By Richard Cowan

WASHINGTON, Dec 3 (Reuters) - The U.S. Congress is preparing for an end-of-year legislative sprint as President George W. Bush on Monday accused Democrats of threatening to ruin progress in Iraq and pursuing reckless tax-and-spend policies.

Following a two-week Thanksgiving holiday recess, the Senate was set to return on Monday and the House of Representatives on Tuesday.

Before the recess, Bush and the Democratic-controlled Congress engaged in daily sniping about everything from how to handle the Iraq war, now in its fifth year, to domestic spending priorities.

Senate Majority Leader Harry Reid called Bush "this bully" for demanding $604 billion so far for war while refusing to accept conditions on how it is spent.

The two sides picked up where they left off.

"It's unconscionable to deny funds to our troops in harm's way because some in Congress want to force a self-defeating policy, especially when we're seeing the benefits of success," Bush said at the White House in anticipation of the likely three-week legislative session.

The success Bush referred to was stepped-up security in and around Baghdad that has suppressed attacks on U.S. troops and Iraqi civilians. But there is scant sign of the political progress necessary to create a self-sufficient Iraq that would hasten the return of the 166,000 U.S. troops now there.

"We could have already given our troops what they need in Iraq and funded our critical needs at home if not for the stubborn refusal of President Bush and his Republican enablers to work with us," Reid shot back.

In the House, Rep. Rahm Emanuel of Illinois, who holds a Democratic leadership post, said Congress "will insist on a new direction."

That new direction includes timetables, some required and others optional for Bush, to wind down the war in Iraq.

A House-passed measure giving Bush $50 billion more for war, but with troop withdrawal strings attached, stalled in the Senate last month.

Republicans are expected to push this month for $50 billion to $70 billion in new war money, without conditions.

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As Republicans and Democrats joust over the war, they also will try to pass a top domestic priority: keeping millions of middle-income families from getting socked with an unexpectedly bigger tax bill for this year.

The "alternative minimum tax" reprieve, which Democrats and Republicans broadly support, has been hung up in a wider debate over the federal budget and growing debt.

As for the budget fight and attempts to prevent a government shutdown after Dec. 14 when stopgap funding expires, there has been no sign yet of a deal.

On Nov. 15, Democrats in Congress offered to cut in half the $22 billion in additional domestic spending they want beyond Bush's request, largely for health care and education, but the president has been cool to the offer.

"Now is not the time to burden our economy with wasteful Washington spending," Bush said.

In between the war, tax and budget bills, Congress also might find time by Dec. 21 to rewrite a domestic surveillance law that expires in two months.

On Nov. 15, the House passed a new version of the Foreign Intelligence Surveillance Act (FISA) that Bush has vowed to veto if it also is passed by the Senate.

The fight centers on enhanced privacy protections some Democrats want and Bush's push to shield telephone companies from lawsuits if they participated in his warrantless domestic spying program following the Sept. 11 attacks in 2001.

Depending on whether any time is left before the end-of-year break, Congress also might try to pass a new farm subsidy and nutrition measure, energy reform and expansion of health care for children from low-income families over Bush's objections. (Editing by John O'Callaghan)

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