Battles on budget and healthcare loom for Obama

After a good end to a not-so-good year, President Barack Obama faces even tougher challenges in the months ahead as looming fights over spending and healthcare set the stage for a difficult 2012 re-election campaign.

When a new Congress convenes on Wednesday, Obama will be confronted for the first time by a Republican majority in the House of Representatives and a strengthened Republican minority in the Senate.

Whether he strikes deals with those newly powerful foes and continues the momentum built in December's "lame-duck" Congress or becomes mired in another bout of legislative gridlock could be a critical factor in Obama's prospects for a second term.

"The political climate is about to completely change for Obama, and how those budget and healthcare battles play out will really determine his status for the race in 2012," said Steven Schier, a political analyst at Carleton College in Minnesota.

A burst of accomplishment in Congress during the final days of December produced a tax deal with Republicans, repeal of the ban on gays serving openly in the military and ratification of a new nuclear arms treaty with Russia.