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Bush focuses on economy in 'period of uncertainty'

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  • President pushes $150 billion package of tax rebates and other measures
  • Bush vows to veto bills that don't significantly reduce earmarks
  • He asks Congress to make his tax cuts permanent
  • Democrats say they'll work with Bush to help economy
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WASHINGTON (CNN) -- President Bush used his final State of the Union speech Monday to call for a quick shot in the arm for the economy in "a period of uncertainty" and touted last year's progress in the ongoing war in Iraq.

With his approval ratings in the low 30s, an opposition-led Congress and his presidency overshadowed by the race for his successor, Bush offered little new.

But he urged lawmakers to work together to complete unfinished business and called for quick steps to bolster an economy unsettled by a housing and credit crunch.

"At kitchen tables across our country, there is concern about our economic future," the president told the nation in his annual address. Interactive: Bush's message over the years »

"In the long run, Americans can be confident about our economic growth. But in the short run, we can all see that growth is slowing."

The White House and leaders of the House of Representatives agreed on a $150 billion package of tax rebates and other measures aimed at spurring consumer spending and investment -- but the president warned Congress not to "load up the bill" with other measures.

"That would delay it or derail it, and neither option is acceptable. This is a good agreement that will keep our economy growing and our people working, and this Congress must pass it as soon as possible," he said.

Bush said he would cut or eliminate 151 "wasteful or bloated" government programs in his budget for 2009 -- cuts he said would total $18 billion of a budget that amounted to $3 trillion in 2008.

The president demanded Congress rein in "pork-barrel" spending -- money for special projects often slipped into legislation at the last minute -- in next year's spending bills. He vowed to veto any measure that does not cut by half the number and cost of congressional "earmarks."

He said he would order federal agencies to ignore any appropriations that were not directly voted on by Congress, saying that spending undermines "the people's trust in their government."

The plan will not apply to the nearly 12,000 earmarks for fiscal 2008 that passed late last year -- and Democrats were quick to point out that roughly half of those earmarks were sponsored by Republicans, some with White House support.

Bush also urged lawmakers to work together despite the upcoming November elections.

"Let us show our fellow Americans that we recognize our responsibilities and are determined to meet them," he said. "And let us show them that Republicans and Democrats can compete for votes and cooperate for results at the same time."

Democratic congressional leaders said they would work with Bush and with the Republican minority in Congress on a "timely, targeted and temporary" boost for Americans amid the looming slowdown.

"The president's vision tonight may have been too small for many of the challenges we face, but his pledge to 'cooperate for results' is right for the times," House Speaker Nancy Pelosi, D-California, and Senate Majority Leader Harry Reid, D-Nevada, said in a written statement.

In the official Democratic response, Kansas Gov. Kathleen Sebelius said Americans "are not nearly as divided as our rancorous politics might suggest."

"The new Democratic majority of Congress and the vast majority of Americans are ready -- ready to chart a new course," she said.

David Gergen, a former adviser to the Reagan and Clinton administrations, called the address "a modest speech with modest goals." He questioned whether the stimulus package Bush wants is big enough to deal with the oncoming slump.

"It's very unclear whether the president has really come to grips with the seriousness of the economic situation," Gergen said. "There are many in the financial community and many economists who believe we are in a recession, and it's deepening rapidly."

On Iraq, having successfully resisted Democratic efforts to bring the nearly five-year-old war to an end, Bush touted what he called the success of his decision to commit an additional 30,000 troops to the fight last year. But while he said those troops had reversed the bloody tide of sectarian warfare, U.S. troops will still be needed to preserve those gains.

"Our enemies in Iraq have been hit hard," he said. "They are not yet defeated, and we can still expect tough fighting ahead."

Critics said the goal of the U.S. campaign -- to get Iraqi leaders to reach political settlement of the conflict -- has not borne fruit. But Bush said U.S. officials "are seeing some encouraging signs" there, including the movement by Sunni Arab leaders to turn against Islamic jihadists loyal to al Qaeda.

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

He said about 20,000 of the additional troops dispatched last year will be coming home in the coming months, but repeated his stance that further withdrawals from the widely unpopular conflict would be based on the recommendations of U.S. commanders.

Meanwhile, Bush again called on neighboring Iran to halt its uranium enrichment program and warned it to avoid interfering with American operations in the Middle East, telling the Islamic Republic that "America will confront those who threaten our troops, we will stand by our allies, and we will defend our vital interests in the Persian Gulf."

Most of the goals Bush laid out were modest compared to previous years, when he used the State of the Union to sell big projects such as invading Iraq, partially privatizing Social Security or developing alternative fuels -- and many of the concepts Bush included were repackaged.

Bush included a new plug for last year's proposal for tax breaks for individual health insurance, framing it as an expansion of "consumer choice, not government control" -- an implicit jab at Democratic presidential contenders, all of whom advocate universal health care.

A longtime conservative goal -- federally backed vouchers for students to attend private schools -- was repackaged as a $300 million "Pell Grants for Kids" program aimed at keeping religious and parochial schools in inner cities. Video Watch Bush explain his plans for schools »

He threatened to veto any tax increases in his final year and repeated his longstanding call to lawmakers to make permanent the $1.6 billion in tax cuts approved during his presidency. Video Watch Bush pledge to veto tax increases »

He left Congress to deal with two previous goals, an overhaul of U.S. immigration laws and Social Security. White House-backed immigration bills failed in Congress in 2006 and 2007, and Bush's Social Security plan did not make it into a bill.

Bush said Social Security and the health-care entitlements Medicare and Medicaid are forcing "painful choices" without long-term changes.

"I have laid out proposals to reform these programs," he said. "Now I ask members of Congress to offer your proposals and come up with a bipartisan solution to save these vital programs for our children and grandchildren."

Among other proposals in the 53-minute speech, the president:

  • Announced plans to hold the annual North American Summit of U.S., Canadian and Mexican leaders in New Orleans, still rebuilding from the devastation of Hurricane Katrina in 2005. White House spokeswoman Dana Perino said the president decided to hold the summit there to send a signal about the city's redevelopment since the hurricane, which killed more than 1,800 people on the Gulf Coast. The president and top administration officials were widely pilloried for their response to the hurricane, which left more than three-quarters of New Orleans flooded. The government has committed more than $100 billion to reconstruction in the disaster zone, and Bush said, "We reaffirm our pledge to help them build stronger and better than before."
  • Took a swipe at Venezuelan President Hugo Chavez, urging Congress to pass a trade agreement with Colombia or risk emboldening "the purveyors of false populism in our hemisphere."
  • Repeated his goal of reaching a settlement of the decades-old Israeli-Palestinian conflict, including the establishment of a peaceful, democratic Palestinian state, by the end of 2008.
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  • Demanded that Congress permanently revise the Foreign Intelligence Surveillance Act, including legal immunity for telecommunications companies that cooperated with his administration's controversial no-warrant eavesdropping program. Opposition to that provision has stalled the bill in the Senate, and temporary revisions to the Watergate-era law expire Friday.
  • Urged Congress to reauthorize his No Child Left Behind education law, which he called "a bipartisan achievement."
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    CNN's Ed Henry and Jeanne Meserve contributed to this report.

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