Bolton, who has oversight on the purse strings of U.S. financial support to the world body, could pull them shut if it doesn't make progress on reforms.
Click in the video box to the right to watch a report by FOX News' Eric Shawn.
"We think the reform process should drive the budget, not the budget driving the reform process," Bolton said. "If you make it a more effective institution, which we believe these reforms will do, you make it more attractive for the United States and others to turn to the U.N. So we think that's something in the interest of the entire U.N. membership."
The United States now pays 22 percent of the U.N.'s bills, the largest amount of any nation. More than two thirds of the world body view reforms as a threat to their power. European Union nations want to approve a budget before implementing reforms. The EU make up 40 percent of the budget.
Bolton recommends delaying the two-year budget and replacing it with one that covers the first quarter of next year unless the reforms are met.
"This is a very critical point for the U.N. The secretary general strongly supports the reforms that we are talking about," he said. "We don't want to wait until later next year when he is closer to the end of his term. This is the opportune moment to move."
But the United Nations does not want to be put in that position.
"Having a three-months budget blocks us from planning anything for the long term and limits our ability to work, and that is why in his statement two days ago, the secretary general said, encouraged them to pass a budget and if we would need to, he would come back with supplementary spending requests," said Stephane Dujarric, a U.N. spokesman.
The situation echoes the confrontation a decade ago.
Back then, former Sen. Jesse Helms, R-N.C., and Sen. Joe Biden, D-Del., led the effort to block funding from the United States unless the world body showed it was improving. Congress withheld billions of dollars and helped force some accounting and ethical changes.
John Dodd, head of the Jesse Helms Center where Bolton spoke last week, says U.N. reform must go further now.
"It is critical that people at the U.N. know it's time to reform, they made promises to reform and they need to go forward with those reforms," Dodd said. "I don't think it's a hopeless cause but it's a great challenge."
The United States and Annan appear to face an uphill battle. The General Assembly members say the decision is up to them and not the secretary-general. As far as changes go, few have been approved, but more could come if the money is withheld.