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Are we experiencing an off-the-books boom? (Something fishy is going on in consumers’ 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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1 posted on 03/19/2013 10:23:36 AM PDT by Ernest_at_the_Beach
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To: Ernest_at_the_Beach

If the government here is going to tax Americans at Greek rates, then one can expect Greek levels of tax compliance.


2 posted on 03/19/2013 10:25:32 AM PDT by JackOfVA
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To: Ernest_at_the_Beach

If it weren’t for black market dealins, I’d be screwed.


3 posted on 03/19/2013 10:27:15 AM PDT by cripplecreek (REMEMBER THE RIVER RAISIN!)
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To: Ernest_at_the_Beach

We’re experiencing a ‘cook-the-books’ boom........


4 posted on 03/19/2013 10:32:38 AM PDT by Red Badger (Lincoln freed the slaves. Obama just got them ALL back......................)
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To: Ernest_at_the_Beach

Here’s what I think: People haven’t bought much for five years. Our patio umbrellas are finally shot, our cars are held together with coat hanger wire, we haven’t vacationed, we buy the cheap beer — you know, living an austere (but fair!) lifestyle that the morons voted for five years ago.

Over these five years, we’ve slowly paid down our credit cards and feel like we’ve been down long enough. We’re starting to buy stuff again out of necessity. And we have these pretty much clean credit cards sitting there.

Screw it! I’m actually thinking about a little trip to Bermuda after going absolutely nowhere for five years. Mmmmmmmm. Bermuda.


5 posted on 03/19/2013 10:33:34 AM PDT by duckworth (Perhaps instant karma's going to get you. Perhaps not.)
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To: cripplecreek

I’m looking for a deal on capsized canoes.


6 posted on 03/19/2013 10:34:08 AM PDT by Track9 (hey Kalid.. kalid.. bang you're dead)
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To: Ernest_at_the_Beach

nothing better than supplementing your government support -welfare, unemployment, disability, etc. - with a cash paying job that will not jeopardize your benefits.


7 posted on 03/19/2013 10:36:50 AM PDT by beekay
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To: Ernest_at_the_Beach

I don’t do the black market, but I do avoid commerce whenever possible. I’ll do my own repairs rather than work for income that can be used to hire a professional for the same repair work. 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.

One area where I have changed is that I no longer look down on those who cheat the system. That now strikes me as a rational and legitimate choice, both in terms of taxes and in terms of courts. Telling the truth creatively to get on a jury and nullify bad laws is a civic duty in these times when government is no longer of the people, by the people, or for the people. Similarly, bartering when possible to avoid any records of taxable income may be the best possible option for protecting our country from those in power.


8 posted on 03/19/2013 10:37:08 AM PDT by Pollster1
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To: Ernest_at_the_Beach

Simple: When you need to buy relatively the same amount of food to feed your family every week, but the price of that food doubles, you spend more.

I used to go grocery shopping at a local morket and spend about $200 each trip.

Since Odumbass took office I rarely get out of there spending less than $300 and have twice crossed $400.

This is with the same general purchasing patterns.

So while my ‘spending’ is up, that is NOT a measure of ‘consumer confidence’


9 posted on 03/19/2013 10:37:59 AM PDT by Mr. K (There are lies, damned lies, statistics, and democrat talking points.)
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To: Ernest_at_the_Beach
Ed is correct.

The most pernicious aspect of the cash or underground economy is the resentment it breeds in the people. If you are playing by the rules, but others are not or do not, then the taxes you pay are not equally born by all.

Such a circumstance is not sustainable, it some think they are getting the short end of the deal, then they will find a way to even up the playing field.

This issue is especially pervasive in the small construction business. More regulation/regulators just makes it worse.

sschu

10 posted on 03/19/2013 10:38:54 AM PDT by schu
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To: Ernest_at_the_Beach

Americans are buying freeze dried foods, medical supplies, warm clothes, firearms and ammunition in record numbers.

That doesn’t reflect any “faith” in the American economy or in the current administration; quite the opposite.

It just means everyone wants to be well-stocked before the SHTF.


11 posted on 03/19/2013 10:39:14 AM PDT by Jack Hammer
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To: Ernest_at_the_Beach

My observation is that it is not just one thing.

I am buying things now because price will go up and may not be available.

I run into cash deals very often. Underground economy is going to be growing for a variety of reasons.

The attitude of screw the govt, they don’t care about me and I don’t care about them is valid.

Business may be buying to avoid taxes, especially farmers.


12 posted on 03/19/2013 10:43:30 AM PDT by PeterPrinciple
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To: Ernest_at_the_Beach

I would add one more thing. I might as well spend my money NOW before the govt destroys everything.

A little on the “eat drink and be merry” line of thinking.

By the way there are two versions of that:

1) for tomorrow we die

2) and enjoy what God has given us.


13 posted on 03/19/2013 10:45:53 AM PDT by PeterPrinciple
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To: Ernest_at_the_Beach
>>> 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.

14 posted on 03/19/2013 10:46:57 AM PDT by Sir Napsalot (Pravda + Useful Idiots = CCCP; JournOList + Useful Idiots = DopeyChangey!)
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To: duckworth

Barbadoes is pretty cool, too.


15 posted on 03/19/2013 10:47:07 AM PDT by Little Ray (Waiting for the return of the Gods of the Copybook Headings.)
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To: duckworth

In addition to what you are saying, I think people are buying larger ticket items before they are hit further by inflation.


16 posted on 03/19/2013 10:48:01 AM PDT by Average Al
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To: cripplecreek

I’m heading for Tampa to go fishing. I’m paying 25% less for cash, told where to sell my fish for a profit, will use that to take a second trip out and eventually go home. Life might get good, without these government turds.


17 posted on 03/19/2013 10:51:52 AM PDT by Safetgiver ( Islam makes barbarism look genteel.)
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To: beekay
nothing better than supplementing your government support -welfare, unemployment, disability, etc. - with a cash paying job that will not jeopardize your benefits.

I had a Davis-Bacon wage job come up recently- needed a few guys for 6 weeks, at a wage well over the prevailing rate here- talked to several guys of a contractor who I knew had been laid off and were on unemployment. Not one of them would take the job. Too lucrative to be on unemplyment- it's very close to your regular rate, its steadier than actual work, and you become eligible for all sorts of other benefits, too.

18 posted on 03/19/2013 10:52:57 AM PDT by Red Boots
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To: Ernest_at_the_Beach

Consumers are loading up the plastic again. The next wave of bankruptcies will take place later this year.


19 posted on 03/19/2013 10:54:13 AM PDT by txrefugee
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To: Ernest_at_the_Beach

How much of America’s consumerism is tied to maxed out credit cards living paycheck to paycheck?

Spending money that you don’t have (just like Big Daddy Sam).


20 posted on 03/19/2013 10:56:41 AM PDT by a fool in paradise (America 2013 - STUCK ON STUPID)
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