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Member Questions of the Week of May 31, 2010

Nancy Whetstone of Mazeppa, MN asks: “What is the current projection of cost per family of four should the American Power Act (Cap and Trade) be enacted?”
OUR ANSWER: As your parenthetical label points out, the American Power Act is, in fact, a cap-and-trade bill — the latest in a string of bills that started with Waxman-Markey in the House and continued with Boxer-Kerry in the Senate. But, as Heritage research assistant Nicolas Loris points out, a change of clothes doesn’t change cap and trade: It’s still a significant tax on energy that will reduce family income and destroy jobs. According to Heritage research, if Boxer-Kerry is signed into law, the net worth of the average family of four will drop by more than $40,000 by 2035. Gasoline prices will rise by 45 percent and residential electricity prices will rise by 72 percent. While the APA is slightly different than the bill we modeled, it’s safe to assume it will have comparably deleterious effects if it passes. Unfortunately, cap and trade is not the only kind of climate legislation that poses a threat to the financial health of the American family. In a recent meeting, the Senate Committee on Energy and National Resources discussed the benefits and drawbacks of a national renewable electricity standard. The drawbacks vastly outweigh the benefits. As this Heritage study reveals, a national RES would: raise electricity prices by 36 percent for households; cut national income by $2,400 a year for a family of four; reduce employment by more than 1 million jobs; and add more than $10,000 to a family of four’s share of the national debt by 2035. Americans were right to be concerned about cap and trade. They should be just as concerned about a national RES.

Ken Sive of Naperville, IL asks: “The financial regulation bill has a component that has a consumer board piece. What are the pluses and minuses of this piece?
OUR ANSWER: As George Mason law professor Todd Zywicki explained at a recent Heritage event to discuss this issue, policymakers can take two approaches to consumer protection. If they take a market-reinforcing approach, they’ll try to enact reforms — like streamlining disclosures — that enable consumers to take greater responsibility for their own financial decisions. If they take a market-replacing approach, they’ll paternalistically regulate products and consumer choices. A Consumer Financial Protection Agency reflects a market-replacing approach, Zywicki said. So, a CFPA is not only not ideal — it could also be harmful. That’s because a CFPA unhooks consumer protection from safety and soundness, competition, and other economic dynamics that are necessary for the market to work properly. Heritage expert David John describes the potential negative effects of a CFPA this way: “Creating a new Consumer Financial Protection Agency … would raise costs for consumers, reduce the number and type of products available to them, increase the micro-management of financial services firms, and greatly increase the confusion caused by differing and conflicting consumer laws in the different states.” That’s why John supports a consumer protection “coordinating council” instead. For more information about this alternative to a CFPA, click here.

Brian Kipling of Greer, SC asks: “Who has statistics of nuclear family deterioration by decade?”
OUR ANSWER: Over the last half-century, out-of-wedlock childbirth has grown by fits and starts, but it has not once had a recession, writes Heritage senior research fellow Chuck Donovan. In 1950, one in 20 American children was born to an unwed mother. Today, that number is nearly four of every 10. Even more worrisome, the rate of childbearing outside of wedlock has risen sharply in recent years, climbing by 26 percent between 2002 and 2007. Births to unmarried mothers as a percentage of all births has increased from 7 percent in the mid-1960s to 40 percent this month, according to commentary by Jennifer Marshall, director of Domestic Policy Studies at Heritage. The collapse of marriage signified by the increasingly high unwed birthrate is highly regrettable, as the benefits of marriage are many. Research shows children whose parents marry and stay married have better health and are less likely to be depressed, are less likely to repeat a grade in school, and have fewer developmental problems than other children. To read more about marriage and family, click here.

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