Barack Obama pulled in $66 million last month, smashing his previous fundraising record amid clear signs that Sarah Palin has mobilised many grassroots Democrats against her as much as she has energised the Republican Party.

Mr Obama's fundraising total for August beat his monthly record of $55 million (£31 million) and was the highest in US presidential history. It came with the addition of 500,000 donors, many of whom signed on to the campaign after the extraordinary entry of Mrs Palin into the race as the Republican vice-presidential nominee.

Although the news was a muchneeded boost for Mr Obama after a turbulent month in which he has slipped behind John McCain in the polls, Democratic strategists conceded that the race was now too close to call, with two new polls showing the candidates in a statistical tie 50 days before the election.

With a newly energised McCain campaign and Republican Party - the result of the impact of Mrs Palin on the race - and a relentless barrage of attack advertisements against Mr Obama, a growing number of Democratic strategists believed that the dream of the Illinois senator to redraw and expand the electoral map had probably ended.

Instead, they said, the White House contest suddenly resembled the last two presidential elections in 2000 and 2004 - extremely close, deeply partisan and likely to be decided by a handful of big battleground states in the Midwest, particularly Ohio and Michigan, and in Pennsylvania.

Mr McCain is limited to spending, between now and election day, the $84 million supplied by the US Treasury after he opted to stay within the public financing system. Yet he will receive the help of the same outside operatives who started the devastating Swift Boat attacks against John Kerry in 2004.

Funded mainly by Harold Simmons, the Texas billionaire behind the Swift Boat Veterans for Truth organisation - which claimed that Mr Kerry had lied about his military service in Vietnam - the American Issues Project is about to start a television campaign against Mr Obama's record. It is entirely independent from the McCain campaign, but will seek to raise questions about Mr Obama's Chicago ties to William Ayers, a 1970s radical who bombed federal buildings, and his relationship with Jeremiah Wright, his controversial former pastor.

Meanwhile, liberal groups unaffiliated with the Obama campaign are about to unleash their own multimillion-dollar advertising campaign against Mr McCain.

Mr McCain started a series of advertisements against Mr Obama in recent days that his rival has called dishonest, sparking an almost hysterical note from the aides of the Democrat at the weekend.

Bill Burton, a spokesman for Mr Obama, accused Mr McCain of “cynically running the sleaziest and least honourable campaign in modern presidential campaign history” with his “disgusting lies”.

Mr McCain, appearing on a daytime talk show, denied that the advertisements contained lies. He said that the harsh tone of the campaign would be different if Mr Obama had accepted his invitation to appear at joint, freewheeling debates across the country during the summer.

Amid mounting concerns that attempts to undermine Mrs Palin were backfiring, Mr Obama has decided to ignore her and concentrate sharper and more aggressive attacks against Mr McCain. On Saturday, having conceded that there was a new urgency to the campaign, he continued a strategy that played on the age of Mr McCain and his ties to President Bush. A blistering memo to reporters from his campaign manager, David Plouffe, mentioned the Alaska governor in passing only.

Bill Clinton, more than two months after Mr Obama clinched the nomination, will finally make his first campaign appearances at the end of this month.

The two had their first post-primary meal together in New York on Thursday at a time when Mr Obama found himself under attack from Republicans - and a growing number of nervous Democrats - for not picking Mrs Clinton as his running-mate.

“I think he's regretting not picking her now, I do. What, what determination, and grit, and even grace through some tough shots that were fired her way,” Mrs Palin told ABC, as part of a strategy to woo women voters to the Republican ticket.

Mrs Clinton appeared for Mr Obama in Ohio yesterday, although there were lingering tensions between the two camps. There have been suggestions by some within the party that the Clintons were dragging their feet when it came to stumping for

Mr Obama. Aides to the former First Lady countered that she and her husband had simply not been asked to do very much.

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