Gridlock as usual or new era of compromise? Washington stares down 'fiscal cliff' crisis after election

Mitt Romney promised that on Day One he would bring "real change" to Washington. He lost. For all intents and purposes, today is Day One of President Obama's second term and a crucial lame-duck session of Congress. 

Together, they face the immediate challenge of dealing with the so-called "fiscal cliff" -- a potentially disastrous mix of massive defense cuts and tax hikes set to kick in this January -- 56 days from now. 

So the big question a day after a decisive Obama electoral-vote victory is -- will it be gridlock as usual, or did Tuesday night's results herald a new era of compromise, at least to resolve the policy threat that some economists say could trigger another recession if un-addressed? The balance of power in Washington was unchanged after Tuesday's results. 

Leaders in both chambers came out of election night calling for bipartisanship -- but also reaffirming their parties' dueling positions, which so far have prevented any compromise from being reached. On the expiration of the Bush-era tax rates, Republicans have refused to allow a tax hike on anybody, citing the harm to small business, while Democrats have pushed for an increase on households making more than $250,000. 

While just one piece of the puzzle, bridging this divide is crucial to tackling the entire slate of disagreements, including a looming face-off over the debt ceiling. 

House Speaker John Boehner said Tuesday night there is "no mandate for raising taxes." He told Fox News earlier that Obama "knows we're not going to raise taxes on American small businesses. He knows it." Boehner predicted a "real brawl" if the president doubles down on that. 

In the other chamber, Senate Majority Leader Harry Reid said Wednesday that "we need to start working together, a lot. Gridlock is not the solution." 

Still, he countered Boehner, saying the election was a "mandate ... that the richest of the rich have to help a little bit." 

"I'm going to do everything within my power to be as conciliatory as possible. I want to work together but I want everyone to also understand, you can't push us around," Reid said, adding: "I think we should just roll up our sleeves and get it done." 

Whether the lame-duck will usher in a new era depends on how the parties view the election results. Despite Obama's win, each party has reason to think their side's position was reinforced. Democrats are set to expand their majority in the Senate, while Republicans could expand theirs in the House. 

"It depends on the extent to which congressional leaders worry about the low approval ratings for Congress," said Darrell West, director of the Center for Governance at the Brookings Institution. "If they think that was one of the reasons why Republicans did poorly, then they will be more willing to negotiate. If they think Republicans lost just because Romney was a bad candidate they will be less likely to compromise." 

But he added "each party has an incentive to negotiate because they both have their political problems." On one hand, the Democrats are often seen as weak on defense and defense industry jobs, which would face nearly $500 billion in cuts alone if so-called sequestration were to go into effect. Meanwhile, Republicans have been seen as defending tax cuts, especially for higher-income earners, at all costs. 

Candidates on both sides pointed to the "fiscal cliff" as a massive problem created by the other side during the campaigns. But right now it is clearly a shared problem because in addition to the Pentagon cuts, they face the end of last year's temporary payroll tax cuts, which would raise workers' taxes by an estimated 2 percent; an end to the current tax rates instituted by former President George W. Bush, which would mean higher taxes for all, and shifts in the alternative minimum tax (AMT) that would take a larger bite from a large swath of income earners. 

Obama and the Democrats have shown interest in letting the so-called Bush tax rates expire for the top earners, while Republicans have not shown an inclination yet for budging on it. Time will tell if there is room for negotiation -- a combination of increased revenue and cuts -- though Obama may hold the upper hand. 

Still, the ideological lines are firm and with the addition of two fiscal conservatives to the Republican ranks in the Senate -- Ted Cruz from Texas, and Jeff Flake in Arizona -- there might be more of a hardening than Hill watchers think, said David Boaz, senior politics analyst from the Cato Institute. 

"My gut level instinct would be there are fundamental differences between the Democrats and the Republicans in Congress and the election hasn't moved us any closer to resolving these questions," he said.