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Marketplace Scratch Pad

Morning Reading

Scott Jagow Jul 1, 2009

Debating trickle-down theories, a high school classmate remembers Bernie, a financial column that’s actually a chain email(?) and a by-the-mile driving tax gets more serious consideration. Those are among the items that grabbed my attention this morning:

Reaganomics on the brain this morning. On one hand, Investor’s Business Daily warns that the administration is circling around tax increases, but it should be looking at tax cuts instead:

Tax hikes in a recession are plain crazy. They will inevitably crimp economic activity, slow retail sales, kill jobs and leave the government starved of revenues.

A major study in 2007 looking at recent U.S. economic history found that when the government raises taxes by 1%, U.S. GDP falls by roughly 2% to 3%. As we’ve noted before, the only surprising thing about this study is its author: Christina Romer, President Obama’s top economic adviser.

Is he still listening to her?

But a Wall Street Journal article points out a Harvard study that finds “trickle-down” economics has very little benefit:

“Increases in inequality lead to more growth,” the paper’s authors wrote. “There appears to be some trickle-down effect in the long run, but since the impact of a change in inequality on economic growth is quite small, it is difficult to be sure from our estimates whether the bottom 90% will really be better off or not.”

If you have a Citigroup credit card, check your rates. From the Financial Times:

Holders of co-branded cards who failed to pay their balance in full at the end of the month saw their rates rise by an average 24 per cent – or nearly 3 percentage points – between January and April, according to a Credit Suisse analysis of data from the consultancy Lightspeed Research.

After FT.com broke news of the hike, Citi issued a statement saying: “We have adjusted pricing and card terms for some customers as part of our regular account reviews. This is an ongoing process to ensure we offer terms, interest rates, credit lines and products based on individual needs and risk profiles. These changes also reflect the dramatically higher cost of doing business in our industry as we work to preserve the broad availability of credit.”

Washington Post columnist Richard Cohen relates his high school connections to the Madoffs:

When I tell people about my relationship with Bernie and Ruth, they sometimes gasp. When I show them the yearbook, they hold it as if it’s a poisonous snake. My yearbook is the closest most people will ever come to evil. Bernie is evil, which is what the judge said Monday in sentencing him to 150 years in jail. The yearbook has become like a Nazi artifact. It is compelling. It is repulsive. It is about evil.

Other stuff:

Fast Company explains how Walgreens is building its own universal health care system.

Editor and Publisher points out that the same column on planning for retirement has appeared in several newspapers under different bylines. Have a look.

The Kansas City Star ponders a future where you are taxed on the miles you drive (instead of a gas tax)!

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