These include cuts to education and Medicare, the Bush Administration's prescription drug program for pensioners.

The military spending does not include the cost of the campaign in Iraq and Afghanistan, for which Mr Bush has requested an extra $US50 billion, but which Administration officials admit is just a starting point for what will be needed.

The Administration has already asked Congress for an extra $US120 billion for Iraq and Afghanistan this year.

The budget deficit for this financial year is expected to hit $US423 billion in the wake of hurricane Katrina and the Iraq war, but Mr Bush has included tax cuts of $US1.4 trillion over 10 years in his budget plan.

President Bush said the Administration's plan to halve the budget deficit by 2010 was "on track", but economic commentators were almost unanimous in their view that this was unlikely to be achieved.

Congress will vote on the proposed budget in October.

"My Administration has focused the nation's resources on our highest priority — protecting our citizens and our homeland," President Bush said.

"Working with Congress, we have given our men and women on the frontlines in the war on terror the funding they need to defeat the enemy and detect, disrupt and dismantle terrorist plots and operations."

The budget starkly reveals that the cost of the war in Iraq remains a major drain on the US economy and that to control soaring government spending, painful and politically sensitive cuts to government programs, especially Medicare and Medicaid, the health care program for low income earners and the elderly, are inevitable.

The proposed cut to Medicare over the next five years is $US36 billion.

Even if Mr Bush gets his budget through Congress more or less intact, which is highly unlikely, the budget deficit would be well over $US300 billion.

The proposed cuts to Medicare have outraged pensioner groups, and even Republicans admit it is going to be difficult to get it passed by Congress in a mid-term election year.

Democrat Senate leader Harry Reid said: "After creating record deficits and debt with his budget-busting tax breaks, the President is asking our seniors, our students and our families to clean up his fiscal mess with painful cuts in health care and student aid."

Mr Bush has also asked Congress for $US250 million in research funds to restart a controversial program that would reprocess spent nuclear fuel.

The US abandoned the technology in the 1970s because it was too costly and there were fears that terrorists or rogue nations could access the plutonium and make nuclear bombs.

However, the Administration has said it wants to phase out the old recycling methods that separated plutonium from the spent fuel and created a nuclear proliferation risk.

It says that using new technology, the plutonium would "remain bound" with other radioactive materials, making it less useful for nuclear weapons and reducing security concerns.

REUTERS