The crowd cheers as President Obama's re-election is announced at an election party in Atlanta. In a second term, the president must take on a polarized Congress, budget challenges and international issues.


WASHINGTON - President Obama confronts a daunting array of domestic- and foreign-policy challenges as he begins a second term in a political climate so fractured that compromise has become all but impossible.

The country is not in economic freefall as it was when he was first elected. The war in Afghanistan is winding down. The U.S. role in Iraq is finished.

The country has stubbornly high unemployment. Depressed incomes. High gasoline prices. The government owes $14 trillion and the debt is climbing. The federal budget is a mess of temporary measures held together by short-term fixes always about to expire and plunge the government into crisis and the economy back into recession.

There are fewer Americans on the battlefield in Afghanistan and Iraq and Osama bin Laden is dead, but al-Qaida remains a threat, new governments in the Middle East may or may not be on America's side, and Iran bedevils the U.S.

As Obama looks out on this second term, he also faces a different political landscape than the one that greeted him four years ago. Then, he swept easily into office on a wave of hope and optimism. Now, he had to struggle to persuade the country to rehire him, and he must navigate a political system that, if possible, is even more polarized. Congress, with an approval rating hovering about 11 percent, has been mocked as the least productive in six decades.

A political loner who has developed few relationships with lawmakers, Obama now must try to forge agreements on major issues with Republicans who almost unanimously opposed his agenda in the first term and with Democrats who are looking for him to deliver on promises, such as climate change legislation, that he abandoned in his first term.

"The major challenge for any president is to build a consensus in the country and not just in Washington," said Ken Duberstein, chief of staff for President Ronald Reagan. "You have to build coalitions to win. Every presidency ultimately goes into a ditch, somehow and for some reason, and you have to have not only the people's trust but the members of Congress know you and trust you. That has not yet developed."

"The parties are as badly polarized and divided from one another as they have been for more than 100 years," said William Galston, a former adviser to President Bill Clinton and a scholar at the Brookings Institution. "Something between leadership and statesmanship is going to be required."

Their history notwithstanding, Obama pledges to work with members of both parties.

"As long as I'm president, I will work with anybody of any party to move this country forward," he said regularly at rallies in the final days on the campaign trail. "And if you want to break the gridlock in Congress, you'll vote for leaders who feel the same way, whether they're Democrats or Republicans or independents."

Even before Inauguration Day, Obama will be under enormous pressure to ward off looming tax increases and spending cuts that threaten to throw the nation into another recession.

Here's what Obama will confront:

SPENDING CUTS: A series of spending cuts are slated to take effect Jan. 2 as the result of a bipartisan deal struck last year to raise the nation's debt ceiling.

The first $110 million would kick in before a new Congress and president are sworn into office. Republicans and Democrats acknowledge that the cuts would be devastating, but they haven't been able to agree on what to do about them. Obama wants some cuts combined with higher taxes on the wealthy. House Republicans oppose tax increases.

TAXES: Nearly every tax cut enacted in the last decade will expire at the end of the year. The $500 billion tax increase paid by Americans at all income levels would leave the average household paying $3,500 more, according to nonpartisan estimates.

Obama wants to extend all the tax cuts on individual incomes below $200,000 and household incomes below $250,000 - and to let them expire for all incomes above that.

Republicans want to extend all the tax cuts - enacted under President George W. Bush and extended by Obama - through at least 2013.

ENTITLEMENTS: The nation's Social Security and Medicare programs are running out of money. Obama has said he's open to "modest modifications" to the programs, but he's not proposed a plan for long-term solvency for either.

Meanwhile, some Republicans on Capitol Hill want to allow retirees to get a fixed annual payment from the government that they could use to buy traditional Medicare coverage or a private health insurance policy.

SYRIA: Washington is facing increasing pressure to play a bigger role in Syria's ongoing civil war. Obama has called for President Bashar Assad's ouster but has ruled out military intervention in the country. Analysts say that leaves the U.S. with limited options but considerable pressure to force Assad out - or the U.S. could be left with weakened influence in the oil-rich region.

IRAN: The country's quest for a nuclear weapon is likely to occupy much of Obama's foreign agenda as the U.S. applies a combination of economic sanctions, diplomacy and warnings. Obama has said economic sanctions are having an impact. He's said he reserves the right to use force as a last resort to stop Iran, but he believes there is still time for diplomacy and sanctions.

ARAB SPRING: As in Libya, the tumult in the Muslim countries is likely to continue and experts say U.S. influence may be limited. Obama has said the U.S. should support the growth of new democracies while ensuring support for American counterterrorism efforts, making sure that Israel is protected, pushing for the protection of "religious minorities and women" and helping "the economic capabilities" of those nations.