Post-election divide surfaces on 'fiscal cliff'

WASHINGTON — A newly re-elected President Obama reached out to congressional leaders in search of cooperation Wednesday as Democrats and Republicans moved from a cliffhanger election to a "fiscal cliff."

Other than House Speaker John Boehner's purple tie, the appetite for compromise appeared more rhetorical than realistic.

Thanks to an electorate that gave Obama, House Republicans and Senate Democrats a new lease on strife, the same leaders who failed last year to strike a deal on raising taxes, cutting spending and reducing the budget deficit found themselves stuck with each other through 2014.

Financial markets were not impressed. The Dow Jones industrial average dropped more than 300 points, the biggest decline in a year. Continuing economic problems in Europe didn't help.

The two sides wasted no time staking out their positions on the potential crisis that is 54 days away: the expiration of almost every tax cut enacted since 2001, which could raise the average U.S. household's tax burden by $3,500, and the first $110 billion of $1.2 trillion in spending cuts set to occur over 10 years.

"The president said he believed that 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," the White House said in a statement.

Hours earlier, however, Obama told ecstatic supporters in Chicago that progress on the nation's fiscal problems won't come easy. "We will disagree, sometimes fiercely, about how we get there," he said.

If there was any doubt about that, Boehner ended it with his own call for cooperation. After congratulating Obama on his victory, he said Republicans would refuse to raise tax rates, as the president has sought for those earning more than $250,000. Instead, he proposed raising revenue by overhauling the tax code.

"Mr. President, this is your moment," Boehner said. "Let's challenge ourselves to find the common ground that has eluded us."

Senate Democratic leader Harry Reid also offered an olive branch but staked out his party's position — that voters delivered a mandate for higher taxes on the rich. "I'm going to do everything within my power to be as conciliatory as possible," Reid said. "But I want everyone to also understand you can't push us around."

Reid's reading of the electorate differed considerably from Senate GOP leader Mitch McConnell's take: "The voters have not endorsed the failures or excesses of the president's first term," he said. "They have simply given him more time to finish the job."

Outside experts said the two sides have little choice but to compromise. Douglas Holtz-Eakin, former director of the Congressional Budget Office, said voters re-elected "the same cast of characters, but we need the movie to have a different ending ... Getting to 2013 without blowing up the economy is the top priority."