The president also sought common ground on plans dealing with education and immigration, speaking to a Congress completely controlled by the Democratic Party for the first time in his presidency.
Mr. Bush acknowledged the new political landscape and congratulated the Democratic majority for the party's gains in the November elections, but said, "Our citizens don't much care which side of the aisle we sit on -- as long as we are willing to cross that aisle when there is work to be done."
Following the president's speech, newly elected Virginia senator James Webb delivered the Democratic response, sharply criticizing Mr. Bush's handling of the war in Iraq and questioning the health of the country's economy. Webb also said that Democrats are looking forward to working with the president on energy issues.
Mr. Bush devoted almost half of his address to the war on terrorism and the nearly four-year-old war in Iraq and said that success in that country was vital to the safety of Americans against the threat of terrorism and to stability in the Middle East.
"Many in this chamber understand that America must not fail in Iraq -- because you understand that the consequences of failure would be grievous and far reaching. The war on terror we fight today is a generational struggle that will continue long after you and I have turned our duties over to others. That is why it is important to work together so our nation can see this great effort through," the president said.
With recently installed Speaker of the House Nancy Pelosi, D-Calif., seated over his left shoulder, the president did not directly address recent Congressional efforts to pass a non-binding resolution opposing the increase of troop levels. Instead, the president defended his plan, saying, "Our country is pursuing a new strategy in Iraq -- and I ask you to give it a chance to work. And I ask you to support our troops in the field -- and those on their way."
The president's plans have raised concerns among some even in his own party. Sen. John Warner, R-Va., a member of the foreign relations committee who was working this week with Democrats and a handful of Republicans to draft the resolution, said in an interview with the NewsHour's Gwen Ifill on Tuesday before the president's speech, that the resolution will "urge [President Bush] to go back and look at all of the options whereby you can possibly employ fewer troops."
Along with announcing plans to increase the size of the Army and Marines by 92,000 over the next five years, the president proposed creating a "special advisory council on the war on terror" composed of members from Congress. He said that the council "will share ideas for how to position America to meet every challenge that confronts us. And we will show our enemies abroad that we are united in the goal of victory."
Speaking from the Capitol, Webb outlined a different direction on Iraq, one that put him clearly at odds with President Bush's strategy.
"The majority of the nation no longer supports the way this war is being fought; nor does the majority of our military. We need a new direction. Not one step back from the war against international terrorism. Not a precipitous withdrawal that ignores the possibility of further chaos," Webb said. "But an immediate shift toward strong regionally-based diplomacy, a policy that takes our soldiers off the streets of Iraq's cities, and a formula that will in short order allow our combat forces to leave Iraq."
On the domestic front, President Bush called on new policies aimed at reducing gasoline consumption by 20 percent over the next 10 years by increasing the use of ethanol and other alternative fuels and raising fuel economy standards for vehicles. Mr. Bush also called for doubling the capacity of the Strategic Petroleum Reserve in an effort to reduce dependency on foreign oil. The president said that his energy initiatives, which would have to be approved by Congress, would also help increase investments in energy technology and research.
"America is on the verge of technological breakthroughs that will enable us to live our lives less dependent on oil. These technologies will help us become better stewards of the environment, and they will help us to confront the serious challenge of global climate change," Mr. Bush said.
On the health of the economy, the president said, "Unemployment is low, inflation is low, and wages are rising. This economy is on the move -- and our job is to keep it that way, not with more government but with more enterprise."
The president proposed three areas of economic reform: eliminating the federal deficit within five years, ending special-interest earmarks and securing Social Security, Medicare and Medicaid benefits.
Webb outlined a different vision of American economy, saying soaring Wall Street numbers were not being reflected in average family incomes.
"Wages and salaries for our workers are at all-time lows as a percentage of national wealth, even though the productivity of American workers is the highest in the world. Medical costs have skyrocketed. College tuition rates are off the charts," he said. "Our manufacturing base is being dismantled and sent overseas. Good American jobs are being sent along with them."
One of most significant direct proposals from the president came in the area of health care coverage. He proposed making employer-financed coverage taxable income after a $7,500 deduction for individuals and $15,000 for families. The president said that this plan would make health care insurance more affordable and would give most workers who receive coverage through their employers a tax cut. The second plan is to give federal funds to states that provide basic private health insurance to their citizens.
The proposal drew sharp criticism from Democrats even before the president officially offered it.
"Under the guise of tax breaks, the president is pursuing a policy designed to destroy the employer-based health care system through which 160 million people receive coverage," Democratic Rep. Pete Stark, chairman of a key House Ways and Means subcommittee, said.
On the topic of education, the president called on Congress to expand the No Child Left Behind Act so that poor students in public schools are allowed to transfer to private schools. Bush also said that schools that have failed to meet goals for several years should be required to change their staff.
On immigration, the president proposed strengthening border security and creating a temporary guest-worker program, which would allow employers to hire guest workers.
"When laws and borders are routinely violated, this harms the interests of our country....Yet we cannot fully secure the border unless we take pressure off the border -- and that requires a temporary worker program," Mr. Bush said.