WASHINGTON (CNN) -- The Iraq Study Group's report given to President Bush on Wednesday says the United States needs to change its strategy to tackle the "grave and deteriorating" situation in Iraq.
Failure to halt the crisis could bring severe consequences to Iraq, the broader region and the United States, the bipartisan panel warned in a report handed to Bush at the White House.
Although panel co-chairs James Baker and Lee Hamilton said in an introductory letter to the report there is no "magic formula to solve the problems of Iraq," the report calls for a "diplomatic offensive" and changing the role of U.S. troops from a combat to an advisory role. (View the complete report -- PDF)
"The current approach is not working and the ability of the United States to influence events is diminishing," Hamilton said in presenting the report. "Our ship of state has hit rough waters. It must now chart a new way forward."
The group's co-chair, said, however, that "not all options have been exhausted."
Among the group's most important recommendations: a change in the primary mission of U.S. forces in Iraq that will allow the United States to move forces out responsibly; prompt action by the Iraqi government to achieve milestones, particularly reconciliation; and new diplomatic actions in Iraq and in the region.
Former Secretary of State James Baker and co-chair with Hamilton, said later in the news conference: "We do not recommend a stay-the-course solution. In our opinion, that approach is no longer viable."
The report suggests: "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."
"At that time, U.S. combat forces in Iraq could be deployed only in units embedded with Iraqi forces, in rapid-reaction and special operations teams and in training, equipping, advising, force protection and search and rescue."
While not recommending a timetable for withdrawal, the report says "the United States must not make an open-ended commitment to keep large numbers of American troops deployed in Iraq."
The report warns of dire consequences, both at home and abroad, if the U.S. fails to take action.
"If the situation continues to deteriorate, the consequences could be severe. A slide toward chaos could trigger the collapse of Iraq's government and a humanitarian catastrophe. Neighboring countries could intervene. Sunni-Shia clashes could spread. Al Qaeda could win a propaganda victory and expand its base of operations. The global standing of the United States could be diminished. Americans could become more polarized," the report says.
"We will take every proposal seriously, and we will act in a timely fashion," Bush said after receiving the report. (Watch Bush's reaction after receiving Iraq report )
Bush urged Congress to take the group's proposals seriously and work with the administration to find "common ground" on Iraq policy.
"The country is tired of pure political bickering," Bush said.
White House spokesman Tony Snow said the report contained 79 recommendations, but generally supported the administration's goals to leave Iraq capable of defending and governing itself. (Watch what the report recommends )
The report also prods the administration to launch a new diplomatic initiative to solve the Israel-Palestinian conflict.
It contends the United States "cannot achieve its goals in the Mideast" unless it embarks on a "renewed and sustained commitment to a comprehensive peace plan on all fronts."
As part of this initiative, the panel calls for direct talks between the United States and Iran, as well as Syria, a move the Bush administration has repeatedly resisted.
Although the president has said his goal is to help form an Iraqi government that can sustain and defend itself, the study group contends that cannot be achieved without serious help from other nations in the Mideast.
"Every country has an interest in avoiding a chaotic Iraq, including all of Iraq's neighbors," the report says.
"Iraq's neighbors and key states in and outside the region should form a support group" to help Iraq achieve long-term security and political reconciliation -- "neither of which it can sustain on its own," the report says, referring to the shaky government of Iraqi Prime Minister Nuri al-Maliki.
The report says al-Maliki's government needs to show "substantial progress ... on national reconciliation, security and governance" or face a reduction in "political, military, or economic support" from Washington.
The study group urges bipartisan cooperation in Washington to enable success.
"What we recommend demands a tremendous amount of political will and cooperation between the executive and legislative branches of the U.S. government," the report says. "Success depends on unity of the American people at a time of political polarization."
The report concludes: "Foreign policy is doomed to failure -- as is any action in Iraq -- if not supported by broad, sustained consensus."