‘Contract With America: The Sequel?’ : Policy: The House GOP’s manifesto for change hasn’t entirely been considered yet. But a conservative think tank is already planning ahead.

House Republicans’ “contract with America” still might be the featured attraction on Capitol Hill, but the sequel is already being written by the conservative think tank responsible for the original.

Called “contract with America II,” the new GOP manifesto will propose even broader reforms than the first contract, which the new Republican-controlled House has begun to take up in keeping with its pledge to consider its provisions during the first 100 days of the 104th Congress.

Intended as a blueprint for congressional action beginning after Day 101, contract II calls for flatter federal taxes, fewer government subsidies, more cost-sensitive health coverage and less generous Social Security benefits for future retirees. Like its predecessor, it is being drafted by the Washington-based Heritage Foundation in an attempt to help guide the Republican campaign to shrink the government and stimulate the private sector.

“We’re thinking beyond the contract--we’re past the contract,” said Stuart Butler, the foundation’s director of domestic studies. “We’re looking at what are the next set of major issues, particularly the ones that will not be completed within 100 days but will need to be examined months from now. And it’s radical thinking in that it fundamentally changes the entire focus of legislation in the future.”

So far, contract II’s tentative provisions have not received the blessing of House Speaker Newt Gingrich (R-Ga.) and the GOP lawmakers who eagerly endorsed the first contract . But it is being formulated by the same group of conservative thinkers who worked with Gingrich to develop the original contract, and the drafting process is being closely monitored by some Capitol Hill insiders.

Some lawmakers and observers--particularly Democrats--contend that the first contract goes too far and they predict that Republicans are likely to alienate many Americans if they embrace the second phase of reforms.

“They’re obviously reaching now to the outer limits,” said Rep. Barney Frank (D-Mass.), who dismissed the second round of proposals as preposterous.

“That’s what happens when you’re in power. The groups that are your ideological supporters start making more and more demands on you, and oftentimes those demands are way out there,” he said.

In its current form, contract II addresses five major policy areas:

* The health care reform debate should turn not on how much coverage is available but who provides it. Congress should consider tax and regulatory changes designed to move Americans away from employer-based health insurance to a system in which participants might choose among plans offered by churches, unions or fraternal organizations.

* The federal tax system should undergo a major shift to reduce reliance on graduated income tax rates that are higher for those with higher incomes. The progressive tax structure should be replaced with some form of flat tax in which the top rates are reduced but fewer deductions are allowed.

* Social Security benefits should be left intact for today’s retirees, but future benefits should be limited so the system will be solvent when baby boomers, now in their late 30s and 40s, reach retirement age. “You’ve got to do this if you really want to overhaul the system,” Butler said. “The budget program is out of kilter. You’ve got to look at that.”

* Congress should build upon this year’s “unfunded mandates” legislation by pursuing ways to streamline government functions, cut the budget deficit, transfer power to the states and return decision-making to communities. The unfunded-mandates bill prohibits Congress from imposing new programs on the states without providing the necessary funds.

* Federal subsidies and other forms of farm support should be reduced or eliminated, particularly now that new trade pacts are expected to boost agricultural exports.

Butler acknowledged that contract II proposals call for more politically difficult reforms than the 10 sections of the original contract.

The first contract calls for changes that tend to be popular with the public, such as bringing down the deficit, reducing violent crime and adopting middle-class tax cuts. Round 2, on the other hand, would reduce benefits enjoyed by middle-class Americans, who are not likely to surrender them voluntarily.

Since the Nov. 8 election, the Heritage Foundation has solidified many of its Capitol Hill connections. Gingrich is a regular visitor. The group’s president, Edwin Feulner, is a close ally of Senate Majority Whip Trent Lott (R-Miss.). California Gov. Pete Wilson stopped by after his reelection.

‘Contract With America’

* The full text of the Republican “contract with America” is available on the TimesLink on-line service. Also available are biographies of House Speaker Newt Gingrich and other GOP leaders. Click “Special Reports” in the Nation & World section.

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