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Are we experiencing an off-the-books boom? (Something fishy is going on in consumersí wallets.)
Hot Air ^ | March 19, 2013 2:41 pm | 1 by Ed Morrissey

Posted on 03/19/2013 10:23:36 AM PDT by Ernest_at_the_Beach

Wages are down.  Jobs are stagnant.  The economy hasn’t generated the kind of growth that should fuel consumer spending.  Yet we are seeing consumer confidence and spending numbers that belie the normal metrics that measure economic health.  According to US News’ Rick Newman, economists suspect that an underground economy has begun to bypass the normal channels of commerce:

Something fishy is going on in consumers’ wallets.

Household spending has held up surprisingly well in recent months, even though new taxes have reduced paychecks and other problems are holding back the economy. Incomes haven’t risen by nearly enough to explain the entire boost in spending. Nor has the use of credit cards.

When your teenager starts wearing expensive clothes and flashing bling he couldn’t possibly afford through his part-time job, you start to wonder where the money is coming from. Some economists are asking the same question about consumers who seem more flush than they ought to be. The answer may lie in the large “underground” economy that doesn’t show up in official statistics.

There are always some businesses and individuals operating on a cash basis to dodge taxes, evade regulations or conceal illegal activity. Economists now speculate that the underground economy may have swelled during the last few years, given all the people who can’t find full-time work at decent pay.

“Severe recessions have historically driven jobless Americans into the shadow economy,” writes Bernard Baumohl of the Economic Outlook Group. “We suspect the destructive nature of the last downturn and the prolonged weak recovery pushed a record number of people into that murky world of cash transactions.”

First, it should be noted that a “black market economy” is not a healthy sign, even if it provides an alternative boost to a stalled overall economy.  It’s not safe for any of its participants, for while it avoids irrational regulation, it also avoids rational regulation as well.  The cash economy might make it easier for some of the chronically unemployed to find ways to make ends meet, it represents no investment in either direction in future health and growth of the markets involved.  Further, it’s not healthy for the government that creates or amplifies such a market, if for no other reason than it cannot extract rational revenues from its participants, putting more of a burden on legal commerce.

If this is indeed the reality of the current American economy, we should ask ourselves how we arrived at this situation.  Because of everything I described in the preceding paragraph, it’s usually more risky than lucrative to engage in underground commerce, and often more costly in various ways.  Only when government expands regulation (and especially irrational regulation) enough does that imbalance tip toward taking the riskier route.  We have spent the past five years since the financial crisis making regular hiring more expensive via ObamaCare especially, but also through Dodd-Frank, too.

Thanks to these new costs, the value of the regular hire has declined dramatically.  It’s not terribly surprising, then, that we’re seeing less of that kind of employment.  Our labor-force participation rate has dropped to 63.5%, a 34-year low, and those who have been out of work the longest have the least value now in the above-ground labor market.  It costs too much now for companies to create open positions that carry the costs of mandated health insurance.  Instead, more employers appear to be paying cash for what used to be called piece work in a bygone era.

As long as this remains the case, the regular economy will never right itself, and we will lose the opportunity for positive investment and long-term economic health until we correct these issues.


TOPICS: Business/Economy; Culture/Society; Editorial; Government
KEYWORDS: economy
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To: txrefugee
I can't speak for everyone obviously.

But here is what's happening to me.

I have spent the last 5 years paying down debts and have finally started making some serious headway to becoming completely debt free. So even though I am making about the same amount of money, I have more disposable income because it's not all going to interest on various loans I used to have.

21 posted on 03/19/2013 11:08:13 AM PDT by TexasFreeper2009 (Obama lied .. the economy died.)
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To: Ernest_at_the_Beach

I recently paid a plumber $120 to crawl under my house and change out three drains. He works for a plumbing company but came over and did it on his day off. (Got him by word-of-mouth. There’s no way I would have had somebody do this job at the price the plumbing company wanted.) I know a roofer and a carpenter who will do one heck of a job, for cash. I think they are otherwise unemployed. I know a woman who will hook up your air conditioner and get it running. She’ll tell you what to buy on the internet and how to get it shipped and help you install it. No warranty, but it’s 1/3 the cost of having a company do it. These people are pretty busy.

Now, having had a company, I’m annoyed. But unemployed people can’t afford paying the freight to have any of these jobs done with insured, bonded, licensed workers. As an employer, once you add the mandatory requirements for health insurance, unemployment tax, social security, and other freight, you must charge $100/hour and $250 to send a truck out. So a simple, minor job, done by the book, costs the client $500-1,000. When the client has no income, they simply put off doing these things or they trade for them or they buy them off-book for cash. And, no, this isn’t healthy for the economy. In the Soviet Union, everybody had their day job where they pretended to work and the government pretended to pay them; then, they had their real work. They’d stand on street corners with a toolbox and fix cars, or do plumbing, or make illegal alcohol. That’s what the government is driving us to; an unregulated, off-book economy. And, here’s the thing. Once the bulk of the economy has converted to off-book, it won’t convert back.


22 posted on 03/19/2013 11:08:56 AM PDT by Gen.Blather
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To: cripplecreek

Lots of cash day work here in California going on.
Our millions of California illegals paid thus.
Saves those hiring big bucks.
Allows the cash-payment workers to claim lower income so to get the govt freebies too.


23 posted on 03/19/2013 11:15:55 AM PDT by OldArmy52 (The question is not whether Obama ever lies, but whether he ever tells the truth.)
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To: cripplecreek

Before the existence of the IRS, one could argue the entire economy was “black market”. I believe the entire article is based on a false premise, though I agree that when a lot of people go galt (it would fit within the author’s definition of “black market”) it does mean we have a problem.


24 posted on 03/19/2013 11:18:43 AM PDT by cuban leaf (Were doomed! Details at eleven.)
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To: schu

The current Administration picks and chooses which laws they will or will not obey.

No surprise if ordinary folks notice and figure that what is good for the gander is good for the goose.


25 posted on 03/19/2013 11:18:46 AM PDT by OldArmy52 (The question is not whether Obama ever lies, but whether he ever tells the truth.)
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To: Track9

I’m looking for a deal on scuba gear; you know how many unfortunate boating accidents there have been with innocent guns on board?


26 posted on 03/19/2013 11:19:28 AM PDT by Michael Barnes (Obamaa+ Downgrade)
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To: Mr. K

It’s why we got chickens, a garden and a couple of steers. We’re splitting the steers with another guy and our chickens produce six eggs a day in winter. We can from the garden.

A friend who is an electrician does most of his work for cash. But they don’t need much cash because they also sell “shares” in their dairy cattle, allowing “shareholders” to legally consume the non-pasteurized milk they sell. They sell their eggs too. They get a lot more than us.

They pay no income tax. They are below the “poverty level”.


27 posted on 03/19/2013 11:23:19 AM PDT by cuban leaf (Were doomed! Details at eleven.)
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To: duckworth

Good point, and it’s also the preppers stocking up.


28 posted on 03/19/2013 11:24:45 AM PDT by Son House (Romney Plan: Cap Spending At 20 Percent Of GDP.)
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To: Sir Napsalot

>>> Further, it’s not healthy for the government that creates or amplifies such a market, if for no other reason than it cannot extract rational revenues from its participants, putting more of a burden on legal commerce.
Ed Morrissey still thinks our government is benevolent, and follows all of its own laws.


I also noticed his use of the word “legal”. Now more than ever the following saying applies in the US: “What is legal may not be moral and what is moral may not be legal.”


29 posted on 03/19/2013 11:26:59 AM PDT by cuban leaf (Were doomed! Details at eleven.)
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To: Michael Barnes

I haven’t heard a thing but I do know how to get rust off stuff.


30 posted on 03/19/2013 11:31:27 AM PDT by Track9 (hey Kalid.. kalid.. bang you're dead)
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To: Ernest_at_the_Beach

Tax cheating
Craigslist
Barter
Lack of income reporting
Black market usage (food stamps for cash, etc.)

ObamaLand is a terrible place, and people react.


31 posted on 03/19/2013 11:44:29 AM PDT by wac3rd (Somewhere in Hell, Ted Kennedy snickers....)
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To: Gen.Blather

That’s why the government would like nothing better than to eliminate cash. If all transactions are done digitally they can trace it and tax the hell out of it. Right down to sales tax at a garage sale.

Comming soon. Due to the extreme cost of paper money the Government will be going to the credit system. All electronic.


32 posted on 03/19/2013 11:46:25 AM PDT by VRWCarea51
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To: Ernest_at_the_Beach

I’ve been wondering about this for some time. The economic numbers don’t add up to what I see with my own eyes. During the election campaign, a black man called local talk radio. He was defending Obama and the unemployment figures. He said unemployment wasn’t as bad as everyone was saying. He said he personally knew about 50 people who were collecting unemployment compensation and working somewhere for cash under the table. Add in the underground economy of the illegals. That’s the Obama economy.


33 posted on 03/19/2013 11:47:41 AM PDT by Fu-fu2
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To: beekay

And that is more or less exactly what it is. The whole dam country is on food stamps. If I didn’t have to spend $300-400 a month on food I could sure buy alot of crap.
Was talking to a friend about this the other day when she was out shopping as cheaply as she could and she noticed everyone elses baskets were full.


34 posted on 03/19/2013 12:00:57 PM PDT by sheana
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To: PeterPrinciple

Your not kidding, screw them!

My wife done some minor damage to her vehicle this winter. Not enough to turn in on insurance which would have killed my rates. The guy at the body shop says $300 to repair it. I said how about straight cash? $250. He does the repair I hand over the cash and we both say screw you to the feds and the KY revenue cabinet.


35 posted on 03/19/2013 12:03:15 PM PDT by sarge83
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To: sheana

Food stamps artificially inflate food costs for those not using them. We not only pay for them, but get screwed by them.


36 posted on 03/19/2013 12:05:11 PM PDT by nascarnation (Baraq's economic policy: trickle up poverty)
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To: VRWCarea51

>>>Due to the extreme cost of paper money the Government will be going to the credit system. All electronic.<<<

Barter has never really disappeared - it’s the natural default human economic system. If it comes down to it, I’ll trade cabbages and tomatoes for someone to come over and dig a trench for the new septic system. I would imagine that somewhere along the line some form of informal money would also emerge - perhaps along the form of paper checks. Ensuring that both parties are satisfied, however, could be a real problem, since it’ll be operating outside the law. However, people could also self-construct parallel government systems, too - sort of like the mob, maybe, or maybe paying people to be a private police force or army. I would bet there would be rough frontier justice sometimes, too.

It’ll be like feudalism all over again.

God help us.


37 posted on 03/19/2013 1:00:00 PM PDT by redpoll
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To: Ernest_at_the_Beach

Wonder how much ‘increased consumer spending’ is fueled by under-the-table cash sales of counterfeit ethanol RINS and bogus “carbon credit” certs?

Wonder how much scrapping out somebody else’s copper church roof or air conditioners “contributes”?

I understand there’s also a cash market for used school buses in Chicagoland, too, that would certainly boost spending, if the cops would just keep their interfering noses out of the business of the scrap business.


38 posted on 03/19/2013 1:43:45 PM PDT by ApplegateRanch (Love me, love my guns!©)
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To: Gen.Blather

My experience is that a lot of these off the books skilled workers are on disability. Ticks me off...


39 posted on 03/19/2013 1:47:22 PM PDT by Mamzelle
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To: Pollster1
"I have no desire to contribute to an economy that will support Obama’s agenda. I’ll reenter the economy if we restore freedom and democracy in 2016."

You're doing the only thing left to reign in the statists - starve the beast. Deny it's fuel to grow ever larger and controlling.

40 posted on 03/19/2013 2:06:05 PM PDT by uncommonsense (Conservatives believe what they see; Liberals see what they believe.)
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