Congressional Finance Chair Discusses U.S. Economy

PAUL SOLMAN, NewsHour Economics Correspondent:

Over the years, he's been called a lot of things: a loner, a genius, an oddball, the frumpiest member of Congress, the sharpest-tongued, today and throughout the years.

REP. BARNEY FRANK (D), Massachusetts: I think, if we were giving a price for the single worst idea to come forward from a group that's been rife with them, it would be this. The idea is this: Let's make the tax code of America better for very rich people; let's give substantial tax relief to the richest people we can find.

PAUL SOLMAN:

Since Democrats took control of Congress in January, 14-term arch-liberal Massachusetts Congressman Barney Frank has become one of the most powerful men on the Hill, chairing the House Banking Committee, now called Financial Services. We spoke to him just before the August recess about the economic issues he's focusing on as he helps shape his party's agenda, his proposal of a so-called grand bargain with Republicans.

Barney Frank, welcome.

REP. BARNEY FRANK:

Thank you.

PAUL SOLMAN:

What's the biggest issue, economic issue in your mind that's facing Congress right now?

REP. BARNEY FRANK:

Really, the increasing inequality in our country economically. Inequality is a good thing. You don't have a capitalist system without it. But we are in a position now in which inequality is excessive. Virtually all of the increased wealth in the country is going to a very small number of people, and what that means is it could have negative economic effects.

PAUL SOLMAN:

Negative economic effects, like the failure of the recent immigration bill, because so many Americans feel recent immigrants are hurting their welfare; the failure of Congress to extend President Bush's ability to promote trade, because voters think trade causes inequality and hurts them.

REP. BARNEY FRANK:

There's a degree of disillusionment on the part of the average American that is, a, factually based in terms of the economics. Now, I do think many people blame the wrong victim, but until you break that down, you're not going to get advances in the various economic issues.

PAUL SOLMAN:

But does Frank really think the president should be encouraged to promote trade more vigorously?

REP. BARNEY FRANK:

I think it would be good if the president could promote trade, if the benefits of trade were distributed less unequally and if the negative impacts of trade were buffered.

I'm for foreign trade. I'm for foreign trade after we have done health insurance, and after we have done a change in the labor laws so people can join unions, and after we have put back into effect some government programs.

PAUL SOLMAN:

But one set of skeptics with regard to this inequality argument say, "Hey, in the last year, wages were rising on average, and particularly for the bottom quintile, the bottom fifth of the population," which is the group you've certainly most historically been concerned about.

REP. BARNEY FRANK:

Well, no…

REP. BARNEY FRANK:

First of all, "were," your tense is correct. That's now been moderating.

PAUL SOLMAN:

You mean the rise in the average wage?

REP. BARNEY FRANK:

The rise, yes. It went up a little bit. It's started to go down, real wages. Secondly, it comes after many years of a real drop.