President Clinton used a blue paintbrush to demonstrate how the $3.7 trillion US national debt will be paid off by 2013 when he presented his eighth and last budget at the White House.

"We're on our way to an achievement that only a few years ago would have been inconceivable - making America debt-free for the first time since Andrew Jackson was president in 1835," he said proudly.

Mr Clinton is in the happy position of presiding over a booming economy which is generating huge budget surpluses, leaving money for the expansion of social programmes as well as tax cuts. But already Republicans are challenging the President's priorities and calling it a classic election year budget.

The $1.84 trillion budget for fiscal year 2001 which the President sent to Congress yesterday proposes increases in spending for education, healthcare, defence, with moderate tax cuts. But the budget that will emerge later this year from the Republican-controlled Congress will almost certainly look very different.

Mr John Kasich, the Republican who chairs the House Budget Committee, called the budget "dead on arrival". Describing it as the President's "fantasy budget", Mr Kasich complained that he has "failed to make basic choices, promising more spending on every government programme".

Senator Pete Dominici, who chairs the Senate Budget Committee, said "This is a document designed to help Al Gore win election."

The President's plan to use half the $746 billion in budget surpluses not generated by Social Security payroll taxes to help pay off the national debt over the next 10 years is strongly contested by the Republicans, who want more for tax cuts. Both sides have already agreed to use the estimated $2.2 trillion surplus arising from Social Security taxes to pay down the public part of the national debt.

A popular measure in an election year is the President's proposal to set aside $160 billion over 10 years to help pensioners pay for increasingly costly prescription drugs. An additional $35 billion would be earmarked to meet "catastrophic drug costs" for those with the highest bills.

Not surprisingly, the pharmaceutical companies approve of the proposals.

The President's proposed tax cuts would total $351 billion over 10 years but almost a quarter of these would be offset by some tax increases, such as 25 cents on a packet of cigarettes and by closing loopholes for the highest earners. Republicans are seeking about double that amount in across-the board tax cuts but, interestingly, Senator John McCain, the Republican Presidential candidate, is getting increasing support in his campaign by proposing tax cuts more in line with those of President Clinton than his Senate colleagues.

Thanks to the budget surpluses, both President Clinton and the Republican leadership have agreed to abandon the caps on budget expenditure which were hailed as a great achievement two years ago. The proposed $1.84 trillion budget for the fiscal year 2001 which begins next October is a 2.5 increase over last year's and in line with inflation.

About one-third would go towards defence and day-to-day operations; 54 per cent to Social Security, health insurance and other compulsory federal schemes called "entitlements" and the remainder to paying interest on the national debt.

Some $26 billion would go to modernising schools and $30 billion to tax breaks to help parents of university students pay for fees of up to $10,000 a year. Another proposal which will be popular in an election year is $91 billion to extend health insurance to five million Americans not covered by existing schemes. Former senator Bill Bradley, who is challenging Vice-President Gore for the Democratic nomination, is proposing a more ambitious scheme to extend health cover to all the estimated 44 million who have no insurance.

The $227 billion for defence spending would go to modernising weapons and equipment and for a 4 per cent rise in military pay. Funds are also provided for the first stage of a national missile defence system which is banned under the anti-ballistic missile treaty with Russia, but which Washington is trying to renegotiate.