Let me be clear: we don't think that we're going into recession

Clinton adviser

Mr Clinton said on Friday that the economy had a "bright future", although the "blistering pace" of the past two years had inevitably slowed.

"But that is not to say the evidence suggests anything other than that expansion will and should continue," Mr Clinton added.

Mr Clinton was speaking as he presented his last report on the economy to Congress.

Bush 'pessimistic'

His words were in stark contrast to president-elect Bush, who told the Wall Street Journal he was "relatively pessimistic" about what the economy looks like.

Although he did not refer directly to a recession, Mr Bush said: "If in fact the economy is slowing down, as the numbers are beginning to clearly show, the operative word is: how soft will the landing be?"

I do not believe the tax cut plus whatever spending plans there will be should be so large as to take us off the path of fiscal discipline

President Bill Clinton

Bush and his team have annoyed the White House by suggesting that the economy could be heading for a particularly "hard landing" from the dizzy heights of early 2000.

Clinton administration officials denounced Mr Bush's comments, accusing Bush of deliberately "talking down" the economy in order to drum up public support for his controversial $1.3 trillion, 10-year tax cut plan.

On Friday Mr Clinton, who leaves office on 20 January, said he thought there was room for tax cuts in the American economy.

What I won't consider is trying to diminish the size of the tax-relief package

President-elect George W Bush

But, in a clear reference to the incoming administration's economic policy, he warned against deep cuts and urged fiscal discipline.

"America can afford a tax cut.

"But I do not believe the tax cut plus whatever spending plans there will be should be so large as to take us off the path of fiscal discipline, for a simple reason - paying down the debt keeps interest rates low," President Clinton said.

He said it was worth giving up higher growth to concetrate on paying off the national debt, which he believes should be wiped out altogether by the end of the decade.

Earlier, Martin Baily, chairman of Mr Clinton's Council of Economic Advisors, joined the debate, telling journalists: "Let me be clear: we don't think that we're going into recession. We continue to be very optimistic about this economy."

The Democrats fear the tax cuts will prove too expensive and have argued that much of the $5 trillion cumulative surplus the country is projected to enjoy by 2010 should be used to fund a federal retirement scheme and medical care for the elderly.

Clinton future

Soft landing for the US economy Small-scale, targeted tax cuts Eventual repayment of the national debt

Reacting to criticism that tax cuts would take too long to rescue a faltering economy, Mr Bush told the Journal he would consider making parts of the package retroactive to 1 January, 2000.

"What I won't consider is trying to diminish the size of the tax-relief package," he said.

Further decade of growth

In his eighth and final economic report to Congress, Mr Clinton predicted that the current expansion, now nearing 10 years, would continue for another decade.

Bush future

Fears of a hard landing for the economy $1.3 trillion in tax cuts to kick start growth Partial privatisation of social security

The report, according to advance copies released to the press, sees the economy growing by 4.1% in 2000 and 3.2% in 2001 before slowing slightly in 2006.

That analysis is considerably more optimistic than that put forward by leading US economists, who in a recent Wall Street survey said growth would be limited to around 2% this year.

Rising prices, sluggish growth

Battered by declining consumer confidence, higher energy prices and overstocked inventories, the US economic momentum throttled back from 5.6% in the second quarter last year to 2.2% percent in the third.

Most analysts have said growth should remain sluggish in the fourth quarter, for which results have yet to be announced.

The report said unemployment should rise to 4.1% this year from its current level of 4%.

By 2008 the jobless rate is seen as going up to 5.1%.

Consumer prices are predicted to rise 2.5% this year after 3.4% in 2000.