Explaining his decision to veto the bill in a speech last night, Mr Bush argued that the proposed legislation would have introduced a "rigid and artificial deadline" for bringing US soldiers back from Iraq.
"It makes no sense to tell the enemy when you plan to start withdrawing," said the president, who warned that to do so would mean "setting a date for failure".
"All the terrorists would have to do is mark their calendars and gather their strength and begin plotting how to overthrow the government and take control of the country of Iraq," he added, stressing that establishing a deadline for withdrawal would demoralise the Iraqi people and encourage insurgents across the Middle East region.
Mr Bush, who requires the additional funding to support the deployment of extra troops in Iraq, revealed that he will meet with congressional leaders at the White House today to try to seek an agreement over a revised emergency war spending bill as soon as possible.
It is only the second time in his presidential career that Mr Bush has vetoed legislation from Congress.
His decision to veto the bill coincided with the fourth anniversary of a speech in which the president declared that major hostilities in Iraq were over following the overthrow of the country's former leader Saddam Hussein, with the US leader having appeared in front of a banner proclaiming "mission accomplished".
Seizing on the anniversary yesterday, the Democrats accused the president of ignoring the wishes of the American people in refusing to set a timetable for withdrawing the country's troops, claiming that his policies had led to further violence in Iraq and made the US less safe.
"The fact remains that President Bush’s mission is not yet accomplished and will not be accomplished until we change course in Iraq," said chairman of the Democratic national committee Howard Dean.
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