Contact: White House, Office of the Press Secretary, 202-456-2580

WASHINGTON, Dec. 20 /Standard Newswire/ -- The following text is of today's press conference by President Bush:

Indian Treaty Room

10:00 A.M. EST

THE PRESIDENT:  Thank you all.  Good morning.  This week I went to the Pentagon for the swearing-in of our nation's new Secretary of Defense, Bob Gates.  Secretary Gates is going to bring a fresh perspective to the Pentagon, and America is fortunate that he has agreed to serve our country once again.  I'm looking forward to working with him.

Secretary Gates is going to be an important voice in the Iraq strategy review that's underway.  As you know, I've been consulting closely with our commanders and the Joint Chiefs of Staff on the strategy in Iraq, and on the broader war on terror.  One of my top priorities during this war is to ensure that our men and women wearing the uniform have everything they need to do their job. 

This war on terror is the calling of a new generation; it is the calling of our generation.  Success is essential to securing a future of peace for our children and grandchildren.  And securing this peace for the future is going to require a sustained commitment from the American people and our military. 

We have an obligation to ensure our military is capable of sustaining this war over the long haul, and in performing the many tasks that we ask of them.  I'm inclined to believe that we need to increase in the permanent size of both the United States Army and the United States Marines.  I've asked Secretary Gates to determine how such an increase could take place and report back to me as quickly as possible. 

I know many members of Congress are interested in this issue, and I appreciate their input.  As we develop the specifics of the proposals over the coming weeks, I will not only listen to their views, we will work with them to see that this becomes a reality.

Two thousand and six was a difficult year for our troops and the Iraqi people.  We began the year with optimism after watching nearly 12 million Iraqis go to the polls to vote for a unity government and a free future.  The enemies of liberty responded fiercely to this advance of freedom.  They carried out a deliberate strategy to foment sectarian violence between Sunnis and Shia.  And over the course of the year, they had success.  Their success hurt our efforts to help the Iraqis rebuild their country.  It set back reconciliation; it kept Iraq's unity government and our coalition from establishing security and stability throughout the country. 

We enter this new year clear-eyed about the challenges in Iraq, and equally clear about our purpose.  Our goal remains a free and democratic Iraq that can govern itself, sustain itself, and defend itself, and is an ally in this war on terror.

I'm not going to make predictions about what 2007 will look like in Iraq, except that it's going to require difficult choices and additional sacrifices, because the enemy is merciless and violent.  I'm going to make you this promise:  My administration will work with Republicans and Democrats to fashion a new way forward that can succeed in Iraq.  We'll listen to ideas from every quarter; we'll change our strategy and tactics to meet the realities on the ground.  We'll never lose sight that on the receiving end of the decisions I make is a private, a sergeant, a young lieutenant or a diplomat who risks his or her life to help the Iraqis realize a dream of a stable country that can defend, govern and sustain itself.

The advance of liberty has never been easy, and Iraq is proving how tough it can be.  Yet, the safety and security of our citizens requires that we do not let up.  We can be smarter about how we deploy our manpower and resources; we can ask more of our Iraqi partners, and we will -- one thing we cannot do is give up on the hundreds of millions of ordinary moms and dads across the Middle East who want the hope and opportunity for their children that the terrorists and extremists seek to deny them, and that's a peaceful existence.

As we work with Congress in the coming year to chart a new course in Iraq and strengthen our military to meet the challenges of the 21st century, we must also work together to achieve important goals for the American people here at home.  This work begins with keeping our economy growing.  As we approach the end of 2006, the American economy continues to post strong gains.  The most recent jobs report shows that our economy created 132,000 more jobs in November alone, and we've now added more than 7 million new jobs since August of 2003.

The unemployment rate has remained low, at 4.5 percent.  A recent report on retail sales shows a strong beginning to the holiday shopping season across the country -- and I encourage you all to go shopping more.

Next year marks a new start with a new Congress.  In recent weeks I've had good meetings with the incoming leaders of Congress, including Speaker-elect Nancy Pelosi and Senate Majority Leader-elect Harry Reid.  We agreed that we've got important business to do on behalf of the American people and that we've got to work together to achieve results.  The American people expect us to be good stewards of their tax dollars here in Washington.  So we must work together to reduce the number of earmarks inserted into large spending bills, and reform the earmark process to make it more transparent and more accountable.

The American people expect us to keep America competitive in the world.  So we must work to ensure our citizens have the skills they need for the jobs of the future, and encourage American businesses to invest in technology and innovation.  The American people expect us to reduce our dependence on foreign oil, and increase our use of alternative energy sources.  So we must step up our research and investment in hydrogen fuel cells, hybrid plug-in and battery-powered cars, renewable fuels like ethanol and cellulosic ethanol and biodiesel, clean coal technology and clean sources of electricity like nuclear, solar and wind power. 

Another area where we can work together is the minimum wage.  I support the proposed $2.10 increase in the minimum wage over a two-year period.  I believe we should do it in a way that does not punish the millions of small businesses that are creating most of the new jobs in our country.  So I support pairing it with targeted tax and regulatory relief to help these small businesses stay competitive and to help keep our economy growing.  I look forward to working with Republicans and Democrats to help both small business owners and workers when Congress convenes in January.

To achieve these and other key goals we need to put aside our partisan differences, and work constructively to address the vital issues confronting our nation.  As the new Congress takes office, I don't expect Democratic leaders to compromise on their principles, and they don't expect me to compromise on mine.  But the American people do expect us to compromise on legislation that will benefit the country.  The message of the fall election was clear:  Americans want us to work together to make progress for our country.  And that's what we're going to do in the coming year.

And now I'll be glad to answer some questions.  Terry.

Q    Mr. President, less than two months ago at the end of one of the bloodiest months in the war, you said, "Absolutely we're winning."  Yesterday you said, "We're not winning, we're not losing."  Why did you drop your confident assertion about winning?

THE PRESIDENT:  My comments -- the first comment was done in this spirit:  I believe that we're going to win; I believe that -- and by the way, if I didn't think that, I wouldn't have our troops there.  That's what you got to know.  We're going to succeed.

My comments yesterday reflected the fact that we're not succeeding nearly as fast as I wanted when I said it at the time, and that conditions are tough in Iraq, particularly in Baghdad.  And so we're conducting a review to make sure that our strategy helps us achieve that which I'm pretty confident we can do, and that is have a country which can govern itself, sustain itself and defend itself.

You know, I -- when I speak, like right now, for example -- I'm speaking to the American people, of course, and I want them to know that I know how tough it is, but I also want them to know that I'm going to work with the military and the political leaders to develop a plan that will help us achieve the objective.  I also want our troops to understand that -- that we support them; that I believe that tough mission I've asked them to do is going to be accomplished, and that they're doing good work and necessary work. 

I want the Iraqis to understand that we believe that if they stand up, step up and lead, and with our help we can accomplish the objective.  And I want the enemy to understand that this is a tough task, but they can't run us out of the Middle East, that they can't intimidate America.  They think they can.  They think it's just a matter of time before America grows weary and leaves, abandons the people of Iraq, for example.  And that's not going to happen. 

What is going to happen is we're going to develop a strategy that helps the Iraqis achieve the objective that the 12 million people want them to achieve, which is a government that can -- a country that can sustain itself, govern itself, defend itself, a free country that will serve as an ally in this war against extremists and radicals.

Caren.

Q    Thank you, Mr. President.  If you conclude that a surge in troop levels in Iraq is needed, would you overrule your military commanders if they felt it was not a good idea?

THE PRESIDENT:  That's a dangerous hypothetical question.  I'm not condemning you, you're allowed to ask anything you want.  Let me wait and gather all the recommendations from Bob Gates, from our military, from diplomats on the ground; I'm interested in the Iraqis' point of view; and then I'll report back to you as to whether or not I support a surge or not.  Nice try.

Q    Would you overrule your commanders --

THE PRESIDENT:  The opinion of my commanders is very important.  They are bright, capable, smart people whose opinion matters to me a lot.

Bret.

Q    Thank you, Mr. President.  You have reached out to both Sunni and Shia political leaders in recent weeks, and now there's word that the Grand Ayatollah Ali al Sistani is supporting a moderate coalition in Iraq.  Has the U.S. reached out to him?  How important is he in the equation moving forward?  And what do you say to people who say more troops in Iraq would increase the sectarian split and not calm things down?

THE PRESIDENT:  Well, I haven't made up my mind yet about more troops.  I'm listening to our commanders; I'm listening to the Joint Chiefs, of course; I'm listening to people in and out of government; I'm listening to the folks on the Baker-Hamilton commission about coming up with a strategy that helps us achieve our objective.  And so as I said to Caren -- probably a little more harshly than she would have liked -- hypothetical questions, I'm not going to answer them today.  I'm not going to speculate out loud about what I'm going to tell the nation, when I'm prepared to do so, about the way forward.

I will tell you we're looking at all options.  And one of those options, of course, is increasing more troops.  But in order to do so, there must be a specific mission that can be accomplished with more troops.  And that's precisely what our commanders have said, as well as people who know a lot about military operations.  And I agree with them that there's got to be a specific mission that can be accomplished with the addition of more troops before I agree on that strategy.

Secondly, whatever we do is going to help the Iraqis step up.  It's their responsibility to govern their country.  It's their responsibility to do the hard work necessary to secure Baghdad.  And we want to help them.

Thirdly, I appreciate the fact that the Prime Minister and members of the government are forming what you have called a moderate coalition, because it's becoming very apparent to the people of Iraq that there are extremists and radicals who are anxious to stop the advance of a free society.  And therefore, a moderate coalition signals to the vast majority of the people of Iraq that we have a unity government, that we're willing to reconcile our differences and work together, and in so doing, will marginalize those who use violence to achieve political objectives.

And so we support the formation of the unity government and the moderate coalition.  And it's important for the leader Sistani to understand that's our position.  He is a -- he lives a secluded life, but he knows that we're interested in defeating extremism, and we're interested in helping advance a unity government.

Kelly.

Q    Good morning, Mr. President.  Your former Secretary of Defense, Donald Rumsfeld, advocated for a lighter, more agile military force.  Have you now concluded that that approach was wrong?

THE PRESIDENT:  No, I strongly support a lighter, agile army that can move quickly to meet the threats of the 21st century.  I also supported his force posture review and recommendations to move forces out of previous bases that were there for the Soviet threat, for example, in Europe.  So he's introduced some substantive changes to the Pentagon, and I support them strongly.

However, that doesn't necessarily preclude increasing end strength for the army and the Marines.  And the reason why I'm inclined to believe this is a good idea is because I understand that we're going to be in a long struggle against radicals and extremists, and we must make sure that our military has the capability to stay in the fight for a long period of time.  I'm not predicting any particular theater, but I am predicting that it's going to take a while for the ideology of liberty to finally triumph over the ideology of hate.

I know you know I feel this strongly, but I see this  -- we're in the beginning of a conflict between competing ideologies -- a conflict that will determine whether or not your children can live in peace.  A failure in the Middle East, for example, or failure in Iraq, or isolationism, will condemn a generation of young Americans to permanent threat from overseas.  And therefore, we will succeed in Iraq.  And therefore, we will help young democracies when we find them -- democracies like Lebanon; hopefully a Palestinian state living side-by-side in peace with Israel; the young democracy of Iraq. 

It is in our interest that we combine security with a political process that frees people, that liberates people, that gives people a chance to determine their own futures.  I believe most people in the Middle East want just that.  They want to be in a position where they can chart their own futures, and it's in our interest that we help them do so.

Jim.

Q    Thank you, Mr. President.  In the latest CBS News poll, 50 percent of Americans say they favor a beginning of an end to U.S. military involvement in Iraq; 43 percent said, keep fighting, but change tactics.  By this and many other measures, there is no clear mandate to continue being in Iraq in a military form.  I guess my question is, are you still willing to follow a path that seems to be in opposition to the will of the American people?

THE PRESIDENT:  I am willing to follow a path that leads to victory, and that's exactly why we're conducting the review we are.  Victory in Iraq is achievable.  It hasn't happened nearly as quickly as I hoped it would have.  I know it's -- the fact that there is still unspeakable sectarian violence in Iraq, I know that's troubling to the American people.  But I also don't believe most Americans want us just to get out now.  A lot of Americans understand the consequences of retreat.  Retreat would embolden radicals.  It would hurt the credibility of the United States.  Retreat from Iraq would dash the hopes of millions who want to be free.  Retreat from Iraq would enable the extremists and radicals to more likely be able to have safe haven from which to plot and plan further attacks.

And so it's been a tough period for the American people.  They want to see success.  And our objective is to put a plan in place that achieves that success.  I'm often asked about public opinion.  Of course, I want public opinion to support the efforts.  I understand that.  But, Jim, I also understand the consequences of failure.  And, therefore, I'm going to work with the Iraqis and our military and politicians from both political parties to achieve success. 

I thought the election said they want to see more bipartisan cooperation; they want to see us working together to achieve common objectives.  And I'm going to continue to reach out to Democrats to do just that.

Sheryl.

Q    Thank you, Mr. President.  Mr. President, Lyndon Johnson famously didn't sleep during the Vietnam War, questioning his own decisions.  You have always seemed very confident of your decisions, but I can't help but wonder if this has been a time of painful realization for you as you, yourself, have acknowledged that some of the policies you hoped would succeed have not.  And I wonder if you can talk to us about that.  Has it been a painful time?

THE PRESIDENT:  Yes, thanks.  The most painful aspect of my presidency has been knowing that good men and women have died in combat.  I read about it every night.  My heart breaks for a mother or father, or husband or wife, or son and daughter; it just does.  And so when you ask about pain, that's pain.  I reach out to a lot of the families, I spend time with them.  I am always inspired by their spirit.  Most people have asked me to do one thing, and that is to make sure that their child didn't die in vain -- and I agree with that -- that the sacrifice has been worth it.

We'll accomplish our objective; we've got to constantly adjust our tactics to do so.  We've got to insist that the Iraqis take more responsibility more quickly in order to do so.

But I -- look, my heart breaks for them, it just does, on a regular basis.

Q    But beyond that, sir, do you question your own decisions?

THE PRESIDENT:  No, I haven't questioned whether or not it was right to take Saddam Hussein out, nor have I questioned the necessity for the American people -- I mean, I've questioned it; I've come to the conclusion it's the right decision.  But I also know it's the right decision for America to stay engaged, and to take the lead, and to deal with these radicals and extremists, and to help support young democracies.  It's the calling of our time, Sheryl.  And I firmly believe it is necessary.

And I believe the next President, whoever the person is, will have the same charge, the same obligations to deal with terrorists so they don't hurt us, and to help young democracies survive the threats of radicalism and extremism.  It's in our nation's interest to do so.  But the most painful aspect of the presidency is the fact that I know my decisions have caused young men and women to lose their lives.

McKinnon.

Q    Thank you, Mr. President.  You mentioned a need earlier to make sure that U.S. workers are skilled, that U.S. businesses keep investing in technology.  You also mentioned that you want targeted tax and regulatory relief for small businesses in the coming year.  Can you describe those ideas a little more?  And also, can we really afford new tax breaks at this point, given the cost of the war on terror?

THE PRESIDENT:  John, the first question all of us here in Washington ask is, how do we make sure this economy continues to grow.  A vibrant economy is going to be necessary to fund not only war, but a lot of other aspects of our government.  We have shown over the past six years that low taxes have helped this economy recover from some pretty significant shocks.  After all, the unemployment rate is 4.5 percent and 7 million more Americans have been -- have found jobs since August of 2003.  And we cut the deficit in half a couple of years in advance of what we thought would happen.

The question that Congress is going to have to face, and I'm going to have to continue to face is, how do we make sure we put policy in place to encourage economic growth in the short-term, and how do we keep America competitive in the long-term?

Part of the competitive initiative, which I have been working with Congress on, recognizes that education of young -- of the young is going to be crucial for remaining competitive.  And that's why the reauthorization of No Child Left Behind is going to be an important part of the legislative agenda going forward in 2007. 

I also spoke about energy in my opening remarks.  In my judgment, we're going to have to get off oil as much as possible to remain a competitive economy.  And I'm looking forward to working with Congress to do just that.  I'm optimistic about some of the reports I've heard about new battery technologies that will be coming to the market that will enable people who -- people to drive the first 20 miles, for example, on electricity -- that will be the initial phase -- and then up to 40 miles on battery technologies.  That will be positive, particularly if you live in a big city.  A lot of people don't drive more than 20 miles, or 40 miles a day.  And therefore, those urban dwellers who aren't driving that much won't be using any gasoline on a daily basis, and that will be helpful to the country.

I'm pleased with the fact that we've gone from about a billion gallons of ethanol to over 5 billion gallons of ethanol in a very quick period of time.  It's mainly derived from corn here in the United States.  But there's been great progress.  And we need to continue to spend money on cellulosic ethanol.  That means that new technologies that will enable us to use wood chips, for example, or switch grass as the fuel stocks for the development of new types of fuels that will enable American drivers to diversify away from gasoline. 

I spent a lot of time talking about nuclear power, and I appreciate the Congress' support on the comprehensive energy bill that I signed.  But nuclear power is going to be an essential source, in my judgement, of future electricity for the United States, and places like China and India.  Nuclear power is renewable, and nuclear power does not emit one greenhouse gas.  And it makes a lot of sense for us to share technologies that will enable people to feel confident that the nuclear power plants that are being built are safe, as well as technologies that will eventually come to fore that will enable us to reduce the wastes, the toxicity of the waste and the amount of the waste.

I'm going to continue to invest in clean coal technologies.  We've got an abundance of coal here in America, and we need to be able to tell the American people we're going to be able to use that coal to generate electricity in environmentally friendly ways. 

My only point to you is we've got a comprehensive plan to achieve the objective that most Americans support, which is less dependency upon oil.

I think it's going to be very important, John, to keep this economy growing -- short-term and long-term -- by promoting free trade.  It's in our interest that nations treat our markets, our goods and services the way we treat theirs.  And it's in our interest that administrations continue to promote more opening up markets.  We've had a lot of discussions here in this administration on the Doha Round of WTO negotiations.  And I'm very strongly in favor of seeing if we can't reach an accord with our trading partners and other countries around the world to promote -- to get this round completed so that free trade is universal in its application. 

Free trade is going to be good for producers of U.S. product and services.  But free trade is also going to be the most powerful engine for development around the world.  It's going to help poor nations become wealthier nations.  It's going to enable countries to be able to find markets for their goods and services so that they can better grow their economies and create prosperity for their people.

So we've got a robust agenda moving forward with the Congress, and I'm looking forward to working with them.  And there are a lot of places where we can find common ground on these important issues.

Continued (See part 2 of 2)