By TOM RAUM
WASHINGTON (AP) - The U.S. economy is slowly digging out of its deepest economic hole since the 1930s. And if nothing else, the next four years should be better than the last four.
But American policymakers, newly re-elected President Barack Obama and a still-divided Congress could either speed that progress or derail it.
The same deep political divisions that bedeviled 2012 _ clashes over the scope of government and whether to tame deficits with spending cuts, higher taxes or both _ will also dominate the Washington dialogue in 2013 even if the president and Congress defuse a ticking fiscal bomb.
Although America's recession technically ended in mid-2009, recovery has been shallow and bumpy. Since then, economic growth has averaged a shade over a weak 2 percent. Unemployment _ 7.7 percent in November _ stands near where it was when President Barack Obama took office.
Obama and GOP leaders in Congress struggled toward year's end in search of a compromise to avert a fiscal cliff, a series of year-end mandatory spending cuts and tax increases. But their differences were wide and resolving them not easy.
Elections in this country decisively gave Obama a second term but kept the balance of power in Congress the same as before, with Republicans controlling the House and Democrats the Senate.
Despite these status-quo elections, change was erupting elsewhere in the world.
Israelis and Palestinians remained stuck in their old patterns of hostility, but their neighborhood was quickly changing as the Arab Spring scrambled the dynamics of the Middle East. Violence sprung up in Syria and Egypt. And a belligerent Iran with nuclear ambitions hovered over the region. North Korea successfully tested a long-range missile. As China named new leaders for the next decade, Obama shifted some of his gaze to Asia and became the first president to visit reclusive Myanmar.
Both sides also were paying new attention to America's neighbors to the south as immigration reform jumped to the front burner following the drubbing dealt Republican immigration hard-liners.
Hispanics now make up 10 percent of the electorate, and their percentage is expanding. Vanquished GOP nominee Mitt Romney, who once suggested illegal immigrants "self deport," won only 27 percent of the Hispanic vote to Obama's 71 percent.
It was also the year of Big Money _ the most expensive presidential election ever and the first since the "Citizens United" Supreme Court ruling in 2010 opened the floodgates to independent expenditure organizations and super-PACs. In all, a record $6 trillion was spent by presidential and congressional campaigns. Neither Obama nor Romney took strings-attached federal campaign funds, the first time both major candidates declined public financing.
The Supreme Court in June handed the president a key victory by upholding his signature health care overhaul that both sides are now calling "Obamacare." But the ruling had a double edge. It also made the Medicaid expansion, central to the new law, optional for states _ an option now complicating deficit-reduction efforts to trim Medicaid entitlement spending.
More presidential debates were staged than ever: some two dozen during the Republican primaries, then three presidential showdowns and one vice presidential debate.
The GOP field began large, including Texas Gov. Rick Perry, former Pennsylvania Sen. Rick Santorum, pizza entrepreneur Herman Cain and Rep. Michele Bachmann of Minnesota _ each taking turns briefly outpacing Romney in polls.
That internal party challenge helped push Romney, who governed Massachusetts as a moderate, ever rightward politically. Yet Romney was never completely able to win over conservatives.
And his penchant for saying things that emphasized his wealth and lack of a common touch, from saying that "47 percent" of Americans don't pay income taxes and expect government benefits to his postelection assertion that Obama won by giving "gifts" to key constituencies. Such tin-ear comments helped isolate him from top Republican leaders, who all but disowned him after the election. Except for a private lunch with Obama at the White House in late November, the Romneys ended the year out of the limelight at their home in La Jolla, Calif.
But running mate Rep. Paul Ryan of Wisconsin, a potential 2016 GOP presidential contender, returned as a power in fiscal deliberations as head of the House Budget Committee.
As campaigns droned on _ Republicans held their convention in late August in Tampa, Fla., and Democrats in early September in Charlotte, N.C. _ Americans could rejoice at the intricate but successful landing of Mars rover Curiosity in a crater near the Martian equator in August, a shot in the arm for a troubled U.S. space program.