The United States will not sit idly by as rogue nations seek to destroy freedom-loving peoples, President Bush warned in his first State of the Union address Tuesday night.

Referring specifically to "axis of evil" members North Korea, Iran and Iraq, Bush said that the United States will work closely with its allies to defeat nations developing weapons of mass destruction, but will also be willing to go it alone.

"We will be deliberate, yet time is not on our side. I will not wait on events while dangers gather. I will not stand by as peril draws closer and closer. The United States of America will not permit the world's most dangerous regimes to threaten us with the world's most destructive weapons," he said.

"Our war on terror is well begun, but it is only begun. This campaign may not be finished on our watch, yet it must be and it will be waged on our watch."

Video: President Bush on rogue nations

Despite a war against terrorism, homeland security shortages and an economic recession, the president said the state of the union has never been stronger.

Video: President Bush on the state of the union

Gathering together the 535 members of Congress, the Supreme Court Justices, members of the Joint Chiefs of Staff, and his Cabinet — save Interior Secretary Gale Norton, who represented the one official who stays behind according to custom — the president's third address to Congress was full of the imagery and command befitting a wartime president.

With Vice President Dick Cheney in his traditional seat over the president's right shoulder, Bush pointed out his guests, including two flight attendants who helped subdue Richard Reid, the Briton accused of trying to set off explosives in his shoes during an American Airlines flight from Paris to Miami; the wife of Johnny "Mike" Spann, the 32-year-old CIA officer killed during a prison uprising in Mazar-e-Sharif; and prime minister of the Afghan interim government Hamid Karzai.

Karzai's entrance distracted members from the introduction of the president's congressional escorts, but his presence was later welcomed by Bush, who said America's new ally against terror would be well served by the former deputy foreign minister.

Afghanistan is only one among many nations helping to rid the world of terrorists, Bush said, warning that the war on terror is only beginning. Among the intelligence that U.S. soldiers in Afghanistan have found in abandoned enemy installments are training and recruitment videos, diagrams of American nuclear power plants and public water facilities, instructions for making chemical weapons, and surveillance maps and descriptions of landmarks in American and other cities throughout the world, Bush revealed for the first time.

"Tens of thousands of trained terrorists still threaten America and the United States will do whatever it takes to stop them," Bush said. "Thousands of dangerous killers, schooled in the methods of murder, often supported by outlaw regimes, are now spread throughout the world like ticking time bombs set to go off without warning. These enemies view the entire world as a battlefield, and we must pursue them wherever they are."

Video: President Bush on terrorist activities

To do so, the president proposed the largest increase in defense spending in two decades. So far, the United States has spent $30 million a day to fight the war.

The increased defense budget includes money for "the best weapons, the best equipment and the best training, and they also deserve another pay raise," Bush said.

Video: President Bush on defense spending

The president formally submits his proposed fiscal year 2003 budget next week. The $2.1 trillion request includes a $48 billion increase in defense spending, including a request for $38 billion for homeland security. With a decline in government tax collections compounded with new security needs, the president warned that there will be a small and short-term deficit, something he said could be contained if Congress is fiscally responsible.

Video: President Bush on deficit spending

At the same time, Bush urged Congress to make permanent the 10-year $1.35 trillion tax cut package passed by Congress last year, a sticking point for some Democrats who say breaks for the wealthy will slow the economic revival.

The president disagrees, however, and said in his speech that most Americans were pleased to receive a tax rebate form sent out to all income tax payers last year.

He also urged the Senate to pass an economic stimulus package, a national energy policy and trade promotion authority, all measures that have already passed the House of Representatives.

Video: President Bush on how to create good jobs

Among the few domestic priorities the president did mention was a patients' bill of rights, improved Medicare system, home ownership for minorities, and a cleaner environment.

He proposed expanding the Peace Corps to the Islamic world and suggested that every American volunteer 4,000 hours, or two years, of service to his or her community and nation.

Video: President Bush on community service

Bush also urged Congress to come up with a security system for pension and retirement accounts, a policy that he wants to review in the wake of energy giant Enron's collapse last month that left thousands of stockholders and employees with badly depleted portfolios.

Video: President Bush on domestic priorities

Enron's collapse has had the nation reeling over whether the energy company's political campaign contributions bought favors in Washington. Complaints about Enron's ties to the White House — particularly during the campaign season when Bush received a sizeable contribution and last summer when Cheney included Enron in an energy task force that made national policy recommendations — effectively died down after the White House revealed that Treasury Secretary Paul O'Neill and Commerce Secretary Don Evans both refused to intervene on behalf of Enron with its creditors.

As 11 congressional committees investigate the largest bankruptcy in U.S. history, the president has said that he is angry that shareholders, including his own mother-in-law, got burned during Enron's lightning-speed collapse last fall.

Though the president didn't mention Enron by name, House Minority Leader Dick Gephardt said in the Democratic response to the address that Enron is a reason for campaign finance reform.

"In the next several weeks, the House of Representatives will once again consider campaign finance reform. If the nation's largest bankruptcy, coupled with a clear example of paid political influence, isn't a prime case for reform, I don't know what is."

Gephardt said that Democrats and Republicans stand shoulder to shoulder in the war on terror, and should not stand toe to toe on the economy. Therefore, he proposed a summit at the White House to find ways to "create jobs, reduce the deficit, simplify the tax code, and grow our economy."

But with 77 applause lines and popularity ratings hovering in the low 80 percent range, the night belonged to Bush, who said that America will lead because its values of liberty and justice are "right and true and unchanging to all people everywhere."

Video: President Bush on America's values

The Associated Press contributed to this report.