Currently viewing the tag: “Rates”

One thing I’d say about the potential implications of a government shutdown on the bond market is that I think it’s probably a mistake to see Treasury interest rates as primarily driven by default risk. If the government of El Salvador or Illinois borrows dollars, it might in the future run out of dollars and not repay its loan. But there’s no reason the government of the United States should ever run out of dollars. It makes the dollars.

An increase in Treasury borrowing costs could be driven by hope or by fear. In the “hope” scenario, if investors increase their view of the growth outlook they’ll become more willing to invest funds in things other than bonds and thus bond interest rates will have to go up. There’s also a fear scenario, which would probably be about the value of the dollar. If you lend the US government some dollars, you’re definitely going to get back the number of dollars that the US government promised you. But right now a dollar buys you about 0.70 euros and maybe five years from now it’ll only buy you 0.65 euros, in which case lending euros to the Dutch government might look like a better bet than lending dollars to the USA. That would drive interest rates up, but it still wouldn’t be default risk.


Yglesias

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ABC News’ Mary Bruce Reports: After falling dramatically behind other countries in college completion rates, President Obama is eager for the U.S. to catch up and reclaim the number one spot by adding an additional eight million college graduates in…



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Political Punch

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Data roaming, boosting wireless broadband coverage also on…
B&C – Breaking News

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After more than a year of talking about it, The New York Times is taking the final steps toward locking the majority of its online content behind a paywall:

The New York Times rolled out a plan on Thursday to begin charging the most frequent users of its Web site $ 15 a month in a bet that readers would pay for news they have grown accustomed to getting free.

Beginning March 28, visitors to NYTimes.com will be able to read 20 articles a month without paying, a limit that company executives said was intended to draw in subscription revenue from the most loyal readers while not driving away the casual visitors who make up the vast majority of the site’s traffic.

Once readers click on their 21st article, they will have the option of buying one of three digital news packages — $ 15 for a month of access to the Web site and a mobile phone app; $ 20 for Web access and an iPad app; and $ 35 for an all-access plan.

All subscribers who receive the paper through home delivery will have free and unlimited access across all Times digital platforms except, for now, e-readers like the Amazon Kindle and the Barnes & Noble Nook.

“A few years ago it was almost an article of faith that people would not pay for the content they accessed via the Web,” Arthur Sulzberger Jr., chairman of The New York Times Company, said in his annual State of The Times remarks, which were to be delivered to employees on Thursday morning.

“This move is an investment in our future,” he said. “It will allow us to develop new sources of revenue to support the continuation of our journalistic mission and digital innovation, while maintaining our large and growing audience to support our robust advertising business. And this system is our latest, and best, demonstration of where we believe the future of valued content — be it news, music, games or more — is going.”

Mr. Sulzberger acknowledged the hurdles The Times must overcome in the minds of many readers, saying he harbored no misconceptions.

“The challenge now is to put a price on our work without walling ourselves off from the global network, to make sure we continue to engage with the widest possible audience,” he said.

Not all visits to NYTimes.com will count toward the 20-article limit. In an effort to ensure that as many as possible of the Web site’s more than 30 million monthly readers are not deterred from visiting, The Times will allow access to people who visit through search engines like Google and social networking sites like Facebook and Twitter. There will, however, be a five-article limit a day for people who visit the site from Google.

The 20-article limit will immediately apply to readers accessing NYTimes.com from Canada. That is to allow the company time to work out any software issues before the system goes live in the United States.

For years, newspaper companies have been offering Web access free in hopes that the online advertising market would look after their costs. But while online advertising has grown, it has not increased quickly enough to make up for the decline in traditional print advertising. So many publications have been looking at ways to make online consumers pay as they do for print.

The debate consuming the newspaper business now centers on the question that The Times hopes to answer: Can you reverse 15 years of consumer behavior and build a business around online subscriptions? Many believe the answer is no.

The Times plan is far less restrictive than the one adopted by the Times Of London, which placed all of its content behind a paywall more than a year ago and allows for no “free” access from any source. So, at least, this means that readers will still be able to read occasional stories on the site (is 20 stores a month a lot? I guess that depends who the reader is) without having to pay, It’s also interesting that links from Twitter and Facebook will not be free of these restrictions, a concession that seems to be an obvious recognition by the paper of the importance of having their content spread via social media. There doesn’t seem to be any similar concession for links from blogs, though, which means I am likely to be far less reluctant to link to content from the Times here at OTB since its not clear that everyone who reads it will be able to access the article [See Update below on this point] .I also don’t see myself putting down the $ 15 per month needed to get unlimited access to something that, at least for now, I can get in multiple locations for free.

It strikes me that the success of this program is still very up in the air. It’s possible that the concessions noted above will be enough to keep casual readers coming to the papers home page, thus avoiding the massive drop off in web traffic that the Times of London experienced after its paywall went up. However, it’s unclear whether this new venture will generate enough revenue to turn things around for the Grey Lady. As long as the same information is available elsewhere for free, I don’t see how this can succeed in the long run.

Update: The Times’ letter to readers about the new plan makes the following bullet points:

This is how it will work, and what it means for you:• On NYTimes.com, you can view 20 articles each month at no charge (including slide shows, videos and other features). After 20 articles, we will ask you to become a digital subscriber, with full access to our site.

• On our smartphone and tablet apps, the Top News section will remain free of charge. For access to all other sections within the apps, we will ask you to become a digital subscriber.

• The Times is offering three digital subscription packages that allow you to choose from a variety of devices (computer, smartphone, tablet). More information about these plans is available at www.nytimes.com/access.

• Again, all New York Times home delivery subscribers will receive free access to NYTimes.com and to all content on our apps. If you are a home delivery subscriber, go to http://homedelivery.nytimes.com to sign up for free access.

Readers who come to Times articles through links from search, blogs and social media like Facebook and Twitter will be able to read those articles, even if they have reached their monthly reading limit. For some search engines, users will have a daily limit of free links to Times articles.

• The home page at NYTimes.com and all section fronts will remain free to browse for all users at all times.

So, it would appear that following a link from a blog won’t cause you to be charged. Which again leads me to think that the Times realizes the importance of referrals from social media and  is willing to give that traffic free access in exchange for the ad revenue it generates.

 




Outside the Beltway

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David Romer’s reflections on macroeconomics after the crisis are excellent, but I didn’t understand one sub-point here about monetary policy:

The simple “one instrument/one target” view of monetary policy (where the instrument is a short-term interest rate and the target is inflation, or a weighted average of inflation and the output gap) is too simple. There are other instruments (exchange market intervention, capital controls, margin requirements, down payment requirements, capital requirements, and more), and other potential targets (notably the exchange rate and indicators of financial risks).

Why would a central bank target the exchange rate over and above inflation and output?

Imagine a country with low and stable inflation and steady real growth with no output gap. Firms in the tradable sector are still going to be wanting a cheaper currency (to increase demand for their products) while firms in the non-tradable sector will want a more expensive one (to increase their consumption possibilities) but why would the central bank get itself sucked into that? If you’re hitting output and inflation goals, it seems to me that you’re doing it right.

Now of course if you’re not hitting your goals, the exchange rate could be the mechanism by which you adjust. Nominal yuan appreciation would reduce inflation in China, and currency depreciation was used to increase output in Israel during the crisis. But I don’t see how this becomes an independent consideration.


Yglesias

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Via John Sides, Jason Sorens presents research on the relationship between union density and tax rates:

What they show is that even when you control for overall state ideology (Democratic states have higher taxes, and really Democratic states have much higher taxes), union density increases tax rates. Increasing union density from 10% of the workforce, as in Nebraska, to 25%, as in Hawaii and New York, increases the tax burden by about one and a quarter percentage points of state personal income. For a sense of scale, the mean tax burden was 10.0% of personal income in 2008, and the standard deviation was 1.23, so this is essentially a standard deviation increase.

By passing right-to-work, Indiana could expect its unionization rate to drop anywhere between four and nine percentage points, taking in the range of values observed in other right-to-work states. This change would decrease Indiana’s tax burden in the long run by between a third and three-quarters of a percentage point of personal income. The predicted effects in New Hampshire would be slightly less, since New Hampshire is slightly less unionized than Indiana.

It’s difficult to make causal inferences based on these kind of statistical correlations, but the underlying theory here seems pretty clear. Under both the conservative “greedy public servants demand high pay for themselves” theory and the progressive “unions are a crucial counterweight to the political influence of the rich” theory, higher levels of public spending are a major political consequence of unionization. One alternative interpretation that I would like to see statistically tested would be that richer places have higher burdens (which is the general global and historical trend) and right to work laws happen to have proliferated in poor southern states 50 years ago.


Yglesias

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John quotes Jason Sorens as writing:

Even when you control for overall state ideology (Democratic states have higher taxes, and really Democratic states have much higher taxes), union density increases tax rates. Increasing union density from 10% of the workforce, as in Nebraska, to 25%, as in Hawaii and New York, increases the tax burden by about one and a quarter percentage points of state personal income.

I’m bothered by the causal language here, the jump from a statistically significant regression coefficient to the claim that “union density increases tax rates.” What’s particularly scary here is that the causal leap is implicit. Sorens doesn’t write: Here’s a correlation, and one possible interpretation is causal. Rather, he reports the regression result as if it is direct evidence of causation.

John does it right. His headline is “Do unionized states have higher taxes?”, not “Does union density increase tax rates?”

You might say I’m being picky here-everyone knows that a regression does not in general directly answer a causal question (especially when you control for an intermediate outcome such as voting patterns). But . . . here’s what Sorens writes: “the evidence suggests that policies discouraging collective bargaining help a state reduce its tax burden in the long run . . .” He’s definitely giving a causal interpretation.

I agree that observational data are relevant to causal questions-much of my career would be a sham if I didn’t believe this-but I also think we’d do best, as social scientists, to clearly distinguish between evidence and speculation. In this case, the data show that states with higher taxes have higher rates of unionized workers. The speculation is that a state policy that changes the rate of unionization would have a certain expected effect on taxation. That’s the part I don’t see the evidence for.

I’m not trying to pick on Jason Sorens here. Gathering data, making graphs, and running regressions of historical data-telling us what’s happened in the past-is a contribution in itself. And then if you want to make some claims from there, go for it-but please separate these claims speculations from the hard data.

The Monkey Cage

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The latest Quinnipiac thermometer poll finds New Jersey Gov. Chris Christie (R) is the “hottest politician” when American voters rate their feelings about politicians and other national figures, topping President Obama who is in fourth place.

Former House Speaker Nancy Pelosi (D-CA) gets the coolest rating from voters, followed by Senate Majority Leader Harry Reid (D-NV) and Sarah Palin.
Taegan Goddard’s Political Wire

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Average monthly price for expanded basic cable service was $ 52.97 in 2008,the most recent…
B&C – Breaking News

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On Wednesday, the Associated Press's Andrew Taylor covered the latest deficit projections released by the Congressional Budget Office.

In his treatment of the predicted unemployment rate, Taylor betrayed no concern whatsoever about the plight of the millions of unemployed who are in that position largely because the Obama administration attempted to bring about an economic recovery through government "stimulus" and government intervention instead of cutting taxes, or even leaving what appeared to be an incipient recovery in late 2008 continue. Instead, as AP reporters Hope Yen and Liz Sidoti did last September in advance of last year's poverty report from the Census Bureau, when they fretted over the report's impact on the Congressional midterm elections, a terrified Taylor spent two paragraphs worrying about the high unemployment rate's impact on the President's reelection prospects:

Though the analysis predicts the economy will grow by 3.1 percent this year, it foresees unemployment remaining above 9 percent.

 

Dauntingly for Obama, the nonpartisan agency estimates a nationwide jobless rate of 8.2 percent on Election Day in 2012. That's higher that the rates that contributed to losses by Presidents Jimmy Carter (7.5 percent) and George H.W. Bush (7.4 percent). The nation isn't projected to be at full employment – considered to be a jobless rate of about 5 percent – until 2016.

Along the way, Taylor engaged in another obsession of the wire service and its establishment press counterparts: characterizing potential upward changes to a tax-rate structure that has essentially been in place with few modifications since 2003 as the end of "the Bush tax cuts," as exemplified in these excerpted paragraphs:

The latest deficit figures are up from previous estimates because of bipartisan legislation passed in December that extended George W. Bush-era tax cuts and unemployment benefits for the long-term jobless and provided a 2 percentage point Social Security payroll tax cut this year.

 

… CBO predicts that the deficit will fall to $ 551 billion by 2015 – a sustainable 3 percent of the economy – but only if the Bush tax cuts are wiped off the books. Under its rules, CBO assumes the recently extended cuts in taxes on income, investment and people inheriting large estates will expire in two years. If those tax cuts, and numerous others, are extended, the deficit for that year would be almost three times as large.

Boy, Andrew Taylor sure seems to want tax increases. Maybe we should nickname him "Tax a Trillion Taylor."

Back on point: Taylor's and the AP's consistent indifference towards the individual unemployed stands in stark contrast to how the wire service and the establishment press doggedly pursued the topic during the first few and final years of the Bush administration, when the unemployment rate was far lower than its current 9.4%.

That's bad enough. But what's far more offensive is the press's obsession, most obvious at AP but also evident elsewhere, not with how long-term unemployment is affecting real people and real families, but instead over how it affects one party's or one president's electoral chances, especially given that the party they're worrying about is the one whose policies have extended the suffering. This is at the same time truly shameless, and truly shameful.

Anyone who doesn't believe that Obama's policies have piled on the pain needs to explain away this:

ReaganVobamaJobs6qsRecov

Good luck.

Cross-posted at BizzyBlog.com.

NewsBusters.org blogs

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On Wednesday, the Associated Press's Andrew Taylor covered the latest deficit projections released by the Congressional Budget Office.

In his treatment of the predicted unemployment rate, Taylor betrayed no concern whatsoever about the plight of the millions of unemployed who are in that position largely because the Obama administration attempted to bring about an economic recovery through government "stimulus" and government intervention instead of cutting taxes, or even leaving what appeared to be an incipient recovery in late 2008 continue. Instead, as AP reporters Hope Yen and Liz Sidoti did last September in advance of last year's poverty report from the Census Bureau, when they fretted over the report's impact on the Congressional midterm elections, a terrified Taylor spent two paragraphs worrying about the high unemployment rate's impact on the President's reelection prospects:

Though the analysis predicts the economy will grow by 3.1 percent this year, it foresees unemployment remaining above 9 percent.

 

Dauntingly for Obama, the nonpartisan agency estimates a nationwide jobless rate of 8.2 percent on Election Day in 2012. That's higher that the rates that contributed to losses by Presidents Jimmy Carter (7.5 percent) and George H.W. Bush (7.4 percent). The nation isn't projected to be at full employment – considered to be a jobless rate of about 5 percent – until 2016.

Along the way, Taylor engaged in another obsession of the wire service and its establishment press counterparts: characterizing potential upward changes to a tax-rate structure that has essentially been in place with few modifications since 2003 as the end of "the Bush tax cuts," as exemplified in these excerpted paragraphs:

The latest deficit figures are up from previous estimates because of bipartisan legislation passed in December that extended George W. Bush-era tax cuts and unemployment benefits for the long-term jobless and provided a 2 percentage point Social Security payroll tax cut this year.

 

… CBO predicts that the deficit will fall to $ 551 billion by 2015 – a sustainable 3 percent of the economy – but only if the Bush tax cuts are wiped off the books. Under its rules, CBO assumes the recently extended cuts in taxes on income, investment and people inheriting large estates will expire in two years. If those tax cuts, and numerous others, are extended, the deficit for that year would be almost three times as large.

Boy, Andrew Taylor sure seems to want tax increases. Maybe we should nickname him "Tax a Trillion Taylor."

Back on point: Taylor's and the AP's consistent indifference towards the individual unemployed stands in stark contrast to how the wire service and the establishment press doggedly pursued the topic during the first few and final years of the Bush administration, when the unemployment rate was far lower than its current 9.4%.

That's bad enough. But what's far more offensive is the press's obsession, most obvious at AP but also evident elsewhere, not with how long-term unemployment is affecting real people and real families, but instead over how it affects one party's or one president's electoral chances, especially given that the party they're worrying about is the one whose policies have extended the suffering. This is at the same time truly shameless, and truly shameful.

Anyone who doesn't believe that Obama's policies have piled on the pain needs to explain away this:

ReaganVobamaJobs6qsRecov

Good luck.

Cross-posted at BizzyBlog.com.

NewsBusters.org – Exposing Liberal Media Bias

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(Todd Zywicki)

Wow, who could have possibly predicted that the Credit CARD Act’s rules that limit non-interest fees and the ability to raise interest rates when a borrower’s risk changes would result in “record high” interest rates (other than me, of course, when I testified to the Senate Banking Committee in 2009 that the act would result in higher interest rates and other than the sponsor of the law, who has acknowledged that it has resulted in higher interest rates but has decided for the rest of us that higher rates is a good thing)?  Even more amazing, it appears that these restrictions on risk-based pricing has hit poor credit risks even harder than less-risky consumers.

Interest rates are now hovering near record highs, at an average rate of 14.72%. And if your credit is bad enough, you could even end up with a rate as high as 59.9% APR.

That’s because while the CARD Act helped crack down on certain fees and requires more disclosures, it didn’t cap every credit card holder’s worst enemy: interest rates.

Sure, the new rules prevent banks from raising most interest rates retroactively, but there’s no limit on the rates they can charge new customers.

“Rates are going up because card issuers know that once you get a card they can’t raise the rates, so they’re raising rates on the front end to ensure they get the revenue from that interest,” said Beverly Harzog, credit card expert at Credit.com.

I should add that, of course, this is not a “record high,” because rates were much higher in the 1970s and 1980s before deregulation led to lower rates.  But they do seem to be the highest in recent memory.




The Volokh Conspiracy

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House Budget Committee Chairman Paul Ryan (R-WI) was announced today as the Republican who will be responding to President Obama’s State of the Union address next week. Ryan has gained a (largely unearned) reputation as a fiscal hawk due to his radical Roadmap for America’s Future, under which the U.S. budget will eventually be balanced (after federal debt surpasses 100 percent of GDP), mostly via privatizing Social Security and Medicare.

According to an analysis by Citizens for Tax Justice, the Roadmap would raise taxes on 90 percent of Americans, while dramatically lowering them for millionaires. In fact, a new analysis from the Economic Policy Institute found that Ryan’s plan would ultimately translate into middle-class tax rates being higher than those for millionaires:

The Roadmap would lead to the wealthiest Americans paying a lower average tax rate than most Americans. Eliminating taxes on capital gains, dividends, and interest, as the Roadmap proposes, would overwhelmingly help taxpayers at the top of the income distribution, who receive most or all of their income from capital. For example, Wall Street financiers could shelter all of their income as tax-free stock options or carried interest.

Middle-class families earning between $ 50,000 and $ 75,000 a year would see their average tax rate jump to 19.1% (from 17.7%) under this plan—an increase of $ 900 on average […]

Millionaires would see their average tax rate drop to 12.8%, less than half of what they would pay relative to current policy

As EPI’s Andrew Fieldhouse concluded, under the Roadmap, “a long tradition of progressive taxation would be abandoned; millionaires and Wall Street bankers would pay significantly lower tax rates than middle-class workers…Income inequality would soar.”

Next week, on the same day that Obama delivers his address and Ryan gives his response, House Republicans will vote to endow Ryan with “stunning and unprecedented” powers to set discretionary spending levels that are binding on the House. The levels that Ryan has laid out, if actually enacted, would result in significant reductions to vital and popular programs like Pell Grants, the FBI, and the National Institutes of Health. This week, House Majority Leader Eric Cantor (R-VA) also called for “elements” of the Roadmap to be in the first GOP budget.

Cross-posted on The Wonk Room.

ThinkProgress

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House Budget Committee Chairman Paul Ryan (R-WI) was announced today as the Republican who will be responding to President Obama’s State of the Union address next week. Ryan has gained a (largely unearned) reputation as a fiscal hawk due to his radical Roadmap for America’s Future, under which the U.S. budget will eventually be balanced (after federal debt surpasses 100 percent of GDP), mostly via privatizing Social Security and Medicare.

According to an analysis by Citizens for Tax Justice, the Roadmap would raise taxes on 90 percent of Americans, while dramatically lowering them for millionaires. In fact, a new analysis from the Economic Policy Institute found that Ryan’s plan would ultimately translate into middle-class tax rates being higher than those for millionaires:

The Roadmap would lead to the wealthiest Americans paying a lower average tax rate than most Americans. Eliminating taxes on capital gains, dividends, and interest, as the Roadmap proposes, would overwhelmingly help taxpayers at the top of the income distribution, who receive most or all of their income from capital. For example, Wall Street financiers could shelter all of their income as tax-free stock options or carried interest.

Middle-class families earning between $ 50,000 and $ 75,000 a year would see their average tax rate jump to 19.1% (from 17.7%) under this plan—an increase of $ 900 on average […]

Millionaires would see their average tax rate drop to 12.8%, less than half of what they would pay relative to current policy

As EPI’s Andrew Fieldhouse concluded, under the Roadmap, “a long tradition of progressive taxation would be abandoned; millionaires and Wall Street bankers would pay significantly lower tax rates than middle-class workers…Income inequality would soar.”

Next week, on the same day that Obama delivers his address and Ryan gives his response, House Republicans will vote to endow Ryan with “stunning and unprecedented” powers to set discretionary spending levels that are binding on the House. The levels that Ryan has laid out, if actually enacted, would result in significant reductions to vital and popular programs like Pell Grants, the FBI, and the National Institutes of Health. This week, House Majority Leader Eric Cantor (R-VA) also called for “elements” of the Roadmap to be in the first GOP budget.

Wonk Room

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Our guest bloggers are Karla Walter, Senior Policy Analyst, and David Madland, Director of the American Worker Project at the Center for American Progress Action Fund.

Union membership is at record lows and is likely to drop even further tomorrow when the Bureau of Labor Statistics announces new figures for 2010. Critics claim that unions are not important to the modern economy — with only 12 percent of workers currently unionized — but the truth is that if you care about the middle class, you need to care about unions.

The middle class is markedly stronger when workers join together in unions. As the chart below demonstrates, the sharp decline over the past 40 years in the percentage of workers organized in unions has been associated with an equally sharp drop in the share of the nation’s income going to the middle class — those in the second, third and forth income quintiles*:

The power of unions to create prosperity for working families is well recognized: Organized labor is one of the few voices for the economic interests of the middle class in our government. Unions were key to creating and protecting the social safety net (including Social Security and Medicare) and winning major legislative victories for working families such as the Equal Pay Act, the Civil Rights Act, the Family and Medical Leave Act and — most recently — the Affordable Care Act.

And unions ensure that workers are paid fair wages. Unionized workers today make significantly more on than their non-union counterparts — about $ 2.50 more per hour than an otherwise comparable worker in the typical state according to a recent study by the Center for Economic and Policy Research.

When unions were stronger in the middle part of the last century, American workers wages rose as they became increasingly more productive. But today, as union strength has decreased, this link has broken down: even though American workers grow increasingly more productive, their wages have stagnated. At the same time, more and more income has become concentrated at the very top of the income scale.

If DOL announces tomorrow that unionization rates have again fallen, it’s not just bleak news for the ranks of the unionized, it’s also bad news for the rest of the middle class.

*Sources: Union membership rate is from Barry T. Hirsch, David A. Macpherson, and Wayne G. Vroman, “Estimates of Union Density by State,” Middle class share of aggregate national income includes the second, third and forth income quintiles and is from the United States Census Bureau’s Current Population Survey (Shares of Aggregate Household Income by Quintile).

Wonk Room

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