AFTER his surprisingly convincing victory and the small but significant gains the Democrats made both in the Senate (two seats) and in the house (six seats), President Barack Obama would seem to be well positioned to effect the changes in the American system for which he had issued clarion calls during his 2008 campaign. That, however, may be too much to expect.

Even after the losses they suffered, the Republicans retain a significant majority in the house and have already indicated that those of their members who have been returned to office remain committed to not allowing the raising of taxes on the rich that is a cardinal part of the revenue-raising and deficit-cutting plan that Obama wishes to pursue.

The Republican leaders have recognised that some compromise has to be worked out to avoid what is known as the ‘fiscal cliff’. This is the law that mandates a combination of tax hikes and spending cuts totalling more than $500 billion starting from January 2013.

So far the solution that the Republican majority leader in the house is prepared to concede is that the current lame-duck Congress — the term of which will expire in January 2013 when a new one will be sworn in — should pass as a first step a bill extending the current tax rates for a year against the promise that in the next year, the new Congress, as the second step, would undertake a comprehensive tax law reform.

This would close many of the current loopholes and raise revenues without requiring the Republicans to renege on their promise to oppose a tax rate increase.

For the moment, Obama appears intent on securing some movement towards raising the tax rate for the two per cent Americans whose annual incomes exceed $250,000 and to maintain the current tax rates for the others.

Obama may accept that avoiding the ‘fiscal cliff’ will be a two-step process but he will insist on securing some binding guarantees that one such element in the second step would be raising taxes on the rich.

This is going to be Obama’s major preoccupation for the last months of his first term as will be the effort needed to ensure that his proposals for Medicare and a reform of the medical insurance system that aroused so much Republican opposition is now fully implemented.

The recovery of the economy, which seems to be proceeding more slowly than expected, will remain the top priority even while he realises that apart from the efforts to reduce the fiscal deficit there is little he can do to stimulate job creation that was the principal concern of the voters in the election.

Another matter is the surprise resignation of Gen Petraeus as director of the CIA after an investigation of an unrelated issue by the FBI revealed that he was having an affair with his 40-year-old biographer.

Almost all the pundits who were picking Obama’s team for the second term seemed agreed that Petraeus should remain the CIA chief. Now Obama has the headache of getting a new man in place to handle the current furore over who would be held responsible for the security lapses that led to the death of the American ambassador and his colleagues in Benghazi.

Meanwhile, the resignation itself and the delay by the FBI in informing the executive and select intelligence committees of Congress of the preliminary results of the investigation which started four months ago plus the release of information after the polls has fuelled another controversy. This will not go away easily if the Republicans have their way.

In recounting all these priorities, the purpose is to emphasise that at least now and during 2013 Obama will be focused largely on domestic issues.

On the foreign policy front, however, Obama is likely to have more leeway particularly after it appeared that the Republican candidate endorsed virtually every element of Obama’s foreign policy.

Equally important, a second-term president who cannot seek re-election traditionally has more flexibility. This is, of course, of particular relevance to the question of Palestine and to the use of the so-called dangers of the Iranian nuclear programme by Israeli Prime Minister Benjamin Netanyahu to block any progress on Israel-Palestine final status talks.

Clinton in the last year of his second term had made an effort that seemed to culminate in an Israeli offer to restore 80 per cent plus of the West Bank to an independent Palestine. Yasser Arafat and many Arab leaders were sceptical whether Ehud Barak, the then Israeli prime minister, would implement such an agreement and feared that it would meet the fate of the Oslo talks. The initiative died shortly after.

Obama, too, is bound to make an effort since he knows that America’s unquestioning support of Israel and failure to force the pace of Israel-Palestine talks has been the principal cause of anti-Americanism in the Arab and wider Islamic world.

A genuine opening has been created for such an initiative by President Mahmoud Abbas’s recent interview on Israeli television in which he seemed to give up the longstanding demand for the right of the Palestinian refugees to return to their homes in what is now Israel.

This has been one of the most intractable issues in Israel-Palestine talks and the significance of Abbas’s remarks was recognised by such Israeli leaders as Israeli President Shimon Peres who termed this statement as evidence that Abbas was a “true partner for peace” and Ehud Barak, now the defence minister, who termed the remarks as “courageous and clear”.

Netanyahu, of course, as expected dismissed the significance of the Abbas concession, maintaining that there is no connection between the statement and Abbas’s actual actions.

Abbas himself has been forced after the resulting furore in Palestinian circles and particularly in Hamas-controlled Gaza to suggest that his remarks were personal and had been misconstrued, but the world understands that by giving up an unenforceable right Abbas has created an opening.

Now the world will look to Obama, and an Obama freed of domestic constraints may well respond to pressure Netanyahu and other Israeli hardliners to return to the talks and to put on the table something akin to the proposals that Clinton had apparently worked out in 2000.

The writer is a former foreign secretary.