Perot pushes his economic prescription: David Usborne reports from Washington that the former contender still has plenty to say

Ross Perot may have abandoned his quest to become the next tenant of the White House, but on one issue he still wants a say: the taming of the federal deficit which, he says, threatens America with 'economic catastrophe'.

Mr Perot, by deciding to release what would have been his economic programme if he had not withdrawn from the race earlier this month, is hoping to apply pressure on the two remaining candidates, George Bush and Bill Clinton, to get serious about cutting the deficit.

He is being joined in the effort by another past figure of the campaign, Mr Clinton's main rival in the early primaries, Paul Tsongas.

The former Massachusetts senator announced this week that he is teaming up with Warren Rudman, the much respected, soon-to-retire Republican senator from New Hampshire, to set up a bipartisan coalition to urge action on the deficit.

The Perot plan has economists almost weeping, both with relief that at last someone has dared to be honest about what needs to be done to balance the budget, and with frustration that it is coming from a past candidate who no longer has much relevance. Indeed, Mr Perot probably calculated that his candidacy could not work because the plan would so shock the public.

By slaughtering herds of sacred cows - raising taxes, even on petrol and cigarettes, and slashing federal and welfare spending - the Perot plan would aim in five years to wipe out the deficit, projected this year to reach dollars 340bn ( pounds 180bn), and transform it by 1998 into a dollars 8bn surplus. This compares with the none-too-specific programmes of Mr Bush and Mr Clinton, who say they will trim the deficit to dollars 130bn and dollars 167bn respectively by 1996.

Both the Bush and Clinton alternatives have drawn stinging criticism from economists, who argue that they are based on hopelessly optimistic models for economic growth and offer scant detail on where the savings would be made. Mr Bush speaks only of cutting back on 'mandatory spending', for instance Medicare. Mr Clinton is slightly more specific, hoping to raise dollars 150bn from higher taxes on the very wealthy and foreign corporations, but proposing at the same time to increase federal spending on infrastructure and training.

Among economists who believe running a deficit is undesirable, Mr Perot's plan is manna. 'This is the best plan I've seen in a long time,' said Charles Schultze, from the Brookings Institution in Washington and a former adviser to President Jimmy Carter. 'If you are serious about balancing the budget, then there will have to be big tax increases'.

The Perot tax increase on petrol - to any European observer a screamingly obvious first step to take - would add 50 cents to the price of a gallon over the five years. It would raise the Treasury an extra dollars 50bn in revenue, while leaving petrol considerably cheaper in America than in almost any other industrialised country. It might even do something for the environment.

Other taboo-breaking steps envisaged by Mr Perot include raising taxes on welfare payments, pruning Medicare benefits, slashing tax deductions on house mortgages and business entertainment expenses, scaling back federal payments on the arts and public transport and pressing ahead with huge cuts in military spending. There would also be a massive clearing out of federal government bureaucracies.

The plan's architects admit that the medium-term effect would be a further depression of growth and increased unemployment. The prescription would, however, be tempered with some business incentives, such as generous tax credits for companies making new investments and offering employee training, and capital gains tax cuts for long-term stock credits. Some of the petrol revenue would be fed into infrastructure investment.

Mr Perot said he was ready to promote his plan, even from outside the race, if necessary with a campaign of television commercials. He also wants to meet both candidates to push his prescription. 'We can do it now. And if we do it carefully and do it well, we can avoid an economic catastrophe,' he said last week.

In the end, the Tsongas- Rudman alliance might prove more influential on the presidential debate than Mr Perot's radicalism. Together, they aim to raise dollars 1m to finance chapters of their alliance around the country to apply pressure on politicians, including all congressional candidates, to face up to the tax-raising decisions that need to be taken. A plan of their own will be unveiled after the summer holidays in September.

Mr Tsongas has some hope that they can have an effect on the race. 'If you think of Congress and the President as a weather vane, then the function of our organisation is to change the direction of the wind', he said.

(Photograph omitted)