CHICAGO (Reuters) - President Bush on Tuesday kept up the pressure on Iraqi President Saddam Hussein to disarm or face attack while Defense Secretary Donald Rumsfeld said Saddam could avoid war by leaving Iraq.

Bush devoted part of a speech about the U.S. economy to the threat posed by Iraq, as the U.S. military buildup continued apace and three weeks before U.S. weapons inspectors provide a report on Iraqi arms likely to be crucial in any decision to go to war.

"For the sake of peace, Saddam Hussein must disarm himself of all weapons of mass destruction and prove that he has done so," Bush said. "Should he choose the other course, in the name of peace, the United States will lead a coalition of the willing to disarm the Iraqi regime of weapons of mass destruction and free the Iraqi people."

At the Pentagon in Washington, Rumsfeld said he still hoped war could be avoided and that one way to do so would be for Saddam to step down and leave, a point he has made in the past.

"The first choice would be that Saddam Hussein would pick up and leave the country tonight, that would be nice for everybody, or he decides suddenly to turn over a new leaf and cooperate with the U.N. and disgorge all of his capabilities," Rumsfeld told reporters.

The United States has declared Iraq in "material breach" of a U.N. disarmament resolution for omitting key details of its suspected weapons of mass destruction in a 12,000-page declaration of its weapons submitted to the United Nations last month.

U.S. officials have said Bush could decide in late January or early February to go to war. Washington has been taking great pains to assure the international community it is abiding by the U.N. weapons inspections process, even as it builds up its military forces in the region.

The United States put more than 10,000 reservists on alert this week for Gulf duty and poured in more planes and ships. It plans to at least double its 60,000 troops already in the Gulf.

"I hope that force will not have to be used. But in the meantime, we'll keep flowing forces," Rumsfeld said.

Jan. 27 is looming as increasingly important, the day when chief U.N. weapons inspectors Hans Blix and Mohammed ElBaradei are scheduled to make their first full report to the U.N. Security Council on Iraq's arms declaration, Baghdad's cooperation with inspectors, and the availability of Iraqi scientists for interviews by the inspectors. Blix is to make an interim report on Thursday.

"Thus far, it looks like he hasn't complied," Bush said of Saddam on Monday. "But he's got time."