* Legislative gridlock looms
* Economy, discontent with Obama propel Republicans
* Republicans gain 10 in governors races
By John Whitesides
WASHINGTON (Reuters) - U.S. President Barack Obama
faced a bleak political landscape on Wednesday after voters
punished Democrats over high unemployment and a sluggish
economic recovery, delivering a divided Congress in Tuesday's
Republicans pushed Democrats decisively from power in the
House and strengthened their ranks in the
Senate, a result that could herald legislative gridlock when
the new Congress takes power in January.
Republican control of the House will weaken Obama in fights
over the extension of income tax cuts set to expire at the end
of the year and over efforts to pass comprehensive energy or
"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.
Television networks projected Republicans would pick up at
least 60 House seats, more than the 39 they needed for a
majority that would elevate conservative John Boehner to House
speaker, put Republicans in charge of House committees and slam
the brakes on Obama's agenda.
The Republican wins surpassed their sweep in 1994, when
President Bill Clinton's Democrats lost 54 House seats, and was
the biggest shift in power since Democrats lost 75 House seats
"DO THINGS DIFFERENTLY"
Republicans have portrayed Obama and his Democrats as big
spenders who have recklessly run up massive deficits. The
charge seemed to resonate with voters.
"Our new majority will be prepared to do things
differently," Boehner told supporters late on Tuesday.
"It starts with cutting spending instead of increasing it,
reducing the size of government instead of increasing it and
reforming the way Congress works."
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 is due to hold a news conference at 1 p.m.
EDT (1700 GMT) on Wednesday to talk about the post-election
Dick Durbin, the No. 2 Senate Democrat, 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 candidates had pushed an agenda of spending cuts
and at least a partial repeal of Obama's healthcare and Wall
Street reforms, but Obama could veto their efforts.
Stocks in health insurers like UnitedHealth Group Inc,
WellPoint Inc and Aetna Inc are likely to rise on the
Republican gains, analysts said, even if a full repeal of
healthcare reform is unlikely.
Similarly, Obama's veto and Democratic Senate power will
likely block attempts by Republicans to roll back the landmark
Dodd-Frank Wall Street reform law.
One big item from Obama's agenda when he took office in
January 2009 is likely to remain unticked.
"These elections are a death knell for any sort of
environmental bill in the short or medium term, however they
say very little -- if nothing -- about Obama's electoral
prospects," Ipsos Pollster Cliff Young said, referring to the
president's chances for re-election in 2012.
REID LIVES ON
Senate Democratic leader Harry Reid won the country's most
high-profile Senate race after a brutal battle with Tea Party
favorite Sharron Angle in Nevada. He said he was determined to
renew the struggle to create jobs and bolster the economy.
"The bell that just rang isn't the end of the fight. It's
the start of the next round," Reid told jubilant supporters in
Democrats also won key Senate races in West Virginia and
California, where Senator Barbara Boxer won re-election,
ensuring they would retain at least a slender Senate majority.
Senate Republicans gained six seats and the re-election
bids of two other Democratic incumbents -- Michael Bennet in
Colorado and Patty Murray in Washington -- were too close to
U.S. stock futures pulled back from earlier gains as
Republican chances of a Senate takeover waned. With opinion
polls favoring Republicans, markets had factored in Republicans
winning the House and Democrats holding the Senate.
Investors said the outcome of Wednesday's U.S. Federal
Reserve meeting was of greater market importance. The Fed is
expected to announce it will pump billions of dollars into the
economy to speed the recovery.
All 435 House seats, 37 of the 100 Senate seats and 37 of
the 50 state governorships were at stake in Tuesday's voting.
Exit polls found voters deeply worried about the economy,
with eight in 10 saying it was a chief concern. Four of every
10 voters said they supported the conservative Tea Party
movement and nearly three-quarters believed government did not
The Republican rout extended from coast to coast and
knocked at least 30 Democratic incumbents out of the House,
including veterans Ike Skelton, chairman of the Armed Services
Committee, and John Spratt, chairman of the Budget Committee.
In the Senate, Republicans picked up Democratic seats in
Indiana, Wisconsin, North Dakota, Pennsylvania and Arkansas as
well as Obama's former seat in Illinois.
The three-way race for the Republican-held Alaska Senate
seat 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.
TEA PARTY RISES
Florida Republican Marco Rubio and Kentucky Republican Rand
Paul became the first Tea Party-backed candidates to win Senate
seats, ensuring an influx of conservative views in the staid
chamber. Another Tea Party favorite, Republican Christine
O'Donnell in Delaware, lost her race.
Grass-roots anger over government spending and economic
weakness gave rise to the Tea Party, a loosely organized
movement that backed a message of smaller government and lower
Republicans picked up at least 10 governorships from
Democrats, including the battleground state of Ohio, and held
the office in Texas in a race with vital implications for the
once-a-decade redrawing of congressional districts that begins
Democrat Jerry Brown won in California in the race to
succeed Republican Governor Arnold Schwarzenegger.
(Additional reporting by Thomas Ferraro in Washington,
Caroline Valetkevitch, Nick Zieminski and Rodrigo Campos in New
York and John Rondy in Milwaukee; Editing by Frances Kerry and
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