Last Chance for Bush to Redefine Legacy

Bush is optimistic about achieving some kind of agreement with the Israelis and Palestinians on a Palestinian state to live side-by-side with Israel, but the senior White House official said the president recognizes that the step would be affected by the waning political strength of Israeli Prime Minister Ehud Olmert.

Former President Bill Clinton also attempted to broker a peace agreement between the Israelis and the Palestinians. Bush, who recently returned from a multi-country trip in the Middle East, believes history may be on his side.

"The difference between now and the end of the Clinton administration is that [PLO leader Yasser] Arafat is gone. Arafat didn't deliver for Clinton, and now there are Palestinians who want a democratic Israel," said a senior White House official.

As for Iran, Bush believes it is in the best interest of the nation to leave the possibility of an attack on the table while diplomatic efforts are being pursued, if Iran does not respond to international pressure to cease its nuclear activities.

The president believes "our intelligence isn't worth a damn inside Iran," a senior White House official told ABC News. "We're not inside the Iranian government... we're reading tea leaves."

Bush and his team of three speech writers have been honing this year's State of the Union address since December.

During his almost eight-year presidency, Bush has framed ambitious agenda items in the State of the Union, including deep tax cuts, vast changes in federal social programs, expansions of executive power and a broad remaking of energy and education policies.

But the president's second term has been defined by an unpopular war, low approval ratings and a midterm election that gave a slim majority of Democrats control of Congress.

The address comes as Bush slides increasingly into lame-duck territory, racking up miles globe-trotting around the world focusing on foreign relations, and as the nation is increasingly focused on the 2008 presidential election.

After more than seven years in the White House, the president faces a Congress led by Democrats, and an American public that largely believes the war in Iraq was a mistake and that is worried about the economy.

Seventy-seven percent of Americans believe the country is headed off on the wrong track — the most since the government shut down briefly in 1996, according to anABC News/Washington Post poll released earlier this month.

A majority of Americans, 66 percent, continues to disapprove of the way Bush is handling his job, and 64 percent said the war in Iraq was not worth fighting. By far the most pressing concern on the minds of Americans, however, was the flagging economy.

The president is expected to spotlight his economic plan as he gives the speech that could be his last, best chance to define his legacy.

ABC News' Ann Compton contributed to this report.

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