Bomb Suspect Was Put on Two Watch Lists
CIA, FBI Flagged Him for Concern, Raising New Questions About Missed Opportunities to Prevent Fatal Boston Attack
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$2 Trillion Underground Economy May Be Recovery's Savior
By: Mark Koba Senior Editor, CNBC
Peter Cade | Image Bank | Getty Images
The growing underground economy may be helping to prevent the real economy from sinking further, according to analysts.
The shadow economy is a system composed of those who can't find a full-time or regular job. Workers turn to anything that pays them under the table, with no income reported and no taxes paid — especially with an uneven job picture.
"I think the underground economy is quite big in the U.S.," said Alexandre Padilla, associate professor of economics at Metropolitan State University of Denver. "Whether it's using undocumented workers or those here legally, it's pretty large."
"You normally see underground economies in places like Brazil or in southern Europe," said Laura Gonzalez, professor of personal finance at Fordham University. "But with the job situation and the uncertainty in the economy, it's not all that surprising to have it growing here in the United States."
Estimates are that underground activity last year totaled as much as $2 trillion, according to a study by Edgar Feige, an economist at the University of Wisconsin-Madison.
That's double the amount in 2009, according to a study by Friedrich Schneider, a professor at Johannes Kepler University in Linz, Austria. The study said the shadow economy amounts to nearly 8 percent of U.S. gross domestic product.
Much of that money goes into cash registers, said Gonzalez, as personal consumption has risen since the recession.
"There is consumer spending in the short term, with people having money even if it's not reported, and that's boosting the economy," she said. "But in the long run, an underground economy is telling us that things have to change."
The shadow economy is a system composed of those who can't find a full-time or regular job. Workers turn to anything that pays them under the table, with no income reported and no taxes paid — especially with an uneven job picture.
"I think the underground economy is quite big in the U.S.," said Alexandre Padilla, associate professor of economics at Metropolitan State University of Denver. "Whether it's using undocumented workers or those here legally, it's pretty large."
"You normally see underground economies in places like Brazil or in southern Europe," said Laura Gonzalez, professor of personal finance at Fordham University. "But with the job situation and the uncertainty in the economy, it's not all that surprising to have it growing here in the United States."
Estimates are that underground activity last year totaled as much as $2 trillion, according to a study by Edgar Feige, an economist at the University of Wisconsin-Madison.
That's double the amount in 2009, according to a study by Friedrich Schneider, a professor at Johannes Kepler University in Linz, Austria. The study said the shadow economy amounts to nearly 8 percent of U.S. gross domestic product.
Much of that money goes into cash registers, said Gonzalez, as personal consumption has risen since the recession.
"There is consumer spending in the short term, with people having money even if it's not reported, and that's boosting the economy," she said. "But in the long run, an underground economy is telling us that things have to change."
Shadow economies are usually associated with illegal activity, such as drug dealing. But anecdotal evidence indicates that off-the-books work in today's job market includes personal and domestic workers, such as housekeepers and nannies.
"The jobs are in service industries from small food establishments to landscaping." said David Fiorenza, an economy professor at Villanova University. "Even the arts and culture industry is not immune to working off the books in areas of music and entertainment."
It also includes firms that hire hourly or day construction labor, information technology specialists and Web designers. Many who have a job that doesn't pay enough take another one that pays under the table.
"We've always had people who make income without recording it, so it's not really new," said Peter McHenry, an assistant professor of economics at William & Mary College. "But the fact that more and more people are doing it shows how bad the job picture is," he added.
The reasons behind the underground economy's growth are fairly simple, according to Gonzalez.
(Read More: Spooked by Uncertainty, Little Main Street Hiring)
"There's a lot of uncertainly about immigration changes and who will be legal, and about paying for Obamacare," she said, adding that most workers in the shadow economy are in the country illegally. "Government rules are keeping businesses from hiring."
A report from ADP Research Institute states that many employers, especially in low-wage businesses such as retail and food service, plan to reduce workers' hours to less than 30 a week to avoid having to offer health benefits through Obamacare (or pay a fine).
"This type of regulation could put more people out of work and into an underground economy," McHenry said.
But employers have their own agenda, according to Padilla.
(Read More: Small Business Owners: Can I Get Some Cash Please?
"Businesses are not angels, and they exist to make a profit," Padilla said. "They are going to do everything they can to keep costs down, and if that means paying people off the books, they will do it. The government doesn't really have the resources to track down every business that does this."
What the government is keeping track of is lost revenues. According to the Internal Revenue Service, about $500 billion in taxes were lost last year because of unreported wages, versus $384 billion in 2001.
"The effects of the underground economy are larger than we think," said David Fiorenza. "The result is less tax money paid to the various levels of government."
"Those working and not paying the taxes puts the burden on those who pay the tax," added Fiorenza. "Taxes could be lower if the government where able to capture the underground economy instead of raising taxes on those currently paying the various income and payroll taxes."
But the dangers of a shadow economy go beyond dollars and cents, analysts said. Workers who aren't on the books don't get Social Security or health benefits, and worse.
"People who do these types of jobs run the risk of getting exploited with lower pay or not being paid at all," Gonzalez said. "There could be more exploitation if more people are forced into this type of economy."
"Some income is better than none, but there is a reason we have certain regulations in place to protect workers and what they do," McHenry said.
(Read More: Stealth Sequester? Where It's Really Being Felt)
In the end, what's happening below the normal economy should not come as too much of a shock, according to Gonzalez.
"People are running out of patience when it comes to finding a job and losing income," Gonzalez said. "So it's not that surprising to have workers take jobs that are in the shadow economy. But it's a sign of how bad things are and how we have to get the real economy moving again."
Record Number of Households on Food Stamps-- 1 out of Every 5
April 25, 2013
The most recent Supplemental Assistance Nutrition Program (SNAP) statistics of the number of households receiving food stamps shows that 23,087,886 households participated in January 2013 - an increase of 889,154 families from January 2012 when the number of households totaled 22,188,732.
The most recent statistics from the United States Census Bureau-- from December 2012-- puts the number of households in the United States at 115,310,000. If you divide 115,310,000 by 23,087,866, that equals one out of every five households now receiving food stamps.
As CNSNews.com previously reported, food stamp rolls in America recently surpassed the population of Spain. A record number 47,692,896 Americans are now enrolled in the program and the cost of food stamp fraud has more than doubled in just three years.
Has Watertown Made Warrantless Searches The 'New Normal'?
The
whole notion of the police "manhunt" is not a new American phenomenon.
Cops chase bad guys, cops corner bad guys. Sometimes the bad guys give
up quietly, sometimes they go down in a blaze of glory. But we've always
had rules of engagement when it came to law enforcement interaction
with the general public.
It appears all that got thrown out the window in the aftermath of the Boston Marathon terror bombing and the subsequent police chase in Cambridge, Massachusetts that came to a screeching halt in Watertown.
Seemingly, for the first time in the United States, we witnessed paramilitary-garbed law enforcement personnel forcing residents out of their homes at gunpoint. In some cases, the language used by law enforcement was menacing.
Because of the hysteria that comes after any terror event, the American people wanted the perpetrators caught and, in doing so, appeared to have allowed their rights against unlawful search and seizure to not be suspended, but removed.
How many times have we watched cop dramas on television where the police had a pretty good idea of where the bad guys were, but as they weren't sure, came to the door and asked permission to come inside to "have a look around"? The only time they ever bashed a door in is when they absolutely knew the bad guys were there. If there was ever any doubt, they'd have to wait... for a court order from a judge.
That did not happen here.
The police came to people's homes, ordered them to leave immediately at the point of a gun in some cases, and then entered their place of residence. It's never "consensual" when the person asking you for something has a gun in his hand. "Probable cause" is convenient, but in this case, very arbitrary.
Again, I understand this was the culmination of a horrific event, but let's say instead of the Thursday evening car chase racing through the streets and winding up in Watertown, it went up Route 9 and ended in very upscale Newton?
Do you think armed police would, under the authority of the governor of Massachusetts and the federal government, put an assault rifle nozzle in the face of a potential wealthy political donor? Would those policemen force the family of the elite into the streets while they entered a home that is worth 20 of their salaries combined?
If it weren't a middle class area like Watertown, would you really see a politician ordering law enforcement to forcibly enter and search homes on the upper west side of Manhattan or Georgetown or Beverly Hills? Would this happen to a celebrity in his home or, heaven forbid, a congressman?
When citizens are searched by pat-down, rousted out of their homes, and we end up thanking the police with blind understanding, the government has essentially found an acceptable means to take more of our rights away without even one politician having to cast a vote.
These past events in Watertown have set a precedent.
The police can now enter our homes anytime they want. It just requires a verbal massaging of the circumstance. After all, who ever heard of "shelter-in-place" before Friday, April 19, 2013?
If the government can order us to stay in our homes, it looks like it can throw us out of them any time it wants... at the point of a gun.
Editor's Note: Video courtesy of WHDH, Channel 7, Boston.
It appears all that got thrown out the window in the aftermath of the Boston Marathon terror bombing and the subsequent police chase in Cambridge, Massachusetts that came to a screeching halt in Watertown.
Seemingly, for the first time in the United States, we witnessed paramilitary-garbed law enforcement personnel forcing residents out of their homes at gunpoint. In some cases, the language used by law enforcement was menacing.
Because of the hysteria that comes after any terror event, the American people wanted the perpetrators caught and, in doing so, appeared to have allowed their rights against unlawful search and seizure to not be suspended, but removed.
How many times have we watched cop dramas on television where the police had a pretty good idea of where the bad guys were, but as they weren't sure, came to the door and asked permission to come inside to "have a look around"? The only time they ever bashed a door in is when they absolutely knew the bad guys were there. If there was ever any doubt, they'd have to wait... for a court order from a judge.
That did not happen here.
The police came to people's homes, ordered them to leave immediately at the point of a gun in some cases, and then entered their place of residence. It's never "consensual" when the person asking you for something has a gun in his hand. "Probable cause" is convenient, but in this case, very arbitrary.
Again, I understand this was the culmination of a horrific event, but let's say instead of the Thursday evening car chase racing through the streets and winding up in Watertown, it went up Route 9 and ended in very upscale Newton?
Do you think armed police would, under the authority of the governor of Massachusetts and the federal government, put an assault rifle nozzle in the face of a potential wealthy political donor? Would those policemen force the family of the elite into the streets while they entered a home that is worth 20 of their salaries combined?
If it weren't a middle class area like Watertown, would you really see a politician ordering law enforcement to forcibly enter and search homes on the upper west side of Manhattan or Georgetown or Beverly Hills? Would this happen to a celebrity in his home or, heaven forbid, a congressman?
When citizens are searched by pat-down, rousted out of their homes, and we end up thanking the police with blind understanding, the government has essentially found an acceptable means to take more of our rights away without even one politician having to cast a vote.
These past events in Watertown have set a precedent.
The police can now enter our homes anytime they want. It just requires a verbal massaging of the circumstance. After all, who ever heard of "shelter-in-place" before Friday, April 19, 2013?
If the government can order us to stay in our homes, it looks like it can throw us out of them any time it wants... at the point of a gun.
Editor's Note: Video courtesy of WHDH, Channel 7, Boston.
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