Busted! Here is the offical transcript, from whitehouse.gov:

Q Do you feel that the number of troops that you've kept there is limiting your options elsewhere in the world? ... Do you feel, as you are confronting these problems, the number of troops you've left tied up in Iraq is limiting your options to go beyond the diplomatic solutions that you described for North Korea and Iran?

THE PRESIDENT: No, I appreciate that question. The person to ask that to, the person I ask that to, at least, is to the Chairman of the Joint Chiefs, my top military advisor. I say, do you feel that we've limited our capacity to deal with other problems because of our troop levels in Iraq? And the answer is, no, he doesn't feel we're limited. He feels like we've got plenty of capacity.

But today, less than a week later Bush's Chairmen of the Joint Chiefs issued a report to Congress...

] The senior military official told CNN that because of the
] U.S. deployments in Iraq and Afghanistan, the report
] concludes that future armed conflicts would last longer
] and produce higher casualties.
]
] The report finds that the United States still would have
] the ability to win another military face-off but wouldn't
] be able to build up its forces as quickly as it did for
] the Iraq war.
]
] "It would be harder to sprint that fast," the official
] said.
]
] "What is certain is the U.S. military remains capable of
] executing every mission it is assigned," Whitman said.
]
] But he acknowledged fighting multiple conflicts
] simultaneously can put stress on forces.
]
] "If you're doing A, B and C and are asked to do D, will D
] be harder? Sure," Whitman said.

Spin Spin Spin all you want, but Bush lied. The reporter asked about our ability to engage in other military conflicts. Bush said no problem. The CJC said Well... we can do any military job required, but it will last longer, cost more money and result in higher casualties. IE these other engagements have weakened our capability to use a military option, because now any future military option cost more in terms of lives, money, equipment, and political capital.

Don't give me this "capabilities" vs "abilities" hair spliting either. We have retained the capability of reducing all life as we know it to atomic ash. We have capability out the ying yang.

Plain and simple, Bush lied about how the war in Iraq and other military adventures have reduced our ability to effectively combat actual clear and present dangers.