In response, critics of the new bill accused Mr. Bush of "fear mongering," and of trying to deflect attention from the bill itself. Its most controversial provision would prevent Americans from suing phone companies that helped the administration spy on them since the White House surveillance program was instituted in 2001.
Mr. Bush has made immunity from civil prosecution for the telecoms a must-have element for revamping the nation's surveillance laws, repeatedly saying he would veto any bill that does not exempt telecoms from lawsuits.
The battle lines are being dug in more deeply as House and Senate members prepare to meet in conference to match competing versions of the legislation, an update of the Foreign Intelligence Surveillance Act (or FISA).
The House-passed version does not include telecom immunity. This past week, the Senate approved a similar version which includes a provision that protects telecoms from civil lawsuits.
There are approximately 40 lawsuits now brought by citizens and consumer groups against companies that enabled the government to illegally eavesdrop on Americans' phone and Internet communications.
Opponents of the administration's program, which engaged wiretaps against any and all Americans without obtaining court-ordered warrants, say the telecoms' participation was illegal. They say that, given the Bush administration's penchant for secrecy, lawsuits against the telecoms are the only way to obtain disclosure about the facts from the government.
Information being sought includes details about the origins of the program. The administration admitted that the sweeping domestic surveillance originated in the wake of the September 11, 2001, attacks. However, declassified documents obtained by the National Security Archive and testimony that is part of these lawsuits suggest the National Security Agency program was put into place shortly after Mr. Bush was inaugurated, long before 9/11.
Mr. Bush claims that unless the telecoms received assurance that they will not be sued for breaking the law (and therefore be liable for damages), those companies will not agree to enact future wiretaps, therefore undercutting the government's intelligence capabilities:
"If these companies are subjected to lawsuits that could cost them billions of dollars, they won't participate; they won't help us; they won't help protect America."
On Wednesday, after the Senate approved a bill granting immunity, the president for the first time admitted that the telecoms participated in the wiretaps which were not authorized by court-issued warrants.
Mr. Bush also raised the specter of what would happen if telecom immunity is not accepted by the House, by recalling the crime scene on 9/11:
"At this moment, somewhere in the world, terrorists are planning new attacks on our country. Their goal is to bring destruction to our shores that will make September the 11th pale by comparison."
Mr. Bush said, "There is really no excuse for letting this critical legislation expire," despite his refusal to sign an extension to the current law while negotiations continue.
House Republicans managed to defeat a House proposal to grant a 21-day extension of the current law.
Critics jumped on the president's refusal to extend FISA.
"The president and House Republicans refused to support the extension and therefore will bear the responsibility should any adverse national security consequences result," said House Speaker Nancy Pelosi.
Expiration of the current Protect America Act would not mean an immediate end to wiretapping. Existing surveillance could continue under the law for a year from when it began - at least until August. Any new surveillance the government wants to institute could be implemented under underlying FISA rules, which may require warrants from the secret court.
Senate Majority Leader Harry Reid, D-Nev., accused the president and Senate Republicans of being more interested in politicizing intelligence than resolving the debate.
Reid said the issue would not even be before Congress if Mr. Bush and Vice President Dick Cheney, "in their unyielding efforts to expand presidential powers," had not created a system to conduct wiretapping, including on U.S. citizens, outside the bounds of federal law.
"The president could have taken the simple step of requesting new authority from Congress ... but whether out of convenience, incompetence, or outright disdain for the rule of law, the administration chose to ignore Congress and ignore the Constitution," Reid said.
Caroline Fredrickson, director of the American Civil Liberties Union's legislative office in Washington, lambasted the president for scare tactics and urged the House not to pass the Senate bill.
"The House should stand up to the bullying from the president and reject the administration's lies and fear mongering," she said. "This administration has abused its power over and over again and it is time for the House to reject any attempts to consider the unconstitutional Senate Intelligence Committee FISA bill.
She also demanded that Americans not be denied their day in court in their suits against phone and Internet companies. "Let the American system of justice decide this case," Frederickson said. "Do not give the phone companies a 'get out of jail free' card. If the companies really 'did the right thing' as the president said, then they have nothing to fear from going to court.
"Terrorism is a threat. But ignoring the Constitution is also a threat."
The 68-29 Senate vote Tuesday to update the 1978 Foreign Intelligence Surveillance Act belied the nearly two months of stops and starts and bitter political wrangling that preceded it. The two sides had battled to balance civil liberties with the need to conduct surveillance on potential adversaries.
While giving the White House what it wanted on immunity for the phone companies, the Senate also expanded the power of the court to oversee government eavesdropping on Americans. An amendment would give the FISA court the authority to monitor whether the government is complying with procedures designed to protect the privacy of innocent Americans whose telephone or computer communications are captured during surveillance of a foreign target.
The Senate bill would also require FISA court orders to eavesdrop on Americans who are overseas. Under current law, the government can wiretap or search the possessions of anyone outside the United States - even a soldier serving overseas - without court permission if it believes the person may be a foreign agent.
CBSNews.com producer David Morgan contributed to this report.