CRAWFORD, Texas -- Warning that growing deficits could imperil the U.S. economy, President George W.

Bush threatened on Saturday to block spending bills that breach his budget plans.

Stepping up the partisan war of words over the economy and budget policy, Bush used his weekly radio address to lash out at the Democrat-led Senate, accusing it of ignoring fiscal discipline by pushing for new spending on non emergency programs like public housing.

"We cannot go down the path of soaring budget deficits. We must meet our defense and homeland security needs, and hold the line on other spending," Bush said from his ranch in Crawford, Texas, where he is spending most of August on vacation.

While Bush stopped short of issuing a blanket veto threat, he made clear he would not shy away from an appropriations battle in the run-up to the November congressional elections, Reuters reported.

The White House is counting on Bush's hard-line stance on spending to help shore up confidence in his handling of the beleaguered U.S. economy.

Democrats blame Bush's $1.35 trillion tax cut in 2001 for bringing back Federal budget deficits after four straight years of surpluses.

The White House expects the Federal government to post a deficit of more than $165 billion this fiscal year -- the largest since fiscal 1994. It expects surpluses to return in fiscal 2005, assuming that democrats who currently control the senate stick to the administration's proposed spending levels.

Republicans said Bush's tax cuts helped the United States recover from the twin shocks of a recession and the Sept. 11 attacks. They blame a surge in government spending advocated by Democrats -- not lower taxes -- for the red ink.

Hoping to convince voters that he is dealing aggressively with the nation's economic troubles, bush this week convened an economic forum and said he may propose a new economic stimulus package to entice investors back to a stock market hard hit by accounting scandals.

"We must remember the lessons of the past," Bush said, comparing the anti-terrorism campaign he launched in response to the Sept. 11 attacks to the war in Vietnam.

"In the 1960s, increased spending required by war was not balanced by slower spending in the rest of the government. As a result, in the 1970s we faced unemployment and growing deficits and spiraling inflation," Bush said. To show Democrats -- and the American people -- that he is serious about fiscal restraint, bush this week rejected $5.1 billion in "extra spending I did not ask for."

Democrats protested the move, saying it jeopardized defense and U.S. foreign policy since the package included money for airport security as well as aid for Israel and the Palestinians.

Bush also criticized the Democrat-led Senate for seeking hundreds of millions of dollars more than he requested for public housing, agricultural research and the national oceanic and atmospheric administration.

"Unfortunately, the Senate has not even passed a budget framework, and so far it has been ignoring fiscal discipline," Bush said.