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A GOP Contract with America for 2010

By David Frum, CNN Contributor
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STORY HIGHLIGHTS
  • David Frum says a new "Contract with America" would be useful for GOP
  • He says new plan could substitute tax cuts for government spending
  • Frum says Republicans need to focus on creating jobs first
  • He says repairing Obama's health plan is more realistic than repealing it

Editor's note: David Frum writes a weekly column for CNN.com. A special assistant to President George W. Bush in 2001-02, he is the author of six books, including "Comeback: Conservatism That Can Win Again," and is the editor of FrumForum.

Washington (CNN) -- Eight weeks to Election Day, and still no sign of an updated "Contract with America," the famous Republican campaign manifesto of 1994.

Party strategists may have decided they don't need a manifesto: they are winning without one. They may also find it too difficult to agree on the manifesto's content: how do you appeal to Tea Party radicals and swing voters at the same time?

Post-election, though, Republicans will be sorry. The Contract with America helped to discipline the new Republican majority of 1994, enabling Republicans to help achieve important things: welfare reform, a cut in the capital gains tax, a balanced budget.

If Republican majorities arrive in Washington in 2011 without a program, the risk is very real they will fall into trouble: pick the wrong fights with the administration, fail to deliver results, share the blame if employment continues to lag.

With those concerns in mind, let me outline what I think would be a constructive GOP platform for 2010. It can be summarized under three main chapter headings: Jobs, Debt, and Health.

Jobs:

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Employment is issue 1 in 2010. The Obama approach to the jobs issue has not delivered the results for which Americans hoped. Confronting that failure, the administration is now proposing still more spending, $50 billion on infrastructure, money that will not begin to flow for years -- and that seems mainly intended to allow Democratic congressmen to brag that they have delivered projects for their districts. The White House is hinting that it may also improve accelerated write-off for business investment: let's hope so.

Republicans should commit to fiscal stimulus through tax relief and (as the economist Milton Friedman would have advised) more monetary stimulus to fight deflation. Measures should include:

(1) Renewal of the Bush tax cuts for another 5 years;

(2) Immediate passage of an 18-month payroll tax holiday and the suggested faster expensing of investment;

(3) Repeal of the tax increases in the Obama health plan;

(4) A commitment by GOP senators to approve to the Federal Reserve Board only appointees committed to a more expansionary monetary policy.

Debt:

America's debt problem is huge and vital, but jobs come first. Republicans should avoid the mistake of addressing the government's balance sheet before first repairing the nation's prosperity.

Balanced budgets are not ends in themselves. They are means to an end raising the incomes of working Americans.

However, over the longer term, excess public debt can weigh down income growth. So as soon as unemployment falls below 7 percent, decisive action on the debt and the deficit will become urgent. In the near term, that should mean:

1) Ending the Obama administration's budget transfers to state and local governments (more than $160 billion of the $800 billion in the 2009 stimulus package was paid directly to state governments to support education and Medicaid spending);

2) Cutbacks in all discretionary federal spending;

3) Ensuring that savings from the end of combat operations in Iraq and (soon) Afghanistan are applied to deficit reduction, not domestic spending.

In the longer term, spending restraint must mean slowing the growth in per-person Medicare and Medicaid spending through comparative effectiveness reviews and tighter government supervision of the spending of government dollars.

The president is right: the same medical procedures cost radically different amounts in different parts of the country -- without anybody ever being asked to show that the more costly treatment delivers better results. Yet the president's own reform did little to improve that bizarre and unsustainable situation.

Which brings us to the third point in the platform.

Health:

Republicans are under pressure from their base to repeal the president's health plan. It probably won't hurt much to schedule a vote on repeal. When that vote either loses or is vetoed, however, Republicans need to move on.

The much talked-about idea of waging guerilla warfare against Obama-care by de-funding programs is unwise. It invites a crisis over a government shutdown. That's the wrong fight at the wrong time.

Rather than "repeal," the Republican slogan on health care should be "reform and repair." Subsidies should be funded in ways that do not kill jobs -- through energy or consumption taxes, as soon as the recession has passed. Cost controls need to be strengthened, by enhancing the market power of insurers as against providers: the insurance exchanges should be national, not state by state.

But there is one thing we can immediately do to restrain health care costs -- which is yield to the country's demand for a harder line on illegal immigration. The health care problem is made vastly more difficult by the immigration problem. One out of four uninsured Americans is foreign-born.

Few of the 12 million illegal immigrants in the country earn enough to buy health insurance policies in the marketplace. Almost all of them will all require massive subsidies if they are to obey the mandate to buy coverage. How much subsidy?

Well, the typical family health insurance policy costs $12,000 per year. That's a big check for a laborer earning, say, $18,000. The problems of the uninsured are already severe enough. Amnesty only makes the problem bigger.

On the other hand, Republicans will be poorly advised if they seek to repeal the commitment to universal coverage in the Obama health law. In this off-year election, we hear disproportionately from seniors, a population already covered by the universal Medicare program. Understandably, they worry that more coverage will divert money from them to younger people. But presidential elections attract those same younger voters. If the GOP has snatched away a coverage already extended to them -- they may have some angry words to say about their loss.

The challenge now is not to retract universal care: it is to moderate health care's cost and then pay that cost in the least economically damaging ways.

The opinions expressed in this commentary are solely those of David Frum.