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Barney Frank's Fiscal Plan: Join the Senate, Soak the Near-Rich

It's somehow perfect that Barney Frank's first order of retirement, after 32 years as a member of Congress, was to show up at a community reading of Moby Dick in New Bedford, the erstwhile whaling hub in his former district where the book begins. Frank was given the honor of being the lead reader at the Saturday event, which means that it was he, with his notorious North Jersey garble, who got to utter the famous first line: "Call me Ishmael."

That retirement, however, may be short-lived. The day before the reading, Frank's line was a different one: essentially, "Call me Senator." After initially disavowing any interest in an interim appointment to John Kerry's Senate seat, Frank declared Friday that he is, in fact, eager to serve in that role--and he has told Massachusetts Governor Deval Patrick, who will make the decision. Like most things Frank does, this caused a stir: having him in the Senate while, in all likelihood, Scott Brown and Rep. Ed Markey vie for the seat, would almost certainly be more consequential than going with a mere time-server.

When I reached Frank on Friday, he gave the same explanation he had given others for his change of heart: watching the debate over the "fiscal cliff," and seeing that major decisions about spending and taxes had been left to be decided in the next few months had convinced him that he could make a real contribution in a brief interim role in the upper chamber. "March and April will be the most important months in American economic history, and I don't think I'm being immodest to think I could impact it," said.

But Frank went further in our discussion, laying out the exact approach he would advocate. Simply put, he thinks Democrats should push for additional revenue through an increase in the payroll tax for upper-income earners--not just the very rich, but also the near-rich who made out quite well in last week's fiscal cliff deal. With President Obama backing off of his original pledge to raise tax rates on family incomes over $250,000 and shifting the threshold to $450,000, the Democrats left vitally needed revenues on the table. The answer for the next round is clear, says Frank: Get more money out of the exempted swath of income -- from both those whose incomes fall within that window and above it -- via the payroll tax.

"We did not get at taxes between $250,000 and $450,000, which makes it good territory for putting it out for the Social Security payroll tax base…There is a segment of income from people who make between $250,000 and $450,000 who we think could sustain an increase in taxes," he said. "If they had been [hit with an income tax increase] I'd say we don't want to double-hit these guys, but now it's a second cut at the apple for this [income range] in a politically popular way, to protect Social Security rather than taking it out on the old woman in Boston living on $15,000 a year."

Frank is referring to Congressional Republicans' proposal to save some money by limiting the growth in Social Security payments over time by changing the way inflation is calculated. The proposal is opposed by many on the left but is likely to return as a bargaining chip in the next round of debate. Frank's revenue suggestion offers an entirely different way to sustain Social Security, one that has been little-mentioned until now: raising payroll taxes on upper incomes. As it now stands, the payroll tax for Social Security is applied only to the first $110,000 of income, which means that a family making $100,000 pays just about the same in payroll taxes as one making $500,000 or $10 million. It's the most regressive part of the tax code, and its regressiveness became all the more noticeable last week when the tax-cut compromise ended a payroll tax holiday that had cut two percentage points off the rate.

Frank's approach would partly remedy that. It would also provide a way of getting revenue out of the $250,000-$450,000 income range that is easier to argue for than other options. After all, after both sides made a big show of agreeing to set the income tax-hike threshold at $450,000, it would seem a total nonstarter among Republicans for the White House to seek more revenue now by pushing to lower the income-tax-hike threshold after all.

But will Frank have the chance to push for his idea? There were signs over the weekend that he is not necessarily going to sail into the seat now that he's decided he wants it. Why is that? Well, partly because the personal dynamics around a Frank appointment are not uncomplicated. For starters, as the Boston Globe's Glen Johnson reminds us, there has been tension over the years between Frank and Markey, who arrived in Congress the exact same year. Most recently, Markey succeeded at getting the 2010 redistricting drawn to his benefit and to Frank's disadvantage.

Patrick has not tipped his hand beyond saying that he demands that whoever serves as interim not run for the seat. But his former chief of staff, Doug Rubin, raised eyebrows with this tweet on Saturday: “I respect Cong. Frank and what he has accomplished, but there are better options for MA Senate interim appointment." Rubin expanded on this to Glen Johnson: "The theory that we have to send experienced people to Washington to break the gridlock; the experienced people are the ones creating the gridlock...If we get beyond the traditional names, there are a lot of smart, talented individuals from Massachusetts who could bring some fresh ideas and energy to Washington, and that’s what we sorely need.”

Adding intrigue to Rubin's comments is that he most recently worked for Elizabeth Warren's successful campaign to unseat Brown for the state's other Senate seat. Rubin says his comments reflect only his own thinking, not Warren's or Patrick's, but one cannot help but wonder what his shot at Frank would mean for the Frank-Warren dynamic, should they serve alongside each other for a few crucial months. The pair has a productive history together: Frank helped author the 2010 financial reform law, Dodd-Frank, that created the Consumer Finance Protection Agency that was Warren's brainchild and which she proceeded to set up before leaving to run for the Senate. "I worked very closely with her," Frank told me.

Making matters even more interesting is the fact that, in crafting the law, Frank also had a quite productive partnership with Scott Brown--to the point of causing grumbles among some Massachusetts Democrats. Senate Democrats identified Brown as a possible supporter of the legislation and asked Frank to make the overture to his fellow Bay Stater, whose state Senate district had overlapped with Frank's House one. Frank assured Brown that the legislation would protect large Massachusetts financial institutions such as Mass Mutual and State Street that had not been at the heart of the Wall Street collapse, going so far as to break off a gym session to assuage Brown. They eventually butted heads over Brown's successful opposition to a new tax on banks to help pay for future bailouts, but a working relationship had been established.

That did not stop Frank from lining up strongly with Warren in her race last year, and sharply criticizing Brown for ridiculing Warren's claims to Native American heritage. But Frank still speaks of Brown as a breed apart from his fellow Republicans. "He's got some appeal, personally -- he's not a right-winger," Frank said to me. That said, Frank added, he'll be rooting for Brown's opponent, whether it's Markey or anyone else, because Brown "is a member of a party that is still hostile to the president...As long as the Republican Party is still in the grips of the right wing, you're an enabler of this."

Frank is confident that Markey or another Democrat can beat Brown. "It's an easy member to make to the people of Massachusetts: you voted overwhelmingly for the president. Do you want to now vote for someone whose victory would be an embarrassment to [Obama]?"

But other Democrats in Massachusetts are more cautious about predicting victory. They note that Brown has retained a high favorability rating, despite the loss to Warren, and that turnout in a June special election will in all likelihood be much closer to that of the January special election Brown won in 2010 than this past November's general election. "Brown emerged [from his loss against Warren] very nicely," said Lawrence DiCara, a former president of the Boston City Council. "But for the failed biology students in Indiana and Missouri [Richard Mourdock and Todd Akin, whose odd declarations about rape were not helpful to Brown in Massachusetts] he may have won." While Brown's opponent will have even more evidence to point to of his party's obstinacy, DiCara added, he or she won't be able to make the case that Warren did that a Brown victory could decide Senate control, since Democrats now hold a five-seat edge. And Andrea Nuciforo, Jr., a former state senator who lost a run for Congress last fall, noted another difference: the Democrat will not "be running against the international Elizabeth Warren juggernaut."

What's for sure is that the race will be far more compelling if Frank's warming the sought-after seat while pushing a major tax overhaul. "Barney wears it on his sleeve," said Nuciforo. "I'm not sure how he could bite his lip on something as important as a race for the U.S. Senate."

Follow me on Twitter @AlecMacGillis