Tag: finance

Guccifer 2.0 Game Over – Year End Review

Via Elizabeth Lea Vos of Disobedient Media,

It’s almost two years since I started investigating Guccifer 2.0.

Since then, largely thanks to several other independent researchers and their contributions, much has been discovered. The purpose of this article is to go back over all of the discoveries made during the last two years, as well as the various challenges received, and to provide an up-to-date status on the validity of different areas of research into Guccifer 2.0. The articles and findings at issue are as follows:

 

Guccifer 2.0’s First Documents

The files that Guccifer 2.0 initially pushed to reporters appear to have been constructed through a process that involved them being deliberately tainted with Russian metadata, a Russian stylesheet entry and in some cases embedded Russian error messages.

While this writer was incorrect in my earliest reasoning on the presence of Flood’s name, we can now fully account for it with 100% certainty. Additionally, conclusions regarding deliberate Russification of Guccifer 2.0’s documents have been reinforced thanks to the Forensicator’s consideration of the error messages therein.

If anyone has tangibly debunked anything this author has claimed in any significant way, it’s the Forensicator who has done so, thanks to the above. Forensicator was even kind enough to give me the opportunity to figure out which of the two shortlisted documents was the original source so I could contribute something towards it.

In other words, this author has not simply run with any single narrative based on a first-glance take, or from a political standpoint. Instead, I and others have actively worked to report on the truth of the matter as factually as possible, updating my understanding as additional material comes to light.

NGP-VAN Study

Approximately fifteen months ago, the Forensicator published a study of an archive Guccifer 2.0 had released in September 2016, which contained a collection of old files mostly related to NGP-VAN, voters, and donors. Key findings included the revelation that the earliest transfers recorded were in July 2016, that a USB device had been used to transfer files and that a number of archives were moved to a USB device (or archived directly to it) on September 1, 2016, before being archived again in another format prior to publication on September 13, 2016.

Due to the difference in timestamp storage conventions between the different archive formats, Forensicator found that the archives compiled in September were, according to the evidence available, most likely to have been compiled where Eastern (EDT) time zone settings were in effect.

That study has been the subject of some controversy, although the controversy that exists is mostly built on conflating the findings with various interpretations of them, and with reporting on the study conducted by third parties. We’ve seen a few journalists misconstruing one of Forensicator’s conclusions as being some sort of bandwidth challenge when the reality is that the major conclusion relates to how the speeds observed in testing managed to fit well with USB transfers (which reinforced other indicators of USB usage such as identifying files being stored on a FAT-32 file system).

Again: Whether people could or couldn’t obtain the speeds observed via Internet transfer is really an argument against a comment made in passing by Forensicator about it being improbable to obtain those speeds for the files that were analyzed under the circumstances Guccifer 2.0 was thought to be operating in (i.e., a foreign hacker remotely hacking the DNC).

However, this was not the point actually being made in the respective conclusion in Forensicator’s study, as the original study shows and the Forensicator’s follow-up article clarified. This is also an argument this writer addressed in an article published last year, titled “Distortions and Missing The Point.”

Since the publication of Forensicator’s initial analysis, we’ve also seen a journalist from TechDirt attempt to argue that there was some sort of “conversion error” and suggested that expressing transfer rates in MB/s rather than Mbps somehow delegitimizes something or someone. It was silly, and their readers were calling out the nonsense in comments before I’d even considered writing a rebuttal.

By the end of July 2018, as part of a hit-piece against myself and associates, Duncan Campbell presented an argument against Forensicator’s study based on speculation, manipulation of Forensicator’s report, and the misconstruing of statements from former NSA Technical Director, Bill Binney. Putting Campbell’s smears and debunked conspiracy theory aside, we’re left with two primary objections to the meat of Campbell’s allegations:

  • WinRar and 7-zip were chosen deliberately in order to leave a false EDT time zone breadcrumb to fool digital forensics investigators.
  • The July 5th transfer date was arbitrarily set for the purpose of the NGP-VAN release in to deceive people into thinking Guccifer 2.0 had something to do with Seth Rich (the DNC staffer murdered five days after that date).

However, there’s no evidence suggesting timestamps were manipulated in the way that was suggested (it’s an entirely speculative theory, and the NGP-VAN archive isn’t the only place we’ve seen the July 5th date).

Whether Guccifer 2.0 did or didn’t deliberately try to leave an EDT time zone breadcrumb by choosing archiving applications specifically for that purpose is, again, difficult to prove but it seems quite an obscure place to try to leave a false trail – especially just to leave evidence that contradicts what Guccifer 2.0 claimed about himself.Certainly, one can argue that the evidence may have been cooked up just to fool digital forensic investigations: it’s a possibility, for sure, but that conclusion is not supported by evidence, and there’s nothing in such arguments that can be tested.

Of course, as this article hopefully makes clear, you could completely disregard the NGP-VAN archive study if you wanted to, but you would still be left with a plethora of evidence that suggests Guccifer 2.0 operated from within in the United States.

Duncan further claimed that Bill Binney had changed his mind and was running in the opposite direction since Binney had clarified that we cannot be sure that the transfers scrutinized were necessarily a transfer from the DNC. In the real world, this is a position Forensicator has long held and provided clarification on back in August 2017 so trying to frame this as some sort of defection, disagreement or division is simply deceitful.

CF.7z Archive

In September 2017, Stephen McIntyre analyzed the “cf.7z” archive that Guccifer 2.0 had released on October 4, 2016, and discovered indication of US central time zone. Forensicator followed this up with additional observations,pointing out how files in the cf.7z archive filled in gaps that were identified in the NGP-VAN archive.

In October 2017, McIntyre published an article titled “Guccifer 2: From January to May 2016,” which made a case for Guccifer 2.0 genuinely hacking to access files that appear in that archive. McIntyre stated:

“To my eye, there is convincing evidence that G2 actually hacked Democrat Party computers from at least January 2016 on,” noting that the dates of transfers would have been in the timeframe that APT29/Cozy Bear were thought to have infiltrated the DNC.

McIntyre also observed very low transfer rates and noted that this is far more in line with what is expected from hackers when transferring files. Of course, dates going back that far could also occur if files were archived directly from a mounted image (e.g., such as those made of DNC servers by CrowdStrike). ThreatConnect did highlight the implausibility of Guccifer 2.0’s claims concerning using NGP-VAN as a vector, but this doesn’t mean I disagree with McIntyre’s assessment.

Based on the CF.7z file, I agree that it does seem, from transfer dates, rates, and other factors, that Guccifer 2.0 could have hacked and/or had access to files before June. It’s what the evidence suggests more strongly in the case of this particular archive.

Language Study

In 2016, Professor Michael J. Connolly was cited by Vice/Motherboard’s Lorenzo Franceschi-Bicchirai, stating that Guccifer 2.0 seemed to lack traits that would suggest he was Russian. Connolly was the only language expert willing to be named in all of the reporting I could find, so this author sought to understand what traits he may have been referring to.

After reading several articles, it seemed clear that key difficulties for Russians communicating in English include: definite and indefinite articles, the use of presuppositions and correct usage of say/tell and said/told. Throughout 2017, I constructed a corpus of Guccifer 2.0’s communications and analyzed the frequency of different types of mistakes. The results of this work corroborate Professor Connolly’s assessment.

Overall, it appears Guccifer 2.0 could communicate in English quite well but chose to use inconsistently broken English at times in order to give the impression that it wasn’t his primary language. The manner in which Guccifer 2.0’s English was broken, did not follow the typical errors one would expect if Guccifer 2.0’s first language was Russian.

To date, Connolly’s language study has not drawn any significant objections or criticism.

Blogging & Social Media Activity

In September 2017, this writer collected and analyzed data relating to Guccifer 2.0’s social media and blogging activity, finding that both appeared to fit in with what would be expected if Guccifer 2.0 was operating within the US Central time zone. While it is possible the persona could have done this deliberately, it wouldn’t make much sense for the Guccifer 2.0 persona to claim to be Romanian, while tweeting and blogging at times that would suggest they were in US time zones. Perhaps Guccifer 2.0 wanted to catch Americans at times of peak activity?! (This wouldn’t explain the dip in activity at lunchtime being there too, though!)

While these activity levels were independently recorded and suggest a US origin for Guccifer 2.0 (which corroborates other indications found), it is, of course, just circumstantial and people can dismiss this on the basis of the arguments mentioned above.

Another discovery made as part of this was the fact Guccifer 2.0 engaged in very little activity on Saturdays. This observation comes simply from the evidence of the persona’s activity, as charted below.

 

Potential Ties To DCLeaks

DCLeaks appeared in June 2016, publishing various leaks from political figures. Among the numerous files published, they released emails of William Rinehart as well as some files relating to the DNC that would later show up as attachments on John Podesta’s emails. Stephen McIntyre noted that the phishing emails for Podesta and Rinehart also shared identical syntax and that this may indicate DCLeaks sources were connected to the phishing efforts.

Shortly after he emerged, Guccifer 2.0 pushed batches of emails from a few DNC-connected individuals such as Sarah Hamilton to DCLeaks.

Some in the press and the cybersecurity industry have speculated that Guccifer 2.0 could have been connected to DCLeaks management. I have tried to quantify the degree of association demonstrated and found nothing to show he was any more than a source for DCLeaks with access to an area to upload his content.

The overlap of activities and Podesta attachments does serve as circumstantial evidence that could indicate there was more to the relationship. That said, the only things I have found substantiating any closer association between the two was an apparent hoax in 2016, followed by another occurring earlier this year.

At this time, there is no definitive evidence that substantiates or discounts a possible relationship between Guccifer 2.0 and DC Leaks.

E-Mail Suggesting Operations In Us Time Zone

In September 2017, Stephen McIntyre posted an article on his site regarding an email communication made by Guccifer 2.0 in which it seems to reveal Guccifer 2.0’s local time zone being set to US central time. This also fell in line with what Stephen McIntyre identified in an analysis of the “cf.7z” archive, in addition to the social media activity analysis detailed in the previous section above.

Again, this was independently recorded and suggest a US origin for Guccifer 2.0. To date, there has been no counter to McIntyre’s finding.

Loaded For Guccifer – GMT +3 Time Zone Indications

At the beginning of 2018, David Jonathan Blake created a blog called Loaded For Guccifer, looking at various pieces of evidence relating to Guccifer 2.0 (as well as DCLeaks and other similar topics).

One of his articles, titled “Doc 1: Part 3 … Back to Romania!” looks at datastores embedded within Guccifer 2.0’s files and reveals that there are indications of GMT +3 time zone present in some of Guccifer 2.0’s first documents as a result of these being present. However, the Forensicator would soon challenge the assumption that this serves as evidence for a Romanian Guccifer 2.0

West Coast Fingerprints & Tracking Changes

In May 2018, Forensicator published a report titled “Guccifer 2’s West Coast Fingerprint,” detailing a discovery revealing that one of the files that had the +3/+4 timestamps embedded in the manner revealed by Blake’s research had been saved on a machine that had PDT time zone settings in effect, which was revealed as tracking changes had been left on for that document). This raises the prospect that the +3/+4 timestamps inferred from the datastore objects may have been deliberate.

Impact of Documents Released – Cui Bono?

It is a severely under-appreciated point that, despite having access to John Podesta’s attachments and other documents (and releasing thousands of files), Guccifer 2.0 somehow managed to avoid releasing anything that was damaging to the reputations of Podesta, Hillary Clinton or the Democratic party’s leadership. None of the material Guccifer 2.0 published had a negative impact on Clinton’s campaign, (though the persona’s access to documents suggests its operator would have had the capability to do so). Even the documents given to Aaron Nevins made zero impact on the General Election in relevant states.

On the other hand, Guccifer 2.0 did manage to very effectively smear the public perception of the DNC leaks and Podesta emails as published by WikiLeaks, and to generate headlines expressing outrage that funneled attention away from their contents. Without arguing attribution at all, one could draw the conclusion the party which most benefitted from the actions of Guccifer 2.0 – even a Russian Guccifer 2.0 – was, in fact, the Hillary Clinton campaign.

Guccifer 2.0’s Russian Fingerprints

At the end of November 2018, Forensicator published a report titled “Guccifer 2.0’s Russian Breadcrumbs,” covering all of the individual files that Guccifer 2.0 published via his blog, which exhaustively detailed the various breadcrumbs left behind by Guccifer 2.0.

As part of the report, Forensicator presented the following metadata mosaic, showing the many unnecessary edits carried out by Guccifer 2.0 and that in most batches of modified documents Russian breadcrumbs of some sort were being left behind.


source: https://theforensicator.wordpress.com/guccifer-2s-russian-breadcrumbs/

The report covers document tweaking times versus independently recorded activity (e.g., social media and blogging activity times, previously discussed above), sources of documents (in terms of where else they appeared), attribution of documents to their relevant organizations and various other anomalies in evidence that seem to contradict the Russian attribution.

The analysis comes with a new revelation of activity on the East coast of the US, from a file that was edited and published on July 6, 2016 (one day after the July 5 transfer date observed in the NGP-VAN archive study).

To quote a follow-up article Forensicator published on this topic (titled “Guccifer 2 Returns To The East Coast“):

Now, we have this additional East Coast indication, which appears just one day after the ngpvan.7z files were collected. This new East Coast indication is found in a completely different group of files that Guccifer 2 published on his blog site. Further, this East Coast finding has its own unique and equally unlikely method of derivation.

Determination To Attribute Self To WikiLeaks, DCLeaks, etc.

From the day he emerged, Guccifer 2.0 was keen to attribute himself to the alleged DNC hack and attribute himself to WikiLeaks. Although he had claimed on day one that he’d sent files to WikiLeaks, the first time Guccifer 2.0 sent anything was in July (based on Mueller’s indictment).

Guccifer 2.0 also made a false claim about DCLeaks (and possibly not the only one), stating it was a sub-project of WikiLeaks. It is evident, then, that Guccifer 2.0 wanted to be perceived as having ties to DCLeaks management.

In addition to this, Guccifer 2.0 tried to attribute himself to Seth Rich on August 25, 2016, in a Twitter DM conversation he had with actress Robbin Young.

What’s interesting about this is that on August 9, 2016, WikiLeaks offered a $20,000 reward for information leading to the arrest of Rich’s murderer. On August 25, 2016, Assange was due to be interviewed by Fox News and by then many had got their hopes up about Assange and were hoping that he would reveal the source of the DNC leaks (under the assumption that Rich was involved and that his death would make it somehow permissible for WikiLeaks to divulge such information).

An important question: Was the Guccifer 2.0 persona trying to “poison the well” by attributing himself to Rich just in case it did turn out there was any substance to rumors)? Or was he just trying to prop up a conspiracy theory and throw people off the Russian trail?

Interpretations of these acts vary considerably depending on the source, but the first of these hypotheses is more coherent with what other evidence in the public domain has revealed about Guccifer 2.0’s efforts and apparent objectives.

CrowdStrike & Coincidence

Around March 26, 2016, approximately five days after John Podesta’s email was phished, CrowdStrike coincidentally started working with the DNC on investigating the NGP-VAN breach that had occurred three months earlier, an arrangement that would persist for five weeks.

It appears that the first mention of the purpose of this visit was made retroactively, at the very end of those five weeks. Guccifer 2.0’s first follower and the first piece of APT-28 malware was constructed just prior to the end of those five weeks.

As soon as they had finished that investigation, Crowdstrike was called back in to investigate a breach. CrowdStrike subsequently visited the DNC around May 5, 2016. Coincidentally, this was the same day on which the second piece of APT-28 malware was compiled.

Crowdstrike then installed Falcon across the network and judging on FEC records, CrowdStrike remained active at the DNC for about 5-6 days, until around the 10th/11th. As it happens, the third piece of APT-28 malware was compiled on May 10, 2016.

Between May 19-25, 2016, a number of DNC emails were acquired (it seems most likely from an internal SMTP server). According to statements retroactively made by CrowdStrike long after the event, they didn’t have Falcon running as per the product’s advertisements at the time (i.e., designed to keep hackers out) and were just “monitoring.”

The company never published incident specific evidence (e.g., logs showing how/when emails were acquired). Half the malware that they published IOCs for was compiled while CrowdStrike were working at/with the DNC.

Additionally, within two days of Assange announcing that WikiLeaks possessed leaks, CrowdStrike executives were retroactively claiming that they’d just eliminated hackers from the DNC.

The day after those executive’s claims were published, Guccifer 2.0 appeared, fabricated evidence that seemed (initially) to corroborate what they had claimed about Trump opposition research being targeted with the documents tainted in a manner that supported the specific attribution they had stated.

Mueller’s Indictment

Mueller’s indictment is detailed, contains a lot of facts, and much of it is consistent with the evidence I’ve seen. There is a high level of specificity to it too. However, there are some inaccuracies, some of which conflict with evidence in the public domain. A report citing evidence that I know was sent to Mueller’s office seems to have been selectively disregarded, and when it comes to the topic of Guccifer 2.0, there are very good reasons to have doubts about attribution to a GRU officer.

Putting those issues aside though, the indictment did cite some new details in relation to Guccifer 2.0 and what the persona had apparently done, some of which were completely new revelations to the public. Among the newer details:

This is an interesting correlation, although one would think that they would use a translation site to get the phrases needed and just use them. What would be served by searching for some very specific phrases that they were going to use, but hadn’t yet published? As one Twitter user explains it, this correlation would necessitate supposed GRU officers intentionally creating a clear footprint of their connection to the persona:

It’s difficult to assess Mueller’s claim here, as we have no information from the indictment about the identity of the server that Unit 74455 is alleged to have used, or whether it is or isn’t a part of Elite-VPN infrastructure that we already know Guccifer 2.0 had used.

Unfortunately, it’s difficult to know from the above statement exactly which VPN service is being referenced. We know Guccifer 2.0 used a free, publicly accessible VPN node owned by Elite VPN, but would an overlap of VPN service usage necessarily demonstrate they used the same account there? Is that even the VPN service being referenced here?

It would help a lot if both Twitter and WordPress could release a report on Guccifer 2.0’s usage of Internet infrastructure so that everyone has the full context here.

The indictment also cites Twitter DM communications between Guccifer 2.0 and WikiLeaks, but we don’t get the full context and sentences are cited selectively. Even so, what we do see is interesting.

However, the indictment cites evidence of communications in which WikiLeaks asks Guccifer 2.0 to send him what he had as it would have a much higher impact than what’s he was doing, something they do on June 22nd, a week after he claimed to have already sent all the files.

The obvious question that no one in the legacy press bothered to ask: Why would WikiLeaks say this if the Guccifer 2.0 persona had already sent WikiLeaks what he had?

The indictment also asserts that Guccifer 2.0 only started trying to send content to WikiLeaks towards the end of June and that this failed initially, after which he got some files through to them six days before the DNC leaks were published. Without full context for this allegation, we also can’t be sure whether WikiLeaks was referring to what they already had ready to publish “this week” or whether they were referencing what Guccifer 2.0 had sent them.

GRU Frames Russia & Manufactures Evidence To Support CrowdStrike?

The reasons I still struggle with the indictment arise due to Mueller’s individual attributions to GRU officers, without supporting evidence for said attribution. When combined with evidence that researchers have brought to the surface over the past two years, we are left with a highly improbable scenario regarding Guccifer 2.0’s appearance, at least, under the premise of being a GRU officer:

The GRU attribution, combined with evidence in the public domain, means we are to believe that the GRU essentially tried to frame Russians for hacking the DNC, and even fabricated evidence specifically supporting two critical claims made by CrowdStrike in an article that was published just one day earlier in the Washington Post.

Year-End Conclusion

In summary, evidence indicated that the Guccifer 2.0 persona was operated by someone that wanted to prop up the claims being made by CrowdStrike to the extent that they fabricated evidence and falsified claims in support of statements that had been made by CrowdStrike executives. They wanted to be perceived as Russian and wanted to be attributed to WikiLeaks from the day they emerged.

Guccifer 2.0’s now-exposed objectives do not correlate with the motives of the GRU: they do correlate with the motives that other groups and individuals (based in the United States) would have had at the precise moment in time he appeared.

While I may suspect certain individuals of involvement in this, what I suspect doesn’t matter much. What matters is that the evidence uncovered shows that there is justification for an independent and impartial investigation into the many anomalies of Guccifer 2.0. It also suggests we may not be getting entirely accurate information from the Mueller probe regarding who was really behind the persona.

Clarification on Personal Perspective And Positions Held

I would like to clarify my own position on a few key points, as this writer’s perspective has been relentlessly distorted by others, and I feel it’s important to correct the record on these misconceptions:

  • I have not claimed that the DNC was “not hacked at all.” I have explained this and demonstrated a far more nuanced position rather than outright denying any hacking had occurred (I’ve cited FBI agent Adrian Hawkins contacting the DNC about the “Dukes” malware and the discovery of APT-29 malware approximately 6 months later) but am skeptical of the APT-28 malware that appeared while CrowdStrike was at the DNC and contend that the preponderance of evidence in the public domain contradicts the premise of Guccifer 2.0 being a GRU agent.
  • I have not claimed that an insider had hacked the DNC, I have merely pointed out that I’ve seen no conclusive evidence that Guccifer 2.0 hacked anything, that his claims have been discredited by ThreatConnect and othersand that this may hint at him having obtained the content he released through means other than hacking.
  • I have not claimed that the DNC was entirely unhurt by Guccifer 2.0’s actions but have pointed out that Hillary, Podesta, the HRC campaign and the DNC leadership did not have their reputations or credibility damaged by what Guccifer 2.0 released (even though having access to Podesta’s email attachments suggested he had the capacity to do this, he avoided it) and that all the data he shared with GOP aligned individuals related to house races rather than the general election.I’ve demonstrated that this didn’t flip or appear to affect general election voting in those states either!
  • I have not claimed that Guccifer 2.0 (or any evidence analyzed in relation to the persona) proves or disproves anything with regards to Seth Rich. Elizabeth Vos and this writer have both repeatedly cautioned from the outset against unduly conflating the two topics, in articles and even an interview. I’ve stated outright that I believe Guccifer 2.0 was lying about Seth Rich and that in making these claims he somewhat contradicts himself.

Wrapping Up 2018

It seems we may now be approaching a point where additional evidence on this topic will only really become available if a formal and impartial investigation into the many anomalies surrounding Guccifer 2.0 is carried out. Besides dragging evidence to the surface, as we have done, there’s not much more we can do to compel such an investigation. Should new developments arise in the form of evidence or establishment media distortions, this author will not hesitate to report on, and where necessary, correct them.

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Bipartisan Support Is Growing For Gun Confiscation In 2019

Authored by José Niño via The Mises Institute,

The 2018 midterm elections produced a split Congress with Democrats gaining control of the House and Republicans gaining seats in the Senate.

 The Guardian detailed House Democrats’ desire to pass gun control legislation in the upcoming Congress:

“Ted Deutch, a Democratic congressman from Florida who represents Parkland, where a February school shooting left 17 dead, said this week that he expected House Democrats to focus on bills with more bipartisan support. Those measures included bump stock bans and “extreme risk protection orders”, also known as red flag laws, which give law enforcement and family members a way to petition a court to temporarily bar an unstable person from buying or owning guns.”

What Are Red Flag Laws?

Red flag laws or Extreme Risk Protection Orders (ERPOs) are the euphemistic label for a variety of new proposed gun-control laws. Under red flag laws, law enforcement has the ability to confiscate an individual’s firearms who is deemed a threat to themselves or others. A simple accusation from a family member, friend, or associate will suffice to seize someone’s firearms.  

These laws, mind you, operate in the absence of normal due process.  The accused in these cases could have their weapons confiscated without even so much as a hearing a before a judge. It could take months before a gun owner could appear in court to win back his gun rights.

Thirteen states currently have red flag laws on the books. What started out as a state-level movement may have some legs at the federal level. Although it’s true that Congressional Democrats are making gun control a major theme of their legislative agenda, it’s naïve to think red flag laws are only relevant because of “gun-grabbing” Democrats have taken power.

As we’ll see below, red flag laws have a history of bipartisan support. And when any piece of legislation has Democrats and Republicans locking arms in agreement, you know trouble lies ahead.

The Gun Control Bipartisan Status Quo

Despite the passionate campaign rhetoric, a significant portion of Republican politicians will change colors on gun rights once in DC. Several GOP members in the upcoming Congress stick out like a sore thumb when it comes to their gun control advocacy:

Brian Mast:  A Congressman from Florida’s 18th district, Brian Mast penned an op-ed for the New York Times a few months ago calling for the ban of so-called “assault weapons” and a number of firearms accessories. However, actions, not words, are what matter most in politics. Mast went on to co-sponsor H.R. 2598, a bill which authorizes the Department of Justice’s Community Oriented Policing Services to provide grants to states with red flag laws on the book.

Marco Rubio: Following the Parkland shootings, Rubio joined the gun control chorus by sponsoring a red flagbill along with Democrat Senators Joe Manchin, Bill Nelson, & Jack Reed. Rubio has even flirted with the idea of regulations on magazine clips, raising the minimum age to buy certain firearms like AR-15s, and tweaking the current background check system.

Rick Scott: Former Governor of Florida and now a US Senator from Florida, Rick Scott poses an interesting threat to gun rights. Despite his ostensible anti-gun-control rhetoric, Scott signed SB 7026 Florida’s most expansive gun control measure in recent history. Scott’s SB 7026 contains red flag provisions, raises the age to buy a firearm to 21, and imposes a three-day waiting period for all firearms purchases.

Larry Hogan: On April 24, 2018, Maryland Governor Hogan signed a series of gun bills, one which included a red flag law. In October, the first month Maryland’s red flag law went into effect, there were 114 requests to confiscate individuals’ firearms.

Maryland’s red flag law has not been without its fair share of controversy.

At 5 a.m on Monday, November 5, two police officers came knocking on 61-year-old Gary Willis’ door to serve him a court order mandating that he turn over his guns. What seemed like a typical court order, quickly turned deadly as one of the cops shot and killed Willis in a struggle that ensued. Quick to defend one of his own, Anne Arundel County Police Chief Timothy Altomare defended the cops’ action by callously claiming that they “did the best they could with the situation they had.”

The tragic incident in Maryland is an ominous sign of what is to come should red flag laws gain more traction.

Whether or not Republicans will support new Red Flag laws is anyone’s guess. The bigger problem at hand is an ideological one, and opponents of gun control would do well to stop putting their faith in the winner-take-all electoral slugfest we see at the federal level every 4 years, and to embrace decentralization instead.

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Demographic Stagnation: US Population Growth Hits 80-Year Low

Last week, the Brookings Institution published a new report regarding population data from the US Census Bureau. The data showed population change estimates for the year ending in July 2018. Brookings said the national rate of population growth collapsed to its lowest level since 1937, “a result of declines in the number of births, gains in the number of deaths, and that the nation’s under age 18 population has declined since the 2010 census.”

This new report comes after recent government data showed geographic mobility within the US is at historic lows. Some states —particularly in the Mountain West—are expanding at a quick rate, but approximately 20% of all states showed evidence of population losses over the last two years.

The aging American population (i.e., those pesky baby boomers) is the broader cause for the downward shift in demographic trends that could cripple the nation in the years and decades ahead.

A historic low for US population growth

The population growth rate of 0.62% for 2017-2018 is the lowest registered since the end of the Great Depression. While the nation’s growth rate has fluctuated through wars, economic upheavals, baby booms, and baby busts, the current rate reflects a further fall that has also registered below the Great Recession low in 2007-2009. 

“These downward growth trends initially reflected declines in immigration as well as lower natural increase (the excess of births over deaths) because the economy was down. But over the past few years, as immigration gained slight momentum, reduced natural increase was more responsible for the overall decline in population growth—as it dropped from 1.6 million in 2000-2001 to just above 1 million in 2017-2018. There were fewer births than in recent decades and more deaths than in earlier years,” said Brookings.

The collapse in births could be a result of the millennial generation, who, are still coping with the Great Recession, due to high debt loads, could be putting marriage and children on hold.

Brookings said the long-term trajectory should yield fewer births as millennials progress in age, with proportionately fewer women in childbearing ages. The increase in deaths is more directly related to the nation’s aging population. 

“This leaves immigration as an ever-more-important contributor to national population growth. In 2001-2002, natural increase exceeded immigration by 50% and that was when immigration was slightly higher than this year (1.05 million vs 0.99 million). Because of the recent decline in natural increase, immigration now contributes nearly as much to population growth, and is projected to be the primary contributor to national population growth after 2030 as natural increase continues to decline. Thus immigration—its size and its attributes—will be an important contributor to the nation’s future population that is growing slowly and aging quickly,” said Brookings.

The child population is declining both nationally and in 29 states

One consequence of declining births in tandem with an aging population is the slower growth of the nation’s younger population. The census data showed that between 2010 and 2018, the nation’s under-age 18 population declined by 780,000 (1%), while the adult population grew by 19.2 million (8%).

This alarming trend could have severe consequences regarding productivity in the economy, as a shortage of prime-age workers could develop into the early 2020s.

Geographical mobility hits a postwar low

In the “greatest economy ever,” the one demographic indicator that would rise should be geographic mobility. However, the latest census data for 2017-2018 showed the percentage of Americans changing residence is at a 1950 low of 10.1%.

Most of this downturn is attributable to local (within-county) moves, which also registered a postwar low, and could represent millennials are “stuck in place.” 

“But a new finding this year was the downward trend in inter-county and interstate migration—the types of moves that should accompany a rising labor market. Hence, the nation’s demographic stagnation appears with this indicator as well,” said Brookings.

The nationwide population growth slowdown did not occur in all regions.

Two states, Nevada and Idaho, expanded by 2% between 2017 and 2018—continuing a recent boom in the Mountain West, which like other regions, had growth declines earlier in the decade. There were more than 14 states which grew by 1%.

The larger story since 2016 is the number of states which had a declining population: ten in 2016-2017 and nine in 2018, compared with only one or two earlier in the decade. These are states where current birth rates plus immigration could not counteract migration to other parts of the country. They include states like Wyoming, Alaska, and Hawaii in the West; Louisiana, Mississippi, and West Virginia in the South; and large urban states such as New York and Illinois—the latter losing population for the fifth consecutive year.

Brookings said as the natural increase drops, all states will heavily rely on migration from the rest of the US and or even other countries to fuel growth or stave off declines.

An aging, slow-growing future

Brookings said the latest census data should prepare the nation for an era of demographic stagnation and low growth. The most recent national growth rate of .62% is at 80-year lows. The rate is still higher than in countries like Germany, Italy, and Japan; it means that governments must budget more for an aging population.

The report concluded by stating there needs to be a more extensive discussion on US immigration policy because of the future contributions that immigrants will aid in the recovery of  America’s society and economy. Otherwise, if birth rates and immigration do not pick up, the US had not just peaked, but the empire is in terminal decline.

Looking ahead: The business environment of the 2020s will be more volatile and economic swings more extreme.

The collision of demographics, automation, and inequality will transform the nation into an unrecognizable America in the decades ahead. The great transformation is already underway.  

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“This Isn’t Normal Price Action”: Was Today’s Historic Surge Just A Bear Market Rally

To the bulls, today’s rally was long overdue.

Whether today’s record 1,086 point surge (and 5% jump) in the Dow was the result of Trump saying yesterday that shares present a “tremendous opportunity to buy” (so BTFD), or thanks to White House advisor Hassett’s assurance that Fed Chair Powell’s job is “100 percent safe”, or due to a major short squeeze of CTAs all of which had just turned short on US stocks, or the result of a massive $64 billion pension reallocation into stocks, or simply a bounce from massively oversold condition, one which the RSI crash to 14 on Monday and the CNN Fear and Greed index plunge to a record low…

… is probably irrelevant: what matters is that stocks exploded higher just as the S&P was poised to slide into its first bear market in a decade.

“We’ve had times when we dropped 20 percent and went into recession but this is an example, so far, where the market realizes a recession isn’t imminent, and going down 20 percent doesn’t make sense,” Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance, told Bloomberg. “It’s somewhat telling that we didn’t cross it, we didn’t officially enter into a bear market.”

But did today’s rally give an “all clear” signal to buy stocks? As numerous traders opined today, it is common knowledge on Wall Street that furious rallies are common during market drops and bear markets. In fact, much more common then than during a regular bull market.

“This is not the kind of price action you see in normal bull markets,” said Robert Baird equity sales trader Michael Antonelli. “This is just a face ripping short cover rally. I am 100 percent not saying we are in a situation like 2008 now, but look at October 10, 2008 to October 13, 2008: the market rose nearly 12 percent in one day. October 27 to October 28, 2008, it rose 11 percent.”

“Bear markets always serve up some very nasty rallies,” said Doug Ramsey, chief investment officer of Leuthold Weeden Capital Management, which manages about $1.2 billion. “There’s a saying that bear market rallies look better than the real thing so I’d expect at some point here a 3 to 4% up day. It’s not unusual at all to see that in a bear market.”

“This type of volatility primarily occurs in bear markets” said Fred Hickey, editor of the High-Tech strategist. “The stock market was short-term oversold & due for a sharp rally. But a 1,086 point rally, while fun for the bulls, will scare some investors away. They’ll realize the current market is too dangerous for more risk-adverse investors.”

In fact, according to Bloomberg data, in eight previous bear markets the S&P 500 experienced rallies of greater than 2.5% more than 120 times as the benchmark plunged from peak to trough. From the collapse of Lehman to the financial crisis bottom in March 2009, the S&P 500 rallied more than 4 percent on 13 different occasions.

The best visual confirmation that today’s rally was nothing but a “face-ripping” short cover rally in the context of a bear market, comes from Matt Thomson who today tweeted the following chart showing historic market gains of more than 4% since 2000. Not surprisingly, the biggest cluster took place during the financial crisis in late 2008 and early 2009, before the market eventually bottomed.

So while today’s rally was clearly viewed with skepticism after the recent rout, some laid out what would convince them that a bottom may indeed be emerging.

For Baird’s Antonelli, along with other indicators, a bottom would be marked by at least two consecutive days in which the percentage of stocks rising exceeds 90, an event that happened today. “I view it with skepticism until it’s proven with a few metrics: volume, breadth, sentiment,” he said.

“But right now I just view it skeptically because this isn’t normal price action.”

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“There Is No Revolution Here”: PhD Pseudoscience-Buster Destroys Musk’s Boring Company Tunnel Idea

The name “Thunderf00t” is the alias of Phil Mason, a British chemist and video blogger who has become well-known for posting YouTube videos that criticize, among other things, pseudoscience. His day job is as a scientist in the field of chemistry and biochemistry at the Academy of Sciences of the Czech Republic. His tongue in cheek, yet starkly accurate criticisms, have earned him nearly 850,000 subscribers on YouTube and an aggregate total of more than 220 million views.

With a penchant for outing nonsense, it was only a matter of time before he criticized Elon Musk’s Boring Company tunnel reveal in a scathing and satirical video posted to YouTube just days ago.

In the video, Mason begins by laying out the long and storied history of humans in history not only creating tunnels like Musk has pitched – but also creating self landing reusable rockets, another claim to Musk’s fame. In the video, Mason lays out the case that underground tunnels, similar to the one that Musk has pitched as the future, have actually been around for nearly 100 years.

From there, he goes on to point out that reusable self-landing rockets have also been around for decades. Musk’s contributions to rocketry, Mason says, have been overstated by about “a factor of 100 times”.

Amidst comparisons to the Simpsons “monorail guy”, Mason takes a deeper dive at the proclaimed cost savings of Musk‘s tunnel – said to be built for just $10 million a mile – versus “normal” tunnels, which Musk has said repeatedly can cost up to $1 billion per mile.

Of course, some tunnels do cost up to $1 billion per mile, Mason points out – when they include fully functional metro lines and state-of-the-art metro stations. These tunnels are larger than Boring Company tunnels and contain significantly more infrastructure. Mason then goes on to note that the type of tunnel Musk is digging, 12 feet around with no infrastructure in it, can easily be made for about $15 million to $20 million per mile. This is a far cry from the nearly 99% cost savings that Musk seems to be trying to pitch to the public.

From there, Mason goes on to compare the cost of these tunnels to the cost of laying six lanes of freeway per mile, which comes in well under $10 million, displaying the cost efficiencies that likely make freeways the more obvious choice. He also goes on to explore the inefficiencies of the elevators that are proposed to be used moving cars underground, and then back above ground, for Musk’s tunnels.

“Blow me!” Mason exclaims at one point in the video, before continuing “Elon Musk’s revolutionary tunnel is comparable to the average cost of digging a tunnel. So much for making tunnelling 100 times more efficient.”

“There is no revolution here,” he concludes. “Let’s be honest here: he’s driving a car through a sewer pipe.”

The video is a must watch for any skeptic or anybody that badly needs a dose of reality. In that respect, we recommend Musk himself give it a watch.

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Three “Crazy Market Stats” After Today’s Historic Day

What has traditionally been the quietest week for markets is shaping up this year to be one of historic turmoil and triumph for traders.

One trading day after the S&P500 suffered its biggest Christmas Eve rout on record, the index enjoyed its biggest point surge on record adding 116.6 points (as did the Dow Jones, with its historic 1,086 point ascent) and the biggest percentage rebound since the financial crisis, with today’s 4.96% jump only the largest since the 7% QE1-driven surge in March of 2009.

There were three other “crazy market statistics” as Bloomberg dubbed them, that defined today’s market actions:

  1. All three major U.S. indexes gained at least 4% on Wednesday: That was the first time the market had such a widespread bounce since 2011. Additionally, both the Dow and the S&P came a just hair shy of topping 5% on the day.
  2. The Dow’s performance perfectly mirrored its last trading day: on Monday, all 30 Dow member stocks finished in the red. Today, all green. That was the first time that has occurred since 2015 and just the 10th time since 2000.
  3. For the first time on record, more than 500 of the S&P500 stocks finished in the green according to Bloomberg data; specifically 99.8% of stocks advanced (For the purists, there are currently 505 stocks in the S&P 500.) The previous record, at least as far back as 28 years ago, was 99.6 percent in 2011, or 498 stocks out of 500. Just one stock of the 505 closed red: Newmont Mining. Today’s other big loser: gold itself, which gave up all earlier as the dollar unexpectedly surged from session lows and is once again just shy of its 2018 highs.

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Rocket Launcher Returned During Baltimore Gun Buyback Program

Baltimore has the highest per capita murder rate among any sizeable American metropolis, making it an anomaly in the national crime landscape for cities with populations over a half million. City officials recently held a three-day gun buyback program in the attempt to rid the region of weapons as homicides climbed over 300 for the fourth consecutive year.

Baltimore police collected more than 1,000 firearms during the buyback event last week. The weapons included 509 pistols, 273 rifles, 245 shotguns, and… a rocket launcher, for which the city paid $500 according to The Baltimore Sun.

City Mayor Catherine Pugh tweeted that 1,800 guns and one rocket launcher were removed from the streets.

Mayor Pugh said, “And yet the @NRA thinks somehow rocket launchers are good for Baltimore. Perhaps a name change is in order: The National Rocket Association.”

Interim police Commissioner Gary Tuggle said Friday police contacted the US Army and the Bureau of Alcohol, Tobacco, Firearms and Explosives, in an attempt to figure out where the rocket launcher came from.

A spokesperson for the Mayor told the Sun that $250,000 had been made available to fund the cost of the buyback program.

Authorities offered $25 for magazines, $100 for revolvers and pump action weapons, $200 for semi-automatic guns and $500 for automatic weapons (and, apparently, rocket launchers).

Some Baltimore residents spoke out against the program as ineffective against gun violence, but Tuggle said the Baltimore Police Department remains devoted to removing dangerous weapons off America’s most dangerous streets, even if that happens to be a rocket launcher.

“If they’re not in existence, they’re not in the home, they can’t be used, they can’t be stolen. They won’t contribute to our violence,” he said.

In case you were wondering, here is the rocket launcher in action, if not quite in the dense urban jungle of Baltimore:

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China To Take Over Kenya’s Largest Port Over Unpaid Chinese Loan

No more Mr. Nice Chinese Guy.

After years of “benevolent” handouts to various African countries by Beijing, all of which however came in the form of loans, of which few have led to viable, long-term projects and cash-flow generating assets, and led to accusations that China is pursuing a “new colonialism” of the African continent (and more recently, nations along the One Belt, One Road corridor), China is demonstrating to the world what happens when its debtors refuse to pay up.

But first a brief detour: readers will recall that China’s ambitions for Africa are hardly new, and were discussed here over 6 years ago for the first time in “The Beijing Conference”: See How China Quietly Took Over Africa“

And while back then few noticed, in September of 2018, during a major conference with African leaders, China’s president Xi Jinping proposed an additional $60 billion in financing for Africa in the forms of assistance, investment and loans, the western media was quick to label the latest round of Chinese financing a “debt trap”, to which a top Chinese official responded at the time that Beijing is merely helping Africa develop, rejecting criticism it is loading African countries with unsustainable financial burdens.

It turns out, the official was not exactly telling the truth, because far from handing out free money the African Stand reports that China is likely to take over Kenya’s lucrative Mombassa port if Kenya Railways Corporation defaults on its loan from the Exim Bank of China.

Call it a “debt-for-sovereign equity” exchange with a twist.

Kenya’s Mombassa port

China’s aggressive strategy emerged when a leaked audit report showed that the Kenyan government had inexplicably waived its sovereign immunity on the Kenya Ports Asset when signing the agreement, thus exposing the Kenya Port Authority to foreclosure – and confiscation – by China’s Exim Bank.

The report said that “the payment arrangement agreement substantively means that the Authority’s revenue would be used to pay the Government of Kenya’s debt to China Exim bank if the minimum volumes required for [rail] consignment were not met”, auditor F.T Kimani wrote. “The China Exim bank would become a principal over KPA if KRC defaults in its obligations, reports Africa Stand and All Africa news.

KRC accepted the multi-billion dollar loan from the Chinese institution to build the Mombassa-Nairobi standard gauge railway (SGR), with construction services provided by China Roads and Bridges Corporation (CRBC), a division of state-owned conglomerate China Communications Construction Company (CCCC), which is why some have said the loan was a low-risk, full recourse vendor financing, one where it is China who gets all the upside while sticking the naive natives with all the potential downside, as the “worst-case scenario” now confirms.

The China-built, China-funded standard gauge railway, also known as the Madaraka Express, is a diesel-powered passenger and freight rail service connecting Nairobi and Mombassa. It construction was plagued by cost overruns, and outside observers questioned its economic viability, but China was not worried: after all, if the 80%-China funded project failed, Beijing would have full recourse.

Sure enough, SGR reported a 10 billion Kenyan shilling loss in its first year of operation, with current estimates that the railway generates about 600 billion Kenyan shilling in revenue.

Meanwhile, in addition to putting the port at risk for a Chinese takeover, at stake is also the Inland Container Depot in Nairobi, which receives and dispatches freight hauled on the new cargo trains from the sea port.

* * *

So what happens if China does takeover the port? Implications would be grave, including the thousands of port workers who would be forced to work under the Chinese lenders. Management changes would immediately follow the port seizure since the Chinese would naturally want to secure their interests.

Further, revenues from the port would be directly sent to China for the servicing of an estimated Sh500 billion lent for the construction of the two sections of the SGR.

In other words, a Chinese-funded project in Africa, is about to be confiscated by China, which will appoint Chinese management, upstream all revenues to China (and, eventually, profits after enough fat is trimmed), and provide China with its own strategist port in east Africa.

A brilliant “investment” scheme? Why yes, and it won’t be the first time China has used it: in December 2017, the Sri Lankan government lost its Hambantota port to China for a lease period of 99 years after failing to show commitment in the payment of billions of dollars in loans. The transfer, according to the New York Times, gave China control of the territory just a few hundred miles off the shores of rival India.

It is a strategic foothold along a critical commercial and military waterway.

“The case is one of the examples of China’s ambitious use of loans and aid to gain influence around the world and of its willingness to play hardball to collect,” says the New York Times of December 12, 2017.

More recently, in September 2018 Zambia lost Kenneth Kaunda International Airport to China over failure of debt repayment.

And while some may gawk at the unprecedented loophole that was left to grant China what is effectively the takeover of a strategist sovereign assets, some suspect that backdoor financial dealings may have been involved becuase as African Stand writes, it is “indiscernible” how KPA signed the loan agreement as a borrower, in one of the toxic clauses subsequently exposing its assets to the Chinese clamp.

“…any proceeding(s) against its assets (KPA) by the lender would not be protected by sovereign immunity since the Government waived the immunity on the Kenya Ports Assets by signing the agreement,” the auditor wrote.

Whatever the reason for the glaring oversight, and the imminent “confiscation” of this critical African asset by Beijing, slowly but surely China’s intrepid vision behind first colonizing Africa (using China-funded loans) and subsequently much of Asia with the “One Belt, One Road” initiative is becoming quite clear.

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Russia Slams Israel For “Gross Violation Of Sovereignty” During Latest Syria Air Strike

Following reports that Israel is plotting a full-scale offensive in Syria (after years of carrying out airstrikes on Iranian or Iranian-affiliated targets south of Damascus), Russia on Wednesday accused the Jewish state of endangering the lives of civilians during a Christmas Day bombing raid carried out by Israeli F-16s flying out of Lebanon.

Russia

According to Al Jazeera, Russia accused the Israelis of violating Israeli sovereignty and threatening two civilian flights landing at a nearby airport in Damascus during attacks on targets allegedly affiliated with the Iranian Revolutionary Guard in the Damascus countryside.

“We are very concerned by the attacks and how they were made. This is a gross violation of the sovereignty of Syria,” the Russian Ministry of Foreign Affairs said in a statement on Wednesday.

“The provocative actions of the Israeli air force…directly threatened two airliners,” Russian defence ministry spokesman Igor Konashenkov said in a statement.

Syrian state media claimed it intercepted most of the Israeli missiles. Israeli, for what it’s worth, has denied that it planned an attack, saying that its fighter jets were merely protecting themselves from anti-aircraft gun fire.

“An [Israeli military] aerial defence system activated in response to an anti-aircraft missile launched from Syria,” the Israeli army said in a statement via Twitter.

A spokesman for the Russian military said the attack was launched from Lebanese territory as “two airliners, not from Russia, were preparing to land at the airports of Beirut and Damascus.” And “to prevent a tragedy” one of the commercial planes was redirected to a Russian airbase.

Meanwhile, three Syrian soldiers were injured in the attack. As the US begins to withdraw its troops, expect Israeli attacks to intensify as Prime Minister Benjamin Netanyahu has warned as Israel tries to stop Iran from expanding its influence from within Syria.

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California Is In Great Financial Shape – And Headed For An Epic Crisis

Authored by John Rubino via DollarCollapse.com,

California Governor Jerry Brown inherited a $27 billion deficit from Arnold Schwarzenegger eight years ago. This month he’s leaving his successor a $13.8 billion surplus and a $14.5 billion rainy day fund balance. Pretty good right? Approximately 48 other governors would kill for those numbers.

Unfortunately it’s all a mirage. California, as home to Silicon Valley and Hollywood, lives and dies with capital gains taxes. In bull markets, when lots of stocks are rising and tech startups are going public, the state is flush. But in bear markets capital gains turn into capital losses and Sacramento’s revenues plunge. Put another way, the state’s top 1% highest-income taxpayers generate about half of personal income taxes. When their incomes fall, tax revenues crater.

That’s happening right now, as tech stocks plunge, IPOs are pulled and billion-dollar unicorns endure “down rounds” that shave major bucks from their valuations. So if this is a replay of the 2008-2009 bear market, expect California’s deficits to return to the double-digit billions.

But that’s not the real problem. Those currently-rosy budget numbers are only rosy because they omit the unfunded liabilities of public sector pensions, which are almost supernaturally large.

Consider just Los Angeles’ schools:

Can we prevent the LAUSD budget crisis from taking down the California state budget?

(SGVT) – Even as its teachers consider going out on strike, the Los Angeles Unified School District’s budget clearly is in crisis. The problem is so big it might wipe out whatever surplus the roaring California economy might generate in 2019 – and then some.

The LAUSD just released its Comprehensive Annual Financial Report, or CAFR, for the fiscal year ending June 30, 2018. As I have been predicting, the LAUSD’s new CAFR doubled the size of its negative Unrestricted Net Position (UNP), the best number I’ve found for judging financial soundness. The reason was, for the first time, municipalities are now required to include unfunded liabilities for retiree medical care on their balance sheets.

The unrestricted net deficits for 2016 and 2017 were $10.5 billion and $10.9 billion, respectively. For 2018 it is $19.6 billion, or 80 percent higher! That’s what a $15 billion obligation will do when it’s recognized.

In bureaucratic language, the CAFR itself explained, the negative UNP “is largely the result of net other postemployment benefit (OPEB) liability and net pension liability for various retirement plans.” They blamed this transparency on the recent accounting standard they just implemented.

And here’s where it gets even more interesting. This fiscal implosion is about to collide with a wave of incoming liberal governors who have big plans for using the public budget to address society’s ills:

The Blue State Challenge

(Wall Street Journal) – Democratic dominance means they now have to pay the union bills.

Democrats received a mixed blessing in November when they seized complete control of state governments in California, Connecticut, Illinois and New York. They now own responsibility for fixing the dysfunctions of liberal governance even as the left wants more spending and taxes.

Anti-Trump furor helped Democrats retake the governorship in Illinois and augment legislative majorities in California, Connecticut and New York. Democrats picked up 12 seats in the Connecticut House and six in the Senate where control is split with Republicans. Democrats in New York flipped eight Senate seats and won a legislative majority for only the third time in 50 years.

With legislative supermajorities, liberals in California can raise taxes without GOP votes and in Illinois place a progressive tax on the ballot as unions have long wanted. Democrats campaigned on more spending—for schools, roads, child care, you name it. But Illinois and Connecticut are spilling red ink while the progressive tax-and-spending structures in New York and California are profiting from the Trump economy while storing up future trouble.

Illinois is forecasting a $1.2 billion deficit next year and has accrued $7.5 billion in unpaid bills despite a $5 billion income and corporate tax hike in 2017. Pensions consume 25% of state revenue, up from 10% a decade ago, yet are still only about 40% funded. Chicago is leaning toward insolvency as pension costs have doubled in a decade.

While New York’s fiscal problems are less glaring, its taxpayer flight is also ominous. The state lost a net $8.6 billion in adjusted gross income in 2016 as high-earners fled for lower-tax climes. Growth has stalled upstate—half of upstate metro economies have contracted over the last five years—as residents have moved.

New York City has benefited from its finance industry and cultural attractions, but even its economy has grown only half as fast as the rest of the country. Roads and subways are in disrepair as politicians have neglected public works to boost pay and benefits for their union friends.

New York, by the way, is the other state that lives and dies with stock prices. In a bear market, Wall Street lays off tens of thousands of analysts, investment bankers and traders, who promptly stop paying taxes.

The last recession/bear market was tough on state budgets. The next one, with debt much higher and unfunded liabilities off the charts – will be brutal.

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