Update: In a press briefing Tuesday afternoon, White House press secretary Jay Carney was asked if the Fox News report, stating that all but 3,000 U.S. troops would be withdrawn from Iraq by the end of the year, was accurate. He responded with a flat "No," reports Politico:

"We want a normal, productive, healthy relationship with Iraq," [Carney] said. "If the Iraqi government makes a request of us, we will certainly consider it." But for the time being, Carney added, the two countries are continuing to operate "under existing agreements."

Carney did not specify the planned withdrawal numbers for the end of the year, reports MJ Lee.

Pressed to comment on whether budgetary concerns are part of President Obama’s considerations on how many military personnel will stay in Iraq, Carney said that "we live in a world ... where resources aren't finite."

As a presidential candidate, President Obama vowed to remove all U.S. service members from Iraq by January 1, 2012.

Original Post: The Obama administration has decided to reduce troop levels in Iraq to 3,000 by the end of the year, according to Fox News, a decision that caused infighting within the administration. The report, sourced to "multiple sources familiar with the inner workings and decisions on U.S. troop movements in Iraq" says Defense Secretary Leon Panetta has already approved the draw down despite the fact that "senior commanders are said to be livid at the decision":

The generals on the ground had requested that the number of troops remaining in Iraq at the end of the year reach about 27,000. But, there was major pushback about "the cost and the political optics" of that decision that the number was then reduced to 10,000.

Commanders said they could possibly make that work "in extremis," in other words, meaning  they would be pushing it to make that number work security-wise and manpower-wise.

Now, sources confirm that the administration has pushed the Pentagon to cut the number even lower, and commanders are concerned for the safety of the U.S. troops who would remain there. "We can't secure everybody with only 3,000 on the ground nor can we do what we need to with the Iraqis," one source said.

In some respects, the report looks tailor-made for the president's critics who would attack him for putting "political optics" ahead of the security of the troops. So far the administration has not issued a denial of the report. Adding details to the administration infighting, Fox News notes that Secretary of State Hillary Clinton advocated keeping 10,000 troops in place "but she has lost the battle." Fox News obtained a quote by Connecticut Senator Joe Lieberman who said he'd "never heard a number as low as 3,000 troops to secure the gains Iraqis have won over the years."

Their story follows a Wall Street Journal report this morning that U.S. commanders are trying to gain authorization to run co-vert operations in Iraq to thwart the influence of Iran in the country, in which the issue of American troop withdrawals was noted:

The move comes amid growing concern in the Obama administration about Iran's attempts in recent months to expand its influence in Iraq and the broader Middle East and what it says is Tehran's increased arms smuggling to its allies.

Compounding the urgency is the planned reduction in the U.S. military presence in Iraq by the end of the year, a development that many fear will open up the country to more influence from Iran