Under the proposal, wealthier senior citizens would have to pay more for prescription drugs and the services of doctors under the Medicare system, The Washington Post and New York Times reported, citing a senior administration official and budget documents.
Bush's proposed cuts in Medicare and Medicaid far surpass what he or any other US president have sought before, the New York Times reports.
The Washington Post said the president would seek an increase of more than 10 per cent for Pentagon spending, increasing its budget to $481bn.
Non-military areas would receive a one per cent increase in spending for the fiscal year in 2008, an administration official told Reuters.
The sum amounts to a decrease in many US domestic programmes after accounting for inflation, which is running at about 2.5 per cent.
Many Democrats have called Bush "fiscally reckless" and say his huge domestic tax cuts are unaffordable and favour the wealthy.