Republicans seized on voter anger over President Barack Obama’s handling of the economy to take control of the U.S. Senate, setting up a clash of priorities that will shape his final two years in office and the race to succeed him.

The economy was voters’ most pressing concern as they cast their ballots in the midterm election, with seven of 10 rating conditions poor, preliminary exit polls showed.

More than five years after the recession ended, ordinary Americans still feel pinched. Wages and incomes have been stagnant even as the unemployment rate has dropped to 5.9 percent from 7.8 percent when Obama was re-elected in 2012. Corporate profits have also set records, stocks have risen to new highs and the nation’s output of goods and services grew more than $1 trillion from its pre-recession peak.

Obama’s Democratic allies took the hit from voters, with Republicans gaining a majority in the Senate for the first time during his presidency and adding seats in the House, which they have controlled for four years.

Obama pledged today to work with Republicans in Congress, saying he would seek common ground on trade and revising the U.S. tax code. During a news conference in Washington, the president cited “real progress since the crisis six years ago” while acknowledging that the benefits of the economic recovery haven’t been evenly shared.
Voter ‘Disillusionment’
“But we just gotta keep at it until every American feels the gains of the growing economy where it matters most, and that’s in their own lives,” Obama said.

Kentucky Republican Mitch McConnell, in line to become Senate majority leader, promised in a news conference in Louisville to work with Obama on issues of common interest, while saying voters “are obviously not satisfied with the direction of the administration.”

McConnell said he and Obama spoke by phone today, with trade policy among the areas where they’ll seek possible agreement.

Senator Bob Corker, a Tennessee Republican, attributed his party’s gains to “disappointment and disillusionment with the administration.” He added, “I don’t think on the other end it’s a major endorsement of the Republican Party, either.”

Repeated Scandals

In the wake of the vote, U.S. stocks rose, the dollar strengthened and precious metals fell. The Standard & Poor’s 500 Index and the Dow Jones Industrial Average each climbed 0.6 percent to record closes. The Bloomberg Dollar Spot Index headed for its highest close since April 2009.

Democratic candidates couldn’t unburden themselves from the anchor of an unpopular president. Along with stagnant wages, they were denied traction by the failed rollout of the Obamacare website a year ago, scandals at the Department of Veterans Affairs, Internal Revenue Service and Secret Service, and public fears over the rise of Islamic State and the potential spread of the Ebola virus.

Fifty-eight percent of voters said they were dissatisfied or angry at the White House, according to preliminary exit polls; 59 percent said the same about Republican congressional leaders.

Wrong Track

The discontent simmered even as the economy showed signs of strength in the run-up to the election, posting its best six months of growth in more than a decade. Gross domestic product expanded at a 3.5 percent annualized rate in the three months that ended in September after a 4.6 percent gain in the second quarter, the best back-to-back showing since 2003.

Most Americans haven’t shared in the gains. Adjusted for inflation, the July median household income of $54,045 was $2,600 lower than in December 2007, when the recession began, according to Sentier Research, an economic-consulting firm.

Voters by 65-31 percent said the country is on the wrong track. That’s 12 points more negative than two years ago and was the second-gloomiest exit-poll reading since 1990, trailing only the 2008 election, the preliminary numbers showed. Half of voters expect life to be worse for the next generation.

In California, voters bucked the nationwide trend that favored Republicans in yesterday’s election, giving Democrat Jerry Brown re-election to an unprecedented fourth term as the state’s governor. Every statewide elected office in California remained in Democrats’ hands, as well as both chambers of the legislature.

Best Positions

Republicans, led by McConnell and House Speaker John Boehner of Ohio, have to decide what mix of confrontation and cooperation best positions the party to hold the ground it took yesterday and make a run at the White House in 2016.

Obama offered an opening gesture with an invitation to congressional leaders from both parties to meet with him at the White House on Nov. 7. He also called some of the night’s winners from both parties, according to the White House.

Yet before returns started coming in, White House spokesman Josh Earnest said Obama won’t delay an executive order on immigration that the president has said he would announce before the end of the year, a pledge opposed by Republicans.

In September, Obama retreated from his promise to swiftly revise U.S. immigration policies, citing the “extreme politicization” of the issue.

Fight Obama

For Republicans, the big question is whether they will make a serious bid to overhaul immigration laws. The issue deeply divides the party, and many strategists say Democrats will be able to use it as a cudgel against their opponents in 2016 if it isn’t resolved by then.

The party’s hardest task will be fostering solidarity between a Tea Party contingent focused on drawing contrasts with Obama and an establishment wing anxious to demonstrate that Republicans can be trusted with power.

Senator Ted Cruz, a Tea Party-backed Texas Republican, said this week that his colleagues must fight Obama at every turn. His priority, he told the Washington Post, is “looking at the abuse of power, the executive abuse, the regulatory abuse, the lawlessness that sadly has pervaded this administration.”

Cruz also wants to dismantle Obama’s health-care law, a mission that would require improbable two-thirds majorities in both chambers to overcome presidential vetoes.

Recruiting Candidates

He may find he hasn’t gained many new followers for his brand of Republicanism in yesterday’s Senate results. The party succeeded in recruiting candidates who generally were younger than the lawmakers they replaced, avoided campaign-killing flubs, and are expected to be more amenable to working with the party leaders in Washington.

Some Republican leaders also say an all-out confrontation with Democrats is a one-way ticket back to the minority. There are a few issues, notably the proposed Trans-Pacific Partnership trade deal, where both sides say Obama and Republicans can come together.

Republicans have hinted at areas where they feel they have the upper hand. For years, they have tried to force approval of the Keystone XL Pipeline, repeal a medical-device tax and begin the process of cutting corporate taxes.

Some Democrats, including Kentucky Representative John Yarmuth, say McConnell will opt to cooperate.

“He will try to do something to preserve his legacy,” Yarmuth said. “I don’t think he wants a legacy that after he finally reached his lifelong ambition to be majority leader that he then spent the two years doing nothing but obstructing.”

Executive Orders

Frustrated with gridlock in Congress, Obama declared earlier this year that he would use his executive power to circumvent lawmakers on climate change and the minimum wage paid to federal contractors, as well as on immigration. That didn’t help his party yesterday and some, including Vice President Joe Biden, have signaled a willingness to compromise with Republicans.

Representative Chris Van Hollen, a Maryland Democrat who is a member of Minority Leader Nancy Pelosi’s inner circle, said some in his party are forgetting how difficult it has been for the White House to work with House Republicans.

“You’re still going to have a House of Representatives that is dominated by a Tea Party agenda,” Van Hollen said. “Even if there were some Republicans in the Senate that now want to work with the president, it’s hard to see how the dynamics in the House change.”

Hillary Clinton

Showing they can govern will be an issue for Republicans not only for holding the Senate against a tough electoral map in 2016 but also as the party tries to position itself against presumptive Democratic presidential front-runner Hillary Clinton.

Clinton already has faced pressure from some Democrats to jump into the race soon to rally the party in the face of yesterday’s losses. Her advisers say she is likely to stick to her plans to announce early next year.

“Republicans will make a huge mistake if they believe that tonight’s victories indicate a mandate for a return to trickle- down economics and political witch hunts,” said South Carolina Democratic Party Chairman Jaime Harrison. “The party of ‘No’ must now lead, and if they don’t then the 2016 political pendulum will swing back so hard that they will have a bad case of whiplash.”

–With assistance from Kathleen Hunter in Washington.

Topics USA Legislation Washington Politics