(Adds details, Cheney comment)

By Caren Bohan

WASHINGTON, May 26 (Reuters) - The White House on Saturday played down a newspaper report that the Bush administration was weighing a scenario for possibly sharp cuts in U.S. troop levels in Iraq next year.

The New York Times, citing unnamed senior U.S. officials, reported the administration was developing concepts in which U.S. combat forces would be reduced to around 100,000 by the middle of the 2008 presidential election year from close to 150,000 now.

White House spokeswoman Dana Perino noted that 30,000 extra U.S. troops for Iraq, ordered by Bush in January as part of a security crackdown, had not all arrived yet. The final wave of reinforcements is expected in mid-June.

Perino said the increase was aimed at setting the very conditions that would allow U.S. troops to return home.

"We, of course, would like to be in a position to bring down troop levels, but certain conditions, as assessed by senior military advisers and commanders on the ground, need to be met to warrant that," she said in an e-mail in response to a Reuters query.

After a four-month battle with Bush, congressional Democrats this week approved $100 billion in funds for the Iraq war without the deadlines for a troop pullout they had originally sought.

That has bought Bush some time to press ahead with his Iraq strategy, despite opinion polls showing it is unpopular among the majority of Americans.

Democrats have vowed to continue their push to impose deadlines for withdrawing U.S. forces from Iraq and Republicans have privately warned Bush that he may lose their support if the troop buildup does not show progress by September.

Bush, now in his second term as president, cannot stand in the November 2008 election but many Republicans fear that public opposition to the war could hurt their party's chances.

NO 'POLICY OF RETREAT'

U.S. Vice President Dick Cheney, in a commencement speech at the U.S. Military Academy on Saturday, acknowledged it was still "tough going" in Iraq but said the United States must not waver from its goal of stabilizing the country.

"The security of this nation depends on a successful outcome," he said at West Point.

Cheney has been among the most vocal voices within the administration insisting that the United States could not back a "policy of retreat" in Iraq and warning that a withdrawal would embolden militant groups such as al Qaeda.

The Times article said there was an internal debate among Bush's advisers, with U.S. Defense Secretary Robert Gates and Secretary of State Condoleezza Rice thought to favor reducing the troop levels next year.

Gates, testifying on Capitol Hill earlier this month, said a September progress report from Gen. David Petraeus, the U.S. commander in Iraq, would determine the future of the higher troop levels. If there appears to be good progress, "I think we can begin to consider reducing some of these forces," he said.

However, Lt. Gen. Ray Odierno has said the troop rise needs to be kept going through early next year.

At a news conference on Thursday, Bush said he would "like to see us in a different configuration at some point" in Iraq but decisions on the timing of changes would be made by commanders on the ground, "not politicians."

He also referred several times to the report of the Iraq Study Group led by former Secretary of State James Baker and ex-congressman Lee Hamilton that recommended pulling out most U.S. combat troops from Iraq by early 2008.

Bush reacted coolly to that report when it was first released in December.

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