President plans tax cuts to woo middle class

In an attempt to pre-empt the Republicans and silence critics in his own Democratic ranks, a beleaguered President Bill Clinton is to make a national prime-time address tomorrow in which he will propose tax cuts for the middle class and set broad policy targets for the last two years of his term.

Decided only after much hesitation, the speech from the Oval Office will be critical in an effort to demonstrate that the Republican mid-term election landslide has not turned Mr Clinton into a lame duck. It will allow him to have his say before the new Republican-controlled Congress assembles on 4 January and launches a salvo of legislative proposals that could consign the President's State of the Union message later that month to virtual irrelevance.

It was far from clear yesterday whether the speech would make the impact Mr Clinton desperately seeks. Without the guarantee of detailed and newsworthy proposals, the major television networks may not even carry it. Even on the tax-cut issue, over which

the President has been closeted with advisers all week, the specifics were still not clear last night.

A tax cut would make good the most notorious unkept promise of Mr Clinton's election campaign, that he would help the middle- and low-income earners who had been "shafted" during the Reagan-Bush era. But he jettisoned it even before he took office, claiming the budget deficit was far worse than expected.

But with Republicans clamouring for even bigger tax and spending cuts of their own, the White House had no choice but to act. The favoured option is a tax credit on children for those earning up to $75,000 (£50,000) or $100,000, costing $40bn to $50bn over five years.

The problem is how to pay for it. Reductions in Medicare and Medicaid, and cutbacks in government that might truncate some departments, are solutions being canvassed.

The Republicans have no such inhibitions. Amid vague talk of sweeping spending cuts, they are calling for a $500 tax credit per child on earnings of up to $200,000 and pressingagain for a cut in the capital gains tax. In all, the "Contract with America" manifesto of House Republicans contains reductions worth more than $200bn.

Hence the risk of a tax-cut bidding war between the two parties, which is already causing jitters on financial markets. Most economists argue that the last thing the surging US economy requires is a fiscal stimulus that would probably increase the deficit, push up inflation, and force the Fed into more severe action on interest rates.

But with the unofficial start of the 1996 campaign just weeks away, political rather than economic considerations are likely to prevail. A tax cut would be another sign of Mr Clinton's lurch to the right - his supporters would say to the centre - as he scrambles to win back the middle ground of America.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Project Implementation Executive

£18000 - £23000 per annum: Recruitment Genius: They work with major vehicle ma...

Recruitment Genius: Chiropractic Assistant

£16500 per annum: Recruitment Genius: A Chiropractic Assistant is needed in a ...

Recruitment Genius: Digital Account Executive - Midlands

£18000 - £26000 per annum: Recruitment Genius: They work with major vehicle ma...

Recruitment Genius: Web Developer

£28000 - £30000 per annum: Recruitment Genius: This company provides coaching ...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own