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Dole prays tax U-turn will impress voters

Desperate to spark his floundering, near-lifeless presidential bid, Bob Dole yesterday embraced the "voodoo economics" he lambasted in the past, by unveiling a $548bn (pounds 370bn) plan to cut income taxes by 15 per cent and thus lead the country into a new era of prosperity.

The economic strategy that will be at the heart of his campaign this autumn was launched at a speech in Chicago, and kicks off a political fortnight which could settle Mr Dole's chances of overcoming his 20-per- cent deficit in the polls and of capturing the White House in November.

On Saturday he is scheduled to make the keenly anticipated announcement of his choice for Vice-President, only two days before the opening of the nominating convention in San Diego. At best this will be a symphony of soft words and sweet reason, orchestrated to appeal to the crucial middle ground of American politics.

At worst (and further wrangling last weekend over abortion in the Republican manifesto offered an ominous portent) it could turn into a brawl between moderates and conservatives, a repeat of the ugly 1992 goings- on in Houston that helped send the then President, George Bush, to defeat.

First, the notoriously visionless Mr Dole must find something to stand for, and yesterday's economic plan aimed to fill that gap. In essence he has reached for the Republican panacea of tax cuts: not the flat tax promoted by publisher Steve Forbes in the primaries, but a 15 per cent reduction in tax rates at every existing bracket, phased in over three years. In addition, he plans a $500-per-child tax credit, costing $75bn, and a halving of capital gains tax.

In doing so, Mr Dole, a longstanding hawk on deficit reduction, may strain his credibility to breaking point. Only a few years ago he was making vicious jokes about "supply-siders" ("the good news is that a bus full of them went over a cliff; the bad news is there were three empty seats"). Now he is making their nostrum - that lower taxes boost economic activity, swell the federal tax take and actually reduce the deficit - his own.

According to the Dole plan, the Republican goal of a balanced budget by 2002 will not be affected, nor will popular entitlement programmes, such as Medicare and social security, beyond the party's existing proposals in Congress. But economists are sceptical and so are ordinary Americans.

Nor does Mr Dole's gloomy diagnosis of the national economy ring entirely true. His measures, he says, will lift sustainable growth from 2.5 per cent to 3.5 per cent a year, creating millions of new jobs. In fact, the economy expanded by more than 4 per cent in the second quarter of 1996, unemployment and inflation are low, and the budget deficit this year is forecast at $116bn, the lowest since the late 1970s. In proportional terms, at 1.6 per cent of GDP, it is the best of any major industrialised country.

Not surprisingly, the White House jumped on the Dole plan. "A gold medal flip-flop" was the caustic post-Olympic judgement of Leon Panetta, the White House chief of staff.

The propaganda wars mask a reversal of roles. Traditionally champions of the working man, the Democrats will fight the election as the party of fiscal rectitude, while the Republicans seek to exploit a widespread feeling that in spite of today's fine figures, jobs are less secure than ever.