* Republicans vow to shrink government, create jobs
* Party headed for Nov. 2 election gains
* Republican pledge short on specifics
By Richard Cowan
STERLING, Va., Sept 23 (Reuters) - Republicans in the U.S. House of Representatives, forecast to do well in November's congressional election, presented a "Pledge to America" campaign agenda on Thursday to create jobs, cut taxes and shrink government.
Boosted by voter disappointment at President Barack Obama's handling of high unemployment and the budget deficit, the Republicans look set to pick up dozens of seats in the House, with a real chance to win back control from the Democrats.
Opinion polls show Democrats should keep hold of the Senate but with a weaker majority.
Dressed in open-necked shirts, the Republican House leaders unveiled their manifesto at a 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."
While short on specifics, the plan calls for $100 billion in savings per year 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.
With the Republican announcement, much of which was leaked to the media on Wednesday, battle lines for the Nov. 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 they also call for tax cuts that would make paring the deficit more difficult.
Democrats are more cautious about spending reductions now, fearing that could stifle an already slow 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 yet unpopular overhaul of the U.S. healthcare system and eliminate unspent funds from his $814 billion economic stimulus program.
A senior Obama aide warned this week that pulling back on federal spending too soon could harm the recovering economy and rattle investors.
"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.
Breakingviews on the Republican plan [ID:nN23241018]
FACTBOX-Obama and Republican positions [ID:nN17188457]
Reuters.com coverage of the election
ALL ABOUT MESSAGE
Losing the Democratic majority in the House would crimp Obama's domestic agenda.
He 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.
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."
Some fear political gridlock after the election.
Congress has yet to agree on whether to extend tax cuts brought in under former President George W,. Bush.
Most Democrats want the cuts to be 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 just as the economy is recovering from its worst recession since the 1930s.
In their agenda, Republican House leaders 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.
The Economic Policy Institute said the spending cuts sought by Republicans would fall particularly hard on education, scientific research and transportation projects.
"Representative Boehner's plan to drive job growth would actually slow economic growth for years to come," it said.
The Republican agenda is reminiscent of "The Contract with America" that House Republicans announced on the steps of the Capitol in 1994, although the presentation was less grand.
That manifesto helped them win control of the House during the second year of Democrat Bill Clinton's presidency. (Editing by John O'Callaghan)
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