One key step would be to begin direct talks with North Korea to negotiate an end to its nuclear program, said the National Security Advisory Group, which includes former top officials of the Clinton administration.
Former Defense Secretary William Perry, the group's chairman, said North Korea could have six to eight nuclear bombs by the end of the year and could have "serial production" next year.
"We must anticipate, given North Korea's desperate economic condition, that some of the products of their nuclear program will be for sale to the highest bidder and could end up in an American city," Perry said at a news conference.
The Bush administration has said North Korea's nuclear program is a regional problem and should be resolved with multilateral talks involving South Korea, Japan and China. North Korea is already believed to have one or two nuclear bombs. North Korea wants talks with just the United States.
"If we cannot resolve the conflict through negotiation, we may drift into a situation where this policy conflict erupts into a military conflict," Perry said.
In addition to North Korea, Perry cited the dangers of nuclear programs in India, Pakistan and Iran.
The advisory group also includes former Secretary of State Madeleine Albright, former national security adviser Sandy Berger, former NATO Supreme Commander Gen. Wesley Clark and former Joint Chiefs chairman Gen. John Shalikashvili.
It was formed in March "partly in response to the perception that Democrats have been indifferent to national security problems and defense," a perception that "flies in the face of the historical role that Democrats have played in national security," Perry said in a report released by the group.
The group recommended limiting defense spending increases and shifting the money to other national security priorities, such as homeland security, intelligence and foreign aid.
It also recommended working more closely with allies to fight terrorism and nuclear proliferation.
By Ken Guggenheim