"If the majority in Congress gets its way, American families and small businesses will face a massive tax hike, It will amount to the largest tax increase in American history," the president said in a statement from the Treasury Department made after a meeting with his economic team.
"I recognize that Democrats control Congress and with it the power of the purse. I also have some power and it's called a veto, and I have the votes in Congress to sustain vetoes and therefore I will use the veto to keep your taxes low and to keep federal spending under control," Bush said.
The primary focus for participants in the economic advisers meeting was how to keep taxes low and get Congress to send its 12 annual spending bills to the president's desk before the new fiscal year begins Oct. 1.
"It's essential that Congress get its work done in regular order and stay on a path to balance the federal budget," White House Press Secretary Tony Snow said before the meeting. "The U.S. economy is performing well, with sustainable growth that continues to support job creation. We want to ensure that we avoid policy and spending choices by congressional Democrats that could threaten to derail the economy."
Bush and his advisers also reviewed the international economy and the trade agenda. Included at the lunchtime meeting were Vice President Dick Cheney, Treasury Secretary Hank Paulson, Labor Secretary Elaine Chao, Commerce Secretary Carlos Gutierrez, U.S. Trade Representative Susan Schwab and members of the president's staff.
Bush said the long-term challenges to the economy can be met by continuing to open up markets to American goods and services through free trade agreements that have been opposed by many members of Congress who say that those deals hurt U.S. workers and don't meet environmental and labor standards.
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The president said his "pro-growth policies" have contributed to strong job growth — 8.3 million jobs — since August 2003, a low unemployment rate and rising wages.
"Unemployment's low. Real after-tax income has increased by an average of more than $3,400 per person since I took office. Tax cuts let Americans keep their own money. It stimulates entrepreneurship," Bush said.
One of Congress' few completed measures this summer has been a minimum wage bill that was sent to the president's desk and signed into law last month.
In addition, the gross domestic product, the measure of growth in the U.S., reportedly rose 3.4 percent in the second quarter of this year, its strongest showing since the first quarter of 2006.
But several issues are scaring investors and businesses, including a credit crunch that the Federal Reserve addressed Tuesday by saying that market volatility and a housing correction is ongoing.
The quasi-government agency that sets the price of borrowing said the economy is expected to continue to move at a moderate pace in the coming quarters, employment and income continue to grow and the global economy is "robust."
While the Fed left interest rates unchanged, it warned about the country's core inflation rate and the need to monitor it.
In addition, the market continues to fluctuate over concerns of liquidity, urged on by a spike in foreclosures and late mortgage payments associated with subprime mortgage lending.
Aftershocks of the subprime lending debacle have made Wall Street skittish as more and more people have proved themselves incapable of repaying the risky debt. Some companies have been forced to quit or curtail their lending, with one — American Home Mortgage — declaring bankruptcy this week.
On Tuesday, Standard & Poor's said it may downgrade about $914 million worth of securities backed by Alt-A mortgages. The rating agency cited rising delinquency rates among the loans.
In addition, the recent collapse of two Bear Stearns-managed mortgage funds and subsequent resignation of the company’s co-president and co-chief operating officer Warren Spector — who before the credit storm was regarded as a possible successor to the current CEO — has fueled liquidity fears.
A dried-up money well would mean the end to the mergers-and-acquisitions boom that has been behind a bull reign on Wall Street.
FOXNews.com's Megan Dowd contributed to this report.