Most U.S. combat troops could be out of Iraq by the first quarter of 2008 under the "way forward" envisioned by the high-profile panel.

BY MIKE ALLEN/WASHINGTON

The long-awaited report by a commission headed by former Secretary of State James Baker gives a bleak assessment of the trajectory in Iraq and suggests that most U.S. combat troops should be withdrawn in the next 16 months, according to excerpts provided to TIME. Baker presented the report to President Bush this morning. "The situation in Iraq is grave and deteriorating," the report's executive summary says. "There is no path that can guarantee success, but the prospects can be improved."

The White House has said the President will consider the report's recomendations along with an administration review and advice from Congress, and has promised significant changes in strategy. They're needed, according to Baker. "If the situation continues to deteriorate, the consequences will be severe," the report continues. "A slide toward chaos could trigger the collapse of Iraq's government and a humanitarian catastrophe. Neighboring countries could intervene. Sunni-Shia clashes could spread while Al Qaeda could win a propaganda victory and expend its base of operations. The global standing of the United States could be diminished. Americans could be become more polarized."

Perhaps the most controversial passage envisions a rapid drawdown of U.S. troops. "The primary mission of U.S. forces in Iraq should evolve to one of supporting the Iraqi army, which would take over primary responsibility for combat operations," the report says. "By the first quarter of 2008, subject to unexpected developments in the security situation on the ground, all combat bridges not necessary for force protection could be out of Iraq."

The President met in the Cabinet Room with Baker and the co-chairman of the congressionally formed Iraq Study Group, former Rep. Lee Hamilton. The President was flanked by Baker and Hamilton as he told reporters that the report "will be taken very seriously by this administration" and that the White House "will act on it in a timely fashion."

"This report gives a very tough assessment of the situation in Iraq," Bush said. "It is a
report that brings some really very interesting proposals." He also urged Congress to take it seriously. "While they won't agree with every proposal, and we probably won't agree with every proposal, it nevertheless is an opportunity to come together and to work together on this important issue," he said. "The country, in my judgment, is tired of pure political bickering that happens in Washington. And they understand that on this important issue of war and peace it is best for our country to work together."

Baker and Hamilton write in an introduction that all options have not been exhausted, and contend that it's still possible to pursue different policies that could give Iraq an opportunity for a better future. They say the report makes clear that the Iraqi government and people also must act to achieve a stable and hopeful future. They acknowledge that their recommendations will require "a tremendous amount of political will and cooperation" between the executive and legislative branches, and say that success "depends on unity of the American people in a time of political polarization." They call for "broad sustained consensus," and say the aim of the report is to move the country in that direction.

The report calls on the administration to "immediately" launch a "new diplomatic offensive" to build international consensus for stability in Iraq and the region. The report says that every country with an interest in Iraq, and key states in the region, should form a "support group" to reinforce security and national reconciliation within Iraq. As expected, Baker and Hamilton contend that the U.S. cannot achieve its goals in the Middle East unless it deals with the Israeli-Arab conflict and regional instability. "We need a renewed and sustained commitment to comprehensive peace plan on all fronts," the panelists write.

Baker and Hamilton also call for continued economic, political and military support for Afghanistan, including resources that may become available as combat forces are moved out of Iraq. The report adds that the U.S. "must adjust its role" to encourage the Iraqi people to take control of their country, and that the Iraq government should accelerate responsibility for security by increasing the number and quality of Iraqi army brigades. It's clear the Iraqi government will need U.S. assistance for some time to come especially in carrying out new security responsibilities, the report says. But the panelists say the U.S. "must not make open-ended commitments to keep large numbers of troops deployed in Iraq." That will be welcome news for the President, the military and Congress. However, that is certainly easier said than done.

A week-long trip to Asia takes the President to the capital of his least favorite analogy. But he says a lost war shows the necessity of steadfastness in a new one.

BY MIKE ALLEN/HANOI

Around President Bush's White House the past three years, "Vietnam" has been viewed, by and large, as an emotional buzzword used by journalists to draw comparison to the Iraq war that the administration views as inapt and inaccurate. In the Rose Garden in June, Ann Compton of ABC News asked the President if he saw, a parallel between what's going on in Iraq now and Vietnam. "No," the President replied, pointing out that Iraq has a government chosen in an election that drew 12 million voters. "Obviously," he added, "there is sectarian violence, but this is, in many ways, religious in nature, and I don't see the parallels."

Now, he does. Not the quagmire alleged by the critics, of course. But as the President arrived Friday morning for three days in Vietnam, Jennifer Loven of The Associated Press asked if this nation of river deltas holds any lessons for the debate over Iraq. "Yes," he answered. "One lesson is, is that we tend to want there to be instant success in the world, and the task in Iraq is going to take a while." Bush went on to say that Iraq is part of a "great struggle" between "radicals and extremists, versus people who want to live in peace." He said overcoming "the ideology of hate" with freedom is going to take a long time. "Yet, the world that we live in today is one where they want things to happen immediately," he said.

The President said at a later appearance that he has been "reading and studying" about the country. "One of the most poignant moments of the drive in," he said at the Sheraton Hanoi, "was passing the lake where John McCain got pulled out of the lake. And he's a friend of ours; he suffered a lot as a result of his imprisonment, and yet, we passed the place where he was, literally, saved, in one way, by the people pulling him out." The Arizona Senator paid a visit in 2000 to Truc Bach Lake where, as a Navy lieutenant commander, he had ejected after being hit by a Soviet-made surface-to-air missile during his 23rd bombing run over North Vietnam. He was taken to the "Hanoi Hilton" and was a prisoner of war for five years, two of them in solitary confinement. The attack is now commemorated with a stone marker emblazoned "U.S." that was visible from the presidential motorcade.

From Bush's window, he could also see bicycles and motorcycles laden with precisely balanced baskets, buckets and bundles that would tax some small cars. Even Vietnam's capital city remains relatively primitive, with hundreds of individual power lines running along the street like great skeins of spaghetti. Bush is in Hanoi for the Asia Pacific Economic Cooperation forum, and he was greeted at an arrival ceremony at the European-style Presidential Palace, which originally was the living and working quarters for the French Governor General of Indochina. A young girl presented the President with a bouquet at the ceremony, and he bent over to kiss her before reviewing military troops. The First Lady, Laura Bush, accompanied him and got a big bouquet from a young boy. Outside the gates, four U.S. flags and four Vietnamese flags marked the historic visit.

Within hours of his arrival, Bush was photographed at the palace in front of a huge bust of Ho Chi Minh, the revolutionary Communist leader. Bush planned a meeting with the Secretary General of the Communist Party, at party headquarters. White House Press Secretary Tony Snow said the meeting was being held because Vietnam is a Communist state. Snow told reporters aboard Air Force One that the Iraq and Vietnam wars are "not comparable" situations, and said he had not heard any concerns from Republicans about the President appearing with trappings of the Communist Party. "Vietnam is now making a transition, we're certainly encouraging that reform in many ways," Snow said, noting that the President will be discussing his "freedom agenda" for encouraging democracy abroad. It was that agenda that got the President into Iraq. Bush plans a breezy, aggressive schedule for the new few days, eager to show he can salute progress in Vietnam without getting bogged down in suggestions that he may be stuck in one of his own.

After five days of giddiness, Democrats express dismay that their new House leader has thrown herself into the fight to become her Number 2, creating a potentially lose-lose situation where she could either be defeated in her first public contest since the election, or brand herself as a dove.

BY MIKE ALLEN/WASHINGTON

As she awaited her new grandchild after her election-night triumph, Speaker-to-be Nancy Pelosi was lauded as one of the most consequential Democrats in history and treated as a foreign head of state at the White House, where she got the big chair in front of the Oval Office fireplace. But the dour Republicans and worried Democrats have switched places, however momentarily, now that she has unexpectedly injected herself into the bitter race to be her underling, the House Majority Leader. "This is the first time I've ever seen a leader insert themselves like this," said a veteran of many Democratic leadership races. Pelosi's camp says it's like a high-school election and won't be a defining moment for her leadership.

It all happened with a five-paragraph letter circulated to the press on Sunday night. The current number two in House leadership, House Minority Whip Steny Hoyer (D-Md.), says he has enough votes to score the majority-leader slot when Democrats meet on Thursday. But he has been challenged by Rep. John Murtha (D-Pa.), a decorated Vietnam War veteran who stunned colleagues last year by calling for the immediate withdrawal of U.S. troops from Iraq. Pelosi wrote a letter endorsing Murtha, noting pointedly in the first sentence that he had asked for it. Praising his "courageous leadership" on Iraq "strong voice for national security," she wrote that she is "pleased to support" his candidacy.

A Democratic strategist, speaking on condition of anonymity because of ties to both sides, said the next 24 hours will be crucial. "Murtha needed to change the dynamic because he was losing," the strategist said. "Steny had a majority before the letter -- he needs to hold on to his people. The question is, Does she do more than the letter, like make calls?"

The incoming Speaker credits Murtha for changing the debate on Iraq, which helped make Democrats a credible alternative to Republicans in the election, according to an official familiar with her position. "She also places a high premium on loyalty," the official said. "When he asked for her public endorsement, she was going to give it to him. He's with the left of the caucus on one issue -- the war. Other than that, he's far to the right." The official added that the squabble will not affect long-term public perceptions of the Speaker-to be. "This is like a high-school election," the official said. "People inside the Beltway will buzz about it for a week, but then no one will remember what happened."

Hoyer says he has commitments from 21 out of the 41 freshmen who will definitely be seated, and more than half the members of the caucus. He released a statement Sunday night saying: "Nancy told me some time ago that she would personally support Jack. I respect her decision as the two are very close."

Even so, many Democrats thought she would stay out of the race. "We had a great deal of unity last week and encouraging Murtha to run against Hoyer really threatens to fray that unity at a time when we want to project an image of being strong and together," said one Democratic aide. "It doesn't bode well for our first 100 hours. To be a majority party, you have to bring disparate groups together, and she's been given credit for being very good at that. If she departs from that record or that approach, it's harder to stay a majority."

The contest is complicated because it is more personal than it is ideological. Republicans want to label Pelosi a San Francisco liberal, while Murtha is pro-gun and pro-life. "People were surprised that she would so publicly endorse Murtha, particularly because it could end up hurting her," said a Democrat not aligned with either side. "She could lose her first big fight, which is not good for her leadership. But if she didn't publicly support Murtha, it would feed into the perception of her as a liberal - something she has been trying to change over the past couple of months in trying to appear moderate."

Rep. Dennis Cardoza (D-Calif.), an early Hoyer backer, tells TIME that he doesn't think the letter will change votes. "We all believed that Nancy would support Mr. Murtha because of their long personal relationship," he said. "That was all factored in before over half the members committed to Mr. Hoyer. This doesn't diminish Nancy's value as our leader. Leadership races are much more personal than a legislative issue. These are very personal relationships that members build up over time." Of the current leadership team, he added, "I don't know why we would break up something that was so successful."

Another Democratic member said: "There's no one in the caucus who didn't know who Nancy Pelosi was going to vote for."

Hoyer poses a competing power base to Pelosi, and they have not had warm relations. "She wants to purge the leadership of people who disagree with her," said a Democratic official with a front-row seat. "It's about people she can personally control. Hoyer is an excellent public face for the party. She's more a behind-the-scenes player."

Republicans have their own tense leadership battle going on, but the Pelosi letter provided a respite from all the adulation for the Democrats. Said one top Republican aide: "Governing ain't easy."

After maintaining a relentless optimism in the face of ominous polls, Karl Rove tells TIME why Republicans wound up taking a bath on Election Night.

BY MIKE ALLEN/WASHINGTON

At the White House senior staff meeting in the Roosevelt Room at 7:30 a.m. on Wednesday, Chief of Staff Josh Bolten thanked Karl Rove for his hard work in the elections, and the group around the big table burst into spontaneous applause. It was a much-needed moment of cheer for Rove, the President's chief strategist, after Republicans lost the House and were headed toward the same fate in the Senate in midterm congressional elections that turned into a blue rip tide of voter ire.

"The profile of corruption in the exit polls was bigger than I'd expected," Rove tells TIME. "Abramoff, lobbying, Foley and Haggard [the disgraced evangelical leader] added to the general distaste that people have for all things Washington, and it just reached critical mass."

Exit polls showed heavy discontent with the course of the war, and Bush announced the departure of Defense Secretary Donald Rumsfeld the next day. But Rove took comfort in results of the Connecticut Senate race between the anti-war Democratic nominee, Ned Lamont, and Sen. Joseph Lieberman, who ran as an independent after losing the Democratic primary over his support for the war. "Iraq mattered," Rove says. "But it was more frustration than it was an explicit call for withdrawal. If this was a get-out-now call for withdrawal, then Lamont would not have been beaten by Lieberman. Iraq does play a role, but not the critical, central role."

And he does not believe his data let him down. "My job is not to be a prognosticator," he said. "My job is not to go out there and wring my hands and say, 'We're going to lose.' I'm looking at the data and seeing if I can figure out, Where can we be? I told the President, 'I don't know where this is going to end up. But I see our way clear to Republican control.' "

Rove, who is Deputy Chief of Staff and Senior Adviser to the President, had long been warning in speeches that Democrats suffered defeat in 1994 after ossified thinking and an entitlement mentality took over the party: "What I was trying to say was: What happened to them could happen to us," he told TIME.

White House Counselor Dan Bartlett said Bush is "deeply appreciative for the time and effort put in by Karl, and for all the political team's effort." Bartlett pointed to the President's statement at his day-after news conference that as the head of the Republican Party, he shares a large part of the responsibility. "He's not the one that's going to sit there and point fingers at others," Bartlett said.

Despite this week's repudiation of the GOP, Rove said he believes the party can still achieve a long-term majority. "I see this as much more of a transient, passing thing," he said. "The Republican Party remains at its core a small-government, low-tax, limit-spending, traditional-values, strong-defense party. I see the power of the ideas, even in a tough year." He added that he has "fundamental confidence in the power of the underlying agenda of this President," and cited fighting the war on terror, entitlement reform, energy, tax cuts, immigration reform, No Child Left Behind reauthorization, democracy agenda in the Middle East, reducing trade barriers, spending restraint and legal reform.

Rove is famous for his political statistics, and his team has come up with an array of figures to contend that the Republicans' loss of 29 seats in the House and six in the Senate is not so out of whack with the historic norms. In all sixth year midterms, the President's party has lost an average of 29 House seats and 3 Senate seats, according to these figures. In all sixth-year midterms since World War II, the loss was an average of 31 House and 6 Senate seats. And in all wartime midterms since 1860, the average loss was 32 House and 5 Senate seat.

The Republican get-out-the-vote program Rove helped invent precluded even deeper losses, he says. "People were talking 35, 40 or more and it didn't happen," he said. "There were a number of elections which were supposed to be close and ended up not being close."

The Republican National Committee has been pointing out that a small shift in votes would have made a big difference. A shift of 77,611 votes would have given Republicans control of the House, according to Bush's political team. And a shift of 2,847 votes in Montana, or 7,217 votes in Virginia, or 41,537 votes in Missouri would have given a Republicans control of the Senate. In addition, the party has calculated that the winner received 51 percent or less in 35 contests, and that 23 races were decided by two percentage points or fewer, 18 races were decided by fewer than 5,000 votes, 15 races were decided by fewer than 4,000 votes, 10 races were decided by fewer than 3,000 votes, eight were decided by fewer than 2,000 votes and five races were decided by fewer than 1,000 votes.

Rove is an enthusiastic historian, but even he has trouble coming up with a parallel for this wild week. "We may look back and see this as a unique expression," he said. Republicans can only hope.

Exclusive: The Speaker bows out of the Republican leadership after Democrats take his power. The contest to succeed him will help define the Republican Party in a new era of divided government.

MIKE ALLEN/WASHINGTON

House Speaker Dennis Hastert (R-Ill.) will not seek reelection to the Republican leadership when his members return as a minority party after taking heavy losses in Tuesday's elections, a Republican official tells TIME. Hastert, 64, a low-key former high school wrestling coach, was beloved by members as a "good cop," compared to the enforcer style of the longtime number two leader, former Rep. Tom Delay (R-Tex.). But Hastert was badly damaged by questions about how much he had known about former Rep. Mark Foley (R-Fla.) and his contact with pages, and members felt Hastert also handled the aftermath of the revelations clumsily.

The battle to succeed him will be bruising, as members attempt to allocate blame for the Foley mess. Among those seeking to replace him at the top of the House leadership, which will now be the minority leader, are House Majority Leader John Boehner (R-Ohio), now second in the House leadership, and Rep. Mike Pence (R-Ind.), chairman of the House conservative caucus, the Republican Study Committee. Other possible candidates are Rep. Eric Cantor (R-Va.), now chief deputy whip and one of the most popular and hard-working members of the leadership, and Rep. Joe Barton (R-Tex.), now chairman of Energy and Committee.

The Speaker plans to announce his departure this week and perhaps as soon as today, officials said. Leadership elections are scheduled for next Wednesday but are likely to be pushed back to closer to the deadline under party rules, which is Dec. 20.

Hastert had long planned not to seek reelection to his House seat in 2008. His officials biography says he is the first Republican Speaker in more than a century and one of only two Republicans to preside over consecutive electoral seat gains in the U.S House of Representatives, and is also one of two Republicans to be reelected Speaker for four consecutive terms.