WRAPUP 6-U.S. Republican House victory puts Obama on defense

Wed Nov 3, 2010 9:49am EDT

* Republicans pick up at least 60 in House, 6 in Senate

* Wall Street cheers Republicans' victory

* Obama, Boehner, Reid to talk about outlook (Recasts, adds new quote from Boehner, market reaction)

By Andy Sullivan

WASHINGTON, Nov 3 (Reuters) -- U.S. President Barack Obama faced a bleak political landscape on Wednesday after voters punished Democrats for the sluggish economic recovery and handed control of the House of Representatives to Republicans.

Democrats managed to retain control of the Senate even as Republicans strengthened their ranks, which could herald an extended legislative stalemate when the new Congress begins work in January.

From tax cuts to housing, Obama's hand is weakened. He will have to fend off attempts to repeal his healthcare and Wall Street reforms and will face an aggressive pushback against administration policies.

Major new initiatives on climate change and immigration are probably off the table. [ID:nN0315887]

"The ability of this administration to get major new programs done was already limited. This just seals the deal," said Jaret Seiberg, policy analyst with the investment advisory firm Washington Research Group.

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Republicans picked up at least 60 House seats, far more than the 39 they needed for a majority that would elevate John Boehner to House speaker and put Republicans in charge of House committees. Many races remained too close to call.

It is the biggest shift in power since Democrats lost 75 House seats in 1948.

'DO THINGS DIFFERENTLY'

Republicans portrayed Obama and his fellow Democrats as big spenders who recklessly ran up massive deficits and extended the reach of an intrusive government. The charge seemed to resonate with voters who have been battered by the deepest recession since the 1930s.

"It's pretty clear the American people want us do something about cutting spending here in Washington and helping to create an environment where we'll get jobs back," Boehner told reporters at the Capitol.

Obama made a late-night call to congratulate Boehner and discuss ways they could work together to create jobs and improve the economy, a Boehner aide said.

The president was due to hold a news conference at 1 p.m. EDT (1700 GMT) to talk about the post-election landscape.

Boehner and other Republican leaders were to hold a press conference at the Capitol at 11:30 a.m. (1530 GMT).

Senate Democratic leader Harry Reid, who survived a high-profile challenge in Nevada, was scheduled to speak at 2 p.m. EDT (1800 GMT) about the Senate outlook.

The No. 2 Senate Democrat, Dick Durbin, said no significant legislation would pass without input from Republicans.

"We need to move beyond filibusters and enter a real conversation about passing legislation that this country needs," he told Reuters.

REPUBLICAN AGENDA

While Republican candidates have pushed an agenda of aggressive spending cuts and a repeal of Obama's reforms, they will have trouble overcoming the president's veto pen.

A clash looms over the budget deficit, which hit nearly 9 percent of gross domestic product last year.

"What is unclear is whether or not the Obama administration is willing to cut any deals with the Congress in the next two years," said Israel Klein, a lobbyist at the Podesta Group.

Stocks extended gains on Wednesday after rising for months on the prospect that increased Republican influence would result in a less aggressive Congress. But even though a divided Congress is seen as bullish for stocks, because it makes passing new laws more difficult and lessens uncertainty for business, investors will be looking for signs of compromise. [.N]

"Gridlock is good but there are issues that have to be addressed such as creating jobs and improving the economy," said John Canally, an investment strategist with LPL Financial in Boston. "We have seen a lot of pointing fingers in this election -- if the two sides show their willingness to cooperate in these press conferences, that will be what the market will be really looking for."

Republicans eyeing a presidential challenge to Obama in 2012 should not read too much into the election results, said Ipsos pollster Cliff Young.

"They say very little -- if nothing -- about Obama's electoral prospects," Young said. [ID:nN03272002]

TEA PARTY EFFECT

Conservative grass roots activists associated with the Tea Party movement shook up the Republican Party earlier this year when they toppled some incumbents deemed not conservative enough and replaced them with less experienced, more ideological candidates.

Tea Party favorites won in Florida, Utah and Kentucky, ensuring an influx of conservative views in the staid chamber.

But the movement may have prevented Republicans from winning the Senate, as voters rejected Tea Party-backed candidates in Nevada, Delaware and West Virginia. [ID:nN02230616] [ID:nN02265640]

Exit polls found voters deeply worried about the economy, with eight in 10 saying it was a chief concern. Nearly three-quarters believed government did not function properly, and four in 10 said they supported the Tea Party.

The Republican rout extended from coast to coast and knocked at least 30 Democratic incumbents out of the House.

In the Senate, Republicans gained six seats, including seats in Indiana, Wisconsin, North Dakota, Pennsylvania and Arkansas as well as Obama's former seat in Illinois.

Senate races in Colorado and Washington were too close to call.

The three-way race for the Republican-held Alaska Senate seat also was too close to call, with incumbent Lisa Murkowski running as an independent write-in candidate against Tea Party favorite Joe Miller and Democratic challenger Scott McAdams.

Republicans picked up at least 10 governorships from Democrats, including the battleground state of Ohio, and seized control of at least 17 state legislatures from Democrats. [ID:nN03279028]

The victories give them control over the once-a-decade process of redrawing congressional districts that begins next year and could help the party extend its electoral advantage.[ID:nN0243983] (Additional reporting by John Whitesides, Thomas Ferraro, Richard Cowan and Kim Dixon in Washington, and Angela Moon in New York; Editing by Leslie Adler)

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