Month: December 2013

ObamaCare’s Employer Mandate Already Costs Employees

By Sally C. Pipes

Some 60 percent of Americans—nearly 160 million people—get insurance through their jobs. Thanks to ObamaCare, that number is about to nosedive. The president’s signature law is hiking the cost of health insurance for American businesses of all sizes. They’re responding by dumping coverage for workers, spouses, and retirees.

Even though the employer mandate, which requires all firms with 50 or more full-time staffers to provide health coverage or pay a fine, has been delayed by one year, the employer health insurance market is slowly bleeding out.

Recently, 30,000 grocery workers in Washington State threatened to go on strike after several supermarket chains announced plans to drop health benefits for part-time workers. Today, workers who put in as few as 16 hours are eligible for health coverage. But the stores say that they won’t be able to afford coverage for part-timers once the employer mandate kicks in on January 1, 2015.

That’s not surprising. Average annual employer-sponsored individual health insurance premiums are up 5 percent this year compared to 2012—to more than $5,800. The average employer premium for a family of four is north of $16,000.

In September, Home Depot announced plans to drop coverage for roughly 20,000 part-time workers. They’ll have to shop for insurance in ObamaCare’s exchanges—which are barely operational despite officially opening for business October 1. Part-timers at Trader Joe’s will have to do the same. They won’t be alone. A National Business Group on Health survey found that one-fifth of big companies think their currently covered part-time workers could end up in the exchanges next year.

ObamaCare is even taking away the benefits of full-time workers—by encouraging their employers to cut their hours and rechristen them as part-timers. The law defines “full-time” as working 30 or more hours per week. So many firms are carefully watching their employees’ hours to ensure that they don’t cross that threshold. A survey conducted by the nonprofit International Foundation of Employee Benefit Plans found that 15 percent of employers subject to the mandate planned to cut hours to reduce their coverage burden.

Spouses also are learning firsthand how ObamaCare will destabilize their families’ benefits. In August, shipping giant UPS said that it would drop coverage for about 15,000 spouses who have access to benefits at their own jobs. The reason? “Costs associated with the Affordable Care Act,” the company said. According to a Towers Watson survey, 12 percent of employers plan to drop coverage for spouses next year, up from 4 percent this year.

Retirees, too, will increasingly find themselves pushed into ObamaCare’s exchanges. Consulting firm Aon Hewitt found that nearly two-thirds of the companies it surveyed plan to “review their retiree health care strategy in light of health care reform.”

To fight back against ObamaCare-fueled cost increases, many companies are turning to consumer-directed health plans, which typically pair low-premium, high-deductible policies with tax-advantaged Health Savings Accounts (HSAs). These plans empower patients to take control of their care. They can save money tax-free in their HSAs and use the proceeds for copayments and other out-of-pocket costs. The high-deductible policy, meanwhile, protects them in the event of a medical catastrophe. And because patients actually own their health care dollars, they have strong incentives to spend wisely.

That dose of market discipline helps lower overall health costs. About one in five workers was enrolled in an HSA plan this year, according to the Kaiser Family Foundation, up from zero in 2005. HSAs are now the second-most popular employer-provided plan. Aon Hewitt says that they could be the leader within three to five years.

Unfortunately, ObamaCare attempts to squash this consumer-directed approach by capping deductibles and requiring all policies to cover a wide array of expensive benefits. The law’s supporters claim its rules will ensure patients get quality coverage. But as the turmoil in the employer-sponsored insurance market demonstrates, ObamaCare may instead ensure that Americans get no coverage at all.

Sally C. Pipes is President, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute in San Francisco. She is a guest contributor for Cascade Policy Institute. A version of this article was originally published by The Detroit News.

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The Check Engine Light Is On

By William Newell

Imagine you’re in a car traveling down I-5 at 60 mph. The car has been modified with solar panels to supplement the car’s gas engine. Suddenly, as you’re driving down the highway, the sun disappears behind the clouds. In order to maintain your current speed, one of two things needs to happen: Another “idling” engine needs to kick in, or the main gas engine needs to “rev” up.

This hypothetical situation is similar to how the electrical grid works. The electric grid, just like the car, needs back-up generators and large high-capacity generators to make up for the times when wind and solar power fail. Often it’s natural gas or coal plants which fill the gaps. These power plants either continually operate without producing electricity as “spinning reserve,” or they operate less efficiently because they are “revved” up and down constantly.

Now, you can probably see the major drawback to subsidizing intermittent energy sources. It is because they rarely create enough sustained electricity to maintain grid stability; and power plants must “spin” or “rev” up and down, meaning little emissions savings are actually achieved.

If our government leaders continue to preach about saving the environment and reducing emissions, they may want to look under the hood to see if their plan will really work.

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

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How the Environmental Left Became the New Climate Deniers

By Todd Myers

“The UN’s Intergovernmental Panel on Climate Change raises the level of alarm….Global warming deniers are now on a par with Holocaust deniers…” Ellen Goodman, The Boston Globe, 2007

When the United Nation’s Intergovernmental Panel on Climate Change (IPCC) released its report in 2007, the response of the environmental left was close to hysterical. The IPCC’s international mandate was so clear, the left called its findings the “climate consensus.” People who questioned the IPCC’s authority, some said, had the mentality of Holocaust deniers.

Recently, the IPCC released a new assessment, with improved calculations of global temperature increases and associated impacts. The new predictions are less dire and the IPCC’s old fans have become the new climate deniers, dismissing the new report as “political.”

Rather than follow the science, liberal politicians and environmental activists are denying today what they said was undeniable yesterday.

For example, writing in The Wall Street Journal just before the release of the new report, actress Darryl Hannah, who frequently protests with climate scientist James Hansen, says action is needed “urgently, if we are to avoid a 4-degree Celsius raise.” Her claim, however, was wrong before the new report was released and is more so now.

The latest projection of the IPCC for temperature increase under the most likely scenario is 1.8 degrees Celsius by the year 2100―less than half what Hannah claims. In fact, her claim is beyond the median projection for the most extreme scenario of 3.7 degrees C.

Claims about sea level are similarly inaccurate. The Sightline Institute claimed “the world’s leading climate scientists warn of the sea level rising by three feet by 2100.” On Twitter, Northwest NPR was even more extreme, asking how Seattle “would be affected if sea levels rise 1 foot by 2020.”

Under the most likely emissions scenario, sea levels will increase about 18 inches by 2100. The most extreme scenario projects an upper limit of sea level rise of 32 inches―less than the three feet claimed by Sightline. NPR’s 2020 estimate is wildly exaggerated, more than ten times the IPCC’s estimate.

Finally, Washington Governor Jay Inslee repeatedly mentions ocean acidification as a reason to take action on carbon emissions. Pointing to shellfish mortality in Washington’s waters, he claims, “We know that two of the most challenging threats we face to our environment are climate change and ocean acidification.” The pH of our waters, he notes, has recently acidified at the rate of about 0.1 per year.

Less than one percent of that trend, however, can be attributed to CO2 emissions. The IPCC reports, “The pH of ocean surface water has decreased by 0.1 since the beginning of the industrial era.” The acidification the Governor attributes to carbon emissions annually is actually the amount that occurred over more than 100 years.

Some realize their cataclysmic projections are no longer in line with consensus science. Instead of adjusting their claims, they turned to undermining the IPCC instead.

One New York Times columnist accused the IPCC of “bending over backward to be scientifically conservative,” claiming it was intentionally low-balling projections for political reasons.

Another left-wing environmental activist was even blunter, arguing “the IPCC report is more of a political document than a scientific one.” That is exactly the view of the best-known climate “denier,” Oklahoma Senator James Inhofe, who told an audience prior to the last IPCC report, “This is a political document, not a scientific report.”

The left has abandoned the IPCC, after years of touting the agency’s unshakable standard of excellence. What changed were not the IPCC’s standards but its conclusions. New science has sparked the left’s new denial.

Real solutions to any risks associated with carbon emissions will come only when policies are consistent with the latest science. The new, left-wing science deniers have made it clear they are more interested in trimming the science to suit their pre-determined politics. As a result, they don’t just deny the science, they deny the solutions for a cleaner Earth, too.

Todd Myers is director of the Center for the Environment at Washington Policy Center and a guest contributor at Cascade Policy Institute. He is the author of the book Eco-Fads: How the Rise of Trendy Environmentalism Is Harming the Environment and is designated a Wall Street Journal Expert panelist for energy and the environment.

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TriMet Violates Clean Air Act While “Regulators” Stay Silent

In previous decades the Portland region failed to meet national air quality standards for carbon monoxide pollution and was designated a “non-attainment” area under the federal Clean Air Act. As a result, the region was required to develop and implement strategies to reduce carbon monoxide.

One of the strategies is that TriMet must increase transit service by 1% annually for the period 2006-2017, on the premise that more transit service will reduce auto-related carbon monoxide emissions. TriMet’s compliance must be measured on the basis of a 5-year “rolling average” of actual hours of service. The “baseline year” for compliance is 2004 and includes the opening of the Yellow MAX line, which began operating that year. This strategy was specifically devised by TriMet to grandfather in the Yellow line, thus giving the agency the best chance for compliance.

However, even with this advantage, TriMet has not met the obligation to increase service. In fact, TriMet service has been steadily decreasing. This is a potential problem not only for TriMet, but for other local governments. If the Portland region were to be found out of compliance with the Clean Air Act, the federal government could delay or cancel federal dollars for such projects as Milwaukie light rail and the Columbia River Crossing. For regional politicians, this would be a disaster.

In January, the crisis was taken up by one of the obscure committees run by Metro―the Transportation Policy Advisory Committee (TPAC), comprised mostly of local government bureaucrats. TPAC agreed to recommend that compliance be measured on the basis of cumulative average of service hours for the 10-year period 2007-2017. The new “baseline year” would become 2008.

After TPAC, the plan had to be approved by the Oregon Environmental Quality Commission (EQC), the governing board for the state DEQ. The EQC took testimony in August and rubber-stamped the TPAC recommendation in early December.

Last week the issue moved to JPACT, another obscure Metro committee that approves all regional transportation spending. The free pass for TriMet was quickly approved.

The final stop will be the Metro Council, which will approve the change on December 19.

Sadly, none of the four entities approving the recommendation ever seriously considered enforcing the Clean Air Act. The top priority at every level has been to craft an escape hatch so that business as usual can continue. However, even a cursory look at the evidence would have shown that TriMet had no excuses for non-compliance.

For example, Metro/TriMet/DEQ have all claimed that the “abrupt drop” in TriMet service was “caused by the recent deep recession.” However, as shown in Table 1, the drop in TriMet fixed-route service has not been abrupt; both hours of service and miles of service were lower in 2012 than they were in 2004, so this has been a problem for years.

 

Table 1

Annual Fixed Route Service Trends for TriMet

2004-2012

 

FY 04

FY 06

FY 08

FY 10

FY 12

Change

Veh. revenue hours

1,698,492

1,653,180

1,712,724

1,682,180

1,561,242

-8.1%

Veh. revenue miles

27,548,927

26,830,124

26,448,873

25,781,480

23,625,960

-14.2

Moreover, the recession had little to do with the cuts because TriMet’s operating budget has grown by 62% since 2004 (Table 2).

Table 2

TriMet Financial Resources

2004-2013 (000s)

 

 

2004

2006

2008

2011

2012

2013

% change

 

 

 

 

 

 

 

 

Passenger fares

$ 59,487

$ 68,464

$ 80,818

$ 96,889

$ 102,240

$ 112,500

+89%

Payroll tax revenue

$ 168,378

$ 192,450

$ 215,133

$ 226,456

$ 248,384

$ 259,233

+54%

Total operations revenue

$ 315,130

$ 342,274

$ 404,481

$ 410,388

$ 488,360

$ 508,971

+62%

It’s interesting that the pollutant in question here―carbon monoxide―is a serious one that can permanently injure or kill people, and has been explicitly regulated under the Clean Air Act for over 40 years. Yet, local air quality regulators don’t care about TriMet’s non-compliance. Meanwhile, Metro is squandering a vast amount of public money on its co-called “Climate Smart Communities” plan, aimed at decreasing carbon dioxide―a harmless trace element that has never been explicitly regulated by the Clean Air Act.

In fact, the most notable consequence of increased CO2 levels in lab experiments is the faster growth of plants, which is generally thought to be a good thing. But CO2 has been demonized by environmental activists as a cause of “global warming,” so it must be regulated.

The new compliance plan for TriMet subtly changes the goal posts. By moving from a five-year rolling average to a 10-year average, and shifting the baseline year to 2008, TriMet picks a better year to begin measuring (service levels had already dropped by 2008), and gives itself more future years to “forecast” increased service, even if there is no reason to think such service will materialize. TriMet has publicly stated that the cost of employee fringe benefits must be reduced by 50% in order to restore lost service, and everyone who has watched public employee union negotiations knows that such concessions will never be made.

TriMet is a federal clean air scofflaw, but the local “regulators” are all in on the scam. For a region that prides itself as an environmental leader, this is a disgrace.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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Portland’s Renewable Energy Pipe Dream

By William Newell

Since 2001 the City of Portland has aimed to obtain all of its electricity from renewable sources. More than 10 years later, the City has failed to meet its own goals, even after renewing the pledge in 2009 and again in 2012.

To achieve its long-standing goal, the City has sought to purchase renewable energy certificates (RECs), which are said to “offset” emissions from electricity use. Unfortunately, RECs have major problems.

First, RECs are not required to show what emissions were avoided in their “production,” so there are few concrete savings for the City to claim. Second, intermittent energy sources require back-up power to maintain grid reliability. When wind dies down, as it often does, the system must make up the shortfall from natural gas and coal plants. Because some plants must “idle” while others “rev” their electricity production up and down, the plants utilize more fuel to produce less electricity. This ends up mitigating much of the claimed pollution savings.

Many Portlanders dream that the City can perfectly meld an urban forest with the concrete jungle, but behind Portland’s green curtain is an unaccountable government wasting taxpayer dollars on what amount to environmental “indulgences.”

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

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TriMet Finally Admits Rail Problems

Last week I wrote about the problems TriMet is having with its constantly failing rail system. On Wednesday, TriMet General Manager Neil McFarlane announced that the agency is hiring an outside firm to review light rail maintenance needs. The contract will cost a maximum of $245,000.

This is an important acknowledgment by TriMet that the vaunted regional rail system is suffering from chronic breakdowns that will require ever-increasing levels of maintenance.

The ownership problems associated with rail transit are well known within the industry. Indeed, four years ago the head of the Federal Transit Administration (FTA), Peter Rogoff, gave a speech on this topic to a room full of transit executives. Mr. Rogoff reminded people that rail systems have significant long-term costs. FTA had recently concluded that there were more than $78 billion in deferred maintenance costs for public transit agencies in the U.S., and three-fourths of those costs were associated with rail systems.

TriMet management is having to face up to this reality. The supposed “operating advantages” of hauling rail cars disappear when the lifecycle costs of rail system ownership are taken into account. Bus transit doesn’t face these problems. The cost of a bus is only one-tenth the cost of a rail car; it can be sent to many locations rather than a few dozen; and the ubiquitous road system is paid for by millions of motorists, not the transit agency. This keeps the maintenance costs of bus transit to a manageable level.

Unfortunately, TriMet is in a financial free-fall, and absorbing substantial costs for depreciation and maintenance of light rail will worsen the fall for a long time to come.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. 

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Knowledge and Courage: What the West Needs to Take Back Our Public Lands

By Ken Ivory

The federal government continues to control more than 50% of all lands in the western United States. Locked up in these federally controlled lands are more than $150 trillion in mineral values and more recoverable oil―in Utah, Colorado, and Wyoming alone―than in the rest of the world combined. Failed federal forest policies prevent harvesting timber, which would improve forest conditions and wildfire resilience, provide useful consumer products and renewable energy feedstock, and revitalize rural schools and communities. FBI criminal activity alerts now warn that terrorists are encouraging the use of wildfire in fuel-laden federal forests as weapons for jihad.

There is no good reason for the federal government to retain control over these lands and resources in states like Oregon. We in the West have, in good faith, simply tolerated the federal government’s delay in honoring its more than 200-year-old obligation to transfer title to these lands for so long that now most people assume there must be some valid reason the federal government controls our lands and resources.

But there is none. At a recent Continuing Legal Education seminar to several dozen lawyers, a law professor (who is frequently quoted as saying it is “clearly unconstitutional” for states to take action to secure the transfer of title to their public lands) displayed an annual average precipitation map indicating that the federal government retains control of western lands because they are “arid.”

The second reason he gave was that the founders of the western states simply gave up their lands as a sort of ransom for the privilege of statehood, citing half a sentence in the statehood enabling acts: “… forever disclaim all right and title….” The funny thing is, this same half sentence is word-for-word the same in the statehood enabling acts of almost all states east of Colorado, where the federal government did dispose of their public lands.

In fact, for decades, as much as 90% of the lands in Illinois, Missouri, Arkansas, Indiana, Louisiana, Alabama, Mississippi, and Florida were kept under federal control. Then, one man had the knowledge and courage to rally citizens to compel Congress to transfer title to their public lands. His name was Thomas Hart Benton, a Democratic U.S. Senator from Missouri featured in President John F. Kennedy’s best-selling book Profiles in Courage.

The statehood enabling acts promising to transfer title to the public lands are the same for all states west and east of Colorado. It’s been done before―repeatedly and recently. And, returning these lands to state control is the only solution big enough to fund education; better care for our lands and forests; protect access; create jobs; and grow local, state, and national economies and tax base.

If we fail to stand up and take action to secure state and local control of our lands and abundant resources, it will not be because it is illegal, unconstitutional, or impossible. It will only be because we―and the local, state, and national leaders we “hire”―lack the knowledge and the courage to do what has been successfully done before.

Do your local, state, and national leaders know why there is a difference between the way the federal government has handled eastern and western lands? Have you inquired what specifically they are doing to compel Congress to honor the same statehood promise for our children and our future that Congress already kept with Hawaii and all states east of Colorado? Have you asked them what groups or influential individuals they will bring to the effort? Have you asked them what specifically you can do to help?

Now is the time to let our representatives know how transferring federally controlled lands back to the state can vastly benefit Oregon’s economy while preserving and using wisely our wealth of natural resources.

Ken Ivory is president of the American Lands Council and a member of the Utah House of Representatives. He was a guest speaker on this issue for Cascade Policy Institute in November 2013.

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The Public vs. Private Sector Compensation Conundrum

Salem Statesman Journal editor Dick Hughes just published a lengthy column asking whether public or private sector employees are better compensated. He cites studies that reach contradictory conclusions, depending on their assumptions, and then answers his question by stating, “Who knows?”

That answer must be challenged because he somewhat dismisses the apparent fact that “…public employees make a whopping 45 percent more” by saying, “One common finding…is that government has a larger proportion of higher-educated workers.”

While higher education may be a big determinant of government compensation, especially in unionized fields such as public school teaching, it means less in the private sector. In the private sector competence can trump credentials. For example, many tradespeople are compensated well above some of their college-educated counterparts because they can fix your plumbing when the pipes freeze, or correctly wire your house so it doesn’t burn down.

Finally, in your opinion, which highly degreed politicians and public employees are worth what we pay them? The list may change depending on whether you’re Democrat, Republican, or whatever, but you get my point.

When we freely purchase services from private sector employees, they earn roughly what they produce. When politics and union bargaining determine pay levels, public sector employees are often paid more than their private sector counterparts. Case closed.

Steve Buckstein is Founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Meet the New Tax Reform…Same as the Old Tax Reform

Oregon Governor John Kitzhaber, fresh off his early October special legislative session “Grand Bargain” success, says he will now turn his attention to tax reform. He has plenty of company in Oregon’s recent history.

Governor Barbara Roberts, concerned that property tax limitation Measure 5 which passed in 1990 would decimate state finances (it didn’t), embarked on her Conversation with Oregon to find out what the average voter might accept in the way of tax and other reforms. Thwarted by the divided legislature, she later supported legislatively referred Measure 1 in 1993, which proposed a new five percent sales tax to fund education. The referral also offered property and income tax reductions. Voters said thanks, but no thanks, with a resounding 75% No vote. It marked the ninth time in state history that voters had rejected adding any state sales tax on top of property and income taxes.

Most recently, Governor Ted Kulongoski appointed members to the legislatively created Comprehensive Revenue Restructuring Task Force in 2007, but it was clear to me (as a member of the Task Force) that no serious “restructuring” was in the cards.

Ask the average Oregonian what “tax reform” means, and they are likely to say it means “more taxes.” And, so far they’d be correct.

Before Governor Kitzhaber has even hinted at specifics of his upcoming tax reform plan, several state legislators are fleshing out their own version of “more taxes” which includes a five percent sales tax coupled with property and income tax reductions. This time, they have in hand a Legislative Revenue Office analysis that says it will create 55,405 new jobs and raise $488 million a year in net tax revenue.

So again, this latest “tax reform” discussion seems to focus on raising more money for the state, thus leaving less money for its citizens and visitors. The concept of “spending reform” doesn’t seem to be on the table, and why should it if legislators and the Governor truly believe that government spending is more important than our own family budgets?

As I’ve noted previously, “Any sales tax is dead in this state―unless coupled with elimination of another tax. Reducing other tax rates won’t sell a sales tax.” That isn’t just my prediction, it’s the expert opinion of Portland pollster Adam Davis, based on focus groups he did for Governor Kulogoski’s Task Force in 2007 and more recent quantitative analysis that convinced him that Oregonians will not accept a third tax…period.

This latest legislative proposal seems determined to make the same mistake that legislative referral Measure 1 made in 1993, blindly hoping that somehow, some way, Oregonians will believe politicians when they promise to lower other tax rates in return for creating a new third tax. But history shows that voters don’t believe such promises. Unless the property or income tax is entirely wiped off the books (I prefer eliminating the income tax), an Oregon sales tax seems destined to be soundly defeated for the tenth time since statehood in 1859.

Even if by some miracle a third tax were approved by voters, it wouldn’t solve our state’s fiscal problems. The best way to do that is to tackle “spending reform” first, finding ways to reduce the size and scope of government. Otherwise, any “tax reform” simply will mask our fiscal problems for a while by allowing government to continue to grow until once again it prices itself above our ability to pay.

Steve Buckstein is Founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

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The Chronic Failure of Rail Transit

The local transit agency, TriMet, likes to claim that continued expansion of the regional rail system is critical because rail has operational cost savings over buses.

Unfortunately, this assertion overlooks a glaring problem: The rail system breaks down approximately 30% of the time.

I subscribe to a TriMet email system that notifies me every time there are service outages on light rail or the streetcar. During the past 12 months, I received 117 such notices.

The Steel Bridge rail crossing is the source of most problems, and when it goes out, four MAX lines are affected. Thousands of riders are inconvenienced, often for hours. But there are many other reasons for rail malfunctions: cold weather, hot weather, collisions with automobiles, and security problems, to name a few.

In addition, Portland streetcar service was completely shut down in the South Waterfront for three weeks in September, due to construction of the Milwaukie light rail line.

In every case of a rail outage, passengers have to be rescued by buses. The road system is ubiquitous, so buses have many options for traveling from one location to another. When a rail car goes down, everything behind it backs up.

TriMet’s management is obsessed with building more rail, but the backbone of daily service is the ordinary bus.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. 

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