Excerpts from the prepared text of President Bush's address last night:

I want to discuss three economic reforms that deserve to be priorities for this Congress.

First, we must balance the federal budget. We can do so without raising taxes. What we need to do is impose spending discipline in Washington, D.C. . . .

Next, there is the matter of earmarks. These special-interest items are often slipped into bills at the last hour - when not even C-SPAN is watching. In 2005 alone, the number of earmarks grew to over 13,000 and totaled nearly $18 billion. . . . The time has come to end this practice. . . .

Finally, to keep this economy strong we must take on the challenge of entitlements. Social Security and Medicare and Medicaid are commitments of conscience - and so it is our duty to keep them permanently sound.

Tonight, I propose two new initiatives to help more Americans afford their own insurance. First, I propose a standard tax deduction for health insurance that will be like the standard tax deduction for dependents. Families with health insurance will pay no income or payroll taxes on $15,000 of their income. Single Americans with health insurance will pay no income or payroll taxes on $7,500 of their income. With this reform, more than 100 million men, women and children who are now covered by employer-provided insurance will benefit from lower tax bills.

At the same time, this reform will level the playing field for those who do not get health insurance through their job. For Americans who now purchase health insurance on their own, my proposal would mean a substantial tax savings - $4,500 for a family of four making $60,000 a year. And for the millions of other Americans who have no health insurance at all, this deduction would help put a basic private health insurance plan within their reach. . . .

My second proposal is to help the states that are coming up with innovative ways to cover the uninsured. States that make basic private health insurance available to all their citizens should receive federal funds to help them provide this coverage to the poor and the sick.

We should establish a legal and orderly path for foreign workers to enter our country to work on a temporary basis. As a result, they won't have to try to sneak in - and that will leave border agents free to chase down drug smugglers, and criminals and terrorists. We will enforce our immigration laws at the work site, and give employers the tools to verify the legal status of their workers.

It is in our vital interest to diversify America's energy supply - and the way forward is through technology. We must continue changing the way America generates electric power - by even greater use of clean coal technology . . . solar and wind energy . . . and clean, safe nuclear power. We need to press on with battery research for plug-in and hybrid vehicles, and expand the use of clean diesel vehicles and biodiesel fuel. We must continue investing in new methods of producing ethanol. . . .

Let us build on the work we have done and reduce gasoline usage in the United States by 20 percent in the next 10 years - thereby cutting our total imports by the equivalent of three-quarters of all the oil we now import from the Middle East.

To reach this goal, we must increase the supply of alternative fuels, by setting a mandatory fuels standard to require 35 billion gallons of renewable and alternative fuels in 2017. . . . At the same time, we need to reform and modernize fuel economy standards for cars. . . and conserve up to 81/2 billion more gallons of gasoline by 2017. . . .

The evil that inspired and rejoiced in 9/11 is still at work in the world. And so long as that is the case, America is still a nation at war. . . .

Al-Qaeda and its followers are Sunni extremists, possessed by hatred and commanded by a harsh and narrow ideology. . . . In recent times, it has also become clear that we face an escalating danger from Shia extremists who are just as hostile to America, and are also determined to dominate the Middle East. Many are known to take direction from the regime in Iran, which is funding and arming terrorists like Hezbollah. . . .

In the sixth year since our nation was attacked, I wish I could report to you that the dangers have ended. They have not. And so it remains the policy of this government to use every lawful and proper tool of intelligence, diplomacy, law enforcement, and military action to do our duty, to find these enemies, and to protect the American people.

Our country is pursuing a new strategy in Iraq - and I ask you to give it a chance to work. And I ask you to support our troops in the field - and those on their way.

The war on terror we fight today is a generational struggle that will continue long after you and I have turned our duties over to others.. . . Both parties and both branches should work in close consultation. And this is why I propose to establish a special advisory council on the war on terror, made up of leaders in Congress from both political parties. . . .

Tonight I ask the Congress to authorize an increase in the size of our active Army and Marine Corps by 92,000 in the next five years. A second task we can take on together is to design and establish a volunteer Civilian Reserve Corps. . . . It would ease the burden on the armed forces by allowing us to hire civilians with critical skills to serve on missions abroad when America needs them.

Read a complete transcript of Bush's speech via http://go.philly.com/sotuEndText