September 03, 2003

"Either I'm Nuts, or I Think the Voters Are Marks to Be Gulled"

Virginia Postrel asks why

Tom McClintock... won't give a straight answer about budget cuts. McClintock has been a fiscall tightwad for years, and he knows the state budget well. Why doesn't he tell us what spending he wants to get rid of? Even if he loses, the state would benefit from hearing some specific ideas for spending reductions...

The answer is clear. Either (a) Tom McClintock is nuts, and thinks he is a magic administrator who can save 12% of everything California spends by cutting waste, fraud, and abuse; or (b) he believes that if offered an honest choice Californians will choose the higher-tax bigger-government Davis-Bustamante position, and that his only chance is to use smoke and mirrors to fuzz the issues and confuse the voters. You can take your pick--in neither case should even a yellow-dog Republican vote for him.

Virginia Postrel also asks why

Arnold [thinks he] can get away with his current, "Elect me, I'm a movie star businessman and I love California" platform.... [H]e won't be able to lead anything other than calisthenics if he gets elected without telling voters how he'd make policy--and budget--tradeoffs. Eventually he'll have to make someone mad, and it will be easier to get away with that as governor if he can point to something of a mandate.

Once again, there are two choices. Either (a) Arnold realizes that the more he talks about the budget, the less people will focus on how he can protect them against the evil robots of SKYNET; or (b) Arnold has no clue what he would do. In either case, not even a yellow-dog cyborg should vote for him.

So in the end Virginia Postrel is depressed because only Cruz Bustamante is treating the voters of California as anything other than marks to be gulled:

Bustamante's scary populist economics might catch on by default. At least he says what he's for. Too bad his ideas are so bad.

Cheer up, Virginia. Move back to California and vote for Bustamante. 20% of being governor is trying to push the legislature in one direction or another. 80% is being a manager--running the state government, and trying to do so fairly and efficiently.

Candidates like McClintock--who are either nutso or are lying to the electorate--or Schwarzenegger--who is either massively uninformed or is lying to the electorate--are unlikely to make good managers. Whether you'll approve of the 20% of their job is a pure dice throw (unless, of course, you're like Daniel Weintraub and believe that you know what they would do--that you are in on the con--and you have forgotten that those who get massively conned the most are those who think they are in on the con).

But dollars will get you doughnuts that people who are either out of touch with reality, massively uninformed, or regard the voters as marks to be gulled aren't going to be very good managers.

So what Virginia Postrel should be telling all Californians is something like this: suppose that you are hiring a contractor to build a pool. You have a choice between a contractor who won't tell you how he can possibly build the pool for the budget he promises to meet (McClintock), a contractor who won't even say whether what he'll build will be a pool or not (Schwarzenegger), and a contractor whose idea of a pool--late rococo bordello, say--does not fit your ideas of what The Substance of Style ought to be (Bustamante).

The choice is obvious. Even though late rococo bordello is not exactly to my taste (although it is less distant from my taste than from her's), if you choose Bustamante at least you'll get a pool. Choose Schwarzenegger and you might get a combination gym and septic tank. Vote for McClintock and you will probably get a mudhole.


UPDATE: Virginia Postrel asks if I really want to vote for somebody who wants to regulate (downward) the price of gasoline. Touche. (More than touche: "Ouch!".) No, I don't. Grey Davis is looking better and better. If he gets recalled, it's starting to look as though we have nothing but a choice among greater evils.

Posted by DeLong at September 3, 2003 09:43 PM | TrackBack

Comments

You missed the post where I agreed with Mark Kleiman that Bustamante is either an economic nut or lying. Are you really planning to vote for somebody who says he wants to regulate the price of gasoline? The guy's economic notions get scarier every day.

Posted by: Virginia Postrel on September 3, 2003 10:04 PM

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It is difficult to believe that even the most partisan of democrats would vote for Cruz Bustamante.

Posted by: Marc Thompson on September 3, 2003 10:49 PM

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My read of Arnold is he is running the classic outsider's campaign. Don't focus on the specifics, and let the independent and not-very-interested voters sweep him into power. Only the politico wonks will focus on policies, the swing voters will go by personality and impression, as they always do (which is why Dean is probably toast: the swing voters in the south and midwest will see him as a rich man's son and a liberal who supports gay marriage-- gay marriage will be his Willie Horton).

I think Arnold could easily win on such an approach: an impression of being a pragmatist, with liberal social views and therefore not alienating the California mainstream. He is also, presumably, a catholic. And his film appeal is broad enough to catch Hispanic and other non-English speaking voters.

What happens when he reaches power is different: then, the hard choices come. But since this crisis was, I believe, precipitated by Republican brinksmanship in the State legislature (refusing to *any* tax increases), a broad mandate for Arnold could easily be used to overturn that opposition and create some kind of compromise (which will satisfy no one, but that is the nature of politics).

Running as the outsider is a strategy as old as the hills in American politics, and it often works: think Ronald Reagan. The tradeoffs inherent in being *in* government usually alienate a lot of the voters: hence Gray Davis' dilemmas.

Arnold is a very shrewd man: his entry into politics (say, vs. becoming a Congressman for a solidly affluent Republican suburb) is high risk. But he is pulling in the right people around him, and he can ride a wave of disaffection.

Is this a portent for Washington? I don't think so: on the economic numbers now, the economy will be strong enough in the first half of 2004, when the election is decided in the minds of the voters (that is a statistically quite strong result).

And Iraq will not turn into a Vietnam quagmire in six months (in fact, like Afghanistan, I expect the Administration to declare success and start withdrawing at least token forces): National Security remains a Republican ace card, they are seen as the party of a strong America. Dean will do surprisingly well in voting terms, but will be slaughtered in the electoral college.

Posted by: JJ on September 4, 2003 03:51 AM

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Arnold will undoubtedly be more popular with GOP legislators than Davis is, but he would still have to get them to agree to a course of action which they have categorically rejected. From what I've heard, the GOP legislature has already rejected compromise. And the Democratic majority in the legislature has little incentive to cooperate with him. Or (more accurately) Arnold would have to get the cooperation of a significant chunk of them, to gain a supermajority.

In terms of Iraq, the admininstration is faced with the problem that Iraq is a bit more central and oily than Afghanistan. Letting it go is not an option. And rather than withdrawing token forces, they're trying to get more forces.

Posted by: Barry on September 4, 2003 04:12 AM

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>>Are you really planning to vote for somebody who says he wants to regulate the price of gasoline? The guy's economic notions get scarier every day.<<

You're right. I did miss that.

Clearly I have some rethinking to do...

Posted by: Brad DeLong on September 4, 2003 06:37 AM

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And what are the chances that Bustamante will succeed in doing that? Greater or less than the chance that Arnold could be a good governor?

Posted by: Barry on September 4, 2003 07:04 AM

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Where could Arnie possibly have gotten the idea that you don't need qualifications or actual policy proposals to run for high office and that what happens in the debates doesn't matter?

Posted by: P O'Neill on September 4, 2003 07:25 AM

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It doesn't bode well that Arnold is backtracking from his comments about that group sex and pot smoking by saying that had only told the interviewer what his (Arnold's) advisers told him to say. As in "the interviewer wants to hear about sex and drugs so that's what I'll say."

Arnold's sounding more and more like a standard issue politician, not a damn-the-consequences truth-telling outside-the system guy.

Posted by: xtopher on September 4, 2003 09:26 AM

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"suppose that you are hiring a contractor to build a pool..."

At what point do you say "maybe I dont need a pool."

Posted by: Rob Sperry on September 4, 2003 09:29 AM

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Long before the cost-plus contract was awarded to your attorney's business cronies (by your attorney) under a secret one-bidder process.

Too late for you, me and all the rest.


Posted by: Barry on September 4, 2003 09:36 AM

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1. Is it really so impossible that the very concentrated retail gasoline market is using oligopoly power to rig prices? It seems to me that this is very possible. In this case some sort of regulation -not on prices but ownership-might be welfare-improving.
2. I have heard quite a bit of anecdotal evidence of the large gas companies using their wholesale pricing power to drive independents out of business. This supports the idea that there is some anti-competitive behavior.
3. Brad, is some gas price regulation worse than cutting medical care for kids or cutting enforcement of environmental rules. I'll choose gas price regulation as the lesser of two evils, especially as I think the price regulation would be more in the nature of a threat (anti-profiteering regulation perhaps) not likely to be used than 70's style regulation.

Posted by: CalDem on September 4, 2003 10:07 AM

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Virginia Postrel never met a radical rightee who should not be loved. I will happily vote against the recall and for Cruz Bustamante, and could care a fig for anything radical rightee VP gobbles. Gobble gobble.

VP is a Texas radical rightee at that. Gobble gobble.

Voting against recall and for Cruz!

Posted by: Ari on September 4, 2003 10:10 AM

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Your pool analogy doesn't .. uh ... hold water. Virginia's problem with Bustamante is that he is offering voters the pool they WANT!

>>Bustamante's scary populist economics might catch on by default. At least he says what he's for. Too bad his ideas are so bad.>Are you really planning to vote for somebody who says he wants to regulate the price of gasoline? The guy's economic notions get scarier every day.<<

FYI even the Bush Administration has announced they are looking into whether the spike in gas prices was price fixing. Are you saying you're to the right of them on this?

Posted by: Dave Johnson on September 4, 2003 10:18 AM

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That post got all messed up. Try this:

Your pool analogy doesn't .. uh ... hold water. Virginia's problem with Bustamante is that he is offering voters the pool they WANT!

>>Bustamante's scary populist economics might catch on by default. At least he says what he's for. Too bad his ideas are so bad.>Are you really planning to vote for somebody who says he wants to regulate the price of gasoline? The guy's economic notions get scarier every day.<<

FYI even the Bush Administration has announced they are looking into whether the spike in gas prices was price fixing. Are you saying you're to the right of them on this?

Posted by: Dave Johnson on September 4, 2003 10:20 AM

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The mere fact of the recall and this entire nightmare is a huge indictment of California's political overclass. Both parties had to be very incompetent to allow this. Gray Davis was re-elected just in 2002! The real issue is not who makes a good governor right now, it's too shock both parties into self reform so that they become responsible again. Only an outsider candidate can do this. If Schwarzenegger is elected, the blame does not go to the California voters' decision to hire Arnold as a poolman. It's because the other people represent crooks.

Posted by: Chris Durnell on September 4, 2003 10:23 AM

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http://www.nytimes.com/2003/09/02/opinion/02KRUG.html?n=Top%2fOpinion%2fEditorials%20and%20Op%2dEd%2fOp%2dEd%2fColumnists

Another Friday Outrage
By PAUL KRUGMAN

When the E.P.A. makes our air dirtier, or the Interior Department opens a wilderness to mining companies, or the Labor Department strips workers of some more rights, the announcement always comes late on Friday when the news is most likely to be ignored on TV and nearly ignored by major newspapers.

Last Friday the Federal Energy Regulatory Commission, known as FERC, announced settlements with energy companies accused of manipulating markets during the California energy crisis. Why on Friday? Because the settlements were a joke: the companies got away with only token payments. It was yet another demonstration of how electricity deregulation has gone wrong.

Most independent experts now believe that during 2000-2001, price manipulation by energy companies, mainly taking the form of "economic withholding" keeping capacity offline to drive up prices added billions of dollars to California's electricity bills. A March FERC report concluded that there had been extensive manipulation of prices in both the natural gas and electricity markets.

Using methods widely accepted among economists, the California Independent System Operator which operates the power grid estimated that withholding by electricity companies had cost the state $8.9 billion. This estimate doesn't include the continuing cost of long-term contracts the state signed, at inflated prices, to keep the lights on during the crisis.

Yet the charges energy companies agreed to added up to only a bit more than $1 million. That is, the average Californian was bilked of more than $250, but the state will receive compensation of about 3 cents....

Posted by: jd on September 4, 2003 10:23 AM

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THE SAME THING HAPPEND TO THE POST! You gotta get a better comment system. Here's the right post:

Your pool analogy doesn't .. uh ... hold water. Virginia's problem with Bustamante is that he is offering voters the pool they WANT!

--"Bustamante's scary populist economics might catch on by default. At least he says what he's for. Too bad his ideas are so bad."--

This is just right-wing speak for, "He's offering what the voters want, which is government programs like education for their kids and health care. Us right-wingers can't stand the idea of democracy."


--"Are you really planning to vote for somebody who says he wants to regulate the price of gasoline? The guy's economic notions get scarier every day."--

FYI even the Bush Administration has announced they are looking into whether the spike in gas prices was price fixing. Are you saying you're to the right of them on this?

Posted by: Dave Johnson on September 4, 2003 10:23 AM

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"Whether you'll approve of the 20% of their job is a pure dice throw (unless, of course, you're like Daniel Weintraub and believe that you know what they would do--that you are in on the con--and you have forgotten that those who get massively conned the most are those who think they are in on the con)."


That's one boring David Mamet movie.

Posted by: david on September 4, 2003 11:01 AM

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I understand: A pipeline breaks in Arizona and so gasoline costs $2 a gallon from Boston to San Francisco. Have you looked at natural gas prices lately? What about the manipulation of the California energy market by energy suppliers during the "power crisis." There was no "crisis" other than the one created by the energy suppliers. In Los Angeles the "public" utility had enough power to sell off excess around the state and did not have to raise rates a penny.

Time to look both to our infrastructure and to competition or price manipulation by energy companies.

Posted by: jd on September 4, 2003 11:08 AM

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I listened with an open mind to those debates last night. The two folks to the left of Bustie were making some very specific points and had some interesting ideas (but in all honesty, I'll vote for neither) while the two Republicans were saying less than the empty chair reserved for ARNOLD. I could not believe the lack of articulation from McClintock in particular. Both of these Republicans kept making the same empty promises to cut spending. WHERE? Oh yea, the Greenie got it right. McClintock has proposed cutting education spending.

Posted by: Hal McClure on September 4, 2003 11:16 AM

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"Bustamante's scary populist economics might catch on by default. At least he says what he's for. Too bad his ideas are so bad."

Too bad, Virginia Postrel is so scary with all the far right smoke.

Posted by: Emma on September 4, 2003 01:09 PM

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I have to laugh at what scares Virginia and Brad: someone says it would be interesting to consider regulating gasoline prices. Sorry, kids, but that is not scary. That's a cry of sanity in an insane world where people like Brad and Virginia think there's "nothing one can do" about gouging oil companies.

Let's put it squarely so we can all begin to get this: Paying gouge prices at the pump should not be anyone's idea of a "market."

Brad, at least, seems to realize (from reading him for some time) that next quarter's profits of the oil companies will show great profits. If it was really increased costs, or foreign problems, or something of that nature, there'd be a pass off with little in the way of increased profit. Yet, Virginia seems oblivious.

The only concern I had with Cruz's boast was that the federal law, such as it is, preempts most state law actions against oil companies, gouging or otherwise.

Thus, I would say it is not nuts to call for more regulation, if possible, of oil companies under the circumstances we face these days. It IS NUTS, however, to worry about whether Cruz is nuts for thinking there's got to be something one can do to limit oil company gouging.

Go, Cruz. At least he's got guts enough to spell out what he's saying and why. And I give him big credit for echoing part of Buffett's point about the structural defect on our property taxes, particularly the commercial property tax rates in California.

But overall, let's just leave Gray in, shall we? This was a stupid temper tantrum of Republicans that needs to be pushed back--at least if we have any respect for traditional electoral processes.

Posted by: mitchell freedman on September 4, 2003 02:51 PM

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Its fun reading the comments by those who believe there is something sinister about the recent rise in gas prices. Here's a suggestion: go back to the archives of newspapers in the mid seventies when there was a "real" gas crisis. Lines of cars around the block. Read the suggestions of many that "gouging" was going on and that price "controls" were needed and many other comments that are of exactly the same ilk as these "the market doesn't work" bleats.
Then find a chart of gas prices from 1978 to 2000.
Gee, prices went down without controls or government doing "something! Who would ever have imagined? Gas prices will go down again chicken littles, grow up, let the market work. I know it is hard to accept, being so smart as you all are with these brilliant suggestions to "do something". Try reading a little economic history before you go off the deep end.

Posted by: Joe G. on September 4, 2003 03:12 PM

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Joe G.,

I remember those days of the 1970s well. I also know that our government did not do anything to regulate prices in the 1970s in any way on behalf of the consumer. The first "crisis" occurred under Nixon/Ford and the second one under the hapless Carter who was sympathetic more to oil companies than to any Democratic Party constitutencies, i.e. working class folks.

I remember also Shiek Yamani of Saudi Arabia, quoted in US media, and then being back by subsequent US government reports, that the Saudis had more than made up in production any shortfall from what was blamed on the fall of the Shah in 1979. As always, it was about who controls refineries and the markets, which tends to be the Seven Sisters (now Five), if you have read Anthony Sampson, John Blair, Robert Engler, or anyone who has actually studied the oil industry.

Yes, prices go up and they go down in a de-regulated world (starting again under that "liberal" Carter).

But nothing in your comment deals with the salient fact: When the prices significantly go , invariably oil company profits go up quite spectacularly. This contradicts the pattern of statements of oil company lackeys blaming it on Arabs, repairs, maintanence, pipes breaking, etc.

It only looks like I'm at the deep end from where you are...at the very deep end. Stop reading bullshit economic theory and get in the real world where oil company quarterly reports will set you straight.

How's that, pal? Sheesh.

Posted by: mitchell freedman on September 4, 2003 04:12 PM

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In addition to his economic illiteracy, there is the matter of Cruz Bustamante's refusal to denounce the racist organization MEChA, of which he was a member when he was in college. See Mickey Kaus' account of the matter.

http://slate.msn.com/id/2087872/

Posted by: Joe Willingham on September 4, 2003 06:00 PM

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Re: Bustamante and MEChA, see Ted Barlow's articles at Crooked Timber:

http://www.crookedtimber.org/archives/000426.html
http://www.crookedtimber.org/archives/000431.html

Posted by: Barry on September 5, 2003 04:37 AM

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Mr. Mitchell,
You state:

"But nothing in your comment deals with the salient fact: When the prices significantly go , invariably oil company profits go up quite spectacularly"

Maybe you can explain to this "bullshit" idiot who doesn't understand "the real world" why, if oil company profits are skyrocketing, the prices of oil stocks have underperformed the Dow?
If your statement is so obvious, why haven't greedy investors jumped on the profiteering bandwagon?

Xom January $35 today $38
Royal Dutch January $45 today $46
CVX January $65 today $74

I guess investors are just stupid, unlike the genius that you are. Is the marketplace not the "real world"? Why aren't greedy profiteers jumping on the oil bandwagon? According to you, its a certainty.....and you, being all knowing of course, bought oil stocks, no? It was obvious, right?

Posted by: Joe G. on September 5, 2003 07:32 AM

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Confusing what investors do with what oil company quarterly reports show following these price spikes is a nice try, Joe G., but it doesn't cut it.

I didn't say I was a genius. I was simply responding in kind to your "chicken little" and "go read some economic history" vitriol.


Posted by: mitchell freedman on September 5, 2003 07:44 AM

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Mr. Mitchell,

"It doesn't cut it"?
So profits for oil companies can skyrocket and the "real world" measure of these same companies value stay relatively unchanged?
You can't explain the illogic of your supposition so you simply blow it off. Fine.
Don't go back and look at history, don't evaluate facts that defy your "logic" and simply continue to cling the idea that since you percieve the current prices as somehow being unfair then they must be part of a grand conspiracy by oil companies to inflate their profits. The market is telling us that the current prices (however "profitable" they may be currently)aren't going to last. This is exactly what my original post, history, logic and the marketplace suggests.
You don't like high prices for gas? Neither do I. So I drive less and slower and my next car will get higher mileage. That's how things work in a free market. Don't like it? Then by all means get big daddy government to "protect" you from all evil and enjoy life as a slave to bureacrats.

Posted by: Joe G. on September 5, 2003 09:43 AM

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If gas prices go up people will drive less, drive smaller cars, or take public transit. Sounds like a good thing to me.

Posted by: Joe Willingham on September 5, 2003 01:32 PM

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Joe G.,

I am only responding to your vitriol and emotional attacks because Brad is the one who started out calling Cruz B. crazy.

Let me lay it out for you--and maybe Brad-- about where one can learn about oil company chicanery and cleverness in gouging the public.

Read any one of the following for starters: "The Seven Sisters" by Anthony Sampson, "The Control of Oil" by John Blair (who spent 3 or more decades as an attorney with the government over oil and gas regulatory affairs), Robert Engler's "The Brotherhood of Oil: Energy Policy and Public Interest, or Joe Stork's "Middle East Oil and the Energy Crisis."

Those are books dealing precisely with the oil companies. These books support my point about gas prices, oil company profits, and private oligopolistic constraints on any "free" market. What we have lacked is a political will to do anything about this conduct. That's not economic theory as much as political fact.

Joe, your original post was that those who disagreed with your points didn't know squat about "economic history." There's some economic history for you.

On the merits, it is YOU who refuses to deal with my point about watching future quarterly reports of the oil companies that will likely show why the reasons for the claims of broken pipes and such as the cause of the spike are nonsense. For it is likely there will be very robust profits reported for the period of the price spike. This comports with past spikes over the decades.

As for your carping about what investors have or haven't done, I won't speak for most investors. But one thing is becoming clear: You speak like an investor who speculates on stock prices--as opposed to a traditional investor who looks for companies he or she believes in for the long haul. I am not a speculator so I don't bother trying to predict the market. I'll leave that to "geniuses" like you as to why or why not some oil company stock prices have only slightly gone up.

Does anyone really think it's necessary to respond to Joe G. any longer?

Posted by: mitchell freedman on September 5, 2003 03:35 PM

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Every time there's an oil price spike people get all freaked and call for an investigation. Congress investigates, finds no proof of wrongdoing, and by the time the investigation is done prices have usually gone back down.

In real terms gasoline prices are the lowest they have ever been. If gas were as expensive as it was back during the Eisenhower administration when I started driving we'd be paying about $3 a gallon.

Posted by: Joe Willingham on September 5, 2003 04:48 PM

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