Lessons for My Children…Chapter 3: Hiding from the government

By Dave Duffy
Issue #138 • November/December, 2012

After opening the discussion in this column last issue about the underground economy, I thought it would be a good idea to explore it more thoroughly since it promises to play such a big role in the future of America.

On pages 8 through 21, Claire Wolfe and John Silveira discuss the statistics, benefits, dangers, and transactions involved in the underground economy, so I decided to give some fatherly advice to my four children on how it will affect them for the rest of their working lives.

Let’s start with the fear associated with the underground economy. Both Wolfe and Silveira wrote disclaimers into their articles that stated they were not advocating doing anything illegal, such as encouraging readers to hide income from the government. I edited those disclaimers out. A third writer, whose article I did not use, submitted her article under a pseudonym because she said she wanted to avoid attracting government attention.

I empathize with these writers’ fear of our government, in particular its tax collector, the Internal Revenue Service (IRS). The IRS will heavily penalize anyone trying to evade paying taxes, and in the past they have seized the property of high profile celebrities and imprisoned them in order to send a message to the rest of us. I suspect they could easily find reasons to punish a publisher and his writers who advised readers to illegally avoid paying taxes.

So I won’t do that! Instead, I’ll explain to my children how the government intends to steal much of the money they earn over the next 30-40 years in order to make payments on the $16 trillion national debt (projected to rise to $26 trillion in a decade), nearly half of which is owed to my generation (I am 68) of retiring folks in the form of unfunded Social Security and Medicare benefits. (The Chinese own only about 8% of our debt.) When the 30-40 years is over, these two programs will either have ceased to exist or be incapable of paying your generation of retirees anything but pennies on the dollar of what you will be forced to put into the system. (Contrast that to my generation getting paid 5-10 times the value of what we put in.)

And I do mean “forced.” The government, or rather my generation who will control a major share of the vote, will instruct the government to maintain retirees’ benefits (Social Security and Medicare) at all costs, even if it means impoverishing the younger generations and imprisoning those who do not pay the higher taxes required.

As an aside, while my generation is doing that to you, it will still expect you to continue to fight their ever growing number of senseless wars (while they sit at home safely watching them on TV), go to jail if you smoke a little grass (while they suck down their booze with impunity), and pay the salaries and benefits of the enormous federal and state bureaucracies who will be enforcing all of the above.

When it is all over and my generation is gone, you will be left with a debt that will crash our economy and lead to a depression coupled with hyperinflation. If you want to get a glimpse of your future, just read about today’s Greece in any of the financial papers, such as the Wall Street Journal, to see what’s happening to them.

There’s obviously going to have to be a societal explosion somewhere along the line if you are to prevent your future from evolving as it is presently designed to do. Hard-pressed younger workers who are already feeling the pinch of fewer jobs and skyrocketing grocery bills will be forced to pay the benefits for my generation of retirees whose aggregate wealth is already many times more than the wealth of the young workers they will try to exploit.

I can’t imagine the younger generations will let this play out to its bitter conclusion, with them unable to adequately provide for their own children because they must use their scarce resources to provide for my generation. Especially because my generation has known Social Security and Medicare have been Ponzi schemes for decades, but has refused to fix them. I even wrote about it in a book I published 40 years ago, and have been writing about it for 20 years in this magazine. Most economists have similarly been sounding the alarm for at least 20 years.

So the underground economy will really be your only refuge, unless you decide to engage in mass protests in the streets like my generation did in the 1960s when we sought to stop a war in Vietnam that ultimately killed 58,000 of us. Of course, I think one response of our government will be to continue to send you off to senseless wars, if only to divert your attention from what is happening to you.

If you do decide your best hope for the future is in the underground economy, I wouldn’t blame you for it. If you and enough of your friends can avoid the heavy hand of the IRS, perhaps you can so starve the government of tax revenue that it will be forced to somehow change things. I don’t know how that will happen without my generation having to endure great suffering as part of the solution. That is what’s happening in Greece, and the rioting in their streets goes on daily.

Good luck! You’re going to need it!