| President George W. Bush in the Senate chamber before his address to a joint session of Congress on Capitol Hill, Washington. (AFP)
Washington, Feb. 3(Reuters): President George W. Bush yesterday issued pointed challenges to overseas adversaries and friends alike but treated North Korea more gently as he laid out a second-term agenda that stressed domestic issues over foreign policy.
Bush, who three years ago said Iran and North Korea were part of an 'axis of evil,' now emphasises diplomacy in dealing with both countries.
Bush also proposed the biggest overhaul of social security since its 1935 creation last night in his State of the Union speech, and for the first time said he would consider limiting future retirement benefits as part of a solution.
'Fixing social security permanently will require an open, candid review of the options,' he told wary members of Congress and millions of Americans watching on television in a speech that laid out a blueprint for his second term.
Bush said any permanent solution must include his 10-year, $754 billion plan for private retirement accounts, a programme Democrats bitterly oppose. To soothe the nerves of those at or near retirement he said he would leave current benefits alone for Americans 55 or older.
Bush promised that following Iraq's watershed elections last Sunday the US would begin a 'new phase' and increasingly focus on training Iraqi forces to allow for an eventual US pullout.
He rejected appeals from some Democrats for setting a troop withdrawal timetable. 'We will not set an artificial timetable for leaving Iraq, because that would embolden the terrorists and make them believe they can wait us out,' he said.
Many Republicans put ink on their index fingers to show solidarity with Iraqis, who used this as a mark to prove they had voted, and held them high when Bush talked about the elections. However, near the northern oil city of Kirkuk today, insurgents dragged Iraqi soldiers off a bus and shot 12 of them dead in the bloodiest attack on security forces since the elections, the Iraqi army said.
Bush reflected a growing optimism over a possible end to West Asia conflict, saying the goal of Palestinian statehood 'is within reach' and promising $350 million in extra aid for the Palestinians in a bid to create a favourable environment for peace negotiations.
Across West Asia, Bush said the US expected a 'higher standard of freedom' and specifically mentioned the need for two key US allies, Saudi Arabia and Egypt, to embrace democratic reforms. He called on Syria 'to end all support for terror and open the door to freedom.'
Facing significant opposition to his goal of revamping social security this year, Bush said the system is 'headed toward bankruptcy' and he wanted to work with both parties in Congress to 'find the most effective combination of reforms.'
Some Democrats groaned and hissed when Bush said the system would be bankrupt by 2042. The issue is one of the most contentious in American politics and Democrats have accused Bush of engaging in scare tactics to convince people the system is in crisis.
Senator John Kerry of Massachusetts, who lost the presidential election to Bush in November, said in a statement after the speech that the best way for bipartisanship is to work together 'on the real crises facing our country, not to manufacture an artificial crisis.'
Bush called Iran the 'world's primary state sponsor of terror' and reiterated his accusations that the country is striving to develop nuclear weapons, a charge denied by Iran.
He also promised to 'stand with' the Iranian people in their quest for liberty, a veiled jab at the republic's ruling clerics.
But Bush talked of multilateral efforts to settle the differences with Iran. 'We are working with European allies to make clear to the Iranian regime that it must give up its uranium enrichment programme and any plutonium reprocessing, and end its support for terror,' Bush said.
Last month, vice-president Dick Cheney said Iran was at the top of the Bush administration's list of world trouble spots and said Israel might 'act first' to eliminate any nuclear threat from Tehran.
On North Korea, Bush referred to the administration's aim of restarting the stalled nuclear talks involving the US, North and South Korea, China, Russia and Japan. 'We are working closely with governments in Asia to convince North Korea to abandon its nuclear ambitions,' Bush said.