Are we experiencing an off-the-books boom?

posted at 12:41 pm on March 19, 2013 by Ed Morrissey

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.


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If this is indeed the reality of the current American economy, we should ask ourselves how we arrived at this situation.

Barack Obama.

Gatsu on March 19, 2013 at 12:46 PM

I can testify that in my home – some purchases have gone “off book”

No doubt about it – the underground economy is growing – and I am grateful

jake-the-goose on March 19, 2013 at 12:46 PM

I can testify that in my home – some purchases have gone “off book”

No doubt about it – the underground economy is growing – and I am grateful

jake-the-goose on March 19, 2013 at 12:46 PM

Agreed. Its only a problem if you don’t vet the guy/gal before you buy/sell.

Gatsu on March 19, 2013 at 12:47 PM

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.

In an era of excessive taxation, perhaps these businesses and individuals are doing what they need to do to survive.

unclesmrgol on March 19, 2013 at 12:49 PM

The higher taxes, fees, and regulatory burdens become, the more profitable (and easier) it becomes to go underground.

I’ve expected something like this to happen.

The new hotness: Barter.

I’ll fix your computer in exchange for something you can do for me that I need. No money needs to change hands. A favor for a favor.

I’ve been doing that some myself. Sure, I could probably make another $200 a month doing work on the side, but why just make my tax form more complicated?

wildcat72 on March 19, 2013 at 12:49 PM

Also, the BLS’ numbers are complete B*lls**t.

Hucklebuck on March 19, 2013 at 12:50 PM

Hey, you! We go boom-boom! Me love you, long time!

- The Black-Market [especially when they ban guns/mags]

OhEssYouCowboys on March 19, 2013 at 12:50 PM

Underground economy?

Galt’s Gulch.

petefrt on March 19, 2013 at 12:50 PM

And here’s the excuse that will be used to give us a Value Added Tax.

LincolntheHun on March 19, 2013 at 12:51 PM

There are other incentives you didn’t mention Ed. Those on unemployment, welfare, SSDI, etc. don’t want extra visible income because that would cause the loss of benefits. Cash only is the only way to go.

Jeff Weimer on March 19, 2013 at 12:53 PM

repair, reuse, barter, grow.

tom daschle concerned on March 19, 2013 at 12:53 PM

If this is indeed the reality of the current American economy, we should ask ourselves how we arrived at this situation.

Barack Obama.

Gatsu on March 19, 2013 at 12:46 PM

Our rat-eared god-king is but the SYMPTOM of the nation’s problem, not the cause. He’s rather unimportant, really, in the grand scheme, and could literally have been any modern democrat and there wouldn’t have been any difference, indeed, the democrats have been running the same candidate for President since the 1970′s.

The 51% majority of voting Looters who re-elected him are the real problem.

That population must be shrunk or else somehow removed from the voter rolls or the complete collapse of the Republic is inevitable.

wildcat72 on March 19, 2013 at 12:54 PM

Are we experiencing an off-the-books boom?

There’s a boom in food and energy prices (which are, naturally, excluded from the inflation index). Not certain about anything else.

petefrt on March 19, 2013 at 12:54 PM

This kind of stuff has gone on for years. My father-in-law (rest his soul) was a cook in a Chinese restaurant. About half of his pay was “under the table”. In other words, he officially earned minimum wage, but the owners paid him a lot more.

They saved payroll taxes, and he got paid more than he might have otherwise. And every spare dime of his earnings went into the bank — my mother in law made sure of that.

When he died, he still had hefty bank accounts. That’s sad, because I’ve always heard that you should time your death so that your final check bounces.

unclesmrgol on March 19, 2013 at 12:54 PM

No doubt about it – the underground economy is growing – and I am grateful

jake-the-goose on March 19, 2013 at 12:46 PM

Cash talks, BS walks! never truer and thus why the push for the “convenience” of an e-wallet so you don’t have to deal with the “hassle” of cash.

/riiiiiiight……

roy_batty on March 19, 2013 at 12:56 PM

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.

Oh, c’mon – he’s slingin’ dope.

Next!

OhEssYouCowboys on March 19, 2013 at 12:57 PM

wildcat72 on March 19, 2013 at 12:49 PM

Barter is definitely the way to go. Keep your cash for necessities, but share and trade for services when and if possible. I am sure someday soon they will find a way to tax bartering.

canditaylor68 on March 19, 2013 at 12:58 PM

I’m willing to consider exchanging minor-to-medium technical support for my condo neighbors in exchange for my dogbeast getting a walk/bathroom break while I’m temp-jailed in cubicle-prison.

BUTT OUT, OBAMA.

Jeddite on March 19, 2013 at 12:59 PM

Here’s how we got here:

Keep Obama In President

OhEssYouCowboys on March 19, 2013 at 12:59 PM

I can vouch for this. My wife runs a horse-boarding business in a rural area…

Payments from boarders: CASH
Lease payment to barn owner: CASH
Work arrangements with cash-strapped boarders: BARTER
Payments for hay loads: CASH
Payments for sawdust bedding from Amish sawmill: CASH
Payments to Amish farrier: CASH
Payments to equine dentist: CASH
Tack equipment for riding: CASH and BARTER

If you ask why, you haven’t been paying attention… ;)

dominigan on March 19, 2013 at 1:00 PM

Our rat-eared god-king is but the SYMPTOM of the nation’s problem, not the cause. He’s rather unimportant, really, in the grand scheme, and could literally have been any modern democrat and there wouldn’t have been any difference, indeed, the democrats have been running the same candidate for President since the 1970′s.

The 51% majority of voting Looters who re-elected him are the real problem.

That population must be shrunk or else somehow removed from the voter rolls or the complete collapse of the Republic is inevitable.

wildcat72 on March 19, 2013 at 12:54 PM

While I mostly agree, I don’t think it could have been just any modern democrat, people really have seemed to come unhinged with him in office, so while he is a symptom of the true liberal rot, he is most definitely acting as gas on the out of control fire.

Gatsu on March 19, 2013 at 1:03 PM

Here’s how we got here:

Keep Obama In President

OhEssYouCowboys on March 19, 2013 at 12:59 PM

Don’t forget this guy.

tom daschle concerned on March 19, 2013 at 1:04 PM

Are we experiencing an off-the-books boom?

To quote a scene from RoboCop.

“I’ll buy THAT for a dollar!”

ToddPA on March 19, 2013 at 1:04 PM

Utter BS… We are living now in the mother of all bubbles… The stocks markets are incredibly inflated because of the trillions of dollars that the Federal Reserve is printing at zero interest… When this bubble implodes it is going to make the 2008 crash look like a picnic…

The only beneficiaries are the Limousine liberals who control Wall Street… In order not to crush the economy Obama and the Federal Reserves are lending them trillions of dollars at zero interest… There is no greater danger to our country than the Limousine Liberals of Wall Street and their power is greater than ever before…

mnjg on March 19, 2013 at 1:04 PM

Stories like this will give the FedGov excuses to crackdown on supposed “evaders” based on anecdotal evidence.

Don’t feed the Evil.

Bulletchaser on March 19, 2013 at 1:04 PM

I’ve been doing that some myself. Sure, I could probably make another $200 a month doing work on the side, but why just make my tax form more complicated?

wildcat72 on March 19, 2013 at 12:49 PM

The tax issue is another problem. We have millions of foreigners living and working in the U.S. who never bother to file or pay federal or state income taxes. Yet we know that immigrants, both legal and illegal, use taxpayer-funded services like food stamps at a much higher rate than citizens. The illegals get all the benefits of living and working in the U.S., without the expense and inconvenience of complying with tax laws.

Now we find that, as part of the sequester, the federal government is laying off USDA meat inspectors, while continuing to finance the idiotic, multi-million-dollar U.S.-Mexican “partnership” that exists for the purpose of advertising the availability of U.S. food stamps to low-income illegal aliens from Mexico!

Why are we supporting a government that cares more about the interests of non-taxpaying illegal aliens than it cares about those of us who are supporting the government with our taxes?

It’s not surprising that the black market economy is growing in the U.S.; it’s only surprising that more citizens aren’t participating in it. But it’s probably just a matter of time.

AZCoyote on March 19, 2013 at 1:05 PM

The first rule of Black Market, is don’t talk about the Black market.

portlandon on March 19, 2013 at 1:08 PM

The Fed is also to blame.

Historically, the idea that someone would keep cash under their mattress was thought to be more foolish than prudent. When you consider the negative real rates that savings accounts and CDs yield, as well as the new cautionary tale told by events in Cypress, is it any wonder the grey market economy is thriving?

Ed – I also think it is important to distinguish that the “grey” market economy is not as unhealthy an omen as the black market warnings being sounded

singlemalt 18 on March 19, 2013 at 1:09 PM

Bulletchaser on March 19, 2013 at 1:04 PM

I think the Fed already has a clue-hence the hard push to legalize illegals, the ability of the DHS to tap into our bank accts without any sort of legal reason and of course the IRS recent marriage to ObamaCare enforcement.

canditaylor68 on March 19, 2013 at 1:10 PM

The first rule of Black Market, is don’t talk about the Black market.

portlandon on March 19, 2013 at 1:08 PM

There is no such thing as the Black Market. ~wink,wink; nudge, nudge~

Liam on March 19, 2013 at 1:11 PM

Are we experiencing an off-the-books boom?

No. Next question.

olesparkie on March 19, 2013 at 1:11 PM

I do not accept the premise that consumer sentiment is really up. Perhaps it has been seasonally adjusted by our elites.

jukin3 on March 19, 2013 at 1:12 PM

…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…

What may be an unintended consequence of an “underground economy” should perhaps be the focus of a concerted effort. Legality has become a subjective term under the federal beast. What the federal government considers legal and what is by all rights legitimate behavior no longer have a tangible relationship. Putting a burden on the commerce the federal government considers “legal” is perhaps the exact prescription that is needed to break the regulatory stranglehold on the economy.

This beast will never die until it is killed by starvation. It has come to the point where this government, its laws and its bureaucratic tentacles – regardless of controlling political parties – is worse alive than dead.

We’ll never, ever, ever get back to constitutional governance unless we destroy the federal government’s ability to harm the citizenry, and then begin anew.

I say keep as much money out of its hands as possible. They’ve forced people to consider a new risk/benefit analysis.

IronDioPriest on March 19, 2013 at 1:12 PM

This reminds me. I’ve got to get to work on the backyard garden. And, as soon as the $12 part comes in, my new used $4000 diamond slab saw that cost $700 cash will be running. Increasing my capacity for cranking out an unknown and unquantifiable number of cut gemstones…

trigon on March 19, 2013 at 1:12 PM

Don’t forget this guy.

tom daschle concerned on March 19, 2013 at 1:04 PM

Both of them are EXACTLY what the State WANTED to create. Dependents in perpetuity, voting for Democrats in perpetuity.

OhEssYouCowboys on March 19, 2013 at 1:14 PM

Let’s use this as a teachable moment. Kids are already being told how bad America is at the local socialist collective indoctrination center known as public school. They’re seeing their government strip away civil rights and confiscate private property. They’re seeing their leaders ignore the rule of law and assert the ability to kill citizens without any sort of due process. They’re witnessing lack of economic opportunity including a bleak employment outlook. There is an ever insulated elite ruling class which is unaffected by the misery of the common folk.

With the addition of a black market, we are able to give our kids the full Soviet Union experience. So dress them in red neckerchiefs and teach them how to denounce friends and neighbors. Because, like it or not, the United States is quickly morphing into the USSR.

Happy Nomad on March 19, 2013 at 1:19 PM

“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.”

The murky view is based on where one sits. It doesn’t look murky from here.

It’s also pretty lame to so broadly suggest it is not safe for the participants, except for the fact that it is underground, meaning essentially illegal because the government can’t enforce it’s rules, of which the most essential concern is skimming their percentage from the activities.

And just because the work is performed underground doesn’t mean standards are below generally practiced standards. And the suggestion that a teenager’s bling is anything near defining the width and breadth of the underground economy is your typical exaggerated strawman for the purpose of denigrating the system at large. Out of that ceiling high stack of 2011 regulations recently reported on, maybe one page might relate to that.

Dusty on March 19, 2013 at 1:20 PM

No comment

*shifts eyes*

Daemonocracy on March 19, 2013 at 1:21 PM

Off-the-books jobs are just the tip of the “new” economy; black market cigarettes/cigars/alcohol, fell off the truck prices for furniture, clothing, electronics, and in almost every transaction, cash ensures a hefty discount. The Doctor charges less for cash, the auto mechanic, too.

The government, with it’s excessive taxes and regulations, has become an enemy who tries to crush us with their power to take our property and force us to comply with what they think is “fair”.

srdem65 on March 19, 2013 at 1:23 PM

It’s like the USSR economy – “you pretend to work, we pretend to pay you”.

Archivarix on March 19, 2013 at 1:24 PM

Its only a problem if you don’t vet the guy/gal before you buy/sell.

Gatsu on March 19, 2013 at 12:47 PM

Great advice for everyone !!!

jake-the-goose on March 19, 2013 at 1:26 PM

Are we experiencing an off-the-books boom?

Oh, and to answer the question… NO… we are not experiencing an off-the-books boom. We’re seeing everyday people find a new way to survive day-to-day against a government that punishes people for achieving “too much success”.

dominigan on March 19, 2013 at 1:26 PM

“Anarchy is the sure consequence of tyranny; or no power that is not limited by laws can ever be protected by them” John Milton

Speakup on March 19, 2013 at 1:26 PM

Off-the-books jobs are just the tip of the “new” economy; black market cigarettes/cigars/alcohol, fell off the truck prices for furniture, clothing, electronics, and in almost every transaction, cash ensures a hefty discount. The Doctor charges less for cash, the auto mechanic, too.

The government, with it’s excessive taxes and regulations, has become an enemy who tries to crush us with their power to take our property and force us to comply with what they think is “fair”.

srdem65 on March 19, 2013 at 1:23 PM

AMEN! Excellent post!

dominigan on March 19, 2013 at 1:27 PM

Appropriate quotes/responses:

Capt. Renault: “I’m shocked!”

Private Pyle: “Surprise, surprise, surprise…”

LooseCannon on March 19, 2013 at 1:29 PM

While I mostly agree, I don’t think it could have been just any modern democrat, people really have seemed to come unhinged with him in office, so while he is a symptom of the true liberal rot, he is most definitely acting as gas on the out of control fire.

Gatsu on March 19, 2013 at 1:03 PM

Obama is different only in the speed and stridency in which he has imposed a socialist dictatorship. Which again might have been done by ANY of the democrats who ran for President since the 1970′s if they had an electorate so accepting of Looting.

Up until Obama democrats HAD TO LIE to the electorate about what they were to win. Even Obama did in 2008. Now they don’t. Election 2012 was a seminal turning point in our history.

wildcat72 on March 19, 2013 at 1:29 PM

The first rule of Black Market, is don’t talk about the Black market.

portlandon on March 19, 2013 at 1:08 PM

It’s not “black” market, just market. “Black market” would be racist. Who do you think we are, Democrats, the party of slavery, segregation and racism? *wink*

dominigan on March 19, 2013 at 1:31 PM

Just another reason to scrap the current tax code for the Fair Tax. A consumption tax will more accurately represent the country’s economic activity and encourage policies that contribute to growth.

Best of all, every time someone purchases something, they’re reminded exactly how much their government is costing them.

LooseCannon on March 19, 2013 at 1:32 PM

From some of what I have read, doctors are changing their practices because of Obamacare. A handful are returning to the long-gone practice of making house calls, with those and other transactions in cash for a lower fee. Short of getting search warrants for every doctor in the country, government can’t get a look at those medical files.

Except for quacks and the occasional Dr. Feelgood and his magic pills, I never thought I would see the day when doctors would feel need to provide services under the radar.

Liam on March 19, 2013 at 1:33 PM

The underground economy is ALSO encouraged as a way to qualify for all sorts of government benefits you wouldn’t qualify for if it was ‘above board’. Foodstamps, housing assistance, etc. etc.

michaelo on March 19, 2013 at 1:33 PM

Oh, and to answer the question… NO… we are not experiencing an off-the-books boom. We’re seeing everyday people find a new way to survive day-to-day against a government that punishes people for achieving “too much success”.

dominigan on March 19, 2013 at 1:26 PM

Exactly.

“Off the books” is being created as a necessity, not because it’s wanted.

The Soviet Union created the same thing, most of the Russian economy was underground. Post-Soviet Russia eventually brought it out into the open by going to a simple flat tax…

wildcat72 on March 19, 2013 at 1:33 PM

Just another reason to scrap the current tax code for the Fair Tax. A consumption tax will more accurately represent the country’s economic activity and encourage policies that contribute to growth.

Best of all, every time someone purchases something, they’re reminded exactly how much their government is costing them.

LooseCannon on March 19, 2013 at 1:32 PM

Much as I like the idea of consumption tax, it will give the black market a major boost. Moving one’s retail into no-paperwork mode is much easier than hiding one’s income.

Archivarix on March 19, 2013 at 1:35 PM

Pssst… hey buddy… you interested in a 32-oz soda or a pack of cigarettes under $5?

The Rogue Tomato on March 19, 2013 at 1:36 PM

“Evil Corporations” aren’t the ones doing this. It’s those pesky individuals and small businesses.

We will see cries on the left for more ability to place clamps on individuals and small businesses to ensure that they are participating properly in our Utopian society.

weaselyone on March 19, 2013 at 1:45 PM

Pssst… hey buddy… you interested in a 32-oz soda or a pack of cigarettes under $5?

The Rogue Tomato on March 19, 2013 at 1:36 PM

Well that certainly is less awkward than “Is that a 32oz soda under your coat or are you just glad to see me?”

Happy Nomad on March 19, 2013 at 1:45 PM

Incomes haven’t risen by nearly enough to explain the entire boost in spending. Nor has the use of credit cards.

Some economists are asking the same question about consumers who seem more flush than they ought to be.

And the next step will be reporting of all bank transactions, and a possible fee on cash withdrawals.

GWB on March 19, 2013 at 1:48 PM

The underground economy is ALSO encouraged as a way to qualify for all sorts of government benefits you wouldn’t qualify for if it was ‘above board’. Foodstamps, housing assistance, etc. etc.

[michaelo on March 19, 2013 at 1:33 PM]

This is one of the few drawbacks to the underground economy. But it seems to me it wouldn’t make much a difference to where we are.

If there is someone here who might think so, ask yourself how much difference there would be in the Federal deficit is some how, magically, the Feds had collected the revenue from the underground economy in the same manner as it does from the above ground economy. I’d submit it wouldn’t make a difference, i.e., they’d still spend it all and still run the same size deficit.

Dusty on March 19, 2013 at 1:48 PM

“Evil Corporations” aren’t the ones doing this. It’s those pesky individuals and small businesses.

weaselyone on March 19, 2013 at 1:45 PM

We used to call that bartering. But, of course, that was before the IRS issued hundreds of pages of regulation about payment-in-kind and other ways that people might get stuff without the exchange of dead presidents.

Happy Nomad on March 19, 2013 at 1:48 PM

The black-market (is that racist?) will only grow larger.
Especially when Americans see governments seizing bank accounts.
I leave as little as possible in the bank.
I have been “investing” in lead.

redguy on March 19, 2013 at 1:52 PM

My philosophy is to treat the federal government (and state & county) as an employee, and pay it what I think it’s worth.

I know an awful lot of folks here in the People’s Republic of Maine who are working cash/barter only and it’s the only way they can keep their heads above water.

No one up here is hiring. Jobs are extremely scarce and those are mostly lower-paid service type ones. You HAVE to do “other” work in order to survive.

TKindred on March 19, 2013 at 1:52 PM

Dusty on March 19, 2013 at 1:20 PM

I was assuming the “unsafe” part was because you run the risk of being afoul the law.

GWB on March 19, 2013 at 1:54 PM

Good thing we’re keeping drugs and the world’s oldest profession illegal.

John the Libertarian on March 19, 2013 at 1:55 PM

Something I saw on the internet a while back….

How to live as a conservative in Obama’s America
or
Going Galt while staying right where you are

- Do anything you can to reduce your tax liability to the federal government. Have more kids (that’s another thing that annoys liberals). If your income and the size of your family are just right, you’ll be effectively tax exempt. Stay that way, even if it means not seeking a higher paying job. (It’s not like they’re out there anyway!)

- To the extent possible, disengage from the economy. This means a few things. If you need a big ticket item, buy it used rather than new, and preferably from an individual rather than a business (avoids taxes). If you buy new, try to buy from a local business. Trade and barter goods and services whenever possible. Plant a garden. Make your own stuff. If you don’t need it, don’t buy it.

- Repair, don’t replace. You’d be amazed how many car and home repairs you can do on your own. Purchase a repair manual for your car. Libraries and book stores have tons of books on home repair and improvements. Don’t pay someone else to do anything you can do yourself. If you’re not handy with tools, get the help of a friend or relative until you are.

- If you invest, invest in hard assets like real estate or precious metals. Don’t just push paper around.

CurtZHP on March 19, 2013 at 1:57 PM

Much as I like the idea of consumption tax, it will give the black market a major boost. Moving one’s retail into no-paperwork mode is much easier than hiding one’s income.

Archivarix on March 19, 2013 at 1:35 PM

In principle, yes, but there is also the psychological effect to consider. With the implementation of a consumption tax, a great deal of what the general public perceives as inherent corruption in the tax code (tax breaks, favors, etc.) will go away. There would follow a greater willingness to abide by a taxing architecture seen as applying fairly to everyone, as well as constant public pressure on legislators to keep the rates low in light of the visibility of the taxes.

LooseCannon on March 19, 2013 at 1:59 PM

Just read Etsy’s statistics or Ebay’s -

djl130 on March 19, 2013 at 2:00 PM

[LooseCannon on March 19, 2013 at 1:32 PM]

The only problem I see with discussing different methods of taxation is that it is intended, fundamentally, to figure out how to collect more in tax revenue. That, in the end, means more government.

The problem is too much government, not insufficient tax revenue. In fact, it’s darn near certain that no matter what type of tax method one has, the government will engage in deficit spending.

Based on the what happened over the weekend with Cyprus, and news today about the same subject being broached in New Zealand, I’d suggest that as long as there is money the government doesn’t have, they will be working on ways to take it.

Dusty on March 19, 2013 at 2:00 PM

If this is indeed the reality of the current American economy, we should ask ourselves how we arrived at this situation.

How long will it be after we passed it until we really know what’s all in it?

Lily on March 19, 2013 at 2:03 PM

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.

Yea right.

Which is safer?

A cash and barter economy, or one that relies on the “safety” of the politicians, the bailed out bankers, the vulture capitalists and the lawyers?

MichaelGabriel on March 19, 2013 at 2:13 PM

I was assuming the “unsafe” part was because you run the risk of being afoul the law.

[GWB on March 19, 2013 at 1:54 PM]

That was the one meaning I took as understood, and being a fundamental characteristic of an underground economy, didn’t think that was what Ed was implying.

The one I thought he implied was not having work done to generally recognized standards, i.e., the other part of regulations not having to do with the government getting it’s cut. For example, below standard housing electrical or plumbing work, backyard garage auto repair, tainted food products, those kinds of things where cutting corners may lead to unsafe conditions and the consumer won’t have the benefit of the government mediating a complaint via the court system.

The bling remark in the USNews story, I read as prostitution, drugs or stolen goods. I think that is a small % of the underground economy.

Dusty on March 19, 2013 at 2:14 PM

Just preparing the way for a crackdown!

astonerii on March 19, 2013 at 2:15 PM

The emerging black market is just the tip of the iceberg. There are plenty of OTHER telling little signs that do not bode well for the American republic. Yet another little “omen” that is currently “flying under the radar” is the fact that American baby boomers are retiring in foreign countries in record numbers. It’s a trickle right now, but long term, it will likely turn into a torrent — the likes of which have not been seen since the Cold War, when people fled the Warsaw pact countries for the West.

My collie says:

With that little 17+ trillion dollar debt looming on the horizon, do you blame them? It’s like musical chairs. When the music stops, and someone has to PAY for all the past excesses of Congress and the President, all the shrewd and sane people are going to want a chair to sit-in. Chances are, the best way to guarantee oneself a seat is to relocate one’s retirement nest-egg in a foreign country — where the progressive Nazis in Washington D.C. will have more difficulty getting their hands on it.

CyberCipher on March 19, 2013 at 2:16 PM

actually this story is probably just the US lame stream media toting more water for their self-made god. Since all the numbers show the economy is in BAD shape even after 4 years of promises and endless semis full of cash – there has to be a reason and it couldn’t possibly be their god and his foolish spending.

Remember, we don’t have a debt problem McLame and god said so. So consumers must be flush with cash and just spending under the table.

katablog.com on March 19, 2013 at 2:19 PM

While there is no doubt that people are going off the books to an increasing degree, the source of spending that the American consumer is doing is not great mystery: the savings rate has been plummeting again for months now. This is very reminiscent of 2008. There were news stories just yesterday about how 25 percent of those with 401k’s are tapping them to pay bills.

This can last only so long before spending dries up, retail craters, and recession swallows the ‘recovery’ yet again.

PD Quig on March 19, 2013 at 2:23 PM

We wound up in this situation for the same reason we don’t take prisoners in the war on terror. We daren’t take prisoners because our legal system is such a farce we can’t guarantee a conviction of even the most guilty human being without umpteen years and millions of dollars of wasted money. Likewise regulation has so murdered the aboveground economy more and more people are turning to the underground one.

The only answer I can see to that is to return to the limited government first principles of our founding. Make few laws, but rigorously enforce the ones we DO keep.

How we’re going to do that when so many people have an investment in the system being what it is I’m not sure.

pendell2 on March 19, 2013 at 2:27 PM

Who run Barter Town?

OhEssYouCowboys on March 19, 2013 at 2:29 PM

CurtZHP on March 19, 2013 at 1:57 PM

Exactly. I needed to have the water line from my well-house to my domicile replaced. Since I am retired and did it myself the only cost was for the materials (PEX PIPE, fittings,tool). I now have the expertise to add water lines to each green house I build and again my only costs will be for materials.

chemman on March 19, 2013 at 2:29 PM

Chances are, the best way to guarantee oneself a seat is to relocate one’s retirement nest-egg in a foreign country — where the progressive Nazis in Washington D.C. will have more difficulty getting their hands on it

Good luck with that. The US IRS has already imposed such onerous reporting requirements on foreign financial institutions that is it near impossible for an American citizen to open an account offshore. De facto currency controls. Foreign institutions don’t want us anymore–just isn’t worth the trouble…especially if you’re a small fry.

PD Quig on March 19, 2013 at 2:30 PM

Good thing we’re keeping drugs and the world’s oldest profession illegal.

John the Libertarian on March 19, 2013 at 1:55 PM

The problem is that “legalization” of something is not a cure all. Here in Colorado our voters legalized marijuana in a very poorly worded voter initiative; and some of the second order realities that were predicted are coming to pass. With legalization you have more widespread use and a rise of Driving Under the Influence and Driving While Ability Impaired. And unlike alcohol where a BAC% can be determined and correlated with impairment, THC is not detected in the tests directly, but by metabolites from past use in the bloodstream. Those levels remain for varying lengths of time not correlated with immediate impairment [i.e. the tests can detect pot use in the past, and cannot accurately differentiate from a current buzz]. Driving stoned is as dangerous as driving drunk, but getting a legal charge is now problematical.

As second point is the matter of taxes. Yes, it will be taxed. However, with the low production costs; like with alcohol and cigarettes [better than half of the tobacco sold in NYC is bootleg/untaxed], most of the retail cost will be taxes. And like with alcohol and tobacco, as the taxes rise, black market [and therefore illegal] sales will rise. With limited home growing legalized, it will be impossible to be sure where it is coming from and every private grower is a potential bootlegger as far as the government is concerned. Thus there will still be raids, and criminal charges.

A similar template applies to prostitution. Even in the Netherlands; legalization, regulation, and taxation did not eliminate off the books [illegal] prostitution and pimping. In large part because of the hassle of doing it legally.

Government itself will make any free trade illegal, because it will be in their financial and power interest to do so.

That template now also applies to jobs, employment, and production in this country too.

Subotai Bahadur on March 19, 2013 at 2:31 PM

Let’s say there is an underground economy what should that tell us and the experts?It tells us all that the United States people and their economy is capable of recovering on its own without all the government intervention. It seems Washington is not intelligent enough to know that and to stop meddling. What say all?

Pardonme on March 19, 2013 at 2:42 PM

Dusty on March 19, 2013 at 2:14 PM

Good points.

GWB on March 19, 2013 at 2:45 PM

Its not an off-the books boom its folks raiding their retirement accts and burning up the credit cards

NY Conservative on March 19, 2013 at 2:48 PM

Its not an off-the books boom its folks raiding their retirement accts and burning up the credit cards

NY Conservative on March 19, 2013 at 2:48 PM

I’m paying off my credit cards. I did raid my retirement account. At least my official one, to minimally help pay for my move to a new job.

Maybe I should join the underground.

astonerii on March 19, 2013 at 2:54 PM

Dusty on March 19, 2013 at 2:00 PM

I agree that the objective should not be more revenue, but less government. That said, I stand by my argument that the high visibility of a consumption tax would exert pressure to keep the rates as low as possible. Coupling this with spending limitations, (balanced budget, base next year’s spending on last year’s revenue, etc.), would go a long way toward forcing budget responsibility.

Right now, the average worker simply sees his net pay, after taxes have already been deducted. With a consumption tax, that worker would see a greater amount in his paycheck, and have to watch it go out a piece at a time with every purchase made. I can think of no better way to make the average Joe more acutely aware of, and promote his objection to, the profligacy of government.

LooseCannon on March 19, 2013 at 3:01 PM

Heaven forbid people should trade goods and services without government authorization.

echosyst on March 19, 2013 at 3:03 PM

Also, one of the really beneficial effects of a consumption tax, instead of the income tax, is that if those in government want more to spend, they will have to embrace policies that engender growth and prosperity.

LooseCannon on March 19, 2013 at 3:03 PM

A retired fireman collects his pension (at 55 no less) and also works for cash (and just applied for another government job). Another is collecting disability, and works for cash. Still another is on her 99 weeks unemployment and working for cash. That’s no black market economy, it’s just plain old double dipping … Some families have quit making mortgage payments altogether and just dare the bank to evict them, which hasn’t happened … going on three years now. Yay for disposable income.

PoliTech on March 19, 2013 at 3:07 PM

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.

Drug money

GarandFan on March 19, 2013 at 3:10 PM

Right now, the average worker simply sees his net pay, after taxes have already been deducted.

LooseCannon on March 19, 2013 at 3:01 PM

Which is why I advocate – since we can’t get rid of the national income tax and return it to the states (where it belongs) very easily – the elimination of withholding, and the payment of federal taxes on the Friday before the Tuesday of election day. We might see some shifts in attitudes, then.

GWB on March 19, 2013 at 3:12 PM

Yeah, it’s the underground economy of trading in food stamps and EBT card for cash. feh. 47 million, remember?

jake49 on March 19, 2013 at 3:16 PM

GWB on March 19, 2013 at 3:12 PM

Agreed! And I thought I was overly optimistic!

LooseCannon on March 19, 2013 at 3:23 PM

I disagree. The underground economy is a good thing. It starves government of cash and forces it to face it’s problems earlier. There may be some downsides, but if you buy into the “lost revenue” argument then you are half way to Bat-Crap Leftist crazy. What do you call a dollar saved from the pinch of Uncle Sam? A full dollar’s benefit for a full dollar’s work.

If Government were even to the level of “average” or above, then you MIGHT possibly make the argument of “stealing”. Conversely, if the decisions are “Where’s Moochie”, or F16s for the Muslim Brotherhood, or Solyndra, then the problem never even approaches the radar.

There is really no excuse for the way that Government is behaving, so it deserves a spanking. That’s what we just tried (to the tune of a 2.8% decrease in the rate of increase) and the kid threw a fit! Stomping it’s feet on top of White House tours, kicking over Tuition Assistance for Military, and biting essential personnel with furloughs.
Nope! Meltdown happened right in the middle of the living room, where all the breakables are. Totally spared the toys in their room; the EPA, and SEIU forces.

IMHO, we need to take away ALL the allowance and force them to sit in their rooms. The “Grey Market” is the LEAST of our worries.

Medbob on March 19, 2013 at 3:41 PM

In September 2009 Obama put a 30% tax on imported tires and the price of my US made BF Goodrich truck tires went up the same amount the very next day. Haven’t bought any since. Don’t know about the people that gave me those brand new BF Goodrich tires I have but I assume Obama is getting his tax…

DanMan on March 19, 2013 at 3:47 PM

These are liberals. They vote for Obama and think taxes are for everyone else. They don’t pay S/E Medicare, Medicaid, on the money they make. They don’t pay the S/E on their babysitters wages. They don’t put that money on an income tax that they might need to sign up for benefits, or college tuition. There is a huge underground economy.

And then there is the economy that runs on abuse of the EBT card.

Fleuries on March 19, 2013 at 4:00 PM

Are we experiencing an off-the-books boom?

No. next question?

Deafdog on March 19, 2013 at 4:06 PM

So make smokes (for example) 10$ per pack and wonder why…

Underground economies exist to fill a void in a free market society. So make your stupid little rules and tax everything to death and watch what we do. Simple, easy (too easy for a lib).

landowner on March 19, 2013 at 4:14 PM

Excessive taxation will result in an underground economy. At some point the question doesn’t even involve “fair”, rather it becomes a “sport” (anybody living in Spain or Italy could attest to that…even if the tax rate went to 10%, with long periods of high taxes the mind-set is still to avoid the 10%). Europe saw that with the introduction of the Euro…the so-called “legacy” currencies had to be converted to the single currency. There were daily limits on doing that before their version of our “Currency transaction report” was issued. It was a real burden having to go to the bank every day for months to convert enough “mattress money” to stay below that reporting threshold. When they ran out of time, they went to real estate transactions where the agreed-upon price was reduced. The real price was made up “under the table” when the lawyer went to the bathroom.

teejk on March 19, 2013 at 4:32 PM

But, I don’t wanna be a pirate.

Or, maybe I do.

Fallon on March 19, 2013 at 4:38 PM

it cannot extract rational revenues from its participants

Sure it can. Several rational taxes such as a sales tax fit the bill.

burt on March 19, 2013 at 6:03 PM

It’s called the interenet; anybody notice the amount of commerce happening on Ebay and Craigslist?

Tater Salad on March 19, 2013 at 6:11 PM

The black market was the only thing that kept the Soviet Union afloat as long as it did. The thing is that if it becomes pervasive enough then the government loses all authority. Our government has already lost its legitimacy through what has been done to the Constitution. That document is a dead letter and has been since FDR stacked the court. But ironically, the more they use the authority they still have the less it is respected.

People now only comply out of fear. Not because there is some legitimacy to the claim the government makes on their resources. Do you really think a child born now feels in any way whatsoever liable for the trillions in debt they had no hand in making and derived no benefit from?

The left can have its kleptocracy but they are going to find they can’t keep it. We are at the stage where the elite think they can game the system and insulate themselves from the ravages they inflict on the rest of us. That state of affairs cannot, and will not last. Eventually even the OWS crowd will get a clue and their anger will be all the more intense for having been fooled and used as they were.

Voluble on March 19, 2013 at 7:17 PM

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