Under pressure from opinion polls and the weight of family history, Mr Bush acted to find a compromise over his proposals as he struggled to avoid his father’s fate of being removed from office after one term by a sluggish economy.

Mr Bush called for Congress to approve tax cuts of at least $550 billion (£350 billion) over ten years after failing to win Senate backing for his initial demands for a $726 billion package. The Senate had slashed the White House plan by more than half, approving cuts worth $350 billion.

The President’s bid to meet the Senate halfway came as he moved to capitalise on his wartime popularity, trying to translate it into domestic success, which his father failed to do. Polls published yesterday suggested that Mr Bush had received a significant boost from the Iraq war. Seventy-three per cent of Americans approved of the job he is doing, according to a poll in The New York Times, up from 59 per cent before the war. However, only 46 per cent approved his handling of the economy. Republican and Democrat strategists regard this as the key issue in the November 2004 election.

The figure is eerily close to the standings of Mr Bush’s father after the 1991 Gulf War. He scored record approval ratings of 91 per cent, but only 49 per cent approved of his handling of the economy. The first President Bush’s failure to address the economy saw him tumble from an apparently unassailable position to defeat at the hands of Bill Clinton.

There were some signs that Mr Bush’s postwar bounce in the polls was rubbing off on his domestic agenda. The number of people confident in his ability to make the right decisions about the economy rose seven points, to 54 per cent. Crucially, the number of Americans who thought that the country was heading in the right direction jumped by nearly 20 points in two months, to 56 per cent.

Mr Bush used a speech in the White House Rose Garden to try to fuse his enhanced standing after victory in Iraq with his call for the large-scale tax cuts, which he said were necessary to spur the economy out of its sluggish state. In particular, he hoped to convince two Republican Senators who are blocking the full scope of his plans to drop their opposition. However, the latest economic indicators continue to alarm. Industrial production fell by 0.5 per cent in March, the worst showing in three months.

Mr Bush claimed that such figures supported the White House case for accelerating many of the tax cuts. “The economy as it is, the American people need that relief right away. If the cuts are good enough for the American taxpayers three or five or seven years from now, they are even better today,” he said.

The “emergency” package of cuts is in addition to $1,300 billion-worth of tax cuts over ten years that Mr Bush introduced in 2001. He mounted a vigorous defence of the decision to abolish the tax paid by investors on share dividends yesterday. He said that the tax, dubbed double taxation by opponents because the corporate profits on which the dividends are based have already been taxed, fell especially hard on pensioners who receive half of all dividend income.

Underlining the urgency of the cuts announced at the start of the year, Mr Bush said: “The pro-growth package was urgent in January. It’s even more urgent today.”

Democrats and some Republicans have said that the size of the package will add too much to the US budget deficit, which will be more than $300 billion next year and would approach $400 billion if the proposals were implemented. Mr Bush tried to turn the argument around, saying: “The best way to reduce a deficit is with more growth in our economy, which means more revenues to our Treasury and less spending in Washington.”

His speech marked the opening shot in a public relations campaign.

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