Domestic programmes are having budgets cut

Spending on the military will rise by 7%, while other discretionary domestic spending will be capped at a 0.5% rise.

Mr Bush has pledged to reduce the record $521bn deficit this year by a third in 2005 and by half by 2009.

But Democrats charge that tax cuts and the spiralling costs of the Iraq war will lead to unsustainable deficits.

Mr Bush made no apology for his priorities.

"We will continue to provide whatever it takes to defend our country by fully supporting our military ... [and] providing the necessary resources to our law enforcement and emergency personnel at home to meet the new threats posed by terrorists," he said.

We will continue to provide whatever it takes to defend our country by fully supporting our military President George Bush

Under the plan, defence department and homeland security spending will rise sharply, while 7 of 15 cabinet-level departments will suffer cuts, with agriculture and environmental protection taking the biggest reductions.

Spending is also forecast to rise more sharply than planned on the new Medicare drug benefit, which is now expected to cost $534bn over the next eight years, as opposed to $400bn when it was passed in December.

But many analysts question whether, in a divided Congress in an election year, domestic spending on popular areas like education and transport can be so strictly limited.

Budget battles to come

The conventional wisdom used to be that the left spent and the right reined spending in, says the BBC's North America business correspondent Stephen Evans.

He's promising a trillion-dollar tax cut and a trip to Mars... and he has a half-trillion-dollar deficit Howard Dean Does the budget deficit matter?

But that world has been turned upside down under President Bush, he adds.

American conservatives are said to feel let down by a Republican who has brought them what they call "bigger government".

They are reportedly pushing for Mr Bush to curb his ambitious plans for funding space exploration and a manned mission to Mars.

Meanwhile Mr Bush will seek to make his tax cuts, which are set to expire in 2011, permanent.

That could increase future budget deficits by up to $2.2 trillion, according to Democratic critics.

And higher spending on social security and Medicare after 2010, when the "baby-boomer" generation retires, is also likely to increase future deficits.

Scepticism on deficit

The growing budget deficit is the focus of anger by leading Democrats.

Signs of growth: State of the US economy At-a-glance

"This administration pledged that its tax cuts and policy choices would not turn record surpluses into record deficits, but this budget shows that's exactly what's happened," said Senate Democratic Leader Tom Daschle.

Mr Bush is counting on a booming economy to boost his tax revenues to $2 trillion next year, thus cutting the deficit.

But his figures do not include any additional spending on Iraq, whose costs in 2004 were $85bn.

Budget Director Josh Bolton said that the administration would be asking for a supplemental appropriation of up to $50bn to cover those costs, depending on the security situation - but not until January 2005.

And the non-partisan Congressional Budget Office recently reported that, if the social security trust fund receipts are excluded, the budget deficit will continue to exceed $500bn for the rest of the decade.

Mr Bush has promised to cut the deficit to a third in 2005, and by more than a half - to $237bn - in 2009.

His plans have been scoffed at by Democrats.

"He's promising a trillion-dollar tax cut and a trip to Mars... and he has a half-trillion-dollar deficit," said Democratic presidential hopeful Howard Dean.

"Where do these Washington people think this money comes from? This is crazy".

Analysts say even his supporters are sceptical.

"He's got to get really serious about budget control and really defend and enforce this budget if he's going to hold conservatives with him in the November elections," said Stephen Moore, president of the Club for Growth, a politically powerful conservative group.