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Hang Tough, Republicans

Now comes the real test for Republicans.

On January 5, 2011 in the new Congress, Republicans will have a majority in the House and gains in the Senate sufficient to pressure President Obama to continue to shift to the center on policies crucial to growing jobs and the economy.

Here is an agenda to move the GOP—and the country—forward:

• Cut corporate income taxes. Japan’s Prime Minister Naoto Kan recently ordered a cut in his country’s corporate income tax rate by five percentage points to stimulate investment in Japan and to encourage businesses to create more jobs. Japan’s Trade Ministry says this will increase Japan’s gross domestic product by 2.6 percentage points ($172 billion), over the next three years. 

If the U.S. fails to do something similar (or better), we will have the highest corporate income tax among leading countries of the world—and both American businesses and foreign investors will keep finding overseas markets very attractive. With Japan’s decrease, American corporate tax rates will be 14 points higher than those of the average 26% of other wealthy nations in the Organization for Economic Co-operation and Development. 

Republicans can make the case for cutting corporate taxes by pointing out that it was one of Obama’s heroes—President Kennedy—whose leadership on personal and business tax cuts ultimately ignited the creation of 9 million new jobs and increased federal revenues from $94 billion in 1961 to $153 billion by 1968.

• Switch to a territorial tax system. The U.S. is one of the few countries in the world that persists in taxing businesses on income earned abroad. Here’s the winning Republican argument: if Obama would back a switch to only imposing business taxes domestically, it would help unlock nearly $2-trillion in corporate cash and liquid assets (more than 50% of which is held abroad) by making American businesses more competitive internationally and domestically. This would spur job creation.

• Stop the taxation of small businesses at their owners’ individual tax rates. Small businesses create most new jobs and are the nimble innovators in our economy. Bill Rys, tax counsel for the National Federation of Independent Business, says that roughly 75 percent of small businesses pay their business tax at the individual level. Republicans should champion reducing those rates to some much lower “entity level” to induce new small business formation, expansion and hiring.

• Repeal Obamacare, with its unsustainable costs and mandates, and the job-killing regulations in the Dodd-Frank financial overhaul bill. As hard as Obama resists this, Republicans must insist on it. Obamacare and Dodd-Frank could jointly lead to a double-dip recession and to massive, long-term damage to businesses and the economy. There’s new hope that Obamacare could eventually unravel under legal assault after a Virginia federal judge ruled it unconstitutional. As a start, Republicans need to press Obama to deliver on his promise to eliminate Obamacare’s requirement that businesses report to the Internal Revenue Service any expenditures of more than $600—a bookkeeping nightmare and business strangler.

• Cease government “industrial policy” for unachievable and outrageously expensive “green” initiatives. Whether it’s the president’s hope of imposing job-killing “cap and trade” energy taxes or his Don Quixote-like fascination with windmills rather than nuclear energy, Republicans need to muster proof that Obama’s “more Gore than Al” proposals can be replaced with a free market mix of cleaner, cheaper, more plentiful energy sources.

• Pass free trade agreements with South Korea, Colombia and Panama. President Bush approved these agreements in 2007 but they stalled in a Democratic Congress, which was hostage to the xenophobia of labor unions and the left. Obama says he wants to double American exports in five years. 

However, after meeting on December 17 with labor chiefs at The White House, the president is backing off supporting a deal with Colombia. 

Republicans need to argue that unless Obama bucks the unions and pushes all three trade agreements, he’ll choke export expansion and, along with it, growth in jobs and the economy.

In politics, to succeed it's essential to seize a message, momentum and the opportune moment. This is it for Republicans. They need to hang tough and run with this agenda—not just for their own good but, more importantly, for the good of the country.

Communications consultant Jon Kraushar is at www.jonkraushar.net.

Communications consultant Jon Kraushar is at www.jonkraushar.net. He is a consultant to corporate and political leaders including Steve Forbes.