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Wednesday, August 4, 1999 Published at 04:31 GMT 05:31 UK

Business: The Economy

Republicans set up Clinton showdown

Tax cuts anyone?

The Republican party is to clash with President Bill Clinton after it agreed a $792bn tax-cutting plan.

The party thrashed out the 10-year package from competing tax bills approved last month by the House of Representatives and the Senate.

The plan would cut income tax rates by 1% - the biggest tax relief for the American people since 1981.

[ image: Bill Clinton: Veto]
Bill Clinton: Veto
Republican leaders hope to get final congressional approval for the bill by Friday.

However, Mr Clinton is certain to veto the measure.

The White House and most Democrats say the plan would squander bigger-than-expected budget surpluses.

Democrats favour targeted tax breaks of up to $300bn as part of a plan to shore up the Social Security retirement system and the Medicare health care programme.

However correspondents say the Republicans may gain political capital even if their tax breaks fail to become law.

A presidential veto could help them rally voters against Vice President Al Gore, the Democratic front-runner in the 2000 presidential race.

The government's coffers have been boosted recently by the strong economy, which has registered nine straight years of economic growth - the longest peacetime boom in history.

The US Government said in June that its budget surplus would be $1,000bn (£600bn) higher than previously planned over the next decade and a half.

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