By ANN GEARAN and JIM KUHNHENN

 Associated press Writers

WASHINGTON (AP) --

After the familiar salutation to "my fellow citizens" and a polite thank-you to the man he replaced, President Barack Obama got right to the point.

"That we are in the midst of crisis is now well understood," he said.

It was an inaugural address that laid out his economic challenges with cold-eyed realism. But his remedies - equal parts hope and policy agenda - face a slew of political and practical hurdles. And he offered no specifics to back up his promise to improve America's standing in the world and end a war that he opposed.

Overall, Obama faces not only new troubles but also intractable foreign and domestic problems that have burdened more than one administration before him.

He promised the world that "we are ready to lead once more," a subtle rebuke of Bush administration policies in war and foreign affairs that candidate Obama had called narrow, highhanded or dangerous. Americans, he said, understood that their nation is exceptional more for its purpose than its power.

"Our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint," Obama said.

The words were aimed at ears overseas that never adjusted to Bush's Texas swagger. Fairly or not, to much of the rest of the world Bush was the cowboy who rode roughshod over niceties such as international treaties while imposing American rubrics of national security and lifestyle.

"To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect," Obama pledged.

He followed with an apparent reference to his earlier promises to talk with tyrants or autocrats whom Bush shunned, although he did not name them.

"We will extend a hand if you are willing to unclench your fist," Obama said.

Obama would gain international good will if he offers Iran's clerical leadership a clearer path to more normal relations, including the possibility of presidential-level discussions. But it is not clear - as Bush learned - that Iran is willing to be bought out of an accelerated nuclear program at any price, or that Obama could do much about Iranian support for terror groups.

Obama named names when it came to the wars in Iraq and Afghanistan, but was no more specific about tactics.

He repeated his campaign pledge to quit Iraq responsibly and "forge a hard-earned peace in Afghanistan."

Withdrawing U.S. combat forces from Iraq is a huge logistical challenge but commanders say it can be done on the 16-month timeline Obama wants. If violence spikes again, Obama will have to decide whether to change course.

Obama calls the U.S.-led invasion of Iraq a mistake and has promised to refocus on the Afghan war.

Even the planned doubling of U.S. forces to about 60,000 in Afghanistan isn't likely to have a major effect on an entrenched insurgency in a huge country.

Obama left no doubt about the urgency of his domestic challenges - the lost jobs, the foreclosures, the shuttered businesses, as well as the weaknesses in an expensive health care system and in the nation's schools. "They will not be met easily or in a short span of time," he said.

Obama has already begun to wrestle with the economic crisis. He won congressional release of the second half of the $700 billion financial rescue fund with the promise to reduce foreclosures and to make loans more available to consumers and small businesses. And he is pushing through Congress an economic stimulus package that already stands at more than $825 billion in spending and tax cuts.

In a sweeping passage in his speech, he said:

"The state of the economy calls for action, bold and swift, and we will act - not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together."

In yet another jab at Bush, he promised to "restore science to its rightful place." And he said he would "wield technology's wonders to raise health care's quality and lower its cost.

"We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age."

"And all this we will do," he declared.

It was a bold promise complicated by his need to keep things from getting worse before he can devote himself to making them better.

The government, for instance, already has spent nearly $350 billion on the financial sector, and the credit markets for the most part remain clogged. And questions already have emerged over whether the size of the new stimulus plan is too big to too small, or whether its massive spending will make its way into the economy in time to help it rebound.

And the markets gave Obama no quarter. Financial stocks fell dramatically Tuesday, leading a steep drop on Wall Street, with the Dow Jones industrials down 332 points.

Obama's team has declared that the economic crisis presents the new administration with an opportunity. To that end, his economic recovery plan embraces key pieces of his broader agenda - affordable universal health care and energy independence.

On health, his speech only addressed one aspect of his reforms - using information technology to modernize health care delivery. And his promise to "harness" the sun and wind and soil as an energy option is more lyrical sentiment than national energy policy, which likely would still rely on fossil fuels and nuclear power.

Even with a Democratic Congress to back him up, Obama still will face political pitfalls and roadblocks. He signaled what could be his toughest task, "an end to the petty grievances and false promises, the recriminations and worn out dogmas that for far too long have strangled our politics."

The words are now behind him. His presidency begins.

---

EDITOR'S NOTE - Anne Gearan covers national security policy for The Associated Press. Jim Kuhnhenn has covered Washington politics for 15 years.