Actually I did not take Dick Cheney's worry that I might be as a legislator making policy too personally because it's very clear, if
you see the vice president's approach, he doesn't think any legislator should be making policy, members of Congress, conservative or liberal, given his view of the Constitution. So I wasn't too upset.

I was a little troubled when one of my Republican -- soon to be no longer a colleague -- in his campaign in Indiana said that if the
Democrats won, Nancy Pelosi would allow me to implement the radical homosexual agenda. The problem is that he lost. He was the first
Republican declared defeated on Election Day, and that apparently left some people expecting me to produce a radical homosexual agenda, and I
don't have one. I felt inadequate.

I mean, I do think we should allow gay and lesbian people to serve in the military and get married and have a job but, by tradition of
radical standards, being in the military, working for a living and getting married are not the stuff of radicalism. So I'm still looking
for a way to satisfy that demand.

What I do want to talk about today is the economy, and it's a problem that we have in America, and it's a problem that is worldwide. It is the increasing separation of the well-being of the average citizen from overall economic growth.

I mean, it has generally been an accepted fact that economic growth is a good thing and that the rising tide will lift all boats. I will tell
you as an aside that I'm a great believer in free speech. It never occurred to me to tell people not to watch rude and stupid things if
they wanted to do that.

If I was going to limit free speech, I would make it a misdemeanor to use metaphors in the discussion of public policy. They almost always
mislead you, especially in foreign policy.

The rising tide lifts all boats has always been a problem. If you think about that analogy, the rising tide is a very good idea if you
have a boat. But if you are too poor to afford a boat and you are standing tiptoe in the water, the rising tide goes up your nose. And
so that's a mistake.

The problem we have is that that used to be something we talked about with people at the lower end. We talked about people in poverty,
people who were barely making in it in our economy, not prospering when the rest of us did.

That's now been reversed. There is now a small segment of the American population that is essentially profiting from economic growth and the great majority are not.

Now, if I were giving this speech six months ago, I would've spent lot of time trying to make that point. There was a big debate. We had an
argument. Was there an erosion in the real incomes of the average citizen or not?

That debate appears to be over. We've given out a handout. One of the things that struck me yesterday when we were putting that together was
we got some quotes from various people from the left, from the right, from the center about inequality in America and it struck us as we
looked at them that we couldn't tell who said what. That's why you were given them as a kind of a matching test. There is now a consensus. The income of 80 percent to 90 percent of Americans has substantially lagged economic growth. That fight about whether or not
it happened is over. The questions, though, are now: One, should we be worried about it; two, if we are worried about it, can we do anything
about it; and, three, what?

Well, there were some, particularly conservatives, who said, "Oh,don't worry about inequality. Inequality, that's just a matter of
jealousy. As long as everybody's got something, that's OK."

Well, of course, part of the problem with that is that the definition of what is adequate is not a fixed point. What you believe to be
adequate, what your kids believe to be adequate, what you need to live a decent life, is an evolving concept.

It's also the case that when a handful of people have a lot of money, they may be driving up prices for others. There are people, I guess,
who don't care about inequality as a moral issue. I do.

But there is a broader point here about why it matters, and that's the political factor. One of the consequences of this separation between
economic growth and the well-being of the great majority of citizens is that an increasing number of citizens don't care about economic
growth. Not surprising. Not only do they not benefit, but in many cases they get the short-term disruptive effects.

I mean, there was a great concept from Joseph Schumpeter of creative destruction in which, as the old economic order is destroyed, resources are freed up for the new order.

Well, increasingly, we have people who see the destruction in their own lives, but don't see that they're going to be part of the new
creation.

And so, for those who don't care about inequality as a moral issue or don't care that there are people who are hurting, think about what it does politically. We are now in a situation in which many of the people in the business community are very frustrated because they cannot get adopted at the national level policies that they think are important for growth.

In some cases I agree with them. In some cases I don't.

Let's look at the specifics. George Bush proposed an immigration policy which had elements that appealed to people who had a
humanitarian concern and also to people in the business community who look ahead and say: Gee, if we don't have a certain rate of immigration, we have workforce problems.

It's certainly hard to see how you solve the Social Security problem 40 years from now, not next year or 10 years from now, without the
kind of increase in the population that you could get from a sensible immigration policy. But Bush's immigration bill bogged down -- bogged
down from his own party -- but there was opposition elsewhere.

Direct foreign investment's a good thing. That's people putting money into America to make jobs. We can't get a bill through to set the
rules to regulate direct foreign investment because of, one, the terrible mistake this administration made by allowing the Dubai Ports
situation, and why somebody in the White House didn't say to the people of Dubai: Look, you're nice people and you're our friends and
why don't you buy some shopping malls and why don't you buy some commercial real estate or some movie theaters or even a factory, but
please don't buy a port right now, given what's going on.

But the overreaction to that mistake is such that it now jeopardizes our ability to set rules for foreign direct investment.

Trade is an issue. Properly done, trade's a good thing. By "properly done," I mean trade which includes some requirement that the people
who want to trade with us pay attention to the environment and work rules.

Let me give you an example of what I think is the disingenuousness of those who say we should do trade without any regard for the environmental and labor practices of our partners.

George Bush says that one of the main reasons we cannot do the Kyoto Treaty is that it will not cover India and China, and that will put
Americans at a competitive disadvantage because we will be bound by it and they won't be.

Many of us say: Yes, you know, you're right; there is a competitive advantage by not following environmental laws when we are. Let's then require of India and China that, if they want access to this great market that's the United States, that they have to do something about the environment. And we're told: Oh, no, you can't do that; that's introducing something that doesn't belong in a trade bill.

Similarly, with wages, the World Economic Forum, headquartered in Davos, just put out their CEO survey in which they noted that the Asian exporters -- the most active Asian exporters -- and the Baltic states pay wages well below what competition would suggest and what productivity would suggest -- therefore, according to the Davos report, giving them a competitive advantage in getting people to do business there.

In other words, my conservative friends understand that mistreating your workers and ignoring the environment give you a competitive
advantage. They just don't want us to do nything about it.

Historically, I think they haven't wanted us to do anything about it because a lack of those things in those countries becomes a reason not
to do them here.

At any rate, we are now stalled. We can't get any progress on trade, on foreign direct investment, on immigration, to some extent on the
implementation of productivity.

That's why the business community ought to care. Even if inequality doesn't bother them, even if Mr. Nardelli getting $210 million for
being fired when other people make $7 an hour for working very hard, even people untroubled by that -- and I envy them the ease of their
consciences; they must get a lot more sleep than a lot of us do -- if they don't care on those grounds, they ought to recognize that we are
in gridlock; that we are unable to go forward with policies that many think are pro-growth because there are so many people who see only the
short-term pain that those inflict, or even the medium-term pain and don't see any gain.

And, again, the statistics have borne that out. So then, the question is: Well, can we do anything about it? Is this some force of nature?

And it is true that the increase in inequality recently has not been somebody's conscious decision to do it. It's been a result of natural
forces, including globalization, information technology.

But the fact that there are things that bring about results in the economy doesn't mean that government is helpless to deal with them.
And in fact what we have is a government in power, today in the executive branch and, until tomorrow in the legislative branch, that
saw the inequality being brought about by increased globalization and technology and decided that we should increase it on the grounds that increasing the inequality better incentivized the business community and therefore we'd all be better off.

You know, no matter what you think about the argument for trickle-down, when there's no trickle, it fails on its own terms. You can argue for trickle-down, but the fact is that the way -- there has just been none. There has been this freezing erosion of real wages. I believe it is very clear that this is something that we can affect.

During the Clinton administration, I think we showed -- not as effectively as I would have liked; I differed with some pieces of it
-- but I think we did show that you could be concerned about increasing inequality, through the government, and retard it. Let's be very clear. Inequality is not a bad thing. It's necessary in a capitalist system, and I'm a capitalist.

You don't have the incentives; you don't have the resource allocation without inequality. But you do not have to have a government reinforcing it. You can have a government retarding it.

What we are talking about is not whether or not there should be inequality, but where we are today.

We have a system which is producing, by a combination of natural forces and government policy, more inequality than is necessary for
efficiency or than is socially healthy, because it produces gridlock.

Now, here's one point about the American economy that my conservative friends not only get wrong but are very inconsistent: They treat it as
if it is some fragile flower.

My God, if you were to raise the minimum wage and pay these people who are working hard in jobs that aren't all that much fun -- $7.50 an
hour -- God knows how the American economy could withstand it.

The fact is that the American economy -- a vast, sprawling complex combination of people and resources -- is much tougher than the
conservatives argue.

And, in fact, it turns out -- and you can see this in the Clinton years -- there is a wide range of public policies which are consistent
with economic growth. Bill Clinton raised taxes on the top bracket in 1993, and we had a great deal of economic growth afterward. Then
George Bush cut the top bracket tax and we had economic growth less than we had under Clinton.

I'm not arguing that the Clinton tax cuts caused it, only that there is a much broader range of public policies, particularly those dealing
with excessive inequality, that are compatible with our national economic growth.

And the fact is that if we do not reverse this trend and begin to reduce inequality, you will continue this gridlock.

By the way, it's an international one, as well. One of the great issues right now in the world is whether the Democratic left in Latin
America will be able to win elections against a somewhat less Democratic left, whether a kind of a radicalism that is not all that crazy about democracy will win elections over the more mainstream people on the left because of a dissatisfaction with the failure of the market to deliver. Because to some extent, democracy has been unwisely entangled with a free market economy as a kind of a package deal.

So the question is what to do about it. I think we here in America could do something about it.

I thought about the grand bargain with the business community.

Now, it's an interesting fact of life in American politics today how angry it's gotten that at this point I will report to you that both
sides that I have approached in terms of the bargain think it's a bad idea because they think I'm going to sell out to the other one.

The degree of confidence Americans have today is fairly low. Fortunately, I've got a pretty safe district, so I can ride out the skepticism until we get to prove it. But here's what I'm trying to do.

I'm trying to show people, look, I am a liberal. I am a strong supporter of the liberal position. I have voted against the trade bills. I have been critical of many aspects of what the business community wanted, partly because I disagree in substance, partly because I will not support policies even if I might agree with them if they're going to have short-term negative effects and no longer-term benefits.

I disagree strongly with academic opinion. Those of us who have been opposing trade bills from NAFTA on have been characterized as protectionists. We're Luddites. We're selfish. We don't understand poor people overseas, et cetera.

When I think about some of my extremely conservative colleagues who start lecturing me about the need to worry about poverty in Africa, it is harder than usual for me to remain civil.

But the fact is this: We are opposing, many of us, this set of policies because they are being pursued in a way that is philosophically and morally flawed.

Our economics are as good as those who are for an unrestrained free enterprise and are better morally because we understand that growth
that does not pay attention to these inequality trends does more harm than good.

Now, as I said, I'd like to win that argument on the merits, but I'll take it on the gridlock situation. I now -- and have said to my friends in the business community -- "I understand your frustrations but stop blocking unions."

You know, when I was in college, there was a big debate: Do unions raise wages? Well, with regard to industrial unions, there were arguments back and forth -- international competition. It is now
clear, I think, that whether or not you think unions raised wages 50 years ago, the absence of unions and their weakness that is inflicted
by anti-union public policy depresses wages. The fact is that people who are not represented, in the service industries in particular, are
the victims of policies which depress their wages.

And I understand -- people say to me, "Well, look -- look at what Wal-Mart does. I mean, look what it does for the consumer."

Well, if you can't afford health care for your kid, a cheap T- shirt is not much of a consolation.

And this anti-union policy that we have has been a serious problem. The health care situation in America. We should be -- and this is in
business's own interest. It costs more to make a car in Michigan than in Ontario -- by a significant amount -- solely because of our health care system.

If we were to have a universal single-payer health care system, which took health care out of the wage system -- stop depressing wages -- we
encourage people to join unions, and we did other things, including in the tax system, we would begin to reverse the inequality.

And there's one very important piece to this, and that's the role of government. Government plays a very important role in achieving the
quality of our life and in reducing inequality.

That didn't used to be controversial. A guy named Roosevelt got elected four times on that issue. That was the New Deal: use our
collective capacity to work together not to interfere with the free enterprise system, but to work alongside it so you reduce inequality.

There are things we can do to reduce that. So I am hoping that we could get that kind of cooperation.

If we don't -- let's be very clear: If people in the business community continue to want to restrain any unionization and fire people who try to organize and don't improve the health care system and insist on cutting back on public sector programs -- you know, I'm told by some of my conservative friends, "Well, the answer to all
these problems with inequality is education."

I think they greatly exaggerate the extent to which education will do it. I know if you're 48 years old and you lose your job in a factory,
the extent to which you are going to be successfully retrained to be a dental technician can easily be overrated by people.

But in any case, even for younger people, yes, it'd be nice for them to get education, but every state is cutting back on its support for
its state university. It's a rare state university today that still gets 50 percent of its funding from the government.

Community colleges or public, they're being cut back. Pell grants have dwindled in real terms.

If you agree with me that we should be reducing -- not doing away with, but reducing inequality, then public sector needs to be valued as a partner.

Let me just close with this. (inaudible) talk about all these things, and I talk about wages. And it does appear over the last year that
real wages, take-home pay for workers after inflation, has been dropping.

It's not that it hasn't been keeping up; you've got handouts that show this.

Corporate profits as a percentage of the national economy have gone way up in the past five years. God didn't do that. The economy did it and the government helped and -- although to some of these people God and the government are the same thing, but I obviously don't agree
with that.

We have now got the beginning, I hope, of an uptick in real wages. But you know what's happening? Many of these same business community
leaders and others who complain about they can't get support for trade and they can't get support for immigration and they can't get support
for foreign direct investment, they're now worrying about wages going up. Read the financial pages of the papers. There is only one concern about inflation: wages may go up.

Wages have significantly lagged growth. They have significantly lagged productivity. And if they even begin, as they have now, to start going
up, respected opinion tut-tuts and says, "Oh, that's a terrible idea; we can't allow that to happen."

Ben Bernanke, to his credit, has said, "Well, if wages go up to the level of productivity, it's not inflationary."

The fact is, we have a catch-up period for wages and people are now saying, "Well, you know what? Productivity may be slowing down, things
may be getting worse. We'll have to clamp down." Yes, well, you know what? Everybody else has had a pretty good dinner except the people working for wages. Everybody else ain't a lot of people.

But telling the people who work for wages, "Oh, sorry, just as you were about to eat we're closing the restaurant" -- do it if you think
it's right, but don't be surprised when their reaction is this negative one you get.

So when I talk about a bargain, I'm not talking about a negotiation, one for one. I'm not in a position to do that. I will tell you this,
though.

The committee that I will be chairing as of tomorrow -- I think it is that our reach exceeds our grasp. Maybe it's our grasp exceeds our
reach. I'm never sure of that.

But we have a larger jurisdiction to talk than to legislate.

We have an oversight jurisdiction over the economy, through the Humphrey-Hawkins bill and through the World Bank.

We intend to have hearings over these next two years.

At first I thought we were going to have to document the fact that real wages for most people are failing. That's now accepted.

What we're going to talk about is why this is happening, what the damage is to our society from it happening and, most importantly, what
we can do about it.

Now, the committee I chair won't have the ability to do some of these bills. It will on some others. But we are ready to do that.

So there are two outcomes possible.

One is that we will be stonewalled by people on the conservative side, and they will continue to use their veto power.

In fact, it's an interesting point. People have said to me, "Well, wait a minute. You're saying the conservatives can block these liberal
things and the liberals can block these pro-growth things. How can that be? Doesn't one side have the majority?"

The answer is, in the American system of government, whoever wants to not do anything starts out with about 25 percent advantage. So it is possible for each side to have the power to block the other.

That's where we are.

Either people will join with us in solving the health care problem and getting it out of the employment equation, which ought to be in
everybody's interest; getting a humane immigration policy; good rules that welcome responsible foreign investment; going forward with trade with reasonable, not oppressive, environmental and labor standards; allowing people to join unions, and we will then be able to go forward in a pro-growth way and engage with the rest of the world and implement productivity-enhancing technology.

Or they'll continue to say no. And they'll use their powers so that you won't be able to get into a union, even if you want to, in many
cases. And the NLRB will continue to be union-busting rather than the welcoming entity it's supposed to be. And you'll continue to have
fewer and fewer people having health care, while it continues to interfere more and more with the wage pool, and we'll have all these other kinds of problems.

If we do -- and I regret that -- but then people should not be surprised when there is no renewal of trading authority, when you do have resistance to a sensible immigration policy.

So that's the choice that has to be made. It's a big sprawling thing, obviously, as I said. It's not a one for one. We're not playing Monopoly. But we're not going to have a situation in which people who represent the great majority of people who work for wages are going to continue to sit by and allow their real incomes to erode and their economic positions to erode.

I think we can break out of this, but that's still to be determined. And so, as I said, what you can expect from our committee over the
next two years is a documentationism. We'll listen to all sides.

I think, as radical as it is -- that Franklin Roosevelt, essentially, got it right -- namely that the best thing you can do for the
capitalist system is to create conditions in the economy in which the natural tendency of a capitalist system to promote inequality is
restrained, not abolished, in which the government works to help people through painful transitions, works to reduce excesses. And in
that context, capitalism will flourish.

The alternative is going to be a continuation of the gridlock we have today. And that is clearly not the best outcome.