WASHINGTON (Reuters) - Fresh from a decisive re-election win, President Barack Obama returns from the campaign trail on Wednesday with little time to savor victory, facing urgent economic and fiscal challenges and a still-divided Congress capable of blocking his every move.
Obama defeated Republican challenger Mitt Romney on Tuesday night after a grueling presidential race and used his acceptance speech in front of a huge cheering crowd in Chicago to strike a conciliatory note toward his political opponents.
But in the cold light of the election's morning-after, it was clear that even though voters have given their stamp of approval for a second Obama term, he could have a hard time translating that into a mandate to push forward with his agenda.
Obama's fellow Democrats retain control of the Senate and Republicans keep the majority in the House of Representatives, giving them power to curb the president's legislative ambitions.
This is the political reality that Obama - who won a far narrower victory over Romney than his historic election as the country's first black president in 2008 - faces when he returns to Washington later on Wednesday.
But that did not stop him from basking in the glow of re-election together with thousands of elated supporters in his hometown of Chicago early on Wednesday.
"You voted for action, not politics as usual," Obama said, calling for compromise and pledging to work with leaders of both parties to reduce the deficit, to reform the tax code and immigration laws, and to cut dependence on foreign oil.
Obama told the crowd he hoped to sit down with Romney in the coming weeks and examine ways to meet the challenges ahead.
But the problems that dogged Obama in his first term, which cast a long shadow over his 2008 campaign message of hope and change, still confront him. He must tackle the $1 trillion annual deficits, rein in the $16 trillion national debt, overhaul expensive social programs and deal with the split Congress.
The immediate focus for Obama and U.S. lawmakers will be to confront the "fiscal cliff," a mix of tax increases and spending cuts due to extract some $600 billion from the economy at the end of the year barring a deal with Congress.
House Majority Leader John Boehner moved swiftly on the fiscal cliff issue, saying he would issue a statement on it on Wednesday, citing "the need for both parties to find common ground and take steps together to help our economy grow and create jobs, which is critical to solving our debt."
Obama also faces looming international challenges like the West's nuclear standoff with Iran, the civil war in Syria, the winding down of the war in Afghanistan and dealing with an increasingly assertive China.
Romney, a multimillionaire former private equity executive, came back from a series of campaign stumbles to fight a close battle after besting Obama in the first of three presidential debates.
But the former Massachusetts governor failed to convince voters of his argument that his business experience made him the best candidate to repair a weak U.S. economy.
The nationwide popular vote remained extremely close with Obama taking about 50 percent to 49 percent for Romney after a campaign in which the candidates and their party allies spent a combined $2 billion. But in the state-by-state system of electoral votes that decides the White House, Obama notched up a comfortable victory.
By early on Wednesday, Obama had 303 electoral votes, well over the 270 needed to win, to Romney's 206. Florida's close race was not yet declared, leaving its 29 electoral votes still to be claimed.
Romney, 65, conceded in a speech delivered to disappointed supporters at the Boston convention center. "This is a time of great challenge for our nation," he told the crowd. "I pray that the president will be successful in guiding our nation.
He warned against partisan bickering and urged politicians on both sides to "put the people before the politics."
The Republican Party, after losing two presidential contests, is now likely to go through a period of painful soul-searching, especially over how it has alienated Hispanic voters, an important constituency in Obama's victory.
'FAILURES OR EXCESSES'
In the election aftermath, there were signs that partisan gridlock would persist in Washington.
Senate Republican leader Mitch McConnell gave no sign that he was willing to concede his conservative principles, in a sign of potential confrontations ahead.
"The voters have not endorsed the failures or excesses of the president's first term, they have simply given him more time to finish the job they asked him to do together with a Congress that restored balance to Washington after two years of one-party control," McConnell said.
Obama's win puts to rest the prospect of wholesale repeal of his 2010 healthcare reform law, which aims to widen the availability of health insurance coverage to Americans, but it still leaves questions about how much of his signature domestic policy achievement will be implemented.
Obama, who took office in 2009 as the ravages of the financial crisis were hitting the U.S. economy, must continue his efforts to ignite strong growth and recover from the worst downturn since the Great Depression of the 1930s. An uneven recovery has been showing some signs of strength but the country's jobless rate, currently at 7.9 percent, remains stubbornly high.
In keeping control of the 100-member Senate, Democrats seized Republican-held seats in Massachusetts and Indiana while retaining most of those they already had, including in Virginia and Missouri.
The Republican majority in the 435-member House means that Congress still faces a deep partisan divide as it turns to the fiscal cliff and other issues.
"That means the same dynamic. That means the same people who couldn't figure out how to cut deals for the past three years," said Ethan Siegel, an analyst who tracks Washington politics for institutional investors.
While the Senate result was no surprise, Republicans had given themselves an even chance of winning a majority, so the night represented a disappointment for them.
U.S. stock futures slipped, the dollar fell and benchmark Treasuries rose after Obama's victory, which investors took to mean no dramatic shift in U.S. economic policy.
International leaders offered their congratulations. Israeli Prime Minister Benjamin Netanyahu, who has had a testy relationship with the U.S. leader, vowed to work with Obama "to ensure the interests that are vital for the security of Israel's citizens.
British Prime Minister David Cameron said Britain and the United States should make finding a way to solve the Syrian crisis a priority following Obama's re-election.
(Reporting by staff in Washington and other bureaus; Writing by Matt Spetalnick; Editing by Frances Kerry and Eric Beech)