With lawmakers returning from their Independence Day recess, Congress faces such tough issues as the crisis in medical malpractice insurance (search) while reaching for a historic deal on giving older Americans a prescription drug benefit.

A main task for the House and the Senate before they leave again in August for a month will be advancing the 13 spending bills needed to run the federal government in the budget year starting Oct. 1.

Total spending is to grow by 2.5 percent next year to $785 billion, but there's an ever-tighter squeeze on available money because of fast-rising defense and homeland security needs and shrinking tax receipts.

In the run-up to the 2004 election campaign, politics will enter into every vote. The spending bills in particular will give Democrats a forum for their argument that the Republican pursuit of tax cuts has saddled the nation with a budget deficit projected at $400 billion this year while leaving education, health, veterans and homeland security programs underfunded.

Republicans, in turn, are eager to get a new child tax-credit bill to President Bush before seeing their constituents in August. Under the $350 billion tax cut passed in May, middle-class families in late July will start receiving rebate checks worth up to $400 per child. But millions of families who don't earn enough to pay income taxes won't get anything. Different bills passed by the House and Senate would remedy that.

Congress also could soon send Bush a ban on the procedure opponents call "partial birth abortion" (search) that Republicans have been seeking since winning the House in 1995. President Clinton twice vetoed similar legislation, but Bush is eager to sign it.

Passing the spending bills should be easier than last year, when Democrats controlled the Senate. It wasn't until February, five months after the fiscal year began, that the federal budget was completed.

But the GOP majorities in both the House and Senate are slim, and while Democrats are demanding more for social and security programs, conservative Republicans say they'll fight any backdoor efforts to boost spending.

In April, just two months after the budget was approved, Congress passed an $80 billion emergency measure to pay for the initial costs of the Iraq war and finance anti-terrorism programs. Another supplemental spending package is likely this year to help pay for natural disaster and security needs.

The first business before the House on its return Monday from the Independence Day break was a bill limiting medical malpractice awards. As in past years, however, that measure appears doomed. The House voted in March to cap noneconomic damages from malpractice lawsuits at $250,000, but many Senate Democrats oppose limits on what juries can award and supporters appear to be well short of the 60 votes needed to overcome a Democratic filibuster.

Among other tough legislative issues pending:

-- Democrats continue to block two Bush federal appeals court nominees and strongly oppose efforts by Senate Majority Leader Bill Frist (search), R-Tenn., to change the rules on filibustering nominees.

-- The Senate Judiciary Committee (search) is close to agreement on setting up a $108 billion fund, financed mainly by companies and insurers, to compensate people sickened by asbestos exposure. Past efforts to find a solution acceptable to bankrupt companies and victims' groups have been unsuccessful.

-- The administration has proposed $247 billion for highway projects over the next six years. The House Transportation Committee (search), Republicans and Democrats alike, has talked of raising the federal gasoline tax to pay for it.

-- The Senate already has spent a month on a bill to make the nation more energy independent through increased production and conservation. But 350 pending amendments remain, and last year the Senate worked nearly two months on an energy bill that never made it off Capitol Hill.

-- The two chambers are far apart on the child tax-credit bill. The Senate passed a $10 billion tax credit bill paid for by renewing customs fees, while the House has approved an unpaid-for $82 billion bill to extend the child credit through the decade and make it available to more wealthy couples.

-- Hours before taking their holiday break, both chambers approved $400 billion bills to provide a Medicare prescriptions drug benefit. But reaching a compromise between the two versions could be a slow process.

The House bill passed 216-215 only after GOP leaders persuaded several Republicans to change their votes. Conservatives objected to creating a new entitlement program without subjecting Medicare to more competition from the private sector. But Democrats who helped craft the Senate bill reject efforts to "privatize" Medicare and don't like provisions in the House bill that link drug costs to income levels and set up medical savings accounts.

"This is one of the more complicated bills that we've had probably before the Congress in a decade, and we need to do it right," House Speaker Dennis Hastert, R-Ill., said before the break. "We need to take our time."