Exuberant Republicans promise to roll back Obama agenda

The U.S. Capitol is seen the day before mid-term elections in Washington November 1, 2010.

WASHINGTON (Reuters) - Exuberant Republican leaders promised on Wednesday to exercise their new power in Congress to slash spending, create jobs and reduce government -- and said they hoped President Barack Obama would work with them.

"It's pretty clear the American people want a smaller, less costly and more accountable government," John Boehner, in line to become the next House of Representatives speaker, told reporters. "Our pledge is to listen to the American people."

Voters anxious about the sluggish economy and unhappy with Obama's leadership punished Democrats in Tuesday's election rout, giving House control to Republicans and weakening the Democratic majority in the Senate.

Boehner and Republican Senate leader Mitch McConnell said voters had given them a mandate to roll back many of the prime accomplishments of congressional Democrats in the last two years, including healthcare and financial regulatory reforms.

But split government is more likely to spark a legislative stalemate when the new Congress begins in January. Senate Democrats can block House initiatives, and Obama's weakened hand will still hold the veto pen.

Republican leaders showed little inclination to compromise with Obama and Democrats.

"We're determined to stop the agenda Americans have rejected and to turn the ship around," McConnell said. "We'll work with the administration when they agree with the people and confront them when they don't."

Boehner said the sweeping healthcare overhaul passed by Democrats in March would ruin the medical system and bankrupt the country. "That means we have to do everything we can to try to repeal this bill and replace it with common sense reforms to bring down the cost of healthcare," he said.

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Republicans picked up at least 60 House seats on Tuesday, far more than the 39 they needed for a majority that would topple Democratic House Speaker Nancy Pelosi and put Republicans in charge of House committees. Many races remained too close to call.

It is the biggest shift in power since Democrats gained 75 House seats in 1948, and it gives Republicans their largest House margin since 1928.

"The people in the heartland, I think it is safe to say, are fearful. They are angry. And they are feeling very strongly that the folks in Washington -- in both political parties -- don't just seem to get it," Jim Slattery, a former Democratic representative from Kansas, said at a news conference.

Obama made a late-night call to congratulate Boehner and discuss ways they could work together to create jobs and improve the economy.

OBAMA FACES PUBLIC

The president was due to hold a news conference at 1 p.m. EDT (1700 GMT) to talk about the post-election landscape. Senate Democratic leader Harry Reid, who survived a tough race in Nevada, was scheduled to speak at 2 p.m. EDT (1800 GMT) about the Senate outlook.

Major new initiatives on climate change and immigration are probably off the table. A clash looms over the budget deficit, which hit nearly 9 percent of gross domestic product last year.

"What is unclear is whether or not the Obama administration is willing to cut any deals with the Congress in the next two years," said Israel Klein, a lobbyist at the Podesta Group.

Jockeying for congressional leadership was already under way. Pelosi maintained her silence as fellow Democrats wondered whether she would step down from her leadership post or resign from Congress altogether. The House's No. 2 Democrat, Steny Hoyer of Maryland, is seen as a possible successor.

Republican Representative Mike Pence stepped down as conference chairman amid speculation that he might mount a presidential bid. Representative Jeb Hensaerling announced his bid for Pence's post, which is No. 3 on the leadership ladder.

"We have seen a lot of pointing fingers in this election -- if the two sides show their willingness to cooperate in these press conferences, that will be what the market will be really looking for," said John Canally, an investment strategist with LPL Financial in Boston.

Financial markets had factored in a Republican takeover of the House, analysts said. Traders were now focused on a Federal Reserve statement due later Wednesday and expected to announce a plan to buy bonds to try to bolster the economy's mild recovery.

TEA PARTY EFFECT

Conservative grass roots activists associated with the Tea Party movement shook up the Republican Party earlier this year when they toppled some establishment candidates and replaced them with less experienced, more ideological candidates.

Tea Party favorites won in Florida, Utah and Kentucky, ensuring an influx of conservative views in the Senate.

But the movement may have prevented Republicans from gaining control of the Senate, as voters rejected Tea Party-backed candidates in Nevada and Delaware.

Exit polls found voters deeply worried about the economy, with eight in 10 saying it was a chief concern. Nearly three-quarters believed government did not function properly, and four in 10 said they supported the Tea Party.

The Republican rout extended from coast to coast and knocked at least 30 Democratic incumbents out of the House, including Armed Services Committee Chairman Ike Skelton, Budget Committee Chairman John Spratt and Transportation Committee Chairman James Oberstar.

In the Senate, Republicans gained six seats, including seats in Indiana, Wisconsin, North Dakota, Pennsylvania and Arkansas as well as Obama's former seat in Illinois. Senate races in Colorado and Washington were too close to call.

The three-way race for the Republican-held Alaska Senate seat also was close, with incumbent Lisa Murkowski running as an independent write-in candidate against Tea Party favorite Joe Miller and Democratic challenger Scott McAdams.

Republicans picked up at least 10 governorships from Democrats, including the battleground state of Ohio, and seized control of at least 17 state legislatures from Democrats.

The victories give them control over the once-a-decade process of redrawing congressional districts that begins next year and could help the party extend its electoral advantage.

(Additional reporting by Andy Sullivan, Thomas Ferraro, Richard Cowan and Kim Dixon in Washington, and Angela Moon in New York; Editing by Christopher Wilson)