U.S. President George W. Bush marked the fifth anniversary of the U.S.-led invasion in Iraq by justifying the "high cost in lives and treasure," saying failure would embolden extremists and make the U.S. more susceptible to attack.

"The battle in Iraq has been longer and harder and more costly than we anticipated. But it is a fight we must win," Bush said in a speech delivered Wednesday morning from the Pentagon.

While crediting the increase last year of 30,000 troops for making progress in the region, he warned that pulling troops would only provide setbacks.

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U.S. President George W. Bush, seen on March 19, 2003, following his address to the nation. He spoke after the U.S. began bombing Iraq. ((Rick Bowmer/Associated Press))

"The surge has done more than turn the situation in Iraq around; it has opened the door to a major strategic victory in the broader war on terror," Bush said.

"We have learned through hard experience what happens when we pull our forces back too fast — the terrorists and extremists step in, fill the vacuum, establish safe havens and use them to spread chaos and carnage," Bush said.

Bush has repeatedly vetoed efforts by the Democratic-led Congress to force troop withdrawals or set deadlines for pullouts.

"The successes we are seeing in Iraq are undeniable, yet some in Washington still call for retreat," the president said.

Bush said the levels of violence, civilian deaths, sectarian killing and attacks on U.S. troops are all down but he warned that "there's still hard work to be done in Iraq. The gains we've made are fragile and reversible."

Although Bush made no mention of it in his speech, Washington has been frustrated by what it views as the lack of political progress being made in Iraq. In an interview this month with the Washington Post, Gen. David Petraeus, the top U.S. commander in Iraq, said Iraqi leaders have failed to take advantage of the reduction in violence to make sufficient political progress.

As well, some observers say violence may be increasing again.

Cost of war exaggerated, Bush says

The war has claimed the lives of nearly 4,000 U.S. troops and cost U.S. taxpayers about $500 billion. But two respected economists recently pegged the eventual cost at $3 trillion.

Bush rejected the predictions, adding that the costs have been worth it.

"War critics can no longer credibly argue that we are losing in Iraq, so now they argue the war costs too much. In recent months, we have heard exaggerated estimates of the costs of this war," he said.

"No one would argue that this war has not come at a high cost in lives and treasure but those costs are necessary when we consider the cost of a strategic victory for our enemies in Iraq," Bush said.

Bush, McCain arguments 'misleading and mistaken': Obama

Bush also rebuffed those who predicted Iraq would become a focal point where al-Qaeda would rally Arabs to drive America out.

"Instead, Iraq has become the place where Arabs joined with Americans to drive al-Qaeda out. In Iraq, we are witnessing the first large-scale Arab uprising against Osama bin Laden."

Bush said a loss in Iraq would embolden al-Qaeda, which would then have access to Iraq's oil resources and could pursue weapons of mass destruction.

"Our enemies would see an American failure in Iraq as evidence of weakness and a lack of resolve. To allow this to happen would be to ignore the lessons of Sept. 11 and make it more likely that America would suffer another attack like the one we experienced that day."

But Democratic presidential hopeful Barack Obama promptly rejected the position held by Bush and Republican presidential nominee John McCain that setting a timetable to withdraw from Iraq would endanger Americans.

"These are the mistaken and misleading arguments we hear from those who have failed to demonstrate how the war in Iraq has made us safer," Obama told military families and local officials Wednesday in a speech not far from North Carolina's Fort Bragg military base.

As Bush spoke, anti-war activists demonstrated around downtown Washington. Thousands of anti-war protesters are expected to converge on the U.S. capital.

With files from the Associated Press