"And the victory of freedom in Iraq will strengthen a new ally in the war on terror, inspire democracy reformers from Damascus to Tehran, bring more hope and progress to a troubled region," he said. In a challenge to Iran's government, he told the country's citizens: "As you stand for your own liberty, America stands with you."

Bush also promised to push forward for Mideast peace, including $350 million in aid to the Palestinians.

"The goal of two democratic states, Israel and Palestine, living side by side in peace, is within reach, and America will help them achieve that goal," the president said.

With more than 1,400 Americans killed in Iraq and the United States spending more than $1 billion a week on the war, Bush urged Congress to support his request for an additional $80 billion. "During this time of war, we must continue to support our military and give them the tools for victory," he said.

While key allies like Germany and France opposed the war, Bush said his administration "will continue to build the coalitions that will defeat the dangers of our time."

House Minority Leader Nancy Pelosi, delivering the Democratic response, challenged Bush on Iraq.

"We all know that the United States cannot stay in Iraq indefinitely and continue to be viewed as an occupying force," she said. "Neither should we slip out the back door, falsely declaring victory but leaving chaos . . . We have never heard a clear plan from this administration for ending our presence in Iraq."

Emboldened by his re-election, Bush called on lawmakers to move on several controversial fronts, including liberalizing the nation's immigration laws, imposing limits on medical malpractice lawsuits, simplifying taxes and extending the life of the tax cuts enacted during his first term.

He also urged passage of long-stalled energy legislation and promised to send Congress a budget next week that holds discretionary spending below inflation. Warning Congress that it will face painful choices, Bush said his budget would substantially reduce or eliminate more than 150 federal programs.

Bush said his wife would lead a nationwide effort to reduce gang violence by encouraging young people to remain crime-free. In a nod to conservatives, he renewed support for a constitutional amendment to ban gay marriage.

Transforming Social Security is a political gamble for Bush and for Republican allies wary of taking big political risks. While Bush cannot run for another term, most GOP lawmakers face re-election next year and are nervous about tampering with a system that Americans like and see no immediate need to overhaul.

Democrats, on the other hand, face a risk of appearing as obstructionists if they simply oppose all of Bush's plan.