Key Democrat Wants to 'Reduce Inequality'

By Fred Lucas | July 7, 2008 | 8:23pm EDT

( - American companies can expect proposals mandating increased wages and health care, a boost in union membership and greater scrutiny of trade agreements, a key Democrat promised Wednesday.

It's all part of the new Democratic congressional majority's agenda to reduce what Rep. Barney Frank (D-Mass.) calls "inequality" that inhibits economic growth.

"Inequality is not necessarily a bad thing. It's necessary in the capitalist system, and I'm a capitalist," Frank said during a speech to the National Press Club. "But we do not have to have a government that reinforces it."

Frank is the incoming chairman of the House Financial Services Committee, which oversees the Federal Reserve and the Securities and Exchange Commission and sets policies for the banking, securities and housing industries. As such, he will be among the most powerful members of Congress in setting economic policy.

Most Americans saw their incomes fall by as much as four percent in real terms since 2001, but the wealthiest one percent saw a near six percent income gain, Frank said, citing Internal Revenue Service data.

Furthermore, the bottom 90 percent income earners have seen their wages stay roughly the same since 1984 while the wealthiest one percent has seen their incomes increase by nearly $400,000, Frank added.

Frank said members of the working class would not care about economic growth if they did not see any benefit for themselves. This created "gridlock" that prevents pro-business legislation from passing, and therefore bridging the income gap was in the best interest of business, he argued.

Frank was not specific on every proposal, but he said he intends to hold hearings into income disparity and what the government can do about it. He is also proposing a "grand bargain" that will tie trade bills, regulatory relief and other business-friendly legislation to mandates on increased wages, union empowerment and health care coverage.

"Government doesn't have to interfere with the free enterprise system, but we can work along with it to reduce inequality," Frank said.

Hank Cox, spokesman for the National Association of Manufacturers, said that with the new Democratic majority in Congress, the business community would face the need to compromise.

"It's a new world we're going to be in," Cox said. "It's safe to say we'll be playing more defense than offense. That does not mean we're going to fold our tents and go home. More deal making will go on."

However, Cox said he fully expected leaders in the manufacturing industry and the entire business community to fight legislation that would make it easier for employees to form a union. Further, Cox said, wage and benefit mandates would not be welcome.

"Ultimately the thing we've got to work on is becoming more competitive and surviving in the global market place," Cox said. "We can't do that if we have to go it alone with all these new requirements. The answer is not arbitrary rules that drive the cost of doing business even higher."

One way to stay competitive in the global market place, Frank said, is to use the U.S. leverage to push other countries to adopt similar workplace standards. Ultimately, he said, countries will bow to U.S. demands for their own economic survival.

"You won't get trade bills through this Congress without workers' rights and environmental protections," Frank said. "China will walk away from the American market like Nancy Pelosi will walk away from the speakership."

Pointing to Wednesday's announcement of the resignation of Home Depot Inc. CEO Robert Nardelli - ousted with a $210 million severance package - Frank said he favors legislation to let shareholders in corporations have more say in what pay the chief executive officer gets.

"Boards of directors don't stand up to CEOs like they stand up to the workers," Frank said. "Shareholders have to be the check."

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