Are we experiencing an off-the-books boom?

[Valin]

Hot Air:

Ed Morrissey

3/19/13

 

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:

 

 

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."

 

(Snip)

 

Another clue to the underground economy comes from government data on the percentage of Americans who forego banking services, finding other ways to handle their money. The percentage of Americans who are "unbanked" or "underbanked" rose from 25.8 percent in 2009 to 28.3 percent in 2011. Some of those people may be low-income customers getting hit with a slew of new banking fees, forcing them to reject traditional banking. But others may be choosing to keep their money out of the mainstream financial system so that nobody checks up on them.

 

We tend to think of the underground economy as a place where Mafiosi and other types of criminals operate. But that's more or less a constant. The new underground economy may entail a lot of people doing honest work, such as freelancers and consultants who used to be full-time professionals, computer-repair people laid off from corporate IT departments, home remodelers benefiting from a revived housing sector, people running eBay business, and retirees earning a few extra bucks by running errands for busy parents. The Internet obviously makes it easier to work from home these days, another boon for the gray market.

 

(Snip)

 

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.

 

(Snip)

[clearvision]

Draw unemployment and work a cash job too.