WASHINGTON, D.C.: With nearly 100 new members, the US Congress convened on Thursday (Friday in Manila) fresh from the year-end “fiscal cliff” fiasco, as lawmakers cast a wary eye towards the tough budget battles ahead.

Twelve freshman senators and 82 newly elected lawmakers in the House of Representatives took the oath of office, eager to make the 113th Congress more productive than the 112th, whose two years were marred by mind-numbing partisan gridlock and record public disapproval.

President Barack Obama’s Democrats enjoyed modest gains in both chambers, but the balance of power remains divided on Capitol Hill: Democrats control the Senate, while Republicans hold sway in the House, where John Boehner kept his job as speaker.

There was little expectation that he would lose the leadership role, but Republican infighting over backing a fiscal cliff deal that hikes taxes on the wealthy triggered speculation about Boehner’s hold on the gavel.

Lawmakers burned the midnight oil as they approved a deal to prevent $500 billion in tax increases and spending cuts from kicking in on January 1, and possibly tipping the US economy back into recession.

But larger budget battles are on the horizon, particularly over US borrowing, an extension of the government’s 2013 budget, and the now-looming spending reductions set to hit the Pentagon and most domestic programs.

Financial markets in Europe and the US cooled on Thursday over the last-minute agreement, after initial stock surges greeted the deal on Wednesday.

Senate Minority Leader Mitch McConnell welcomed the new members, and offered warm words to fellow Republican Senator Mark Kirk who made an emotional return Thursday after spending most of 2012 recovering from a stroke.

He also acknowledged that his last-gasp deal forged with Vice President Joe Biden was an “imperfect” one that went against Republican no-new-taxes orthodoxy.

But with the battle over taxes behind them—the deal raises rates on individuals earning over $400,000 and on couples earning more than $450,000—McConnell was eyeing the coming bout over spending and the debt ceiling.

“The president knows as well as I do what needs to be done. He can either engage now to significantly cut government spending or force a crisis later,” McConnell said. “It’s his call.”

Obama resumed his Hawaii vacation hours after Congress approved the fiscal cliff deal late on New Year’s Day, and signed it into law on Wednesday by auto pen.

But Biden was on hand to swear in the new senators, including five women, bringing to a record 20 the number of female senators, as well as Tim Scott, the first black Republican in the Senate since 1979.

Asked about the looming fiscal fights, Biden expressed confidence that the White House and lawmakers would overcome their differences.

Senate Majority Leader Harry Reid said that his party will hold firm during the coming budget debates.

“Democrats will continue to stand strong for the principle of balance,” he said. “Any future budget agreements must balance the need for thoughtful spending reductions with revenue from the wealthiest among us and closing wasteful tax loopholes.”

The deal averted a financial crunch that had global repercussions, but the International Monetary Fund, rating agencies and analysts have warned that the critical problem of deficits and debt still hang over the US economy.