Mr Bush's budget forecasts a deficit of over $400bn for two years

Bush unveils budget

The plan includes the $145bn economic stimulus plan agreed with congressional leaders, as well as $70bn to continue funding wars in Iraq and Afghanistan.

Against a worsening economic backdrop, it forecasts a deficit of over $400bn.

"Our budget protects America and encourages economic growth. Congress needs to pass it," Mr Bush said.

Democratic Senate Majority Leader Harry Reid criticised the proposal, saying: "This budget is fiscally irresponsible and highly deceptive, hiding the costs of war in Iraq while increasing the sky-rocketing debt."

The BBC's Jamie Coomarasamy in Washington says domestic spending will be the focus of what are expected to be fierce election-year political battles over the budget.

Mr Bush's plan to rein in federal health care programmes will be welcomed by fiscal conservatives, our correspondent says, but the Democrats are condemning the move as an attack on the middle class.

'Future problems'

Speaking after he presented the annual budget request to his cabinet, Mr Bush described it as a "good, solid budget" that, if his policies were followed, would balance by 2012.

He said: "It's a budget that keeps important objectives. One, it understands our top priority is to defend our country so we can fund our military as well as fund the homeland security.

The budget proposal seeks savings from health care programmes

"Secondly, the budget keeps our economy growing. It's essential that we make sure we deal with the uncertainties - the economic uncertainties - we face."

Mr Bush said his proposal would cut "wasteful or bloated" spending and also urged Congress to make his tax cuts permanent.

The defence department's budget is set to increase by 7.5% and the Department of Homeland Security's by 11%.

Mr Bush has also asked for additional funds to combat illegal immigration, proposing a 17% increase for customs and immigration enforcement and to help meet the costs of a fence on the border with Mexico.

However, much of the rest of the government faces a spending squeeze.

Mr Bush is seeking almost $200bn in savings over five years from the health care programmes Medicare and Medicaid, which help the elderly and the poor.

'Failed policies'

The Democrats criticised a spending plan they said did nothing to fix the government's growing deficit and which they warned would pile up problems for the next administration.

"Today's budget bears all the hallmarks of the Bush legacy - it leads to more deficits, more debt, more tax cuts, more cutbacks in critical services," said Democratic House Budget Committee chairman John Spratt.

Democrat Kent Conrad, chairman of the Senate Budget Committee, echoed the criticism.

"The president proposes more of the same failed policies he has embraced throughout his time in office - more deficit-financed war-spending, more deficit-financed tax cuts tilted to benefit the wealthiest and more borrowing from foreign nations like China and Japan," he said.

White House spokeswoman Dana Perino acknowledged that US war efforts in Iraq and Afghanistan would "certainly" cost more than the requested $70bn in 2009.

The budget covers the 2009 fiscal year, which starts on 1 October 2008. It proposes a 6% increase on projected spending of $2.9 trillion in the current budget year.

It forecasts a deficit of more than $400bn for the next two years - more than double the $162bn deficit for the 2007 fiscal year.