The Democrat -controlled US House of Representatives has defeated proposed legislation to fund the war in Iraq and Afghanistan for another year.
The bill would have seen the Pentagon provided with $162.5 billion (105.5 billion euro) to keep fighting wars in Iraq and Afghanistan through mid-2009.
Republicans abstained claiming Democrats were "playing political games" with 132 representatives abstaining.
The Senate is expected to debate its version of the bill next week.
President Bush had earlier promised to veto any measures that restricted his actions in Iraq. The House did pass two components of the bill that call for extended education benefits for returning soldiers and for President George W Bush to begin withdrawing troops from Iraq within 30 days of the bill becoming law.
The Senate panel's bill also would spend about $9 billion more than Bush requested for a variety of programs, which could draw a White House veto. And it inserted other provisions, such as providing $5 million to open a US consulate in Lhasa, Tibet, where China has been accused of human rights abuses.
Under the House-passed plan, US combat troops, who have been fighting in Iraq since early 2003, would begin withdrawing within one month of the legislation being enacted and set a goal of completing the withdrawals by the end of 2009.
Assuming Congress eventually delivers the new funds, more than $800 billion will have been appropriated for the wars in Iraq and Afghanistan to date, with most of the money going for Iraq.
By proposing to send the Defense Department enough money to fund the wars through mid-2009, Democratic leaders said they would have given the next president, who takes office in January, time to come up with his or her own war plans.
But the move also was aimed at eliminating the need for Congress to pass more war money shortly before the November congressional and presidential elections, in which the unpopular war is expected to play a prominent role.
Meanwhile, Republican presidential candidate John McCain claimed the five-year-old war in Iraq can be won in four more years. The Arizona senator had earlier talked about a US military commitment that could continue for a century.