The day after U.S. President George Bush said progress in Iraq justifies a large American military presence in the troubled region, a new report out of Washington showed meagre gains have been made.

The White House told Congress Friday that progress had stalled in Iraq as the country's leaders were not meeting important benchmarks in security and stability set by the U.S.

A report in July by the administration concluded the Iraqi government was making satisfactory progress on eight of their goals, and unsatisfactory progress on eight others. Two other goals couldn't be rated for performance.

In Friday's follow-up report, the administration reported that Iraqis had done enough to move along only one of their goals - allowing former members of Saddam Hussein's Baath party to hold government positions.

"The overarching goal of de-Baathification reform is political accommodation between the Shia and Sunni communities," the report said. "The leaders' agreement combined with the return of former Baathists to civic life is a significant step in that regard."

Iraq accomplishments noted

Bush officials said there simply wasn't enough time between the July report and the September report to make further improvements.

White House Press Secretary Tony Snow pointed to several accomplishments in Iraq in a written statement accompanying the report. He noted the passage of a budget, sharing oil revenues among the provinces and local reconciliation efforts.

"These are precisely the 'effects' the benchmarks were intended to produce, even if the formal benchmarks themselves have not been met," he said.

There was more bad news for Iraq on Friday in a second, separate report released by the State Department. Religious freedom in the region has sharply deteriorated, it concluded, but not only between Shia and Sunni Muslims. There were attacks on worshippers of all faith.

On Thursday evening, Bush addressed Americans and assured them U.S. troops were strengthening prospects in Iraq and as a result needed to stay in the region to ensure progress would continue.

However, violence in the region continues to cast a shadow on the American mission.

Just 12 hours before Bush's speech, a prominent Iraqi ally to U.S. troops against al Qaeda was assassinated in Anbar province. Abu Risha had posed for the press with Bush just ten days before when the president was in Anbar and suggested the province be taken as a model of progress in Iraq.

Terry McCarthy, a news correspondent with ABC News, told CTV's Canada AM the murder came as a shock to Iraqis and said this could result in setback in Bush's efforts.

He said Iraqis have a grimmer view of their country than Bush has.

"Most Iraqis realize that violence has gone down a little bit, since the American troop surge, but they're very nervous that this is not sustainable," McCarthy said from Baghdad.

"People are greatly fearful of the security forces having been infiltrated by Shiite militias and so far there's very little sign that the U.S. has been able to weed those militias out particularly from the police force."

Bush did relent a little by saying he would drop the number of troops to the level that was in Iraq before the buildup he ordered earlier in the year. Right now, there are about 168,000 troops in Iraq, the highest level of the war. Bush said he would bring back 5,700 troops by Christmas instead of spring as originally planned, plus four more combat brigades by July as currently scheduled.

Nearly 3,800 American troops have died in the war, which has been going on for the past four and a half years and has cost the country a half trillion dollars.

American political historian Allan J. Lichtman likened Bush to a used car salesman.

"What he's done here is what the used car salesmen do," he told CTV's Canada AM Friday. "They jack up their prices, he put more troops in. Then they lower the price and say -- 'Look, a big sale, you're saving money,'" he said.

"There is no troop reduction, there's only a reduction of the increase," he said.

With files from The Associated Press