Barack Obama prepares to build bridges – but first he needs new allies to help him do it

Urgent work to avert the 'fiscal cliff' as key figures from first term get ready to leave President's team

The rigours of the election campaign barely behind him, President Barack Obama was back in the Oval Office yesterday pondering the immediate challenges of negotiating a compromise with Congress to avert a so-called "fiscal cliff" of impending tax increases and spending cuts and revamping his inner circle.

While the President has kept a low profile since election night, behind the scenes he has been laying the groundwork for negotiations with Congress on a package that must be agreed by the year's end. Otherwise, deep cuts – to the Pentagon in particular – will come into effect automatically, as will the expiration of Bush-era tax cuts for the rich. The knock-on effects could suck $700bn out of the economy.

The burning question in Washington is whether the results of the election will create a framework for compromise between Mr Obama and the leadership of the Republicans, who easily retained control of the House of Representatives. Both sides will have to offer concessions for an agreement to be possible. That will mean summoning political flexibility of the kind that was absent in Washington before the election.

"Hopefully people will read those results and read them as a vote for cooperation and will come to the table," David Axelrod, the top Obama advisor, said yesterday. "Obviously, everyone's going to have to come with an open mind to these discussions. But if the attitude is that nothing happened on Tuesday that would be unfortunate."

Mr Obama attempted to phone congressional leaders of both sides on Tuesday night after his victory but was told they were sleeping. Since returning to the White House, however, he has been working the phone lines to Capitol Hill, which will reconvene in a last-duck session early next week.

The President told the congressional leaders he believed "the American people sent a message in yesterday's election that leaders in both parties need to put aside their partisan interests and work with common purpose to put the interests of the American people and the American economy first", the White House said in a statement.

Almost as urgent, however, is beginning auditions for a refreshed Obama cabinet. Among veterans of his first term in office who have signalled their intention to leave, the most obvious are Hillary Clinton at the State Department and Treasury Secretary, Timothy Geithner. However, some expect Eric Holder, the Attorney General, and Leon Panetta, the Secretary of Defence and former CIA director, to also head for the exit.

Pressure is likely to be on the President to appoint at least one high-profile Republican to his cabinet and eyes have turned to the retiring Senator from Maine, Olympia Snowe, a moderate, for some important position.

Speculation for the position of Secretary of State has long centred on Senator John Kerry, who is chairman of the Foreign Relations Committee in the Senate, as well as Susan Rice, ambassador to the United Nations. Ms Rice, however, has been damaged more than anyone by the fallout from the killings in Benghazi in September. Thomas Donilon, the current National Security Advisor, might also be a candidate for top US diplomat.

Nothing, however, will take the glow from Mr Obama's victory more quickly than the fiscal negotiations. Especially difficult is the taxation issue. Ending the tax cuts for families with income above $250,000 was a pledge repeatedly made by the President on the campaign trail and thus doing anything different in these negotiations would be extremely difficult.

On Wednesday, John Boehner, the speaker of the House, did at least signal a degree of suppleness, noting for the first time that some revenue increases may be tolerable to his party, though signalling that in return Mr Obama would have to swallow cuts in funding for social safety net programmes.

"Mr President, this is your moment," said Mr Boehner, whose own position had been bolstered by his party's success in holding the House. "We're ready to be led – not as Democrats or Republicans, but as Americans. We want you to lead, not as a liberal or a conservative, but as President of the United States of America."

Team Obama, Mk II: Who's in and who's out

OUT

Timothy Geithner

The Treasury Secretary is widely expected to leave office and return to his family in New York. Indeed it is believed President Obama had to persuade him not to step down mid-way through his first term.

Leon Panetta

The Defence Secretary and former CIA Director has overseen the withdrawal from Iraq and the planning for the drawdown from Afghanistan. He is concerned about cuts to military spending.

David Plouffe

One of the President's closest aides and architect of the 2008 campaign, Mr Plouffe is expected to stand down from his official role as Senior Advisor to Mr Obama.

IN

John Kerry

The Senator from Massachusetts who lost the 2004 presidential race to George W Bush has rebuilt his career and in 2009 replaced Vice-President Joe Biden as chair of the Senate foreign relations committee. He is known to want the post of Secretary of State when Hillary Clinton steps down.

Olympia Snowe

There have been calls by some Democrats to rebuild damaged relations with the Republicans. One way would be to bring some into the cabinet. Olympia Snowe, a moderate who has just stepped down as Senator for Maine is widely touted as a potential Transportation Secretary.

Janet Napolitano

The Homeland Secretary is thought to be eager to replace Eric Holder as Attorney General, and is also seen as candidate for a place on the bench of the Supreme Court.