Republicans present "Pledge to America" agenda

STERLING, Virginia Thu Sep 23, 2010 5:26pm EDT

1 of 3. House Republican leader John Boehner (C) holds a copy of 'A Pledge to America' while outlining 'A New Governing Agenda' for the 111th Congress at the Tart Lumber Company in Sterling, Virginia, September 23, 2010. Surrounding him are (L-R): House Republican Conference Vice Chair Cathy McMorris Rodgers and House Republican Chief Deputy Whip Kevin McCarthy.

Credit: Reuters/Larry Downing

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STERLING, Virginia (Reuters) - Republicans in the House of Representatives unveiled their campaign agenda on Thursday -- a "Pledge to America" to create jobs, cut taxes and shrink government -- as they head for big gains in November's congressional election.

Boosted by voter disappointment at President Barack Obama's handling of high unemployment and the soaring budget deficit, Republicans look set to pick up dozens of seats in the House, with a real chance of winning control.

Losing the Democratic majority in the House would impede Obama's domestic agenda as the economy recovers slowly from its worst downturn since the 1930s. Opinion polls show Democrats should keep hold of the Senate but with a weaker majority.

Dressed in open-necked shirts, Republican House leaders unveiled their manifesto at a lumberyard and hardware store in Sterling, Virginia, near the U.S. capital.

"Republicans have heard the American people," said John Boehner, the party's leader in the House. "We are very serious about implementing our pledge."

Robert Gibbs, Obama's press secretary, derided the agenda as "the same litany or catalog of failed policies that got us into this mess."

Later in the day, the Democratic-controlled House sent legislation to Obama aimed at helping small businesses by boosting lending and providing $12 billion in new tax breaks that Democrats said would not add to the deficit.

All Republicans, except one, voted against the bill.

NOTABLE OMISSIONS

The agenda is reminiscent of "The Contract with America" that House Republicans announced on the steps of the Capitol in 1994. That manifesto helped them win control of the House during the second year of Democrat Bill Clinton's presidency.

While short on specifics, the new Republican plan calls for $100 billion in annual savings by scaling back federal spending to 2008 levels -- with exceptions for the elderly and U.S. troops -- and ending government control of mortgage giants Fannie Mae and Freddie Mac.

Republican House leaders also vowed to stop "job killing tax hikes" and allow small business owners to take a tax deduction equal to 20 percent of their business income.

Carl Fritsche, president of the Tart Lumber Co that hosted the event, was skeptical of the deduction, echoing a complaint by Democrats that more tax cuts could swell the deficit.

"I wasn't looking for that because, frankly, we need to cut the deficit. I'm not sure how we would pay for that," he said.

Fritsche said his main concern is ensuring his tax bill does not go up, which Republicans say they would guarantee.

With the Republican announcement, much of which was leaked to the media on Wednesday, battle lines for the November 2 election have become clearer.

The Republicans, who lost control of Congress in 2006, aim to cut the projected $1.3 trillion deficit with immediate spending reductions. But their call for tax cuts would make paring the deficit more difficult.

Democrats are more cautious about spending cuts now, fearing that could stifle the economic recovery.

Under pressure from the conservative Tea Party movement to slash the size and cost of government, the Republicans promised to repeal Obama's landmark overhaul of the healthcare system and eliminate unspent funds from his $814 billion economic stimulus program.

If there are tensions between establishment Republicans and Tea Party activists, Boehner tried to ease them. After his news conference, he spoke to well-wishers outside Tart Lumber and asked whether he could keep a tea kettle one was holding.

Some high-profile Republican initiatives were noticeably absent from the campaign document, including a call to repeal some provisions of a new financial industry reform law.

"The agenda is focused on what the American people want done right now," an aide said, adding Boehner still favors repealing the financial reforms.

A senior Obama aide warned this week that pulling back on federal spending too soon could harm the recovering economy.

"If you try to tighten the belt right now, I think you would spook markets in a substantial way," Austan Goolsbee, chairman of the White House Council of Economic Advisers, told the Reuters Washington Summit on Wednesday.

The Economic Policy Institute, a liberal-leaning thinktank, estimated the new Republican plan would reduce the deficit by 5.5 percent but cause gross domestic product to shrink by 1.1 percent, leading to a loss of 1.1 million jobs.

ALL ABOUT MESSAGE

Obama is unlikely to sign into law many, if any, reforms proposed by House Republicans. But they set markers in what could be a rough fight in the final two years of Obama's term if Republicans do as well as predicted in November.

"It's more of a campaign document than something they're going to be able to push through," said John Canally, an investment strategist with LPL Financial in Boston.

The Republican manifesto gave few details about how to balance the federal budget and revamp the troubled Social Security retirement program.

"This is more about message than what may become law," said Dan Ripp of Bradley Woods & Co, a private firm that tracks Washington for institutional investors.

"And it is the right message," he said. "I think part of the reason that the market has been trending upward (in recent weeks) is it reads a Republican sweep, which is going to put the brakes on what the Obama administration has been doing."

Congress has yet to agree on whether to extend tax cuts brought in under former President George W. Bush that are due to expire this year. Most Democrats want the cuts extended only for the first $200,000 of a person's income, saying the country cannot afford to continue tax cuts for higher earners.

Republicans want the lower rates renewed for all Americans, regardless of income, and say that losing the cuts would hurt small businesses and job creation.

"Very, very slim" is how Dick Durbin, the No. 2 Democrat in the Senate, described the chances of a vote on the tax issue before the election. The Senate is hoping to adjourn at the end of next week so anxious lawmakers can hit the campaign trail.

(Additional reporting by Thomas Ferraro in Washington and Caroline Valetkevitch in New York; Editing by John O'Callaghan)

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