Filed at 10:03 a.m. ET
WASHINGTON (AP) -- The United States faces a ''grave and deteriorating'' situation after nearly four years of war in Iraq, a high-level commission warned bluntly on Wednesday, prodding President Bush to launch a diplomatic offensive to stabilize the country and allow withdrawal of most combat troops by early 2008.
''There is no path that can guarantee success, but the prospects can be improved,'' the commission said after its review of a war that has taken the lives of more than 2,900 U.S. troops and grown so unpopular at home that it helped trigger a Democratic takeover of Congress in last month's elections.
The commission recommended the United States reduce ''political, military or economic support'' for Iraq if the government in Baghdad cannot make substantial progress toward providing for its own security. Portions of the report were obtained by The Associated Press.
President Bush received the report in an early morning meeting at the White House with commission members. He pledged to treat each proposal seriously and act in a ''timely fashion.''
He was flanked by the commission's co-chairmen, former Secretary of State James A. Baker III, and former Rep. Lee Hamilton in a remarkable scene -- a president praising the work of a group that had just concluded his policy had led to chaos.
The report painted a grim picture of Iraq nearly four years after U.S. forces toppled Saddam Hussein. It urged Bush to embrace steps he has thus far rejected, including a call to involve Syria and Iran in negotiations over Iraq's future.
It warned that if the situation continues to deteriorate, there is a risk of a ''slide toward chaos (that) could trigger the collapse of Iraq's government and a humanitarian catastrophe.''
''Neighboring countries could intervene. ... The global standing of the United States could be diminished. Americans could become more polarized,'' commissioners said.
With diplomacy under way, the report said, the U.S. should increase the number of combat and other troops that are embedded with and supporting Iraqi Army units.
''As these actions proceed, U.S. combat forces could begin to move out of Iraq. ... By the first quarter of 2008, subject to unexpected developments in the security situation on the ground, all combat brigades not necessary for force protection could be out of Iraq.''
Baker, Hamilton and the other members of the commission traveled to the Capitol from the White House to present their findings to senior lawmakers. The report makes 79 separate recommendations on Iraq policy, said one official familiar with the work.
The recommendations came at a pivotal time, with Bush under domestic pressure to change course and with the new, Democratic-controlled Congress certain to cast a skeptical look at administration policy.
Additionally, Defense Secretary Donald H. Rumsfeld, the architect of the administration's war policy, has resigned. His replacement, Robert Gates, is on track for Senate confirmation this week after a remarkable assessment of his own -- that the United States is not winning the war.
Bush has rejected establishing timetables for withdrawing the 140,000 U.S. troops and has said he isn't looking for ''some kind of graceful exit out of Iraq.''
There was no letup in the killing in Iraq, where a mortar attack killed at least eight people and wounded dozens in a secondhand goods market. Police said the shelling was followed closely by a suicide bombing in the Sadr City Shiite district of the capital.
It was the type of violence that has led many to declare that Iraq is in the throes of a civil war -- an assessment that Bush has refused to accept.
By whatever name, Baker, Hamilton and the other eight members of the commission said the status quo was unacceptable.
''The situation in Iraq is grave and deteriorating,'' they warned.
''Violence is increasing in scope and lethality. It is fed by a Sunni Arab insurgency, Shiite militias, death squads, al-Qaida and widespread criminality. Sectarian conflict is the principal challenge to stability.''
Bush said the report ''gives a very tough assessment of the situation in Iraq. It is a report that brings some really very interesting proposals, and we will take every proposal seriously and we will act in a timely fashion.''
He also urged members of Congress to give serious consideration to the recommendations.
''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 commission's recommendation to have U.S. forces embedded with Iraqi units reflects an approach the military already has been emphasizing in recent months. But administration officials say Iraqis are not yet ready to go it alone against the insurgency.
The commission also recommended a renewed push to resolve the Arab-Israeli conflict, saying the United States cannot otherwise achieve its goals in the Middle East.
U.S. allies in the region, including the powerful Sunni leadership in Saudi Arabia, say the Arab-Israeli conflict underlies other Mideast problems and that rancor from the impasse makes other issues harder to solve.
The commission recommended that a ''diplomatic offensive'' be aimed at building an international consensus for stability in Iraq, and that it include every country in the region.
The United States accuses Syria and Iran of bankrolling terrorism and stirring up trouble in the region. The United States has had no diplomatic ties to Iran for nearly three decades, and pulled its ambassador from Syria last year.
Still, the commission said, ''Given the ability of Iran and Syria to influence events within Iraq and their interest in avoiding chaos in Iraq, the United States should try to engage them constructively.''
Ahead of the report's release, the White House said it would consider talking to Iran and Syria if the commission recommended it.
Yet the administration's overall tone has been one of skepticism about reaching accommodation with Tehran and Damascus. Administration officials have suggested there is more to lose than to gain by rewarding Iran and Syria with high-profile discourse with American diplomats, and warn that Iran in particular could try to use contact with U.S. officials to gain leverage in ongoing separate diplomacy over its nuclear program.