By Michael Abramowitz and Dan Eggen
Washington Post Staff Writers
Tuesday, January 29, 2008

President Bush told the American people last night that his strategy to stabilize Iraq is achieving results "few of us could have imagined just one year ago," even as he sought to reassure the public that his new stimulus plan will stave off a recession that threatens to hobble the nation's economy during the final year of his presidency.

Appearing before Congress for his seventh and last State of the Union address, Bush claimed vindication for his controversial decision a year ago to send a "surge" of about 30,000 additional troops to Iraq. "The enemy is still dangerous, and more work remains," Bush acknowledged, but with a decline in the number of high-profile attacks, sectarian violence and civilian deaths, he said, progress is unmistakable.

"Some may deny the surge is working," Bush said, "but among the terrorists there is no doubt. Al-Qaeda is on the run in Iraq, and this enemy will be defeated."

Bush's address highlighted the shifting priorities of an administration that had planned to focus its final year on the war and other international challenges but has found itself moving quickly in the past month to address the growing crisis in the economy. The past year has brought an increasing tide of bad economic news, culminating in last week's global stock market panic over a collapsing housing market and other financial woes in the United States.

The president called on Congress to finish work quickly on a $150 billion stimulus package, urging lawmakers not to "load up" the initiative with measures beyond the tax rebates and business incentives he agreed to last week with House leaders. "That would delay it or derail it, and neither option is acceptable," said Bush, who also repeated his long-ignored call to make permanent his early-term tax cuts.

The president avoided grim economic talk and instead described conditions as mixed. "In the short run, we can all see that growth is slowing," he said. "America has added jobs for a record 52 straight months, but jobs are now growing at a slower pace. Wages are up, but so are prices for food and gas. Exports are rising, but the housing market has declined."

Bush appeared in a cheery mood during his valedictory State of the Union. He chuckled at the partisan rites of the annual speech, in which Democrats and Republicans roared at different junctures, interrupting him with applause more than 70 times in the 53-minute address. His remarks, however, came amid a fierce political campaign season in which many voters are looking beyond the Bush presidency to his potential successors.

In a nod to the political realities, the president did not revive the kind of ambitious reforms on Social Security and immigration that animated his past State of the Union addresses. He offered instead a menu of familiar initiatives, mixed in with modest new proposals on education, social services and assistance for military families, that his aides said stand a reasonable chance of congressional passage before the political conventions start in late August.

One new plan would devote $300 million to new grants for low-income children to attend private schools. The president also proposed writing into law rules that require federal agencies to give equal consideration to religious-based groups providing social services to the poor.

Bush, whose administration has come under fire in recent years over the poor treatment of injured soldiers, also unveiled several initiatives aimed at boosting federal assistance to families of veterans and active service members. One proposal would give hiring preferences throughout the federal government to military spouses; another would allow troops and veterans to transfer unused GI education benefits to spouses and children.

Bush's approach suggested that he remains undaunted by the low approval ratings that have characterized his presidency in recent years. "We have unfinished business before us," the president said, "and the American people expect us to get it done."

Democrats chose a centrist red-state governor, Kathleen Sebelius of Kansas, to respond to Bush's address. She described the stimulus package as only a "temporary fix" and blasted Bush's foreign policy for leaving the nation with "fewer allies and more enemies." But her message also struck a conciliatory tone: "There is a chance, Mr. President, in the next 357 days, to get real results and give the American people renewed optimism that their challenges are the top priority."

The top two congressional leaders, House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry M. Reid (D-Nev.) offered faint praise for Bush. "We agree with the President that we must work together to make progress on our most pressing challenges," they said in a statement. "Yet, tonight, the President offered little more than the status quo. At a time when our economy is on shaky ground and our leadership around the world is eroding, the status quo won't do."

Bush made clear to Democrats that he intends to employ fully the powers of the presidency until his final hours in office. He reiterated his demand that they approve new surveillance legislation by Friday, when a temporary wiretapping law is set to expire. He also said he will use his veto pen and administrative powers to try to rein in the proliferation of "earmarks," the projects inserted by lawmakers into annual spending bills and totaling roughly $17 billion in the last budget.

Bush warned he would veto any spending bill that does not cut in half the number and cost of earmarks from the year before. He also said he will sign an executive order requiring agencies to ignore any earmark not included in the language of legislation. "The people's trust in their government is undermined by congressional earmarks," Bush said.

Bush's pledge was met with skepticism from many Democrats and even some in the GOP, who noted that the practice increased dramatically while Republicans controlled Congress. "The number of earmarks exploded under Republican leadership in the House, and for six years President Bush did nothing to slow their growth," said House Majority Leader Steny H. Hoyer (D-Md.).

In keeping with the traditional civility of the occasion, Bush was greeted warmly as he entered the House chamber. Among the lawmakers present were two of his would-be Democratic successors, Sen. Hillary Rodham Clinton (N.Y.) and Sen. Barack Obama (Ill.).

The White House invited a customary mix of prominent and ordinary citizens to sit with first lady Laura Bush as a way of humanizing some of the broader themes of the president's speech. Last night, the guests included a single mother from Tanzania who benefited from the U.S. global AIDS initiative; the co-chairs of his commission on health care for veterans; and several troops who served with valor in Iraq and elsewhere. Bush did not introduce any of the guests, as he and past presidents have done.

Bush devoted special attention to the two main issues that could shape long-term perspectives on his presidency: the souring economy and the war in Iraq.

On Iraq, Bush made clear he is not ready to accelerate a drawdown of U.S. forces, which are scheduled to return to pre-"surge" levels of 130,000 by mid-summer. He cited a warning from Gen. David H. Petraeus, the top U.S. commander in Iraq, that pulling troops out too quickly risks the recovery of al-Qaeda in Iraq and an increase in violence.

"Members of Congress," he said, "having come so far and achieved so much, we must not allow this to happen."

Democrats challenged Bush's upbeat portrait of conditions in Iraq. While even critics concede violence has ebbed because of the troop increase, many military experts are unsure whether this is a temporary phenomenon. And even senior U.S. military commanders are concerned that the military progress has not been matched by steps to forge a more lasting political accord.

Bush renewed his call to strengthen the No Child Left Behind Act, which set up a system of testing and other benchmarks for the nation's schools, and urged Congress to ratify trade agreements with Colombia, Panama and South Korea. He also promised that the United States will do "everything we can" to achieve a peace deal between Palestinians and Israelis, which has become a major goal in his final year in office.

Bush also proposed to contribute $2 billion over three years to an international clean-energy fund. He will seek additional funds from countries such as Britain and Japan, and a donors' committee will dole the money out in the form of grants, loans and loan guarantees. The money would probably go to firms selling such things as energy-efficient coal plants and would help make those less expensive for buyers from developing countries.

Staff writers Paul Kane, Lyndsey Layton and Steven Mufson contributed to this report.