By John Harwood, Chief CNBC Washington Correspondent
NEW YORK ( CNBC) -- The 112th Congress convenes this week with a surge of new Republican energy -- and big questions about where that energy will go. Will that energy pour into renewed partisan warfare, with President Obama battling a Republican-led House infused with Tea Party fervor? That's what most of America's recent political history would suggest. Or will it go into a bold, bipartisan push for action on reducing America's long-term budget deficit, and perhaps overhauling the tax system at the same time?
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The most significant initial event in setting the tone for Washington's new governing dynamic will be the president's State of the Union address, which is expected later this month. Obama is expected to draw lines of resistance against some Republicans demands, such as canceling unspent stimulus funds, rolling back government spending to 2008 levels and cutting back new financial regulations. But administration aides said the White House does intend to demonstrate its commitment to reducing spending. The question is whether Obama pursues relatively modest spending reductions as a way of building credibility with the American public for more ambitious measures after his 2012 re-election year, or moves more rapidly toward a comprehensive deficit reduction deal. Such a deal, foreshadowed by the presidential debt-reduction panel's report in December, would reduce entitlement costs for Medicare and Social Security, cut domestic and defense spending alike and raise tax revenue. By reducing loopholes and deductions popular among average Americans and businesses, the tax measures might raise additional revenue while lowering the top marginal rates for both individuals and corporations. Given the Republicans' drive to make Obama a one-term president, a massive compromise on all those issues will be highly difficult to achieve. So would a deal on comprehensive immigration reform strengthening border security while provide a path to citizenship for illegal immigrants already here. But eras of divided government have produced some of the signal legislative achievements of the past generation, from tax reform under President Ronald Reagan in 1986 to welfare reform under President Bill Clinton 10 years after that. Senate Majority Leader Harry Reid, in an interview last month, pointed toward immigration legislation as a potential area for compromise. And few anticipated the scope of the president's lame-duck tax-cut deal with Republicans last month. -- Written by John Harwood of CNBC