Sorry, 4S! My rebuttal to his iPhone 4 proposal was to state the same but about the 4S.
My proposal was that since this year we'll ("probably") see the iPhone 4S, 5, and 5S as Apple's phone lineup in the current prices, why not change the off-contract price of the iPhone 4S to $299 (same price, $0, on-contract) to shut up the people talking about the "cheaper" iPhone. The iPhone 4S could even be sold at (the) $299 (equivalent) only in the countries that Apple deems necessary.
Drop the iPhone 4 from production entirely and end its cycle.
I'd wager that it actually costs Apple more to make a 4S than it does to make a 5, but the 5 is saddled with amortizing design costs that the 4S has already paid off. Stick the basic guts of the 4S into the iPhone 5 body, use the less expensive iPod touch 5 camera and not only do you reduce production costs you kill the 30-pin connector at the same time, something I'm sure Apple is eager to do.
I wouldn't be surprised to see an all 4" aluminum cased, Lightning connected lineup when the 5S debuts.