Pentagon officials said Wednesday that there are currently about 127,000 U.S. troops in Iraq, a drop from more than 130,000 in recent days.

Ham said the decline is due largely to the planned return home of a Pennsylvania National Guard unit -- the 2nd Brigade of the 28th Infantry Division -- which is at the end of its Iraq rotation. He said it should not be interpreted as the beginning of troop withdrawal from Iraq.

Bush said his recent meeting with al-Maliki gave him confidence that the new government will be a capable partner to get the country back on its feet -- but he said the Iraqis still need help from U.S. forces.

"If the United States of America leaves before this Iraqi government can defend itself and sustain itself and govern itself, it will be a major blow in the war on terror," Bush said, pounding his fist on a lectern set up in the Rose Garden.

Bush's news conference lasted nearly an hour and included his trademark teasing of reporters. He complimented one on the fancy handkerchief sticking out of his breast pocket and congratulated another as being knowledgeable for a newcomer to the White House.

Bush also poked fun at a reporter for wearing sunglasses during the news conference -- and later apologized in a phone call after learning that the reporter wore sunglasses because he's losing his sight to an eye disease.

Unlike typical presidential press conferences that tend to be more wide-ranging, most of the questions focused on Iraq.

Bush said U.S. agents collected new intelligence in recent days following last week's air raid that killed Iraqi terrorist Abu Musab al-Zarqawi and are conducting raids to stop further violence.

The president also said that a crackdown in Baghdad that al-Maliki began Wednesday offered the promise of reducing the violence. That crackdown sent tens of thousands of Iraqi police and soldiers patrolling the streets, searching cars and securing roads.

"The terrorists are vulnerable, and we will strike their network and disrupt their operations and continue to bring their leaders to justice," Bush said.

He spoke anew about an idea he first proposed publicly Monday at the Camp David meeting with his war council -- an oil royalty trust that would give citizens across Iraq a stake in how the resources are developed. He suggested it might be structured like Alaska's system, where citizens get a share of the state's royalties from the trans-Alaska oil pipeline.

Bush also said he was impressed with al-Maliki's ideas for reconciliation after the war, including former supporters of Saddam Hussein. Bush suggested he would not like to see terrorists given amnesty as part of the process. "If somebody has committed a crime, I don't know whether or not they'll be that lenient, frankly," Bush said.

A senior White House official said the Iraqis have indicated that they're looking for "models" in national reconciliation. Another official said al-Maliki had inquired whether Bosnians or South Africans might be able to provide expertise.