"No issue in our country is more important than finding an end to this intractable war," said Reid, D-Nev. "Completing the mission in Iraq is the president's job, and we will do everything in our power to ensure he fulfills it." Bush is expected to announce a revised strategy next week for the war, which has claimed the lives of more than 3,000 members of the U.S. armed forces.

The two houses convened at the stroke of noon, under Democratic control together for the first time since 1994.

That meant a return to power for men long used to wielding it. Liberals such as Sen. Edward M. Kennedy of Massachusetts and Rep. John Dingell of Michigan are committee chairmen again, for example.

And it brought reduced circumstances to others - no one more so than Rep. Dennis Hastert, R-Ill., just a member of the ranks after eight tumultuous years as speaker.

By custom, lawmakers brought their children to opening ceremonies in the House, and Pelosi swept into the chamber accompanied by her grandchildren.

Formality reigned, as always, in the Senate, where Vice President Dick Cheney administered the oath of office to 33 new and newly re-elected senators.

Former President Clinton watched from the gallery as his wife, Sen. Hillary Rodham Clinton, was sworn in for a second term from New York.

In a chance encounter, he dodged questions about her presidential ambitions. "I would like not to talk about it today," he said.

It fell to Rep. John Boehner of Ohio, the new House Republican leader, to hand the gavel - symbol of the speaker's authority - to Pelosi. "Whether you're a Republican, Democrat or an independent, this is a cause for celebration," he said, noting her place in history.

But he also gave notice to the party she leads, adding, "Republicans will hold the incoming majority accountable for its promises, and its actions."

Across the Capitol, Sen. Mitch McConnell of Kentucky took over as leader of minority Republicans, and said it was time to put an end to "a culture of partisanship over principle." He said cooperation was clearly possible on minimum wage and lobbying bills, and he added that he hoped the issues of Social Security and immigration would also yield to compromise.

Reid said he was eager for cooperation, and he arranged for a rare closed-door meeting of all senators before the Senate convened to help set a more cordial tone.

Leader of a slender majority, the Nevadan said, "Some may look at this composition as a recipe for gridlock, but I see it as a unique opportunity. ... We must turn the page on partisanship and usher in a new era of bipartisan progress."

He tempered his optimism when referring to Bush - a man he has previously called a loser. "The president has 22 months left in office. If he wants to accomplish anything, he will have to work with us in Congress to pass bipartisan legislation," he said.

In the two months since the election, both Reid and Pelosi have promised longer hours in Congress, an institution where the five-day work week is a rarity.

While Thursday was set aside for ceremony and celebration in the Senate, the House plunged immediately into work on the agenda that Democrats campaigned on last fall.

Despite Republican procedural protests, Democrats said they had the votes to assure passage of rules changes designed to end what they long called a "culture of corruption."

The changes expand restrictions on privately financed trips enjoyed by lawmakers, prohibit travel on corporate jets and require greater disclosure of earmarks, the pet projects inserted into legislation at the behest of individual lawmakers.

House members would still be allowed to take trips financed by foundations that seek to influence public opinion, but only if the ethics committee approves the travel in advance.

Current rules ban congressional travel paid for by lobbyists or foreign governments, and violations of the existing restrictions played heavily in the scandal involving Republican lobbyist Jack Abramoff.

House Democrats have an ambitious agenda for the next few weeks. They have pledged to pass bills to raise the minimum wage, expand the opportunity for federally funded stem cell research, make Medicare prescription drugs cheaper, reduce the cost of student loans, implement anti-terror measures and reduce tax breaks enjoyed by the oil industry - all before Bush goes to the Capitol on Jan. 23 for his State of the Union address.

The Senate operates on a far slower pace, but Reid has said he will attempt to complete work on the early measures. Legislation to crack down on lobbyists will be the first bill brought to the floor next week.

At least one measure - the stem cell legislation - faces a veto threat. Republicans have also hinted Bush would reject a measure that orders the administration to muscle drug companies into lowering their prices for prescriptions filled under Medicare.

The guard changed, too, on the other side of Capitol Hill, where the taciturn but tough-dealing Harry Reid took over as majority leader in the Senate, in which the Democrats hold a 51 to 49 edge (at least as long as the critically ill Tim Johnson of South Dakota, who underwent major brain surgery last month, remains in office).

In the House, there were thunderous cheers from Democrats after Ms Pelosi - resplendent in burgundy suit and trademark pearl necklace, surrounded by her children and holding her youngest grandchild, Paul in her arms - was elected in a traditional hour-long roll-call vote. But proceedings in the Senate were far more demure - low key and typically clubby.

Vice President Dick Cheney, in his constitutional role as President of the Senate, swore in the 33 members elected in the 7 November midterm elections. They are a notable group - among them Hillary Clinton who, if her presumed plans bear fruit, would be moving to the White House in a couple of years, and the indefatigable Robert Byrd of North Virginia. As the oldest member of the chamber, the 89-year-old Mr Byrd will not only become President Pro Tempore of the Senate, third in line to the presidency after Mr Cheney and the newly enthroned Ms Pelosi. He is also now the longest-serving senator in US history. He was first elected in 1958 and is now embarking on his ninth six-year term.

In her words after taking the Speaker's gavel, Ms Pelosi promised to foster "partnership not partisanship" in a bid to build a co-operative relationship with the Republican White House in the last two years of President George Bush's term. But she is kicking off the new Democratic era on Capitol Hill with a "100 hour" legislative blitz of heavily Democratic measures, including an increase in the minimum wage, an expansion of embryonic stem-cell research, and a tightening of ethics rules over congressmen's dealings with lobbyists.

Bills will be introduced on a daily basis over the next fortnight and - given the majority's total control of House proceedings - immediately voted through. But there is no guarantee they will become law, given the cumbersome ways of the Senate, and the ever-present threat of a Bush veto.

Bipartisanship, moreover, could be stretched to the limit as soon as next week, when Mr Bush is likely to announce his new Iraq policy, including the dispatch of 20,000 or more troops to the country, a strategy strongly opposed by most Democrats in both the House and Senate.

Thereafter, the congressional session will be increasingly overshadowed by the 2008 presidential race, which starts in earnest over the next couple of months. At least seven senators in addition to Ms Clinton, as well as two members of the House, have either announced or are mulling runs. If the Congress of Ms Pelosi and Mr Reid performs well, it can only enhance the prospects of a Democrat returning to the White House after an eight- year interval.

How big a blow is it for the White House?

A huge one, that Mr Bush and his top strategist Karl Rove certainly weren't expecting. After a series of high-profile scandals, and a general feeling they had been around too long, Republicans were braced for losing the House. But loss of a 10-seat majority in the 100-seat Senate was a shock. The only consolation is they might conceivably regain that majority back in the months ahead, depending on the health of South Dakota Democrat Tim Johnson, who suffered a severe brain illness in December. His condition is still listed as critical. If he dies or is forced to resign, a replacement would be named by the state's Republican governor, who would presumably appoint a Republican. That would create a 50-50 split with Vice President Dick Cheney holding the tie breaking vote. But the Democrats will do anything to avoid this. Expect an "El Cid strategy" where even lifeless, the political warrior is strapped into the saddle and sent into battle.

What exactly are the Democrats planning?

Nancy Pelosi, the incoming Speaker (and the first woman to hold the third-ranking post under the US constitution) has mapped out an agenda of largely populist measures the House will pass during an initial "100 Hours" legislative blitz. This will start with new ethics rules governing lawmakers' ties with lobbyists, followed by the first increase in the minimum wage since 1997, bills expanding embryonic stem cell research, moves to lower drug prices and cut tax breaks for energy companies, and allow the government to negotiate lower prescription drug prices. The Democrats also want to restore 'pay-as-you-go' rules for federal spending, whereby any tax cut or spending increase would be offset by other tax increases or spending cuts. They also say they will pass a bill implementing unfulfilled recommendations of the 9/11 Commission, thus bolstering the party's national security credentials. All this is supposed to happen over the first 100 hours of floor session, in practice over the next fortnight, and before Mr Bush delivers his State of the Union address on 23 January.

Exactly what will they be able to do?

Certainly not everything they want. The minimum wage proposal already has Mr Bush's grudging support, while the new ethics rules, banning gifts and meals aid by lobbyists, will certainly go through. The rest is more problematic. Mr Bush used his only veto thus far to block an earlier bill passed by the Republican-controlled Congress on stem cell research. Even though the President has never been as weak, there is no reason to suppose he won't veto a repeat measure. The 9/11 Commission pledge looks good on paper; in practice turf battles on Capitol Hill will prevent the streamlining of Congressional oversight of intelligence that was a key recommendation of the 2004 report.

There are two other obstacles in Ms Pelosi's way. One is the Presidential veto. In both House and Senate, the Democrats are far short of the two-thirds majority required to override. The other is the hybrid nature of Congress. Strict procedural rules in the House mean the majority party can ram through almost anything it likes. Senate rules, however, offer endless opportunities for delay by the minority, above all the filibuster which only a 60-vote "super-majority" can break.

Even with a fit Mr Johnson, the Democrats only have 51 votes. On top of that, there is a conservative-liberal split in Democratic ranks on key social issues like gay rights and abortion. Thus, important legislation is likely to pass only on a bipartisan basis. For all the fine promises to co-operate, expect normal partisan politics to resume shortly - especially with a Presidential election on the horizon.

So is there any chance of improving the tarnished image of Congress?

Frankly, not much. Americans were disgusted with the outgoing 'do-nothing' Republican-run 109th Congress, which in its final year sat for just 102 days. By the end, its approval rating of only 25 per cent made even George W Bush look like a rock star. The ethics rule changes are the bare minimum required, after the Jack Abramoff and Randy 'Duke' Cunningham scandals, which saw two Republican Congressmen convicted of bribe-taking and influence-peddling. But "draining the swamp," as Ms Pelosi promises, requires draining a Democratic swamp as well.

Republican lobbyists have lost the clout they gained under the former (now disgraced) House majority leader Tom "the Hammer" DeLay. But their Democratic counterparts are emerging into the sunshine, fully expecting their piece of the action. The fact is that money is so vital for US politics that the role of the lobbyists, in terms of fundraising, is irreplaceable.

And for their pious talk, this is payback time for Democrats - in the House especially - after 12 years of being steamrollered by Republicans. Expect collision and stalemate, and renewed public grumbling about "those politicians in Washington".

But what about Iraq?

This could produce the most momentous clash of all. Mr Bush and the executive branch he heads still decide Iraq policy. But his expected proposal next week for a 20,000-plus troop "surge" in Iraq is regarded with deep scepticism not only by Democrats but also by many Republicans on Capitol Hill. Iraq could trigger the real nightmare for a highly unpopular "lame duck" President - that moderate Republicans, looking to their own survival in 2008, could make common cause with Democrats.

Even so, however many klieg-light hearings the Democrats convene to scrutinise Iraq policy, they will not use either of the truly drastic options theoretically open to them - an initiation of impeachment proceedings against Mr Bush for his mendacious handling of pre-war intelligence or a cut-off of funding for the war that would instantly bring the troops home. The first is "off the table" Ms Pelosi has said. The second, given the sacrosanct status of the military, is unthinkable.

Can the Democrats make a real difference?

Yes...

* America is yearning for change, and the opportunity is there for the Democrats if they wish to grasp it

* Mr Bush is so weak politically that he will not be able to block everything the Democrats seek to accomplish

* The Democrats need results to bolster their chances of recapturing the White House and retaining Congress in 2008

No...

* Blunders already made by the new Speaker of the House, Nancy Pelosi, show she will be unable to control her troops

* The party's wafer-thin majority in the Senate gives Republicans a blocking minority on anything of importance

* Although the Democrats abhor Mr Bush's Iraq policy, they have no agreed alternative to replace it with

The biggest novelty of all however, is that George Bush will for the first time be facing a House and Senate both run by the Democrats, setting the stage for almost inevitable confrontation between the White House and the legislature for the last two years of Mr Bush's final term.

As the two sides made their final preparations for the new session, both made symbolic appeals for bipartisanship and co-operation in the public good.

"The next two years can be fruitful ones," Mr Bush wrote in The Wall Street Journal. "We can show people that Republicans and Democrats can come together." Speaking after meeting with his cabinet yesterday on the eve of the new Congress, he urged Democrats to help rein in government spending through the practice of "earmarks", whereby spending projects are secretly slipped into legislation without scrutiny. He also followed several of his predecessors in asking for a "line item veto", allowing him to veto such individual clauses of a measure without killing the entire bill.

But he warned: "If the Congress chooses to pass bills that are simply political statements, they will have chosen stalemate" - a clear threat that he would use his veto to block bills he does not like. With only small majorities in both chambers, the Democrats have no chance of assembling the two-thirds majority required to overrule him. Indeed, the veto shadow hangs over the raft of measures that Ms Pelosi intends to push through the House in its first 100 hours of business in the next two weeks.

They include relatively uncontroversial items such as tighter ethics rules for Congressmen in the wake of recent lobbying scandals, and an increase in the minimum wage from $5.75 (£3) to $7.25 per hour - the first such boost since 1997, and a plan Mr Bush has signalled he will not oppose.

Other proposals are almost certain to run into White House objections, among them a vote on expanding embryonic stem cell research, an idea that has wide public support but which Mr Bush blocked in 2005 on the only occasion he has wielded the veto in his six years in office.

Equally uncertain is the fate of the Democrats' plan to vote down a ban on the government negotiating with the politically powerful pharmaceutical companies to lower drug prices under the Medicare public health programme.

The "100 hour" initiative will also be an early test of how the Democrats intend to run Congress after 12 years in the minority when they were increasingly cut out of the legislative process. During the mid-term campaign, Ms Pelosi and her colleagues promised to give a Republican minority a greater say in shaping legislation. However, many Democrats want the party to give as good as it got.

One thing that will not change is the rules for television coverage of the House, which is currently limited to close-up images of floor speeches. The rules do not allow panning shots that would show that, in 99 cases out of 100, the speeches were made to an empty chamber. C-Span, the network which covers Congress, pleaded for more flexible rules last month.

But Ms Pelosi refused the request, claiming that the present system "best preserved the dignity and decorum" of the House".

But whatever he decides will face intense scrutiny in the new 100th Congress, where many Republicans, as well as Democrats, argue that the administration should start withdrawing troops, rather than sending servicemen into a civil war which any American presence, however large, is powerless to control for long. Those tensions have been exacerbated by the sectarian taunts exchanged at Saddam Hussein's execution on Saturday.

Mr Bush has been careful not to tip his hand. But every sign is that he is leaning towards a temporary "surge" in US strength - 20,000 to 30,000 is the figure most commonly mentioned - above all to regain a grip on Baghdad.

In doing so, he would be sending another signal that he is not inclined to give ground to his critics, or embark on the radical shift in strategy his opponents are demanding.

A taste came last month with the tepid White House reaction to the report of the Iraq Study Group chaired by the former Republican Secretary of State, James Baker, which urged an early start to troop reductions, and the opening of diplomatic contacts with Iran and Syria. The latter step has been ruled out while, in an apparent rejection of a hasty pull-out, the new Defence Secretary, Robert Gates, has warned that an American defeat in Iraq would be "a calamity".

But opposition in Congress, even among Republicans, is strong. Richard Lugar, outgoing chairman of the Senate Foreign Relations Committee, has expressed reservations about a force increase in Iraq, while Chuck Hagel, the Nebraska senator, said such a move would be "folly".

Scepticism will abound too at the Foreign Relations Committee hearings on Iraq, due to start on 9 January and run for three weeks. Joe Biden, the panel's Democratic chairman, says he is "totally" opposed to a troop increase, adding that one would be "contrary to the overwhelming body of informed opinion, both by people inside the administration and outside the administration".

Although a 30,000 increase to the existing deployment of 145,000 troops is feasible, by delaying rotation of units and lengthening tours of duty, many senior generals say it could only be temporary, given the existing overstretch of the military. At some point the troops would have to leave, irrespective of the level of violence at the time.

New figures show that 1,930 Iraqi civilians died in December, which was also the deadliest month in two years for US servicemen, taking the lives of 111 soldiers. Since the 2003 invasion, more than 3,000 have been killed and about 25,000 injured. More American troops would merely invite more casualties, critics contend.

The President's new approach also would signal the abandonment, at least temporarily, of the strategy of turning security over to Iraqi forces. This was the policy favoured by General George Casey, the highest-ranked US general in Iraq.

But for all the Pentagon claims that more and more Iraqi units were now trained for the job, the violence has only increased.

General Casey is now likely to be removed, probably within the next two months, while Lt-Gen John Abizaid, the head of Central Command and in overall charge of the Iraq war, is also due to step down.

After the post-midterm election replacement of Donald Rumsfeld by Robert Gates at the Pentagon, Mr Bush will in effect have installed an entire new leadership of the war.

Former GOP Rules Committee Chairman David Dreier of California said he supports the reforms but complained that the new rules could easily be sidestepped - and that more extensive reforms once demanded by Democrats had been left out.

Many Republicans also were expected to vote for a Democratic proposal to require lawmakers to disclose publicly their want for pet projects - referred to as earmarks in legislative terms - for their districts or states, such as a bridge to a small community in Alaska. Minority Whip Roy Blunt, R-Mo., said Republicans would tend to vote for the earmark reforms despite its linkage to a "pay as you go" rule that would threaten efforts to extend GOP-passed tax cuts that expire at the end of 2010.

The PAYGO rule would require tax cuts to have corresponding cuts in government spending or tax increases elsewhere to pay for them. Likewise, any increase in entitlement programs like Medicare would have to have corresponding tax increases, or equal cuts in other government programs.

"I give them kudos," said Rep. Jeff Flake, R-Ariz., a fierce but sometimes quixotic foe of Congress' earmarking ways. But, he added, "The PAYGO stuff wreaks havoc on tax cuts."

If strictly enforced, the PAYGO rule would make it difficult for Democrats to pass increases in federal benefit programs such as Medicare. In the near term, it would mean Democrats' bill to cut student loan rates will be less generous than they'd like. The rule would also threaten efforts to extend Bush's tax cuts, most of which expire at the end of 2010.

"This is putting the American taxpayer on a collision course with higher taxes," said Paul Ryan of Wisconsin, top Republican on the Budget Committee.

"Today, we are cutting our national credit card," countered Heath Shuler, D-N.C., during floor debate Friday. To underscore the point, Shuler cut a credit card in half at a news conference populated by moderate-to-conservative "Blue Dog" Democrats who are most responsible for implementing the rule.

The PAYGO and earmark proposals come a day after Democrats seized control of Congress for the first time in 12 years, with a jubilant Nancy Pelosi becoming the first woman ever to rise to speaker of the House.

"This is an historic moment - for the Congress, and for the women of this country," Pelosi said Thursday when she took the House gavel. "It is a moment for which we have waited more than 200 years."

NEW SPEAKER: Pelosi promises big results

Pelosi, D-Calif., will exert vast influence over the congressional agenda and stands second in the line of succession to the presidency. In her first step as speaker, she orchestrated bipartisan 430-1 passage of a measure banning lawmakers from accepting gifts and free trips from lobbyists and discounted trips on private planes. Rep. Dan Burton, R-Ind., cast the sole "nay" vote.

The vote, said Majority Leader Steny Hoyer, D-Md., amounted to "sweeping ethics reforms that begin to address some of the most egregious transgressions of the recent past."

Republicans applauded Democrats' efforts to require greater disclosure of lawmakers' earmarks. The Democratic effort largely mirrored a GOP plan passed last year in the wake of the Randy "Duke" Cunningham scandal, in which the former California GOP congressman pleaded guilty to corruption charges for channeling earmarks to defense contractors in exchange for $2.4 million in bribes. Lesser scandals have hit other lawmakers.

Democratic budget hawks, especially the moderate-to-conservative "Blue Dogs," say that restoring the rule is crucial to curbing the budget deficit. Various forms of PAYGO were in place from 1990-2002, however, and Congress often found ways around it.

The version up for a vote Friday can easily be waived. Still, the incoming chairman of the Budget Committee, John Spratt Jr., D-S.C., touted it as better than the status quo.

"You've got to offset those tax cuts," Spratt said. "And if you want to enhance an entitlement, you've got to pay for it."

Democrats left in place - for now - a GOP rule limiting committee chairmen to three two-year terms.

Copyright 2007 The Associated Press. All rights reserved.

Mr Giuliani, who is currently making up his mind whether to run, is at or near the top of every poll of possible candidates for the Republican nomination in 2008, mainly on the basis of his much admired handling of the 11 September attacks and their aftermath. But the 140-page strategy document, obtained by the New York Daily News lists his liabilities as well, including his stormy divorce from Donna Hanover, one of his former wives, his ties to his former aide Bernard Kerik, embroiled in scandal and controversy, and his support for abortion rights, gay civil union and gun control.

While these views give Mr Giuliani cross-party appeal, they may be too much to stomach for conservative Republican primary voters. The document also says that he needs to raise $100m (£50m) to fund a campaign. The document was apparently lost in the luggage of a staff member, before falling into the hands of someone "sympathetic to one of Giuliani's rivals for the White House" who then gave it to the Daily News.

Meanwhile, Barack Obama, the youthful first-term Illinois senator weighing a bid for the Democratic nomination, is coming under fresh scrutiny for admitting that he used cocaine and other drugs when he was student.