WASHINGTON -- In the economic vision laid out by U.S. President George W. Bush, there won't be a war with Iraq, growth will soar, taxes will fall and fewer Americans will be out of work.

Even then, Mr. Bush presented the U.S. Congress yesterday with a budget that projects deficits as far as the eye can see, including a record $307-billion (U.S.) in 2004 on all-time high spending of $2.23-trillion.

"A recession and a war we did not choose have led to the return of deficits," Mr. Bush said of his spending plan for fiscal 2004, which begins on Oct. 1, 2003.

Over the next five years, the White House expects expenditures to outstrip revenues by more than $1-trillion, according to the 745-page budget. As recently as 2001, the government was projecting a 10-year cumulative surplus of $5.6-trillion.

The government now expects the deficit to hit $304-billion in the current fiscal year, which began Oct. 1 -- that's twice the size of last year's shortfall and three times larger than it was forecasting just six months ago. Economists quickly pounced on what they said were unrealistic assumptions and omissions in the budget plan, which they say may have undervalued the 2003 and 2004 deficits by at least $100-billion.

"The estimates suggest that if growth is slower -- as we expect -- and we go into war -- as it now looks -- the deficit could run much higher," suggested Mary Dennis, senior economist at Merrill Lynch in New York.

Mr. Bush predicted the economy would grow 2.9 per cent this year, paced by consumer spending and business investment. That compares to a 2.8-per-cent consensus forecast among economists and a 2.5-per-cent estimate by U.S. Congressional forecasters.

The White House also puts this year's jobless rate at 5.7 per cent -- less than the current 6 per cent and below the consensus forecast of 5.9 per cent.

Most importantly, however, a war with Iraq could cost as much as $400-billion, and the budget makes no provisions for it, in spite of sharp hikes in spending for the military and homeland security.

But White House budget director Mitchell Daniels vigorously defended the administration's failure to include the cost of a possible Middle East war.

"It would have been very unnatural to include costs for a conflict that Saddam Hussein could avert at any day by complying with the world community's 11 years of demands that he disarm," Mr. Daniels told reporters.

The fate of Mr. Bush's budget now rests with the Congress, which is responsible for drafting detailed appropriations bills. Congress has yet to complete the budget bills for fiscal 2003.

Already, Mr. Bush's 10-year, $674-billion package of tax cuts is in trouble. Its largest single provision -- an elimination of taxes on corporate dividends -- is facing stiff opposition, even among Republicans. "The Democrats will be sure to use the administration's own numbers to argue against permanent tax cuts by raising concerns about large, long-run deficits," noted economist Augustine Faucher of Economy.com.

Roughly a third of the 2004 deficit, or $114-billion, and about $33-billion of the 2003 deficit is due to the tax cut.

The White House said the projected deficits are modest in relation to the size of the economy.

The current record deficit in dollar terms was $290-billion in 1992, the last year of the presidency of Mr. Bush's father.

Mr. Bush's projections also count heavily on uncharacteristic spending restraint by Congress. He wants to limit overall spending growth to 4 per cent in fiscal 2004. That's less than half the 9-per-cent hike that Congress set for this year.