Victorious Republicans face familiar dilemma: fight or cut deals

By Richard Cowan and David Lawder WASHINGTON (Reuters) - Victorious Republicans appeared at odds on Wednesday over how to capitalize on their new control of the U.S. Congress. Some lawmakers were eager to use their new muscle to step up attacks on President Barack Obama, while others talked hopefully of compromises that could lead to rare bipartisan legislation. The strongly diverging views were an early indicator of the task ahead for House of Representatives Speaker John Boehner and likely new Senate leader Mitch McConnell, who will have to find a way of reconciling moderates and conservatives in their caucuses to show Americans that Republicans can govern and not just obstruct Obama's legislative agenda. If conservatives seek confrontation with Obama that threatens a government shutdown or a market-rattling stand-off, that could hurt Republican hopes of taking back the White House and holding onto their congressional majority in 2016. McConnell ruled out on Wednesday government shut-downs or debt defaults under his watch. But he opened the door to more spending cuts as part of next year's budget process in return for raising the debt limit. Mike Lee, one of the most conservative Senate Republicans, said his party should seek to dismantle Obama policies where possible and "impose a much-needed check on the lawlessness of this administration in its final two years." The fiscal hawk from Utah would not rule out confrontational tactics such as tying spending cuts to the debt limit next year. “I think that’s one of many options that can be considered. I think all options will have to be on the table,” he told Reuters. The first hints of how Republicans might rule Congress in 2015-16 are likely to come by mid-December. That is when the outgoing Congress has to either pass legislation to keep the government running or risk another government shutdown. UGLY MOOD Exit polls showed Americans were fed up with the partisan gridlock in Washington. While they typically blame both parties for the ugly atmosphere, it was Obama's Democrats who bore the brunt of voters' wrath on Tuesday as they stripped Democrats of control of the Senate and voted in Republican governors in strongly Democratic states. Despite the clear signal from voters, some Republicans still appeared to be in no mood to reach across the aisle. "I've never heard of someone gaining a majority and ... the winning party has to compromise," Tea Party conservative Representative Raul Labrador, who was among a small group of lawmakers who tried to oust Boehner in 2013, said in an interview. Representative Tom Cole, an ally of Boehner, said he backed negotiation rather than confrontation. "I’m actually more optimistic than most, maybe it’s wishful thinking, that the next few years can be pretty productive as the president goes into legacy mode and Republicans realize that they need to get some things done to have any chance of winning in 2016," he said. Cole said he was worried that Democrats could decide to put the brakes on all legislation so that the next Democratic presidential nominee "can run against a do-nothing, crazy Republican Congress." OBAMA INVITE Obama invited Republican and Democratic congressional leaders to the White House on Friday for a conciliatory post-election huddle on next steps. But during a conference call last Thursday, Boehner told his rank-and-file that he had no intention of taking his cues from Obama if his party prevailed. "I’m prepared to move quickly, along with Mitch McConnell, to make clear that the new Congress will be about jobs and the economy – starting with the many jobs and energy bills" that have previously passed the House, according to a source familiar with the call. While some of those "jobs bills" have bipartisan support, many are a red flag to Democrats since they would mean repealing all or major parts of Obama's landmark 2010 healthcare law, suspending the president's climate change regulations and moving to open vast federal lands to more oil and gas production. Obama is expected to veto many of these initiatives while pressing ahead with executive actions on immigration and climate that are likely to enrage Republicans, who already accuse the president of abusing the powers of his office. Jim Manley, a Democratic strategist and former aide to outgoing Senate Majority Leader Harry Reid, said based on recent history, he expected Washington's gridlock would only get worse after Tuesday's Republican victory. "If you think the take-away for the House Republican conference will be the need to compromise, you need to get your head examined," Manley said. In the Senate, McConnell is expected to feel the pull of competing interests within his caucus, just as Boehner has since 2011, when House Republicans became the majority. Immediately after the Republican takeover of the Senate was secured on Tuesday, Senator Ted Cruz of Texas, a Tea Party darling, called for "full repeal" of Obamacare. Cruz engineered the October, 2013 federal government shutdown in a failed bid to repeal Obamacare. The 16-day closure hurt the Republican Party's image but raised Cruz's profile as he weighed a run for the White House in 2016. BALANCING ACT At the same time, McConnell will have to listen to the pleas of senators representing more moderate states who want to run for re-election in 2016 with some accomplishments in their pockets. Republicans will quickly introduce stand-alone legislation in the first quarter of 2015 that would approve the Keystone XL crude oil pipeline from Canada to U.S. Gulf Coast refineries, Republican Senator John Hoeven said in an interview. Hoeven said the bill would be an early test of Obama's willingness to work with Congress. Until now, the president has resisted making a decision on the project, which is deeply opposed by environmental groups. Republicans could also set early votes next year on repealing an unpopular Obamacare medical device tax, approving a new trade negotiating authority for Obama and encouraging natural gas exports. Obama in the past has indicated a willingness to make some targeted improvements to his healthcare law, as long as the goal was to improve, not scuttle, the law. Some Republican aides speculated that as Obama is forced to talk directly to McConnell and Boehner, instead of dealing through now-Senate Majority Leader Harry Reid, some trust could be built up that could become a springboard for negotiating bigger deals next year. Washington knows all too well, however, that such conversations do not always lead to productive work. In 2013, Obama dined several times with Republican senators in a fruitless attempt to reach a major budget deal. (Additional reporting by Susan Cornwell, Timothy Gardner and Patricia Zengerle, editing by Ross Colvin)