Obama Victory Preserves Balance of Power in D.C.

Fiscal Policy Looms as Most Pressing Issue for Second Term

In the wake of his victory over Mitt Romney, President Obama's most pressing issue lies in fiscal policy, with key reforms from his first term, financial regulation and health care, likely protected by a preservation of the "balance of power" in Washington, D.C., the Economist Intelligence Unit said.

Dealing with the so-called "fiscal cliff" should be more straightforward "now that Congress is no longer anticipating a change of control in 2013, which might have changed incentives for bipartisan co-operation," the group's analysts wrote in a recent report.

Obama holds something of an advantage in the coming negotiations, in that tax rates will certainly rise across the board unless a compromise is reached, an unpalatable prospect for Republicans especially, but also for Democrats. The magnitude of the planned spending cuts over the next decade is likely to remain, especially if some tax rises are included in the package.

Additionally, Obama's re-election brings continuity to a wide range of other policy areas, the Economist Intelligence Unit said. There are "gathering signs of sufficient political backing for a more comprehensive reform of the tax code in the next four years, which would have to take the form of a larger political bargain that appeals to both Republicans and Democrats," the group said. "This would be no easy task."

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