Democratic presidential candidate John Edwards criticized the Bush administration on Sunday for failing to engage directly with Iran to resolve problems with the Iraq war and Iran's effort to develop nuclear weapons.

"It's a huge strategic mistake not to be dealing directly with Iran," Edwards told the Associated Press in an interview before a campaign event in Dubuque.

"What we should be doing with Iran, both on the Iraq issue and the nuclear issue, is being much smarter than we're being now. We have tools available to us to engage them."

America's relationship with Iran emerged as a hot topic last week amid reports the Iranian government was shipping armor-piercing weapons to militias in Iraq.

Some intelligence reports suggested the shipments were being authorized by top Iranian officials. President Bush accused Iran of providing weapons to hostile Shiite groups, but stopped short of blaming top Iranian leaders.

Edwards said Bush's reluctance to open diplomatic lines with Iran and Syria was costing the United States in its efforts to stabilize Iraq. The former North Carolina senator said the U.S. and its European allies have the leverage and resources to enlist Iran's cooperation.

"The way for America to engage them on this issue is to use the economic tools available ... to make it clear if they are willing to give up their nuclear weapons we are willing to make nuclear fuel available to them," he told the AP.

Edwards said the United States should offer a serious package of economic incentives and make it public, "so the Iranian people, who have not been historically anti-American, know that we've made this offer ... and hopefully drive a deeper wedge between a radical leader (Iranian President Mahmoud Ahmadinejad) and his own people."

Edwards also discussed the Senate's failure Saturday to pass a resolution opposing Bush's plan to increase the number of troops in Iraq. He said it was up to Congress to find other ways to curtail America's involvement.

"That means using its appropriations authority in the Constitution to put a cap on the number of troops in Iraq so they can force (Bush) to start drawing down the number of troops," he said. The reality is the Democrats hold a slim majority in the Senate and such a move would require Republican votes, and any such legislation would face a certain veto by President Bush.

Edwards also addressed criticism aimed at his campaign pledge to fight poverty in America. In recent weeks, Edwards has taken heat for his new multimillion-dollar home in North Carolina, which features a handball court, swimming pool and basketball court.

Laughing at a question about the home, Edwards said the work he and his wife, Elizabeth, have done to help less fortunate people speaks for itself.

"We've shown that commitment through our lives, not just in our public lives but in our private lives as well," he said.