Thursday, August 16, 2012

Pundits and Deficits

Jamelle Bouie makes an interesting point:

I have a theory for why Douthat—and many other pundits, center-right or otherwise—ignore this clear record of responsible budget action from liberals.

They approach politics like every other voter.

Pundits are supposed to know more than the rest of us, but like everyone, they develop heuristics and short-cuts to help them understand the world. For many pundits, one such short-cut is that Democrats—and especially liberals—support more spending and thus higher deficits. In the absence of a challenge, pundits will default to this assumption, and it takes a lot to shake their perceptions.
Let's think that through on the particular issue of why many pundits ignore the plain fact that the parties flipped on deficits in more or less the years 1978-1982, which you may notice is thirty years ago...pundits may seem to last forever, but in fact that means that for most pundits, they've never blogged or op-edized or appeared on Fox News when Republicans were actually the party of smaller deficits.

So how come?

Begin with Jamelle's point: most of the guilty pundits here aren't actual budget experts.So they're adopting their views from elsewhere. And the default, reasonably accurate view for many years leading up to the 1978-1982 flip was that Republicans (and perhaps conservatives in general) were for balanced budgets, while Democrats were not.

So what happened when the parties flipped?

1. Republicans didn't flip their rhetoric at all. Ronald Reagan's particular political genius had to do with believing things that were not so, and he never stopped believing in balanced budgets, even while his policies exploded the deficit (he also fully believed in not negotiating with terrorists even while paying off Iran to release hostages, and fully believed in the evil of Communism even while finding Gorbachev a totally worthwhile partner). After Reagan...well, in some ways Republicans have never been over Ronald Reagan, so there's some of just adopting style of separating rhetoric and reality. But eventually that becomes the war on budgeting, in which they keep the rhetoric but just apply it to a different problem. Leading for example to "balanced budget amendments" that wouldn't actually balance the budget but would cut spending.

2. On the Dem side, the problem is that their core positions is slightly complicated. Not very, to be sure, but Keynsianism means that Democrats do not favor totally balanced budgets at all times, which makes it harder to see that overall they have become quite concerned about budget deficits.

3. And then there's the particular circumstances of 2009: mainly because of the recession and existing policy, the deficit is very high during the Obama years. It has virtually nothing to do with Obama policy; indeed, the deficit had already spiked up in FY 2009, which we were deep into before he was even sworn in to office. But it's certainly muddied the situation quite a bit -- in 1993 the deficit was already falling when Bill Clinton took office so Democratic policies finished the job, but in 2009 that was hardly the case.

I should mention someplace here that the flip on deficits is only about the basic party position; there certainly are some Republicans (Tom Coburn for example) who are anti-deficit, and some Democrats who reject the part about running balanced or surplus budgets during good times to offset deficits during recessions.

But the overall pattern is clear, and very much reflected in what the parties have done in office since the late Carter and early Reagan years. And maybe in another thirty years or so most pundits will have figured it out.

27 comments:

  1. "After Reagan...well, in some ways Republicans have never been over Ronald Reagan, so there's some of just adopting style of separating rhetoric and reality. "

    This sentence is striking. When, do you think, Republicans WILL get over Reagan? I suppose the Dem equivalent is FDR, and I have no idea when and how Dems got over him (though I think have another iconic President after him and the political realignment of the south helped?), so I don't know what the time scale is here.

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  2. Eventually, rhetoric became more important than reality. Isn't that what we are seeing with Romney/Ryan?

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  3. Perhaps this is unfair of me, but it seems to me that one of the basic differences between the parties right now is that Democrats take governing seriously, and Republicans don't. So Dems who decide they need to do something about deficit reduction produce complicated plans involving a lot of different variables, because they want to actually solve the problem. Republicans in the same position produce a lot of rhetoric and hot air, because they don't really care whether these policies will work, and never expect them to be put into place anyway.

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  4. Maybe part of this is that Republican voters say that they're concerned about deficits more than Democratic voters, so most pundits create an association between worries about deficits and Republicans.

    Also, there might also be a problem of degree. Perhaps Republicans would have been more worried about deficits if the Bush administration was consistently running a trillion plus deficits per year like we are now.

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  5. I wouldn't overthink this. In American politics, "deficit" doesn't mean "the gap b/w what government spends and the revenue that it takes in". It means (more like) "spending I don't like". This is true of ordinary voters and true of pundits as well. Ergo, Douthat, Ryan, etc. think we have a "deficit problem" b/c we spend a lot of money on programs that they ideologically oppose.

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  6. Excuse me for being so blunt, but I remember only one Democratic presidential candidate before 2012 who was running on an explicit deficient-reduction/careful budget platform, and that was Al Gore in 2000. He was the only one who emphasized budget issues.

    Against that are a large number of Democrats in Congress who strenuously resist cuts to their favored programs (much like Republicans). They may say that they want a more balanced budget, but only if they get to score political victory too (make the GOP accept tax increases).

    It took a bunch of hard-asses in the GOP to push these Democrats into accepting cut-only deficit reduction last year. So I'm not buying Dems as being more responsible on budgets starting in the 1980's. As far as I can see, it started last August.

    It's an important point how recent this budget discipline is. That said, the Democrats seem to be more realistic and more united in budget discipline, at least at this point. But liberals are not likely to keep the pressure on. Not the liberals I know, that is.

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    1. "only if they get...tax increases." But Dems don't want tax increases because they love taxes; they want them because they believe it is responsible budgeting. Just like Taft Republicans used to want before Kemp Republicans took over.

      Walter Mondale ran on raising taxes because of the deficit, and Democrats in general (w/help from old-school Republicans Baker, Dole, Domenici) pushed Reagan to accept taxes in 1982. Dems were eager to reach budget deals during the Bush years, and Dems began the Clinton years with a deficit-reduction package. The history on this is very, very clear.

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    2. It is also responsible budgeting to trim programs, but why isn't that the first impulse of Dems? Why weren't there more cuts in April 2011 compared to August 2012?

      If you think the history is clear, you're ignoring part of it. Lowering spending has rarely been part of the Dems plan. That doesn't mean that Repubs have actually reduced spending either, but that's where pressure to restrain spending has generally come from.

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    3. MP, consider the possibility that the Democrats are reluctant to cut spending because they believe that government is there to do things and some of those things are even more important when the economy is bad and money is short.

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    4. @Scott, I have considered that. Do you really think I haven't? But I measure that against the near endless growth of what government does, and how much it costs to fund government, since it's not free. What I see is that deficit spending and borrowing has led us to give the government more and more remit on stuff that we wouldn't want if we had been paying the full price.

      The push always seems to be for more, very rarely do we have the review period where we assess and trim back the less useful spending. That's budgeting101, like you might use at home. But as I said above, the pressure to restrain spending doesn't usually seem to come from liberals.

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    5. I don’t agree.

      First, let’s look at the Republicans for some context. They were fully in charge between 2001 and 2006. During that time, we had zero spending restraint. They eliminated Pay-Go. The Afghanistan and Iraq wars were taken full off budget, not paid for with either tax increases or spending cuts. Then the Medicare prescription drug benefit –added without any new taxes or offsetting cuts. And of course, the Bush tax cuts. BTW, Paul Ryan voted for all those things. Dick Cheney said “deficits don’t matter.”

      Now, it is true that the Democrats in 2009-10 did not generally restrain spending. But I don’t think it’s fair to judge them on this time period. The situation did not call for general spending restraint. Government spending helped prop up the economy by filling the demand gap. And here is an important example of spending restraint. The Affordable Care Act (Obamacare) cut Medicare spending to the tune of $716 billion over 10 years. This extended the life of the Medicare trust fund for 8 years, to 2024. And along with the tax increases, it offset the cost of Obamacare. The Republicans pilloried Obama over this in the 2010 elections, and are doing so again now. Do you give Obama and the Dems credit for these cuts? Had they approached Obamacare the way the Republicans approached the prescription drug benefit, they wouldn’t have even attempted to pay for the new spending.

      I bet you and I would agree on a lot of government spending that we should get rid of. Agricultural subsidies, some defense spending. I think we need to find further efficiencies in the health care system to slow Medicare spending growth. The Democrats haven’t always been as good on these things as I would like. But the Republicans have been horrible.

      You must be looking further back into history to conclude that Republicans are better at spending restraint. I think your conclusion is off-base with respect to the contemporary Republican Party.

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    6. First, ModeratePoli, I didn't mean that the way it came out. Sorry.

      Second, the Republicans had an opportunity to impose spending constraints, one of their own making. In 2011, when they insisted that the debt ceiling couldn't be raised, some of them, I believe, left an out by suggesting that a plan for future cuts would be adequate. At least that's how I interpreted it; maybe I was reading too much into it or maybe it was just more spin. Cutting in such a weak economy is probably a bad idea, but drawing up a plan for future action could have had advantages. In any event, Boehner proved willing to negotiate a deal with Obama, but the House Republican caucus shot it down, with Ryan among the lead. Thus they got nothing of what they claimed to want and triggered a downgrade of our credit rating. The issue was pushed off to the supercommittee, which went nowhere (and they were part of its going nowhere), and now they're trying to get out of the prearranged sequester, which is a consequence of their own handling of the whole issue (although they call it Obama's defense cuts). Now, frankly, the I think the sequester is probably a horrible idea, but it was intended to be that way, and isn't it what they claimed to want? But then what do we really know about the wants of a party that condemns Obama for cutting $716 billion out of Medicare and then turns around and condemns Obama for doing absolutely nothing to address entitlement reform, condemns him for spending $787 billion on a stimulus package and then condemns him for doing absolutely nothing for the economy? (Sorry, I'm getting hot under the collar again.)

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  7. I think the actual pattern is that a combination of Democractic Presidents and Republican Congresses are good for deficit reduction, since Democratic Presidents will veto Republican tax cuts and Republican Congresses are less generous in funding domestic spending programs than Democratic Presidents prefer. Both the periods 1995-2000 and 2011-12 have had Democratic Presidents with Republican control of at least one House of Congress, and both periods saw significant deficit declines, in the former case generating substantial surpluses. On the other hand, 1993-94 and 2009-10 both saw large spending increases passed during the first two years of a Democratic Presidency on party-line or nearly party-line votes in Congress. Do you honestly think spending in 2012 would be lower if Democrats had won the 2010 midterm elections? A number of President Obama's programs that would have created substantial new spending were kept from passage by the Republican House, and your failure to acknowledge this shows you have your own partisan blinders on.

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    1. I do believe that we would not have seen the debt limit increase tantrum of 2011, which was a purely partisan fight. So the economy would be better, as that tantrum cost the economy dearly.

      Your argument would make more sense if Republicans were not trying to back out of the eminently reasonable defense cuts that they proposed as part of that bargain. We can only hope that Panetta is savvy enough to make sure that those cuts are surgical instead of hackery.

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  8. You are forgetting history.

    Paul Tsongas ran on an explicit budget discipline platform in 1992. He had some success (winning the NH primary) but lost, but the guy who won, Bill Clinton, made deficit reduction a big priority with his first budget right out of the box. That budget, which ultimately led us to a balanced budget in the late 1990s, was passed by a Democratic Congress without a single Republican vote in either house.

    Before that, the Democratic Congress maneuvered President George H.W. Bush into the deficit reduction measures of 1990. Give Bush credit for that too, but it helped sink his standing within his own party.

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    1. My comment above was meant to reply to ModeratePoli.

      Now, responding to Anonymous, the 1993 budget contained a lot of budget cuts - it may have redirected some spending but the overall effect was reducing the budget deficit. And in 2009-10, given that we were on the precipice of a depression, reining in spending would have been exactly the wrong thing to do. We needed federal budget deficits to fill the demand gap. Some people just can't wrap their minds around that, but it's true. Now maybe you prefer tax cuts to spending as stimulus, or maybe you think we should have spent differently, but the one thing Obama and Congress should not have been doing in 2009-10 was reducing spending in the name of deficit reduction. As it was, Obama bought into the need for deficit reduction too soon.

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    2. @cgw, I'll have to review 1993 budget, but it sounds like you know the era and I'm inclined to believe what you write is truth, not spin.

      The big problem may be the Dems in Congress. People's impressions don't come only from the presidents or presidential candidates, but from the members of Congress who are there year after year.

      I'd also request that you comment on my point that the hard-core Republicans pushed the Dems into budget negotiations that trimmed the deficit. They didn't get there on their own volition.

      I'm also aware of the need for the stimulus in 2009, and I supported it. Looking back and having done more research (here), I would have changed some, but not more than a third.

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    3. I'd be more inclined to think you were moderate if you truncated the names of both parties similarly. Using the proper name for one, and a shortened nickname for the other, is a classic method of denigration.

      One of the nice things about being a woman with a profession today is not having to put up with crap like that at work.

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    4. @Anon, it's a bad idea to draw a conclusion on such thin evidence - in this case, one use of Republicans instead of Repubs. Be a little slower to follow your inclinations next time.

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    5. It's true that the hard-core Republicans forced the spending cuts last year. Most notably the debt ceiling deal, including the sequestration component that will result in the big defense cuts that they are now squawking about. And other cuts at different points in the last two years.

      If you think those spending cuts were a good thing, give credit to the Republicans. I think they were a bad thing - the overall effect on the economy was bad. It's one thing to debate over what our spending priorities should be - we should always do that. But it's another thing to try to cut spending in the name of reducing budget deficits while we're in a depressed economy and what we need is (short-term) bigger budget deficits. That was the case in 2009-10, and it's still the case even though we've managed to back away from the economic precipice.

      I think of "budget discipline" as doing the right thing in budgeting. Balancing current and future needs, taking into account what is required under the economic conditions, coordinating with monetary policy. Unlike state governments, the federal government can run budget deficits. In a soft economy like this one, with interest rates at basically zero, the responsible thing is to run a big budget deficit. In a sane political world, we would all agree to run big deficits now and shrink deficits when the economy recovers, and the debate would be centered about how best to do that.

      There is spending that would be very, very beneficial right now that we are not doing because our political debate is so stilted. Infrastructure spending - stimulative in the short term, and laying the groundwork for future prosperity and tax receipts. Continued extended unemployment benefits and related help so long as employment is hard to fund, for human reasons but also stimulative because the money will be spent and circulate through the economy.

      Then there is bad spending - e.g., farm subsidies, and much of defense (IMO). If you are saying the parties are both bad on this stuff, I would agree. Ideally, we'd redirect that money to something more useful while keeping up or increasing overall federal spending levels. That would require breaking the hold of lobbyists on both parties.

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    6. First, thanks for answering my question. No deflection at all--you must not be a politician.

      The argument about whether more stimulus would be helpful or damaging is one that I used to have regularly in my own mind. But not anymore. We've seen high budgets for 3 solid years, yet the employment numbers that stabilized at the end of 2009 have stayed there. If the additional stimulus that we've had through 2010-11 haven't increased employment, how much more money do we have to devote to reducing unemployment? We're already in the diminished returns part of the curve.

      Maybe if we had an all infrastructure stimulus, that would help, but another $400 billion on our already high deficit--I'm not game for that much of an experiment funded by borrowing.

      I'm against extended unemployment benefits. For many people, it delays the necessary adjustment to considerable lower level of income. That's a painful adjustment, but it usually needs to be done. And again, we're borrowing considerable amounts, so it's our duty to make sure that we spend as wisely as possible.

      I'm not a fan of a sudden collapse in federal spending a la Ron Paul. That would send us back into the very painful recession we had in 2008-9, but I'd to see gradual reductions. This was the proposal of the Simpson-Bowles commission. It's a terrible shame that the hyperpartisanship of 2010-11 prevented real consideration of this great plan.

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    7. I appreciate the discussion. I like this blog not only for JB but also for its high quality commenters.

      I think many people don’t appreciate the depth of the economic downturn. In January 2009, when the stimulus was being designed, it was believed that the economy had shrunk by about 3% in the 4th quarter of 2008. A disastrous number, reminiscent of the Great Depression. At that time, the experts believed that the hole in our economy was about $2-3 trillion. Larry Summers, et al. believed an $800M stimulus, while it didn’t match the size of the hole, was big enough to achieve “liftoff” and allow momentum to take care of the rest. We learned about a year ago that the economy shrunk by 8.9% in the fourth quarter of 2008. 8.9%! The hole in our economy was many trillions. We got hit by a Mack truck. And what’s scary is it could have been worse.

      But because of the size mismatch, the stimulus was only big enough to get us growing again. The economy began growing again in the summer of 2009, and unemployment stopped growing at the end of 2009. But there wasn’t enough momentum for “liftoff”. It doesn’t mean the stimulus didn’t work – the CBO says that ARRA created or saved about 3 million jobs. To use a metaphor, it’s not that our firetrucks didn’t work, it’s just that we brought a 2-alarm response to a 7-alarm fire.

      We have run large deficits for the last three years – from $1.4T in fiscal 09 (before the stimulus, the 09 deficit was projected to be $1.3T, so ARRA barely added to the projected deficit that year) down to a projected $1.0T in fiscal 12. Deficits are coming down (slowly) because the economy is growing (slowly). If you want quicker deficit reduction, the way to do it is to enhance growth.

      Yes, running deficits is stimulative by comparison to trying not to run deficits (BTW, we are not doing anything special to stimulate the economy right now other than the extended payroll tax cut). But large deficits really aren’t a choice right now. If we try to significantly shrink the deficit right away, we will end up shrinking the economy and thwarting our own attempted deficit reduction. Example – at the end of this year, we are due for expiration of the Bush tax cuts and for sequestration (automatic spending cuts) to take effect. The consensus of economists is – if those measures take effect it could send us back into recession.

      Another thing to keep in mind is that we are overextended as a society, thanks to the collapse of the housing bubble, unemployment for many, the hit to retirement accounts, and the hit to the incomes of those who are employed. The private sector needs time to deleverage. Aggregate demand is down. Big business is sitting on big piles of cash because aggregate demand is down and they don’t see the opportunity to invest their cash and make money. Absent more government action, we’re likely to remain in this situation for a while and only come out of it very, very slowly.

      We’re living the paradox of thrift. Everyone tightens their belts to shed their debt. My spending less means you earn less. Then you have less to spend. Etc. Economic activity shrinks. The federal government is the only actor in a position to break the cycle, to act. But right now, they aren’t.

      And I haven’t said anything about the human element. If we’re reading this blog, it probably means we’re educated and pretty comfortable in our lives. For the people at the bottom of the economic ladder, or young people just getting out of college who can’t find a job, there aren’t a lot of good options available right now. The idea of deficit reduction might feel like the right thing to us, but it does nothing for them.

      Anyone who doesn’t want government to do anything extra to improve the economy is getting what they want right now.

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  9. On average, the economy has done better and deficits have been lower under Democrats than under Republicans.

    As cgw says, the conditions since 2008 have called for deficit spending. Ronald Reagan and George W. Bush, however, ran large deficits in good years and bad.

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  10. Part of the story must be explained by the strategic insight of the Atwater/Rove school; namely, liberals tend to be self-conscious (at times self-loathing), so the Right can get away with all sorts of crazy shit by pairing it with right-wing-eous indignation at liberal pushback. This doesn't quite capture the Reagan years, but most of the rest.

    For example, liberals all knew that Dumbya pretty much read a book by Natan Sharansky, and having no more wisdom, insight or experience, decided to pretty much commit the US to a New American Century that will work real well if the rest of the world remains in their shacks for another 100 years. If the world doesn't oblige, Dumbya's strategy is a fair bit less compelling. You liberals knew that, but for the most part you kept your mouths shut, since Dumbya is Fredo incarnated, and shredding such a one felt like the politically incorrect attacking of the mentally incompetent.

    Heck, in 2008 the Republicans put a know-nothing woman on their Presidential ticket who claimed that she flew 18 hours, halfway across the planet, to drop a preemie with Down Syndrome. Once again, you knew that Palin's account of her kid's birth was the most wolf-faced crazy lie in the history of politics, but you held your fire, cause its a handicapped kid, or something, and there was also surely some schadenfreude at the heat coming Andrew Sullivan's way.

    So there's tremendous hathos in watching Romney stumble his way through a campaign; today's latest ridiculous blundering affirmation that he paid 13% taxes every year occurs against the backdrop of a pasty-faced white guy, rich beyond belief via scurrilous means, obnoxious, condescending, secretive. There's nothing about Mitt generating the least bit of politically correct sympathy, and if you go over to Daily Kos today, you'll see that he generates none.

    What does this have to do with spending? People like spending and they like balanced budgets. So Republicans spend a lot while they plan to balance budgets.

    Don't buy that, liberal? What are you, a hater?

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  11. Bouie might be right as to how pundits mentally buy into myths, but consider also Douthat's incentives. His job is to be a Republican. So he writes in support of Republicans, evaluates them based on the fluffiest of their rhetoric rather than their records.

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  12. I recently read that great Atlantic profile of David Stockman from 1981 the other day. I'd encourage anyone who wants to understand the war on budgeting to give it a read (or re-read). http://www.theatlantic.com/magazine/archive/1981/12/the-education-of-david-stockman/5760/ The big thing I took was that when conservative intellectual ideology of limiting government spending comes into conflict with the traditional political goals of giving goodies to your supporters and backers the political goals win. As head of the OMB Stockman tried to sell the idea of big budget cuts by balancing cuts to liberal priorities like anti-poverty programs or school lunches with cuts to conservative sacred cows, but the higher ups in Congress and the West Wing kept pulling the rug out from under him. There's a great anecdote in the article about how this one nuclear reactor in Tennessee kept getting more and more funding because it was in the home state of the Senate Majority Leader even though Stockman tired every trick in the book to end it, because he saw it as everything that is wrong with how the Federal Government spends money. Hence Stockman's book title about his years in the Reagan White House "The Triumph of Politics". You see this in the Ryan/Romney budget, where you would see tens of millions of people loose their health care and under the plan hunger could become a major facet of life for more and more Americans. But whatever money is saved would be gobbled up by tax cuts for the very wealthy and a massive military build up. Maybe the "war on budgeting" is really just politics triumphing once more, I mean its garbage from a policy/arithmetic stand point but its a good communications strategy. Maybe that's enough for the GOP to embrace it.

    That said I think a lot of conservative public intellectuals have seen what happens to apostates and have decided that deviating from the party line is simply too risky. They saw what it did to folks like Stockman and Frum over the years and don't want to rock the boat because of all the powerful economic incentives to stick with everyone else.

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  13. Nobidy's overthinking this. Words have meanings. Twisting meaning is a good indication of ignorance or deception, or both.

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