The 108th Congress convenes Tuesday in what seems like a flashback to two years ago, with Republicans again controlling both houses and vowing to fulfill the president's promises.

But the similarities are more illusory than real. The buoyant optimism that surrounded the inauguration of President Bush has eroded, given the grim realities of terrorism, war, a sluggish economy and a return to budget deficits. The task ahead appears far more complicated, difficult and dangerous than it was in January 2001.

Republicans are counting on Bush to lay out a compelling agenda in his State of the Union message later this month, but they concede that dramatic breakthroughs may be difficult.

"I think it's going to be very difficult to get a lot of sweeping change," Sen. Rick Santorum (R-Pa.), the third-ranking Senate Republican leader, said of prospects in that chamber. The margin of GOP control is thinner in the Senate than in the House, and controversial proposals often die there.

The contrast between 2001 and 2003 is likely to be apparent from the start of the session.

Within a few months of beginning the 107th session, Congress had rammed through Bush's $1.35 trillion tax cut and was well on its way to passing his broadly backed program to improve schools.

This year, Congress will first have to clear away a huge stack of unfinished business from last year. It will have to act on long-overdue domestic spending bills, as well as legislation to extend unemployment benefits that expired just after Christmas, before it can take up any new business, such as tax cuts and other initiatives to revive the economy.

Other issues, many of which will spark disputes between the parties, include changes in Medicare to offer a prescription drug benefit and cut costs; fine-tuning of the 1996 overhaul of the welfare system; and reauthorization of transportation programs. Republicans will push for limits on damages from lawsuits, starting with medical malpractice cases; abortion restrictions and a ban on human cloning; expedited action on Bush's judicial nominations; and proposals to encourage energy production, including a renewed effort to open Alaska's Arctic National Wildlife Refuge to oil drilling.

Democrats can be expected to offer alternatives on most key issues; challenge the GOP on spending for education and homeland security; and advocate help for minorities following racially inflammatory remarks that led to the resignation of Sen. Trent Lott (Miss.) as the chamber's Republican leader late last month.

Many initiatives from both parties will be hamstrung by spending constraints that stem from the soft economy, tax cuts and spending increases for the military and homeland security. All will add to deficits that have replaced surpluses of the late 1990s.

Education, health and other social programs are likely to suffer the most, and states will have a hard time persuading Congress to help relieve their fiscal difficulties, which also threaten those programs.

"There's no pot of gold we have to pay for all the education and social programs people want," said Jim Dyer, staff director for Republicans on the House Appropriations Committee.

War with Iraq would likely divert attention from domestic priorities that are not directly related to protecting Americans from terrorism, according to several lawmakers and congressional aides. Congress has already authorized the use of force to oust Iraqi President Saddam Hussein and approved a down payment on the war, but it would be deeply involved in postwar policy, finances and oversight.

The basic political arithmetic also presents problems for Republicans. They have few votes to spare in either chamber, especially in the Senate, where they have a two-vote margin. Although voters in November stripped Senate Democrats of the one-vote majority they gained in 2001 after Sen. James M. Jeffords (I-Vt.) left the Republican Party, Democrats still have more than enough votes to deny Republicans the 60 votes needed to pass most controversial measures.

Another potential impediment to any major breakthroughs is the leadership changes in both houses, especially in the Senate.

Sen. Bill Frist (R-Tenn.), who will replace Lott as Senate majority leader, is only in his second term and has no experience leading the often-balky Senate. However, he is popular among colleagues and has close ties with the White House. The No. 2 Republican leader, Sen. Mitch McConnell (Ky.), is also new to his position, but he is an experienced Senate floor operator.

Senate Democrats could also see changes in leadership if their leader, Sen. Thomas A. Daschle (S.D.), steps down to pursue the Democratic presidential nomination in 2004. Sens. Harry M. Reid (Nev.) and Christopher J. Dodd (Conn.) are competing to succeed him. Reid, the No. 2 Democratic leader, is regarded as the favorite.

The Senate also faces a possible slow start on judicial nominations and major legislation if the two parties do not reach a quick agreement on how to divvy up committee funding. Republicans, citing one set of precedents, are demanding two-thirds of the committee budgets. Democrats, citing other precedents, say the portions should more closely reflect the 51-49 breakdown of the Senate.

Senate rules require that nothing changes from the previous Congress until a new organizing resolution is passed. As a result, until Democrats and Republicans cut a funding deal, Democrats will continue to control the committees and the 10 new senators will be without committee assignments. And no action would be likely on conservative judicial nominations.

In the House, Rep. J. Dennis Hastert (R-Ill.) will remain as speaker, but Rep. Tom DeLay (R-Tex.) will replace retiring Rep. Richard K. Armey (R-Tex.) as majority leader. Rep. Nancy Pelosi (D-Calif.) will succeed Rep. Richard A. Gephardt (D-Mo.) as Democratic leader.

With polls showing strong approval for Bush, and with the White House looking toward reelection in 2004, lawmakers expect the president to set the tone for the session, lay down priorities and establish limits with his veto pen.

"Much of the agenda will be driven by the president, not only because he's up for reelection, but also he has the megaphone and support and confidence of the American people," said Rep. Deborah Pryce (R-Ohio), incoming chairwoman of the House Republican Conference.

Even Republicans appear unsure about specifics of the agenda, and some independent observers of Congress say the results are likely to hinge on whether Bush seeks consensus or confrontation with the Democrats.

"If he takes some risks with his own [conservative] base, he can force the Democrats to legislate with him," said Thomas E. Mann, a senior fellow at the Brookings Institution. "But if he plays the same game of words vs. deeds, rhetoric vs. policy, it could be pretty bloody."

A Republican legislator made the same point, but he put the onus on Democrats. "If the other party wants to cooperate, we can get a lot done," said Sen. Jon Kyl (R-Ariz.), chairman of the Senate Republican Policy Committee.

Congress's first order of business is likely to be passage of a stop-gap funding bill to finance the government through January, while lawmakers try to pass the 11 domestic spending bills that should have been enacted by Oct. 1. Lawmakers are planning an omnibus spending package and are considering procedural shortcuts to avoid a rank-and-file rebellion over what many lawmakers regard as a shortchanging of education and other popular programs. Until agreement is reached, $34 billion in new spending for homeland security will be beyond reach, said Dyer, the appropriations staff director.

Congress also plans swift action on a bill to extend federal unemployment benefits, which expired for nearly 800,000 jobless workers Dec. 28 after Congress became deadlocked over details of an extension. Major differences remain, but Bush has weighed in on behalf of an extension. A compromise is likely, with payments retroactive to late December.

A bigger fight is in store for the economic package. Bush is planning about $300 billion in tax cuts, focusing on relief from the levy on corporate dividends. Democrats will push for tax relief for the less affluent and possibly for new spending to create jobs. Some action is considered likely.

"The stimulus package is almost a sure thing right now," said Rep. Robert T. Matsui (Calif.), a senior Democratic member of the House Ways and Means Committee. However, procedural obstacles could slow passage, delaying the impact.

Sen. Bill Frist (R-Tenn.), who is replacing Sen. Trent Lott as majority leader, is only in his second term and has no leadership experience.If Sen. Thomas A. Daschle (D-S.D.) steps down as minority leader to run for president in 2004, the Democrats will face their own upheaval.