healthcare that had eluded Democratic presidents since the 1940s. Though voters like many of its components, they have been less enamored of "Obamacare" as a whole. He now will have the opportunity to prove its worth.

The same may be said for the Dodd-Frank financial reforms, which aim to rein in some of Wall Street's worst excesses.

Obama's legislative attempt to curb global-warming emissions died in the Senate, but he can continue the effort through regulation. He can also continue an effort to create millions of "green" jobs, which has so far fallen far short of its goals.

He came nowhere near his goal of cutting trillion-dollar budget deficits. He will rejoin that battle as soon as this week.

But for many voters, these issues were pushed aside by the economy, which plunged into a deep recession in the final months of 2008.

Here, too, Obama can point to success: his 2009 stimulus created millions of jobs and blunted the impact of the worst recession since the 1930s. The domestic auto industry, on the verge of collapse in 2009, has been restored to health.

The country avoided economic catastrophe but robust growth remains elusive. As Obama won re-election, 23 million Americans were either unemployed, underemployed, or too discouraged to look for work.

Obama's cautious approach to the housing crisis did little to stem an epidemic of foreclosures or help those left deep in debt by plunging real-estate values. A follow-up stimulus stalled in Congress as the administration focused on its healthcare and Wall Street reforms.

NOT A BACKSLAPPER

Though Obama was the first sitting member of Congress to win the presidency since President John F. Kennedy in 1960, his relations with Capitol Hill were problematic at best.

A private person by nature, Obama shied from the backslapping and arm-twisting that is often needed to advance an agenda in Washington. Democratic lawmakers grumbled privately that he cared little for their political concerns.

Republicans opposed his initiatives in an unprecedented manner, providing few, if any, votes for his major initiatives. In the Senate, action slowed to a crawl as Republicans threw up a record number of procedural hurdles.

The dysfunction came to a climax during the debt-ceiling battle of 2011, which brought the country to the brink of default. Consumer confidence plummeted and credit-rating agencies issued a historic downgrade of the country's debt.

It's unclear whether Obama could have done much to break the logjam on his own.

Congressional scholars Norm Ornstein and Thomas Mann, who have studied Washington for 40 years, argued in their book "It's Worse Than It Looks" that the Republican Party has become an ideologically extreme "insurgent outlier" with little interest in the compromises needed to run a vast and diverse country.

But Republicans would have been willing to work with Obama when he took office had he shown some independence from his own party, said former Bush aide Tony Fratto.

"That was a missed opportunity - I thought this particular president, at this particular time, had a real, unique opportunity to turn the tables on Congress," Fratto said.

Obama's relationship with the business community has been rocky as well. Corporate leaders complained that their White House meetings seemed more like photo opportunities than policy sessions.

Wall Street turned against the administration in the wake of the 2010 financial reforms and even prominent Democratic figures like J.P. Morgan Chase CEO Jamie Dimon accused Obama of demonizing the financial industry.

The "grand bargain" that would set U.S. finances on a sustainable path will remain as elusive as ever, as investors continue to snap up U.S. debt at rock-bottom interest rates and lawmakers face little pressure from their constituents to make the sorts of painful concessions that will be needed to reach a deal.

Republicans might determine that it is in their best interest to cooperate on an immigration overhaul, but they will want to negotiate on their terms.

The economy could give Obama a much-needed tailwind in his second term as employment, consumer confidence and a range of other measures indicate that the recovery may finally be taking hold.

An improved economy could solve some of Obama's problems by narrowing budget deficits, putting more Americans back to work and vindicating many of the decisions he made in his first year in office.

For a president who has seen much of his first term hijacked by the sluggish economy, that would be an ironic turn of events.

"The 2008 presidential election had the effect of raising expectations to a level that would have been very difficult to satisfy even in the best of circumstances. And the circumstances have not been the best," said William Galston, a Brookings Institution scholar and former policy adviser to President Bill Clinton.

(Reporting by Andy Sullivan; Editing by Fred Barbash and Jim Loney)

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