The President could yet rue pushing his plan through, writes Conor O'Clery in New York.

Things are looking bleak for American workers. Weekly earnings fell by 1.5 per cent in the first quarter, the biggest drop since 1991 when George Bush senior was president.

Surveys show that a laid-off worker needs five months to find a new job, the longest stretch since 1984. Job creation is sluggish and few companies contemplate pay rises anytime soon.

Inflation is low but as the American pay packet shrinks, important family costs are rising. Car insurance went up 9 per cent and college fees 7 per cent last year. Many corporations have reduced matching contributions to pension plans; others have raised employees' health insurance premiums.

By contrast, life for chief executives gets better all the time. Their compensation rose 15 per cent in 2002. A chief executive in the US today earns 200 times the pay of the average worker, up from 56 times in 1989, according to the Journal of Economic Issues.

Despite hard times, the corporate culture is resistant to change. As American Airlines forced pilots to take pay cuts of 20 per cent last month, senior executives quietly gave themselves pension guarantees worth $41 million (when the news leaked, chief executive Mr Donald Carty was forced to resign but the benefits stayed).

Federal Reserve chairman Mr Alan Greenspan gave his most recent assessment of the economy to Congress on Wednesday.

It was "not unreasonable" to expect an upturn later in the year, he said, but "recent readings on production and employment have been on the weak side". In other words the job market isn't going to improve anytime soon.

President George Bush's response has been to campaign for $726 billion in tax cuts over 10 years, including the abolition of the tax on dividends. The cuts would mostly benefit the rich (on last year's income, the President would have got a $44,500 tax cut, and Vice-President Mr Dick Cheney $107,000, according to the Wall Street Journal) but have been presented as a stimulus that would create one million new jobs.

However, economists mostly agree that tax cuts will inflate the deficit and spark higher interest rates and inflation. In two years under Bush-economics the US has already gone from a surplus to a record $400 billion trade deficit.

The issue of tax cuts is so personal for Mr Bush that commentators believe the role of the White House economic team in formulating economic policy has been subverted.

Mr Greenspan's warning earlier this year that the mounting deficit was a reason to abandon the tax cuts has been ignored. The half-dozen most senior people Mr Bush appointed to advise on economic policy when he assumed office have all left or been pushed since last autumn, including Treasury Secretary, Mr Paul O'Neill, who thought the tax cuts were a bad idea.

The new team voices support for the tax cuts but is weakened by the perception that this reflects the President's will rather than their convictions.

Mr O'Neill's successor, Mr John Snow, is a former deficit hawk. The new head of the Council of Economic Advisors, Prof Gregory Mankiw, has attacked rising deficits in a book that took issue with the idea that tax cuts designed to encourage economic growth were really beneficial to the economy.

Mr Bush's economic team is in effect the Republican majority in Congress, which is on the brink of giving him his tax cuts, though even they couldn't stomach the amount he asked for and have settled on $318 billion over 10 years, including a temporary abolition of tax on dividends.

The victory may, however, be costly. In the present climate, most Americans believe Mr Bush is wrong on tax, according to a poll published yesterday by the Wall Street Journal/ABC News shows. Only 29 per cent agree that cutting tax is the best way to create jobs.

Some 55 per cent said they would prefer the government to provide money for health coverage. More than six in 10 people said they believed the tax cuts benefited wealthy Americans.

That perception could be costly in next year's presidential election. The survey demonstrates that Mr Bush is squandering the political capital he has accumulated in the post 9/11 war on terrorism.

Most observers maintain that Mr Bush is unbeatable in 2004, but he has not learned - or more precisely he has misapplied - the lesson of 1991 that defeated his father: "It's the economy, stupid!"