Bush says budget will limit non-defense spending

WASHINGTON, Feb 3 (Reuters) President George W Bush said today that his upcoming budget proposal would emphasize restraint on domestic spending while putting defence and war costs for Iraq and Afghanistan as the top priority.

''Cutting the deficit during a time of war requires us to restrain spending in other areas,'' Bush said in his weekly radio address.

Previewing the fiscal year 2008 budget he will unveil on Monday, Bush also said it would show that his goal of erasing the deficit by 2012 could be accomplished while making his tax cuts permanent.

''Congress needs to make this tax relief permanent, so we can keep America's economy growing. Pro-growth economic policies also play a vital role in our plan to balance the federal budget,'' he said.

''Our growing economy has produced record levels of tax revenue.

This increase in tax revenue has helped us cut the deficit in half three years ahead of schedule,'' he added. ''On Monday, we will take the next step when I submit to Congress a budget that will eliminate the deficit by 2012.'' An administration official has said that the president will request a total of 245 billion dollar to finance the wars in Iraq and Afghanistan through late 2008. That will include a 0 billion request for the wars for the rest of the current fiscal year that ends on September. 30 and 145 billion dollar for next year.

Including 70 billion dollar that Congress has already approved, the total of 0 billion for this fiscal year would mark the highest spending level so far for the two wars.

''Our troops deserve our full support, and this budget gives them the resources they need,'' Bush said, adding he would set as his top priority ''keeping America safe and winning the war against extremists.'' He did not discuss any of the numbers in the budget, nor did he specify the non-defense areas where he would curb spending. However, he said some ''wasteful spending'' could be cut by getting rid of ''earmarks'' -- or special interest projects.

This is the first year Bush will submit his budget to a Democratic-controlled Congress.

Many Democrats have called Bush fiscally reckless and contend that his huge tax cuts were heavily skewed toward the wealthy and were unaffordable in the long run.

The Congressional Budget Office, a nonpartisan agency that analyzes the budget, said in a report last month that achieving a balanced budget was possible by 2012.

But its assumptions did not factor in either an extension of the Bush tax cuts or changes Congress is likely to make to shield middle-class Americans from the alternative minimum tax that initially was aimed just at the wealthy.

REUTERS PDM PM2050