The fiscal 2005 spending includes a $9.2 billion request for research on missile defense programs under contract with Boeing, Northrop Grumman, Orbital Sciences Corp. and Lockheed Martin Corp. Bush also wants $3.2 billion for new ground combat vehicles being developed by Boeing and Science Applications International Corp. that Northrop would help build.

``It looks like the Northrop Grumman programs are right in the sweet spot,'' Chief Executive Officer Ronald Sugar said in an interview Thursday. ``All of our major program areas, we believe, are going to be well supported and well funded.''

Bush's request to Congress for the year starting Oct. 1 boosts military spending by 7.1 percent to $402 billion and increases homeland security funding 9.7 percent to $30 billion. To meet his goal of cutting the record budget deficit by half in five years, Bush seeks less than 1 percent more for other agencies and proposes cutting the budgets of the Agriculture Department and the Environmental Protection Agency.

Spending Cuts

The agriculture funding would be cut by 8.9 percent in Bush's request to Congress and the EPA would get 7.2 percent less as the president seeks to keep spending growth below a 4 percent cap he set. Bush reaffirmed his pledge to reduce the deficit to $237 billion by 2009 from $521 billion estimated for this year by the White House. The president's budget forecasts growth in gross domestic product of 4.4 percent this year and a reduction of the deficit to $364 billion in 2005, not including additional costs related to military operations in Iraq.

Under Bush, the defense budget has grown to almost 20 percent of his budget proposal this year from an average of 17 percent under former President Bill Clinton. Defense accounted for 22 percent of the budget during the tenure of Bush's father, George H. W. Bush, and 27 percent under Ronald Reagan.

`Defend Our Country'

``We will continue to provide whatever it takes to defend our country,'' Bush said in the budget.

The Pentagon's fiscal 2005 budget for defense includes about $74.9 billion for weapons buying and another $69 billion for research and development. Procurement is slated to increase to $90.7 billion by 2007 and hit $114 billion by fiscal 2009. Research and development spending averages about $70 billion annually through 2009.

Pentagon Comptroller Dov Zakheim said last week he's been assured defense spending won't be crimped by Bush's vow to reduce the deficit.

Boeing's missile defense program will get $1.5 billion, or 19 percent, more than Congress approved for this year. The Army also would get $1.5 billion more for the Boeing-Science Applications International ground combat program, known as the Future Combat.

Spending on Lockheed Martin's Joint Strike Fighter program - - the Pentagon's most costly project -- would increase to $4.5 billion from $4.3 billion this year.

Higher Profit

Boeing last week predicted higher profits in 2005 due to military orders. The Chicago-based company, which said net income in 2005 will rise to $1.95 to $2.20 a share from the 2004 estimate of $1.75 to $1.95, is benefiting from six straight years of accelerated U.S. defense spending under Bush. The company is the lead contractor on the U.S. missile-defense shield and the $96 billion Future Combat System program.

``Defense has done exactly what it's supposed to - and that is keep the earnings mill going,'' Boeing chief executive Harry Stonecipher said in a televised interview Thursday. ``We received over $50 billion worth of orders last year, and that may be a record.''

The budget is expected to include about $100 million that would benefit smaller companies, such as InVision Technologies Inc., the biggest maker of bomb detectors used in U.S. airports, and L-3 Communications Holdings Inc., the No.2 maker of detection equipment, said Brian Ruttenbur, an analyst at Morgan Keegan.

InVision, which had $439 million in sales in 2002, expects demand to increase next year after a decline last year as larger airports install permanent explosive detectors to replace the free-standing equipment many installed last year to meet the deadline, the company said in October.

Bomb Detectors

``We thought after Sept. 11, we'd see a knee-jerk reaction to the cause of aviation security,'' InVision Chief Executive Officer Sergio Magistri said in an interview last week. ``We're very pleased instead to see a long-term, nationwide commitment from the government to improving security.''

Military construction, defense and homeland security are the three parts of the budget most likely to be addressed before the end of September, when lawmakers are expected to return to their districts to campaign for the November election, said Senator Ted Stevens, the Republican chairman of the Appropriations Committee. Congress probably won't pass all 13 annual budget measures before the elections because of disagreements over funding priorities, he said.

``We're going to try to do what's pretty close to a freeze on non-defense spending,'' said Senate Budget Committee Chairman Don Nickles, a Republican from Oklahoma.

Skeptics

Investors who buy U.S. government debt and some members of Congress are skeptical cuts will be made before the November election that includes the president, a third of senators and all of the House of Representatives.

U.S. Treasuries are little changed since Bush said in his Jan. 20 state of the union address that he wants to curb government spending, indicating no expectation that government will have to stop borrowing, said Ken Anderson, who helps manage $65 billion of fixed income investments at Evergreen Institutional Asset Management in Charlotte.

``They'll spend like crazy because it's an election year, and maybe next year they'll get religion,'' Anderson said.

The yield on 10-year Treasuries rose to 4.16 percent from 4.13 Friday and 4.05 percent on Jan. 20 when Bush gave his state of the union address, according to prices from Morgan Stanley. Yields would have dropped below 4 percent if investors expected government spending to shrink, Anderson said.

`Cold War' Spending

``Bush's plan for cutting spending doesn't give the whole picture, since so many other parts of the government will continue to grow,'' Anderson said. ``We're already up to Cold War levels on defense.''

The Standard and Poor's 500 Aerospace and Defense Index has risen 3o percent in the past year as company profits rose.

Lockheed said last week 2004 profit from continuing operations will rise to as much as $2.50 a share, from $2.34 last year. Sales will rise as much as 8 percent to $34.5 billion. Raytheon said profit from continuing operations this year would rise to as much as $1.35 a share, up from $1.29 last year, as sales rise as much as 10 percent to $20 billion.

Halliburton Co., the biggest U.S. oil services company, and closely held engineering company Bechtel Group Inc. were beneficiaries of the $87 billion emergency spending bill passed last year to fund occupation and reconstruction costs in Iraq and Afghanistan. Last month, Bechtel won a $1.8 billion contract for Iraq reconstruction. It was the largest awarded to date as part of the money Congress had approved for Iraq.

Deficit

Bush, who has never vetoed a spending bill, said in his state of the union address Jan. 20 that he wanted Congress to hold the line on spending outside of his priorities for defense and homeland security.

Pressure to cut the record deficit is growing. The White House Office of Management and Budget estimated last week that this year's shortfall would reach $520 billion, about 10 percent more than previous estimates, because of the cost of rebuilding Iraq. The administration's forecasting arm also concluded that a new prescription drug benefit added to the federal Medicare health insurance program for seniors may cost $140 billion more than expected when the provision was signed into law in December.

The deficit is an issue for the November presidential election and in Congress, as Democrats accuse the White House of squandering the surplus left to him by Clinton.

Bush is statistically tied in a contest with John Kerry, the senator from Massachusetts who is the leading presidential among Democrats, according to polls. His approval rating fell to 47 percent in January from 58 percent in December, and Kerry got 46 percent, according to a poll taken Jan. 27-29 by American Research Group. The survey of 768 registered voters has a margin of error of plus or minus 3.5 percentage points.

Election Issues

Defense and homeland security issues were ranked behind the economy and war issues in Iraq in a CNN/Gallup/USA Today poll taken Jan. 9-11.

Democrats seeking to challenge Bush for the presidency say he has driven up the size of the federal budget deficit by pushing $1.7 trillion in tax cuts that favor rich people without addressing the 2.5 million manufacturing jobs lost since Bush took office.

``Should we be running half-trillion dollar deficits every year, should we be 3 million jobs short of where we were when George Bush took office?'' Howard Dean, the former Governor of Vermont who is seeking the Democratic nomination for president, said in a December interview.

Democrats

Kerry has challenged Bush's tax cuts for those making more than $200,000 a year, saying the country would benefit more from universal health care and education programs. ``That's a fight we will win,'' Kerry said at a New Hampshire debate last week.

Senator Kent Conrad of North Dakota, the senior Democrat on the Budget Committee, has said Bush should be more concerned about the drop in government revenue after his tax cuts.

``The president is now focused on domestic spending, which is a very small part of federal spending,'' Conrad said at a Jan. 27 hearing. ``It's been the revenue side of the equation where we've really seen things fall off.''

It will be tough for Congress to agree to hold down spending, said Senator Mike Enzi, Wyoming Republican and a member of the Senate Budget Committee.

``We're not very good at cutting anything,'' Enzi said at a Senate Budget Committee hearing on the deficit on Tuesday. ``We're not even good at slightly cutting things.''