Mr Bush said: "I haven't vetoed the first bill yet. But I'm going to. And the reason why I'm going to is because members of Congress have made military decisions on behalf of the military.
"They're telling our generals what to do. They're withdrawing before we've even finished reinforcing our troops in Baghdad.
"They're sending, in my judgment, a bad message to the Iraqis and to the enemy and, most importantly, to our military folks. So I made it clear I'd veto."
The president added that he will invite the Democratic leaders of both the House and the Senate to the White House after his veto to discuss a way forward.
"I'm optimistic we can get a bill, a good bill and a bill that satisfies all our objectives and that's to get the money to the troops as quickly as possible," Mr Bush said.
Democrats intend to deliver the bill to the White House on Tuesday May 1st, which marks the fourth anniversary since Mr Bush famously declared an end to combat operations while onboard the USS Abraham Lincoln.
The majority leader of the house, Harry Reid, was quoted by the Reuters news agency as saying that Mr Bush's actions showed "a lot of swagger".
"If you look at the president's statements the last few days, I think they've been very promising," Mr Reid said.
"At least as far as I'm concerned, the president has changed his tune. This is just a lot of swagger, and he should stop swaggering and sign the bill."
Democrats are attempting to continue with their Iraq exit plan, which the majority of their candidates campaigned on, while attempting to avoid appearing as if they are pulling the plug on US troop funds.
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