In a major shift for the Bush administration and potentially the largest reshaping of the federal government since 1947, President Bush proposed the creation Thursday of a new Homeland Security Department, headed by its own Cabinet secretary, to lead the domestic war on terrorism. 

Speaking in a nationally televised, prime-time address from the White House residence, Bush said the new department was needed to better protect Americans from terrorist attacks. Facing widespread criticism over the current homeland security operation, Bush called for a sweeping overhaul that would take 100 agencies, in whole or part, and consolidate them into one super-agency with 170,000 federal workers and a $37 billion budget. "America is leading the civilized world in a titanic struggle against terror," Bush said. "Freedom and fear are at war, and freedom is winning." 

The new department would open its doors Jan. 1, and current Homeland Security Director Tom Ridge was expected to be appointed the department's first secretary. 

White House and congressional aides said late Thursday that they strongly believed Bush would tap Ridge for the new Cabinet position. 

Despite administration claims to the contrary, the announcement's timing seemed designed to blunt the impact of congressional investigations that began this week into the failure of the nation's intelligence agencies to cooperate and piece together clues in their possession before the Sept. 11 terrorist attacks. 

Bush addressed intelligence lapses, saying that "based on everything I have seen, I do not believe anyone could have prevented the horror of Sept. 11, yet we now know that thousands of trained killers are plotting to attack us, and this terrible knowledge requires us to act differently." 

In a surprising moment in the speech, Bush addressed rank-and-file law-enforcement and intelligence workers, urging them to act on any tips or leads that could help prevent terrorist attacks and calling on supervisors to take such reports seriously. FBI officials have been accused of mishandling reports from field agents. 

Just hours after the president's address, the Senate early Friday approved by a broad margin a counterterrorism bill costing more than $31.5 billion, far exceeding Bush's request and setting up a showdown over the cost of domestic security. 

The proposed Homeland Security Department would have four major parts. The agency's border and transportation security division would take the Coast Guard from the Transportation Department, the Customs Service from the Treasury Department, and the Immigration and Naturalization Service and Border Patrol from the Justice Department, and unite them. 

Treasury also loses one of its most storied agencies, the Secret Service, which guards the president and vice president. 

Meanwhile, the Federal Emergency Management Agency and other agencies would form a new emergency preparedness and response function. 

The Lawrence-Livermore National Laboratory would be removed from the Energy Department and placed in a new chemical, biological and nuclear countermeasures unit. Bush said the lab and other scientific centers combined with it would "bring together our best scientists to develop technologies that detect biological, chemical and nuclear weapons and to discover the drugs and treatments to best protect our citizens." 

Intelligence coordination plan 

Significantly, the department also would include an information analysis and infrastructure protection unit whose responsibility would be to serve as a central place to assess intelligence from the FBI, CIA and other agencies. 

The FBI and CIA have been criticized for not sharing or following up on intelligence they had before Sept. 11. 

Differing from the president, FBI Director Robert Mueller has said that if the FBI had better handled its information, the attacks might have been prevented. 

The plan to create a new homeland defense agency with a secretary seated at the president's Cabinet table for was an about-face for the administration. When the president appointed Ridge to his post last year shortly after terrorist attacks, administration officials insisted that an entirely new Cabinet agency was not needed. 

A security czar with Cabinet-level status was sufficient, they said, because Ridge had full access to the Oval Office and the president's complete backing. 

But almost from the outset, the arrangement ran into problems. After last year's anthrax attacks, for instance, the administration was criticized for relying on too many spokesmen who sometimes gave conflicting and confusing messages. 

Many lawmakers and security experts had also criticized the czar post from the start, saying that Ridge could not be effective because he had no congressionally granted budget authority and no power to order the heads of Cabinet departments to take actions he felt necessary to prevent or respond to domestic terrorist attacks. 

"I do think that as time has gone by there has been an increasing level of frustration at the difficulty of coordinating all of these different agencies scattered around the government," said Rep. William M. "Mac" Thornberry (R-Texas), who has had extensive discussions with the White House in his push to make homeland security a Cabinet-level agency. 

Some experts feared the proposal could spur heated turf wars on Capitol Hill, saying lawmakers and special interests would be likely to fight a plan they view as threatening. The proposal could reduce the number of agencies Congress oversees and federal jobs as redundant positions were eliminated, they said. 

Bush: Efficient, not expansive 

The president, a conservative Republican who typically has opposed the expansion of government, is in the unusual position of proposing a new bureaucracy. But the president pitched the idea as not bigger but better government. 

"The reason to create this department is not to increase the size of government, but to increase its focus and effectiveness," he said. 

Bush and his aides compared the change to President Harry Truman's reorganizing of national security agencies during the Cold War. 

But others saw potential problems and warned that the plan--while likely to be approved by Congress--might be altered during that process. 

Rep. Jan Schakowsky (D-Ill.), a member of the House Government Reform Committee, said she worried about the low priority that may given to the non-security functions of agencies like the Coast Guard, which would be incorporated into the agency. 

"This is a serious issue for Chicago, where the Coast Guard provides search-and-rescue service," Schakowsky said. 

Others spoke of the difficulty of pulling several agencies into a single new bureaucracy. 

"It's going to be rough," said Dan Goure, security analyst for the Lexington Institute in Arlington, Va. "We have never before pulled parts of several different Cabinet departments together into one entity." 

The $31.5 billion counterterrorism bill passed 71-22 by the Senate on Friday heads to a House-Senate conference panel to iron out its final form. Bush, who proposed a $27.1 billion package in March, has threatened to veto any bill that is too expensive. The House passed a $29 billion measure in May. 

The spending would cover the current federal fiscal year that ends Sept. 30. 

Democrats chided GOP critics of the Senate bill, which mostly contains money for the military, the FBI, efforts to thwart cyber- and bioterrorism, and other responses to the Sept. 11 attacks. 

"Tell your people back home they don't need this protection," said Senate Appropriations Committee Chairman Robert Byrd (D-W.Va.). "Tell them, don't tell us."