Governor Jeb Bush on the Desired Trend in Real GDP

From Bloomberg, a quote from the Governor’s speech in Detroit:

… I don’t think the U.S. should settle for anything less than 4 percent growth a year–which is about twice our current average.

I applaud the Governor’s aspirations. Here is a plot of what real GDP would have looked like had we had 4% annual growth (log terms) since 1967Q1 (in red), and if we’d had it under the administration of G.W. Bush (green).


Figure 1: Real GDP, in bn. Ch.2009$, SAAR (blue) and under 4% growth starting from actual level in 1967Q1 (red), and starting from actual level in 2001Q1 (beginning of G.W. Bush administration) (green). Growth rates calculated as log differences. Source: BEA 2014Q4 advance release, and author’s calculations.

Well, if 500,000/month job creation is the norm (as Governor Mitt Romney asserted), why wouldn’t 4% growth be the norm? Just because it hasn’t happened yet, doesn’t mean it can’t.

Update, 2/10 6:15pm Pacific: Noah Smith has more on the “4% solution”.

49 thoughts on “Governor Jeb Bush on the Desired Trend in Real GDP

    1. macroduck

      In identifying 2% as the current trend, he clearly implied that he was talking about real GDP. It’s not really open to question.

  1. PeakTrader

    Maybe, Jeb read this report:

    UCLA Anderson Forecast: U.S. economy falls short of true recovery
    June 05, 2013

    “U.S. real GDP is now 15.4 percent below the normal 3 percent trend. To get back to that 3 percent trend, we would need 4 percent growth for 15 years, 5 percent growth for eight years, or 6 percent growth for five years, not the disappointing twos and threes we have been racking up recently, which are moving us farther from trend, not closer to it. It’s not a recovery. It’s not even normal growth. It’s bad.”

    1. rtd

      I was wondering if Jeb read the White House forecasts from a few years back. It seems like I recall a 4% growth for 2013 in numerous reports from various years.

      Or, it’s likely just another politician pandering to an electorate along the lines of: “We’re America. The greatest nation on earth. And I don’t think the U.S. should settle for anything less than 4 percent growth. Our current president isn’t a fan of this nation or he wouldn’t settle for less than 4 percent growth. Why not 4.3% growth you ask? Well, my times up…….. so god bless you & god bless the U.S.A. & hallelujah & yee-haw” or something similar.

  2. 2slugbaits

    And just think. Of all the Bush kids “Jeb” is supposed to be the smart one. Some parents should not be allowed to procreate.

  3. jonathan

    Why not 6%? Why are we settling for anything less than 8% growth? When you say “why not”, you can say whatever you want.

  4. EconBlowser

    This guy is the exonomics blogosphere equivalent to the really, really [expletive deleted] opening act for a standup show. WTF is this blog post even about? IDK why a serious economist would even listen to this obviously political comment. Much less take it serious and devote time to make a blog post on the comment. I’d rather sleep in my ivory tower office, or stare at some hot coed or something. Mentioning Obama’s forecast is a great point, something Menzie wouldn’t dare question. He loves the liberals like fat kids love the cake. Tell us how great Hillary is going to be.

    1. baffling

      then why are you even reading this blog and commenting? go listen to faux news and enjoy absorbing their “facts”.

    1. PeakTrader

      The “Misunderestimated” President and the long boom of 1982-07:

      Bush inherited the worst stock market crash since the Great Depression and a recession. However, the Bush Administration turned the recession into one of the mildest in U.S. history (which wasn’t a recession based on annual per capita real GDP growth), after the record economic expansion and structural bull market from 1982-00.

      Over a five-year period in the mid-2000s, U.S. corporations had a record 20 consecutive quarters of double-digit earnings growth, two million houses a year were built, 16 million autos per year were sold, U.S. real GDP expanded 3% annually, in spite of 6% annual current account deficits (which subtracted from GDP).

      The U.S. economy was most efficient, while Americans stocked-up on real assets and goods, and capital was built-up. It was one of the greatest periods of U.S. prosperity, the fourth longest economic expansion in U.S. history, and in a structural bear market that began in 2000.

      1. JBH

        Bush inherited a bear market and recession. Bush bequeathed a bear market and a worse recession. Real growth during the Bush years was 1.8%. One of the worst performances in US history. Also on Bush read JFK-9/11: 50 Years of Deep State , chock full of references. On the start of the Bush dynasty and far, far more, read and ponder on the material in Carroll Quigley’s magnus opus, Tragedy and Hope . Economics is one part econometrics and ninety-nine parts understanding what it was that really went on. Archives are opening up, books are being published, so there is otherwise no excuse for not knowing. You have about as much chance as snowball in hell of seeing what’s coming, otherwise.

        Hat’s off to BC, Anonymous, and a handful of other regulars here whose meaty comments evince that they have done this kind of work.

      2. baffling

        peak, that buildup was from leverage, and we just saw how that works in the private sector.
        “Bush inherited the worst stock market crash since the Great Depression and a recession. However, the Bush Administration turned the recession into one of the mildest in U.S. history”
        and bush proceeded to create an even bigger stock market crash and financial crisis. rose colored glasses you have.

      3. PeakTrader

        The 2001-07 expansion was built upon the 1995-00 boom, when actual output exceeded potential output, along with the entire 1982-00 boom, and on top of a mild recession.

        Living standards improved at a steep rate in the 2001-07 expansion, because the country was at or near full employment, while the U.S. consumed up to $800 billion a year more than it produced in the global economy.

        And, you can’t blame the housing boom/bust cycle entirely on Bush. There’s lots of blame to go around, including for Clinton and Congress.

  5. sherparick

    Bill McBride has a very good article on the potential real growth rate of GDP in the U.S. economy and connection to demographics.

    Basically, countries during the “transformation” from agricultural/feudal to industrialism grow (or need to grow) at very high rate as vast numbers of workers move from low productivity/subsistence agriculture labor to high productivity industrial labor. In 1800, 90% of the U.S. population of 4,000,000+ were farmers or farm labor (free and slave). By 1900, this had fallen to less than 50% of a population of 76,000,000 plus. By 2000, this had fallen to less then 2% in a population of 285 million, and that 2% was extremely productive due to mechanization and other technological advances in agriculture.

    With U.S. population growing at much lower rate, and the transition completed, the only way the the U.S. can get a boost from labor force growth is to import it through immigration. Much disparaged by the Right, the large immigration from Mexico and Central America in the nineties and early oughts boosted U.S. growth rates as low productivity peasants from these regions became high productivity industrial and service workers in the U.S. For demographic reasons (lower birth rates in Mexico and Central America), this is not likely to be repeated in the coming decades.

    The other part of economic growth is productivity increases due to technical changes and systemic developments. This been a hard thing to figure and is variable and may be impacted by the cost of labor (hypothesis: high labor costs spur business to find labor saving devices and methods, low labor costs (and U.S. labor costs have been falling in real terms for the last 35 years) encourages business to substitute labor rather than make risky, uncertain investments in R&D.) The best guess right now is that productivity is growing at 1.5%. So with labor growing at .5% annually means that real GDP growth baseline is 2%. Another factor to consider is that at minimum the U.S. loses -2% of GDP growth annually due to its trade and current account deficit, primarily of the interests of Big Finance, Multinationals, Walmart, and US imperial politics in maintaining a “Strong dollar” policy. So if the U.S. reports 2.5% growth, that would be 4.5% if trade deficit (primarily China and Oil) were eliminated.

    There is no evidence that the tax policies of the Regan Administration or Bush the Younger’s administration boosted trend line economic growth, which actually was worse then was in the 1970s, and certainly much worse then the high tax, highly New Deal period of the 1940s, 50s, and 60s, and which of course went up during the 1990s under the higher tax regimes of Bush I and Clinton:-) This might be just correlation and not causation, but certainly rebuts the story that Republicans like “Peak Trader” like to tell (it is amazing how 2007-09 gets completely attributed Obama, who only became President on January 20, 2009, well into FY 2009 which had begun on 1 October 2008).

    Although Jeb’s speech was about addressing low wages and inequality was substance free, I can only imagine that his economic program will be more tax cuts, particularly cuts in capital gains, corporate taxes, and inheritance taxes “to promote investment” and to encourage “job creators,” while reducing environmental regulations, “reforming” entitlement spending, and reducing “hammock programs” so as to “reduce the barriers of success.”

    The thing that historically boosted real wages and incomes is low unemployment, and we are not likely to see it as long as the Fed feels spooked by a U-6 unemployment rate falling to 5.5% (when the real unemployment rate, adding up involuntary part-time and discouraged workers is still above 10%), I don’t see much improvement as the Fed seems willing to risk a recession because the fear that inflation is out there somewhere (even as it falls toward 1%, a full 100 basis points below the Fed’s 2% target ( a target that is completely the result of group think among the world’s central bankers). With all the hard money zealots in the Republican Party/Conservative Movement, I don’t see Jeb calling for another round of QE.

    1. PeakTrader

      sherparick says: “…rebuts the story that Republicans like “Peak Trader”. ”

      You haven’t rebutted anything, made false assumptions, write like a political hack, and ignored economics.

  6. Ricardo

    Menzie wrote:

    why wouldn’t 4% growth be the norm? Just because it hasn’t happened yet, doesn’t mean it can’t.

    The 19th Century nominal GDP was 3.84% (real US GDP was 4.13%) . The 50 year period after the Civil War, 1850-1900, nominal GDP was 4.26% (real GDP was 4.38%) Of course we had a gold standard then so it is doubtful we could have the same sustained growth rate with a floating currency.

    But then under Reagan nominal GDP was 7.88% (real GDP was 3.47%)

    Menzie, if the world only began with Keynes MONETARY THEORY you are probably correct.

  7. Rick Stryker


    Thanks for bringing Bush’s statement to my attention. I’m leaning Walker right now but Bush’s statement is just what I and others want to hear the candidates saying. I’ll have to take a look at Bush.

    The Democratic Party is the party of low expectations while the Republican party is the party of opportunity. That contrast between Democrats and Republicans should be clarified. Democrats do well when there is some kind of crisis, recession, or slow growth. It’s much easier for them to convince people that they need the protection of government when things don’t look so great. Republicans need to set ambitious goals such as Bush has, to signal the difference to the voters and to focus policy. When you have an ambitious goal, you automatically go after anything and everything that could be slowing growth: excessive regulation, government programs that through high implicit marginal tax rates encourage people not to work, the minimum wage, etc.

    Democrats understand well the mortal threat to their policies if a Republican sets these goals and works to achieve them. They will mock and jeer, saying meeting the goal is impossible. But they don’t realize that people want to see ambitious goals set even if they aren’t achieved. Walker’s jobs pledge is a good example.

    So keep jeering my Democratic friends: with any luck, Republicans will own it all come 2016.

    1. Menzie Chinn Post author

      Bruce Hall: Take 1.35 to the 1/8 power, subtract 1. Or you could go to FRED and calculate directly; it’s 3.8%/annum.
      By the way, since population grew 21.6% over the 1999-2007 period, the increase in per capita real GSP is much less pronounced, on annual basis: approx. 1.3%.

      1. Bruce Hall

        Oh, thanks. I guessed it was about 4% which is probably where Bush is getting his idea. By the way, are these discussions using per capita real GSP or real GNP? I’m thinking the latter so while the former is a very good way to look at economic growth, if we are going to use that for discussion, shouldn’t that approach also be used in perspectives regarding national economic performance?

        1. Menzie Chinn Post author

          Bruce Hall: Well, I think it’s useful to remember population growth over the past five years has been about 0.7%. Add 1.3% to 0.7% and you get…2%. Unless Jeb Bush has a proposal to accelerate population growth substantially; if by allowing more immigration, I’d be behind that.

          1. Bruce Hall

            Menzie, I think the open borders will take of the population growth, but I’m not sure how much that growth will add to the GDP 😉

  8. macroduck

    Every president ends up living with the legacy of his (or her) predecessor. Ask Obama about that. Bush has been close tp presidential politics most of his life, so surely is aware that blame and credit early in the next president’s term will be the legacy of the Obama years. The 2017-2020 period may not experience 4% growth, but the recent upturn and the size of the output gap raise the possibility.

    Campaigning on optimism worked for Reagan, when Jeb’s near association with presidential politics began. He may very well be taking a page from Reagan’s book. Dissatisfaction with the economy is Obama’s biggest negative in approval polls, so expressing optimism regarding the economy is sort of obvious as campaign rhetoric . Winning comes before governing, so even if 4% growth is not attainable, it’s worth talking about. If Bush gets lucky, he can win and enjoy a belated economic rebound over which he has no real control.

    I find it interesting that some commenters here (pretend to?) take Bush seriously in his assertions about the economy. That sort of naïve tribal faith is cute among school children. It’s just sad to see among adults.

  9. 2slugbaits

    There’s very little that a President can do to promote long run economic growth. A President’s influence is pretty much confined to short run aggregate demand management. No one, even really smart folks, understand long run economic growth in a deep way. And if the smart folks don’t get it, I wouldn’t bet that a Bush clone got it. We know that population increase is by far the biggest single contributor to economic growth, and given that Bush would be almost 64 if he won in 2016, I’m guessing his virility quotient would not allow him to contribute much to population growth….little blue pill or not. Besides, there would be at least an 18 year lag. The efficient allocation of capital doesn’t seem to be a strong suit of the Bush family either. Besides the financial mess surrounding Bush 43, we also had the S&L fiasco under Bush 41. And don’t forget about hapless Neil Bush and Silverado Savings & Loan. This is not a family that seems to understand financial markets. Okay, what about technology? Hmmmm…isn’t this the family that was amazed by scanners at supermarkets?

    There are a few things that “Jeb” Bush might be good at. For example, immigration policy, but I don’t see his supporters signing up for it. They couldn’t swallow Bush 43’s immigration plan, so it’s a little hard to see how they’d swallow a Bush 45 plan. Given his personal history a Bush 45 presidency might initiate a more rational drug policy. So that’s a plus. His weight seems to fluctuate a lot, so maybe a Bush 45 presidency would be a boon to the diet and exercise business.

    The Bush family: Home of the Empty Suit.

  10. Rick Stryker


    Wrong again.

    The S&L crisis was not a Bush 41 presidency crisis, although the effects of the crisis continued into Bush’s presidency. The crisis really began in 1979-80 with high interest rates that affected the asset-liability mix of the S&Ls . The Democratic Congress responded in 1980 by passing the Depository Institutions Deregulation and Monetary Control Act, which Democratic President Jimmy Carter signed, and which was designed to strengthen the S&Ls by allowing them to get into business lines that banks were in. However the crisis didn’t really get going until the mid to late 1980s and continued into the 90s. Democratic Speaker of the House Jim Wright was notorious at the time for interfering with regulators on behalf of his friends in the S&L industry, particularly Vernon Savings and Loan. Wright was ultimately forced to resign in 1989. I would also remind you that 4 of the Keating Five were Democrats.

    You also repeat the myth that Bush 41 was amazed at seeing a common supermarket scanner. That myth was created by the New York Times in an attempt to aid the Clinton campaign’s effort to portray Bush as out of touch with ordinary people. Despite this myth having been debunked (by left-leaning for example), the NYT as far as I know never corrected it and so guys on the Left like you continue to repeat it.

    Because of pervasive left wing media bias, progressives believe many “facts” that have been made up by someone with an agenda. At the same time, you don’t hear about many facts that are contrary to your world view. For example, you believe Republicans are ignorant because the media looks for any opportunity to expose any Republican for the slightest reason, often making up the facts. But you don’t believe Democrats are ignorant since the media rarely calls any attention to it. For example, The Washington Post recently passed over without comment the President saying “he’s first president since George Washington to make some booze in the White House.”

    The problem with that statement of course is that George Washington never lived in the White House, since the White House was finished during John Adam’s presidency. Adams was the first President to live in the White House. So the current occupant of the White House does not understand basic history about it.

    If a Republican president had made this statement, you’d know about it since the Washington Post, NY Times, or other mainstream media would have been sure to let you know. That’s why you have a distorted view of the world.

      1. Rick Stryker

        Somebody I reluctantly voted for in 2008. He’s often indistinguishable from a Democrat but nonetheless better than the other Democrat who was running.

          1. Rick Stryker


            That would the Republican, John McCain, who, along with Democrat John Glenn, was cleared of all charges involving Lincoln Savings and Loan. However, the Senate Ethics Committee ruled that the other three Democrats, Riegle, Deconcini, and Cranston, acted improperly. Cranston was reprimanded.

  11. Jeff

    Oh Goodie. Since we are on the topic of fantastic political promises, can we talk about Obama’s goal of adding 1M manufacturering jobs by 2017? Menzie, I expect biweekly updates with your classI red line trend analysis.

    1. Menzie Chinn Post author

      Jeff: Glad you look forward to it. You do know that given the pace of job creation in manufacturing in the last half year, it’s entirely plausible to hit that 1 million target…(run a linear regression on log manufacturing employment)?

      1. Jeff

        Over the last 6 months, never mind the rest of the data we have!? Is that what passes for rigorous analysis in your mind? I can also extend the last 6 months of WI employment to show that Walker’s second administration will create over 400K new jobs. Amazing what can happen when you cherry pick the right data.

        1. Menzie Chinn Post author

          Jeff: Well, do it over whatever period you want; do it using assumptions regarding I(0) vs. I(1) time series (one typically can’t reject null of I(1), but I’ll leave it to you). Then report back.

          I will note that in in order to hit the 250K target by the end of his first administration, as he promised, he needs to have created 93,200 jobs in January alone. I don’t care how you pick the sample, I don’t think you’re going to get a prediction of that nature unless you are incredibly inventive, which you could be.

          1. Jeff

            If you start the clock in 2013, as one should, then the data says he will fall well short of 1M. To claim he will hit 1M is either naive or delusional on your part.

          2. Menzie Chinn Post author

            Jeff: I’m starting the cumulation at 2013M01, but the question is the sample over which to estimate the trend. Try an random walk w/drift, estimate with robust standard errors, over 2010M03-15M01 (trough to present). +/- 2 SE band encompasses 1 million cumulation by 2017M01.

  12. 2slugbaits

    Rick Stryker Oh, I see. It was Jimmy Carter in 1979 who made poor old, misunderstood Neil Bush get into all that trouble. Right. That’s just another version of “the devil made me do it.” As to Bush 41 and the scanners…I know what I saw. He went out for a photo op and at the very least pretended to be amazed. Was he faking his being surprised? Perhaps. Based on my personal experiences with Bush 41……

    As to John McCain, yes…he was cleared. What’s your point? The committee simply cleared him, that doesn’t mean he wasn’t guilty of doing what he was charged with doing. In fact, McCain even admitted that he did it:

    ?”I have done this kind of thing many, many times…”

    McCain’s defense was not that he didn’t do it, but that he didn’t think it was wrong. McCain compared his dealings with Keating as “helping the little old lady who didn’t get her Social Security check.”

    BTW, there’s a good reason why McCain and Glenn were cleared. They were the only two to have retained some very high powered attorneys. The other three were approaching the end of their careers anyway and decided a legal fight wasn’t worth the cost. In other words, the committee needed a couple of scalps so they selected the three that said they wouldn’t contest the charges and planned to retire anyway. That’s Washington’s idea of “ethics”. That’s how things work. Not quite what I was taught “ethics” meant back in college.

    As to Democrats, I am probably the last person to say they’re saints. I grew up in Chicago during “Hizzonor”s heyday. I think I’m pretty familiar with political corruption. The difference between the two parties is that all of today’s Republicans are corrupt, whereas there are a still a few Democrats who aren’t. That’s what unlimited money in politics will buy you.

    1. Rick Stryker


      You are still making up the facts.

      The impetus for the myth about Bush and the scanner came from a NYT Times article by Andrew Rosenthal in 1992. Photos and video that you may have seen were interpreted in the light of that article, which claimed that Bush was amazed at seeing a supermarket scanner that had been in use for at least a decade. But there is an immediate problem with this claim. Bush was at a National Grocer’s Association convention, in which new technology was being showcased; he was not touring a typical grocery store. Nobody is showcasing scanner technology that already exists at such a convention.

      And indeed, when people started to look into it, the NYT article fell apart. It turned out the NYT wasn’t even at the event, but based its article on a pool reporter’s report, Gregg McDonald of the Houston Chronicle, who merely noted in his report that Bush had a look of wonder on his face, but did not characterize at all what he was amazed about. Not a problem though, since the NYT made up out of thin air the details that were omitted from McDonald’s report.

      Soon after the NYT report, Howard Kurtz in the Washington Post exposed it in an article entitled “The Story That Just Won’t Check Out” and a little later the Houston Chronicle weighed in with “Bush Wrongly Ridiculed About Grocery Scanner.” It turns out that Bush was being shown a new kind of scanner that weighed groceries and could read damaged bar codes. And yet the myth that Bush was amazed at seeing a simple grocery scanner lives on.

      You are also completely wrong that the reason that McCain and Glenn were cleared is that they retained lawyers and fought while the others, who were going to retire anyway, did not think it worth the legal cost to put up a fight. All of them hired lawyers. And all of them fought back. But there were real differences in culpability, which is all in the public record.

      I won’t attempt to refute your claim that all Republicans are corrupt while some Democrats aren’t. I think it should be obvious you made that one up too.

  13. 2slugbaits

    Rick Stryker Since you brought up John McCain. Based on the tone and content of your many posts over the years, I think it’s fair to say that you believe in advancement by merit. Lifting yourself up by your bootstraps and all that. Let’s compare Obama’s personal achievements to McCain’s. Basically Obama started from next to nothing. A mom on welfare and without a father. A confused and troubled teenager by his own admission. I think it’s safe to say that he lived the American dream. What about McCain. Well, he kind of struck out in the marriage fidelity department. His personal story is that he suffered as a POW. Others who were with him at the Hanoi Hilton tell a slightly different version. Nevertheless, being shot down wasn’t something that he set out to accomplish. It was an accident, so self-praise for your time as a POW seems a little strange to me. Maybe he was shot down because he was a lousy pilot and had no business being in the cockpit? But how did he get to be a Navy pilot? His old man was a full admiral in the Pacific fleet. Were it not for his father’s influence he would have washed out of the Naval Academy. Now McCain wasn’t responsible for who his father was, so maybe a little nepotism was unavoidable. But it gets worse. As it happens, my nephew graduated from the Naval Academy with John McCain’s son. His son graduated third from the bottom and it took him six years. Gee…do you think McCain might have intervened to keep his son in the program? It’s a little hard to give Sen. McCain a pass on this. Anyone else’s son would have been washed out. So let’s compare Obama’s career with McCain’s. Which one best represents your belief in accomplishment by merit?

    1. Rick Stryker


      I do believe in advancement by merit. And I think both advanced by merit.

      Neither came from a particularly disadvantaged background.

      McCain came from a military family and went into the family business, attending the Naval Academy with the intention of pursuing a military career. I’m sure that coming from a prominent military family helped get him into Annapolis and helped him in his military career. But when the 20mm shells were exploding over Hanoi, his father was not there to help him. Nor were his family or friends able to help him as he suffered through severe torture in Vietnam with great honor, refusing offers of early release for propaganda purposes unless other prisoners who had been there longer were released first. McCain won a silver star, a bronze star, and other medals all by himself. When he came back, his military career was shot–he can’t raise his arms over his head because of the torture. So he changed careers and went into politics.

      Obama was mostly raised by his grandparents, who sent him to what I understand is the best prep school in Hawaii from the fifth grade. That naturally gave him an important advantage in his journey from Occidental to Columbia to Harvard. Obama went to a much better high school than I and most of the country went to–so yes, he had initial advantages. But he still had to do everything on his own. When you look at the 2008 Presidential contest, it was Hilary who was poised to inherit the Presidency and she assumed she would. She had all the advantages. But Obama took it on merit.

      I think Bill Clinton wins the “pull yourself up by your bootstraps award” of any modern president I can think of.

        1. Rick Stryker


          Yes, it’s a disadvantage but then everyone has both disadvantages and advantages. Other President’s have had a similar disadvantage:

          Bill Clinton’s father died in an accident 3 months before he was born. His stepfather was a gambler and alcoholic and domestic violence was common at their home.

          Gerald Ford’s mother and father separated 16 days after his birth.

          Herbert Hoover’s father died when he was five and his mother died when he was nine, leaving him an orphan. Andrew Johnson’s father died when he was 3.

          James Garfield’s father died when he was a toddler. Rutherford Hayes’ father died before he was born. Andrew Jackson’s father died before he was born too.

          1. baffling

            thanks rick. no need to try and minimize the significance of the disadvantage by comparing to others. it is simply a significant disadvantage. period. although your examples could imply those who overcome such disadvantages are very special people indeed.

  14. Jeff

    Your +/- 2 SE resuit is driven by the fact you picked the most favorable starting point. And even so, to be within 2 SE means there is roughly a 3% chance of that happening. Personally, I don’t like those odds but if you still think it’s possible I applaud your optimism and I would gladly take you up on a friendly wager.

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