November election will define Obama presidency

The congressional election in November will define US President Barack Obama's next two years in office as Republicans look likely to pick up seats and put their stamp on issues ranging from the huge budget deficit to economic recovery and immigration.

Reuters correspondents will interview an influential line-up of newsmakers at the Reuters Washington Summit starting on Monday and they will take an in-depth look at the election and its implications for Obama.

Elected in 2008 on the promise of changing Washington, Obama will be forced to scale back his ambitions if the Republicans, who have tried to block his agenda of reforms and economic measures, do well in the November 2 election.

He is unlikely to try more signature legislation like this year's healthcare and Wall Street reforms and would have to take Republican demands for low taxes into account when trying to cut the fiscal gap and speed up the economy's recovery from its worst recession since the 1930s.

"The upcoming midterm elections will dramatically change political reality for Obama," said Larry Sabato, a political science professor at the University of Virginia.

"He will be working with Congress much less and depending on his own executive branch much more," Sabato said. "We're probably headed for a period of intense gridlock, and that's just going to be a fact of life."

Obama's Democrats could lose control of the House of Representatives, and maybe even the Senate, in November when Americans are expected to punish them for failing to reduce a jobless rate stubbornly near 10 percent.

The resurgent Republicans are demanding a greater role in responding to the weak recovery and are threatening to try to rewrite Obama's healthcare overhaul and take a fresh look at Wall Street regulations if they win big enough at the polls.

Big Republican gains could also end any chance for climate change legislation that was supposed to be a hallmark of Obama's presidency.

A comprehensive immigration overhaul demanded by Hispanic groups could be hard to pursue and the Obama administration may get tougher on China's policy of keeping its currency weak against the dollar, which critics say steals American jobs.

COMPROMISE IN SHORT SUPPLY

Will history repeat itself?

When Republicans seized the House in 1994, President Bill Clinton moved to the center to take account of the country's mood, leading to a major compromise on reforming the US welfare system. Clinton coasted to re-election in 1996.

Can Obama do the same?

So far, the parties are in no mood to compromise, as shown by a festering debate over extending Bush-era tax cuts that are due to expire at the end of this year.

Republicans want to extend all of the cuts, even for the wealthiest Americans, saying raising taxes on anyone in a bad economy is a bad idea and that small businesses could be hurt.

Democrats want to limit the tax cuts to families earning up to $250,000 per year and accuse Republicans of coddling millionaires at a huge cost to the government budget.

"We simply can't afford that," Obama said on Wednesday. "It would mean borrowing $700 billion in order to fund these tax cuts for the very wealthiest Americans."

There is also no sign of compromise on another big issue -- how to cut a projected $1.47 trillion annual budget deficit.

Predictably, Democrats want to protect popular spending programs while Republicans oppose tax hikes. A push to limit spending could complicate Obama's use of stimulative policies to rev up the economy.

Republicans are ecstatic at the prospect of winning the House and maybe even the Senate. But they face turmoil from the right flank.

The conservative Tea Party movement has already ousted Republican establishment candidates and has many in the party nervous. Witness Christine O'Donnell's victory over veteran Republican Mike Castle in the Delaware Republican Senate primary election this week.

"Republicans all across the country are going to look at the Delaware results and maybe get a little worried," said Julia Clark of Ipsos, which conducts polls for Reuters.

Obama is likely to take the opportunity to make over the White House staff after the elections and some groups would like to see a more business-friendly attitude to help ease a period of uncertainty on Wall Street.

How will the White House itself change after the November election with Obama's chief of staff, Rahm Emanuel, expected to leave to run for Chicago mayor?

Other key players may depart or take new jobs, giving Obama a critical opportunity to reshape his team for the second half of his four-year term and in the run-up to his expected re-election campaign in 2012. 

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