The Underground Economy

Mar 26

Because the population is growing and new people are continually coming onto the job market, we need to produce roughly 1.5 million new jobs a year—about 125,000 a month—just to keep from sinking deeper.

Don Peck “How A New Jobless Era Will Transform America” The Atlantic March 2010

 

Jobs Creation and the Unemployed

  • It will take 10 million additional jobs to bring the U.S. back to a 5% Unemployment Rate
  • At 600,000 new jobs/month it will take us two years to return to 5% Unemployment
  • The Unemployment Rate is around 10% or approximately 12.5 million people
  • The Underemployment Rate is at least 17%, or approximately 22 million people

In a sense every time some one is laid off now, they need to start all over. They don’t even know what industry they’ll be in next.

Gary Burtless, Labor Economist, Brookings Institution

The Failures of a Growth Economy

 Because of short term results rather than long term value creation, and “financial engineering” rather than funding business innovation: “natural” rate of unemployment will be between 6.5 and 7.5 percent even if the country reaches complete “recovery”.

 Edmund Phelps, Nobel Prize Economist, Harvard Business Review

 

Trained throughout childhood to disconnect performance from reward, and told repeatedly that they are destined for great things, many are quick to place blame elsewhere when something goes wrong, and inclined to believe that bad situations will sort themselves out-or will be sorted out by parents or other helpers. Sense of entitlement and highly structured childhood results in a lack of independence and entrepreneurialism in many 20-somethings. 

 Twenge/Alsop  Atlantic Monthly  March 2010

 

Compounding all of the above is that skills diminish, behavior changes, and people age as unemployment lengthens. What is going to happen to all these people?

 

The Major Players in the Underground Economy

It is estimated that the Underground Economy could be as large as 8 to 15% of  U.S. GDP (Gross Domestic Product) or $14 trillion.  That is a total of $970 billion to $1 trillion, and is most likely expanding at a rate of 5 to 6% per year!

  1. Labor/Goods/Services: Paid in Cash
  2. Illegal Drugs/Organized Crime: UN Report Retail Value $321.6 billion Worldwide
  3. Prostitution
  4. Weaponry: Smuggling, Theft from Arms Manufacturers
  5. Alcohol/Tobacco: Tax Avoidance, Smuggling
  6. Copyrighted Media: DVDs, Music CDs, Computer Software, Video Games
  7. Currency: Counterfeiting, Exchange

The Major Factors Stimulating  the Underground Economy

  • Unemployment
  • Underemployment
  • Illegal Immigration: 9 to 20 million people plus
  • Complex/Unfair/Unenforceable/Uncollectable Tax Codes and Revenues
  • Greed

Tax Gaps and Tax Avoidance

Illegal immigraton is estimated at $50 billion per year in lost tax revenues.

Private cash contracting is estimated at $400 billion per year in lost tax revenues.

Criminal activity is estimated somewhere around $1 trillion per year in lost tax revenues.

The U.S. government deficit is 10.6 % of GDP or $1.5 trillion.

The Bottom Line 

  • America’s infrastructure including streets, roads, highways, bridges are all deteriorating at an alarming rate
  • Our Public Education System of primary, secondary, and higher learning is approaching a shambles
  • The Public Services sector including police, fire and emergency services are understaffed with rising crime rates and declining morale and are all quickly reaching crisis proportions
  • Escalating Medicaid and other social services expenditures mirror our rising underclass with poverty rates and illegal immigration a major drain on scarce resources

If individuals are unemployed, underemployed, or illegal immigrants where might they turn to support themselves and their families? The best guess is that the Underground Economy would look more and more attractive all the time. Some would simply avoid taxes by working for cash. Others of course would most likely turn to more illegal and much more lucrative forms of tax avoidance, which not only means billions in lost tax revenue, but is also costly to regulate and control by police and other agencies. 

We the Taxpayers Take a Substantial Double Hit 

  • We pay more for our share of infrastructure and schools
  • We pay more for police, security agencies, jails and prisons to regulate and control illegal activities and warehouse lawbreakers. 

As populations increase so do all the problems above, in fact if history is any indicator they will undoubtedly accelerate faster than population growth in terms of percentages and therefore overall numbers. 

Consequently, the arguments for decreasing populations rather than allowing them to increase look better and better all the time! 

 

 


Economy

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The Real “Inconvenient Truth”

Mar 06

NASA Photograph

The intelligent solution would require the courage and the wisdom to put our knowledge to the test.  It would be poignant and distressing in ways, but not fatal. It would henceforth limit every human female on Earth capable of bearing children to one.

Alan Weisman The World Without Us

What Al Gore Has Accomplished

 

  • I admire the book, An Inconvenient Truth. I admire its entire presentation 
  • I admire how it evolved into a film from a man’s quest to educate through a series of slide shows, traveling throughout the United States and other countries 
  • I admire Al Gore’s  messianic zeal to tell a story that has to be told 
  • I admire his courage coming back from a questionable “political defeat”  to center on a cause, which is critical for us and future generations
  • I admire all the people; researchers, editors, producers, artists that worked on both the book and the film – it was all very well done

 

But Al Gore Failed to Acknowledge The Defining Issue

What I don’t admire nor understand is how Al Gore could have rejected the telling point of his journey.

Global Warming is certainly a major issue. It is extremely important, but that alone does not make it The Defining Issue.  

  • What is crucial to understand is that we are adding one million people to this planet every four days 
  • What is crucial to understand is that we have now burdened the planet and ourselves with almost 6.5 billion people; and 300 million plus live in the United States  
  • What is crucial to understand is that 300 million Americans are using and abusing 30% of the world’s resources, and the rest of the world is doing a good job of consuming what remains  
  • With an ever-increasing sea of humanity, it would seem irrefutable that a few adjustments here and there to our environmental footprint is not going to be statistically significant in reducing Global Warming or the rate of depleting natural resources

Consequently, the billions of inhabitants on this planet are most assuredly the root cause and The Defining Issue

Why We All Fail to Acknowledge The Defining Issue

  • People shun efforts to reduce populations because we have already produced more than our fair share of children, so we ourselves are already part of the problem 
  • Therefore, we find it uncomfortable and somewhat disingenuous to be lecturing about population reduction when we ourselves have failed to live up to our own pleas for restraint 
  • Al Gore has four children, that is a significant increase from one or two 
  • When rereading the Gore book I could find only 6 pages out of 325 that spoke in any real way about overpopulation  

What We Can No Longer Avoid

  • Many Should Consider Having No Children, Most Should Consider Only One, a Very Few Only Two
  •  Let’s at least be realistic,  we can’t possibly make any significant changes in our current environmental catastrophe-in-the-making until we are willing to be forthright about the fundamental cause
  • Reducing populations is the only measure that can significantly impact and reduce Global Warming and stop the depletion of our natural resources
  • Anything else  is comparable to building more freeways that will be obsolete before they are completed.  To be frank, that is “Don Quixote” stuff

Yes, but some would say the United States is a relatively small part of that 6.5 billion number.  True, but we are also the greatest consumer of resources and products, and the greatest polluter and contributor to greenhouse gasses. 

Reducing populations means we must be at least as committed as others, if not more so.  We are the most powerful country in the world.  As we go, so goes the world.  To ask others to do what we are not willing to do is a formula for failure and eventual disaster.

In conclusion, what would you rather have: a world population of  3 billion in 2075 and a comfortable, livable environment, sharing equitably and sustainably our natural resources; or a world of 9 billion people in constant conflict and anxiety, with much of that population living in a poverty, pollution, toxic nightmare and governments fighting constantly for whatever natural resources remain?

 


Environment

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