By BBC News Online's Steve Schifferes

Next week the US economy will set a record. February will mark the longest-ever US economic expansion.

The 107 months of growth - surpassing the l961-69 boom - have created millions of jobs, thousands of paper millionaires, and scores of happy politicians.

And that has set the background for a scramble to distrubute the spoils, as a budget deficit has, remarkably, turned into a growing budget surplus.

At the beginning of the Clinton years, Republicans and Democrats were fighting over how to get rid of a huge budget deficit. They were deadlocked over whether to raise taxes or cut spending.

That fight twice led to a conflict that shut down the government, and to the demise of one of Mr Clinton's main antagonists, Republican Newt Gingrich.

Now the booming economy has propelled the government into a surplus that could reach $2 trillion in the next decade.

Dividing the spoils

So it is no longer a question of what to cut. Rather, it is whom to give the money away to that is dominating politics.

Republicans are falling over each other to pledge a variety of tax cuts. Leading Presidential contender George Bush wants to give back $800bn.

And now President Clinton has joined the fray, promising $350bn in tax give-aways to middle Americans.

But he argues that money should also be put aside to "save" social security, the US Government pension scheme that is expected to run out of funds sometime in the next 30 to 40 years - a goal the Republicans say they share.

And he would like to put aside some money to extend the coverage of Medicare, the government's health insurance scheme, which does not cover prescription drugs.

Alan Greenspan, the head of the Federal Reserve, the US central bank, favours a more Conservative course. He wants to use the money to pay down the Federal debt of $3.6 trillion.

That is also supported by the Administration, which believes it would lead to lower borrowing costs for ordinary Americans.

But it is opposed by many Republicans who fear it as an alternative to tax cuts.

If the money was used to pay down the debt, the US could theoretically eliminate public borrowing for the first time since 1834.

Record economic performance

The growing budget surplus is due to buoyant tax revenues.

But it is also the product of a very tight budget deal that has cut "discretionary" spending (i.e. not social security) very severely.

Whether that deal can survive such a huge surplus is still debatable.

And how much the US citizens actually want tax cuts is also unclear, given their rising real incomes.

The booming US economy has brought economic benefits right across the income spectrum.

The unemployment rate has dropped by half, to 4%, a 40-year low, while the economy has created some 17 million jobs.

And the steady growth has trickled down, lowering unemployment among minority groups and - in theory - helping those cut off from state benefits under welfare reform to find new jobs.

People investing in the stock market have done even better.

Stock market boom

The Dow Jones industrial average of 30 leading stocks has tripled in the last five years.

The Nasdaq index, which tracks mainly high-tech and computer stocks, jumped by 80% in the last year alone.

The result has been a burst of personal optimism.

A staggering 86% of those earning $75,000 or more said they had a good year personally in 1999.

And Americans are even more optimistic for the future, with two-thirds saying they expect 2000 to be better than 1999.

But despite the optimism, there are worrying signs ahead for the economy.

Many people and companies have borrowed money to the hilt, and savings are at a record low.

The biggest cloud on the US economic horizon is the spiralling trade deficit, which reached a record $300bn in 1999.

Although all candidates have pledged support for free trade, protectionism could be the biggest economic issue in the election.

President Clinton, who has brokered a free trade deal with China, wants to ensure that it will receive Congressional backing.

But many Democrats in Congress oppose the President's free trade agenda.

The Goldilocks economy

The policy deadlock in Washington has meant that neither the President nor Congress can claim very many concrete achievements - and that pattern is likely to continue this year.

For many businessmen and investors, credit for the remarkable economic performance is given not to President Clinton, but to the head of the Federal Reserve, Alan Greenspan.

The central bank chief is credited with ensuring that the economy is running neither too hot nor too cold, but just right - as Goldilocks told the three bears in the children's story.

But he may become less popular with investors if he continues to raise interest rates further this year.

Mr Greenspan has already warned that he believes the stock market is over-valued.

And he believes that a tightening labour market could lead to higher wages and higher inflation in the long run - even though, remarkably, there has been no sign yet of inflation taking off.

His three interest rises last year do not appear to have had much effect, and most observers expect several more increases to try and slow the economy. There could be a large rate rise in early February, when the Fed next meets.

That could bring the party to an end - and it could mean that those huge budget surpluses never materialise.