WASHINGTON – In a sobering assessment of the Iraq war, President Bush acknowledged yesterday that Americans’ resolve has been shaken by grisly scenes of death and destruction and he pointedly criticized the performance of American-trained Iraqi troops. “No question about it,” he said. “The bombers are having an effect.”

At a year-end news conference, the president also refused to say whether his strategy for overhauling Social Security would entail cutting benefits, raising the retirement age, or limiting benefits for wealthier workers. “Don’t bother to ask me,” Mr. Bush said, adding that he would not tip his hand until he starts negotiating with Congress next year.

Mr. Bush said he will submit a federal budget that will cut the deficit in half in five years in part by asking for strict spending discipline. His fiscal 2006 budget is due to Congress in February.

“I will submit a budget that fits the times. We will provide every tool and resource to our military, we’ll protect the homeland, and we’ll meet other priorities of the government,” he said. “It’s going to be a tough budget, no doubt about it.”

For 53 minutes, Mr. Bush fielded questions on international and domestic affairs. It was his 17th formal news conference, held one day before he flies to the presidential retreat at Camp David for a vacation that will stretch into early next year and include a stay at his Texas ranch.

Mr. Bush spoke a day after the deadliest attacks in Iraq since July – killing at least 54 people in Najaf and at least 13 in Karbala – and six weeks before Iraqis vote for a transitional assembly that will choose a president and a government and draft a permanent constitution. American newspapers showed chilling pictures of rebels in the heart of Baghdad executing election workers in cold blood.

“And so the American people are taking a look at Iraq and wondering whether the Iraqis are eventually going to be able to fight off these bombers and killers,” Mr. Bush said in perhaps his clearest expression of frustration with Iraqi forces. Mr. Bush’s strategy calls for American troops to protect Iraq while local police and soldiers are trained to do the job themselves, eventually allowing America to withdraw.

“Now I would call the results mixed in terms of standing up Iraqi units who are willing to fight,” Mr. Bush said in a candid assessment. “There have been some cases where, when the heat got on, they left the battlefield. That’s unacceptable. Iraq will never secure itself if they have troops that, when the heat gets on, they leave the battlefield.”

What is needed, he said, is a better military command structure.

Polls show an erosion in Americans’ confidence that a stable, democratic government will be established in Iraq. “Polls change. Polls go up, polls go down,” Mr. Bush said.

He said he understands why Americans have doubts about Iraq’s ability. “They’re looking on your TV screen and seeing indiscriminate bombings, where thousands of innocent – or hundreds of innocent Iraqis are getting killed.” But Mr. Bush said those pictures do not reflect that 15 of Iraq’s 18 provinces are relatively stable and that small businesses are starting up. “Life is better now than it was under Saddam Hussein.”

“But no question about it. The bombers are having an effect….They’re trying to shake the will of the Iraqi people and, frankly, trying to shake the will of the American people.”

Mr. Bush warned that insurgents would try to delay Iraq’s elections, scheduled for January 30, and intimidate the people. “I certainly don’t expect the process to be trouble-free,” the president said. “Yet I am confident of the result. I’m confident that terrorists will fail, the elections will go forward, and Iraq will be a democracy.” He said he could not predict when American forces could come home.

He renewed his warning to Syria and Iran against “meddling” in Iraq’s political process. “I meant it. And hopefully those governments heard what I said,” Mr. Bush said, without threatening any consequences.

The president expressed fresh hope for peace between Israel and the Palestinians, saying, “We’ve got a good chance to get it done.” He welcomed efforts by Prime Minister Blair to go to the region this week and make plans for a conference to help develop a Palestinian state.

Mr. Bush said he favored diplomatic approaches – rather than regime changes – in Iran and North Korea. He said diplomacy “must be the first choice, always the first choice of an administration trying to solve an issue of…nuclear armament.”

The president defended his failed nomination of a former New York City police commissioner, Bernard Kerik, to be the Homeland Security secretary. Mr. Kerik ultimately withdrew, citing his failure to pay all the required taxes for a family nanny-housekeeper who may have been in the country illegally. The incident raised questions about the ability of the White House to fully vet its nominees.

“In retrospect, he made the right decision to pull his name down,” Mr. Bush said. “The lesson learned is continue to vet and ask good questions.”

On Capitol Hill, House Minority Leader Nancy Pelosi, a Democrat of California, disputed Mr. Bush’s assertion that Social Security is in crisis. She said the Congressional Budget Office has concluded that Social Security is secure for nearly 50 years without any changes. She challenged Mr. Bush to give Congress “a clear and honest accounting of the difficult trade-offs among benefit cuts, tax increases, and a massive escalation of record deficits.”