America's Black Market Economy Booms!

The alternate headline of course could always be, "the inevitable had to happen sooner or later." Welcome to sooner folks. What I mean of course is that the inevitable results of the infliction of Socialism upon our economy is a new robust, underground economy. The good new I guess is that at least something besides the public sector, which produces nothing on its own merits, is humming along just fine. Our unofficial economy, which means crime and such, is flush with cash.

OK, simply labeling that part of the economy that happens outside of official channels as crime is not fair, but make no mistake about it, when people get caught in these enterprises, they will not be happy with the ensuing consequences. With that being said, participating in the underground economy in order to take care of one's responsibilities is the socially advantageous behavior in many instances. Bad laws lead to moral behavior becoming illegal, and Barack Obama has led us to that place. The former Soviet Union also had a vibrant underground economy, which traded in everything from boom boxes to blue jeans, to of course, cigarettes.

From the US News Article, (which I may add has improved a little since bankruptcy and switching to exclusively online content.)

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.

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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."

Baumohl cites several unusual trends to make the case for a booming underground economy. First, retail sales since 2009 have been rising at levels typically associated with an unemployment rate of 6 percent or lower. But unemployment has been above 8 percent for most of that time.

"Many of those who have left the labor force since the last recession have managed to earn income in the shadow economy," he believes. "Their spending still shows up in the official retail sales and personal consumption data."

Mayor Bloomberg and Governor Cuomo of New York succeeded in making it painful to sell and buy cigarettes legally in New York State. The result of course has not been that less people are smoking, only in the birth of a booming black market cigarette trade. Cigarettes are purchased legally from mass wholesalers in New Jersey, Connecticut, Pennsylvania, and Delaware, and then driven across an unguarded border into that vast laboratory of Socialism known as the Empire State. (Coincidence?) Those cigarettes are then sold for a hefty profit to those wishing to avoid the excess taxation rates of New York's legal cigarette market. Illinois of course has created the same relationship with Indiana, Michigan, Missouri, and Wisconsin. The only difference is that now, tax revenues in these two states have decreased so tremendously that they've twice hauled tobacco industry executives into their state legislatures for the purpose of getting to the bottom of why their tax revenues have taken a hit, primarily from from these sources.

Our current state of economic affairs has turned a much larger percentage of American Citizens into petty criminals. People are doing piecemeal work under the table so to speak, so that employers may avoid the punitive effects of hiring made reality by Obamacare and Dodd Frank. People who contract for cash don't need to be insured by the employer, have no Social Security Contribution due from the employer, no unemployment insurance to pay, no 1% financial transaction tax, and most of all, no responsibility to insure regulatory compliance of any kind beyond the perfunctory record keeping of tracking one's expenses. While this activity borders on the realm of illegality, (most especially since many times the cash payments are kept under the table so to speak,) it is none the less a superior circumstance to the alternative, which is an even greater number of Americans on food stamps. Bear in mind that we have already broken that illustrious record recently, both in terms of numbers and percent to total population.

Unfortunately, with the advent of black markets, other forms of crime will be heralded as well. People who break the law usually do not want to be caught doing it. That will add layers of organization and costs as well, both economic and societal. The good news is that the American People are showing an amazing amount of resilience and ingenuity as far as figuring out a way to adapt to an incredibly bad situation. The bad news is that this is going to get worse before it gets any better. We have 3 and 3/4 years of that old Obama magic ahead of us, and Zerocare does not fully implement until next year.

Cross Posted from Musings of a Mad Conservative.