Is It Gerance or Framany?

Germany and France have been talking a lot and have a lot of talking to do. They are discussing closer ties in the EU, especially among the two of them as they seem to be largely calling the shots. Yet they are not yet proposing a single Euro bond to support the spending needs of all countries in the EU. In other words, the voters in Germany and France will vote their leaders out if such an overt move is made toward their countries bearing the burden for those PIIGS. Now I realize that folks in Germany may view Greeks as being lazy and over paid, but the French have never hit me as the hardest working individuals. I am not meaning this as an insult as long lunches, lots of vacation and a more relaxed work environment are perhaps beneficial to doing good work, but it is hard for the French to look upon the Greek as lazy.

We had an office in France and sent a manager over from the U.S. to figure out what was going on there. After a year, he could not figure out at all what three people did in the office. We closed it, even though that cost more than keeping it open due to French laws on what we had to pay to those we laid off. All the work from dozens of people in that office was transferred to another office and they did not have to hire anyone to take it. Just saying . . .

It is stuff like this that drives voters crazy in Germany. I just read today that jobs paying 70,000 euros in Germany pay 100,000 euros in Greece, and the Germans do a better job. Imagine that German worker now being asked to support the higher paid Greek when the higher paid Greek is complaining about perhaps having to deal with longer hours, less pay, fewer benefits, later retirement and the like (all of which are categories where the German worker is already behind the higher paid Greek). And it is no small secret that cheating on taxes is rampant in Greece. If we had a state in the U.S. that did this and looked to the federal government to be bailed out, I think a lot of other states would revolt.

Okay, let's visit this last thought for a moment. As I write this I am sitting in a house in Del Mar, California, that my family and some friends are renting for the week. Very reasonable at $1500 for the week. The house across the street with no ocean views is for sale for $2.3 million. Probably one out of five cars in this area cost over $50,000. The streets are clean as they clean them. Every major road has bike lanes. They have beautifully maintained parks and beaches. I have never seen so many cars in my life and so little public transportation. Indeed, I was in a traffic jam the other night on a highway that had eight - yes EIGHT - lanes going in my direction and it jammed as these were going down to seven. A fair percentage of these people have a fantastic life, but they also have a state deficit well north of $10 billion (assuming the revenues are as rosy as predicted).

So how would I feel if I were asked to have my tax dollars help bail out California? I would be totally pissed off, that is how. I know there is more wealth within 15 miles of me than in my entire state of New Hampshire, and this is not an overstatement in the least. Within 15 miles of me is San Diego, La Jolla, Del Mar and a host of other southern CA locations. San Diego alone has over three million people, which is nearly three times the number in all of New Hampshire and I suspect the real estate value of San Diego exceeds that of the entire state of New Hampshire by multiples - seriously.

Now if you are from California and fuming at my words, let me lay a bit more stuff on you to ponder. We do not have many bike lanes in NH, though we do have a lot of hiking and bike trails to use, numerous 4000+ foot mountains to climb, ski resorts, lakes, etc. We do not have hundreds of miles of beaches to visit, just 16 miles of coastline and access to Maine and Massachusetts coast. We have no income taxes and no sales tax, other than on prepared food. And you can get an excellent house in the best towns with the best schools, with a few acres to play on, for under $500,000. I dare say that the average citizen in NH gets by on half as much as the average citizen in CA, when you price in government spending.

So if we in the Granite State, with our great median income, low poverty, low unemployment and a well managed deficit, are called upon to help California, well they need to build into this package some hefty future paybacks. I look at this as akin to the relationship between Germany and Greece. Not saying the folks in California are like the Greek as I know they work hard, but their public spending is through the roof and I am not about to pay for it. I am not willing to pay for their lavish lifestyle.

Of course some of this is tongue-in-cheek. I have plenty of friends in California who work hard for modest lives and have no more to do with the CA deficit than I do with the federal deficit. Still, you can see where some in Germany or France are taking offense to supporting their less prudent neighbors.

I suspect folks in other states feel the same in dealing with the states that had the massive real estate and debt problems. Not our problem.

I guess therein lies the rub. It is in fact our problem. We can go down with the ship even if we did what we were supposed to do. And so, the sound thing to do is support our brethren - despite their foolish ways - and expect them to do the same for us, or perhaps somehow repay us in time, for our generosity. Germany and France have taken this attitude to date - because it serves their self-interests - but they are quickly butting up against sentiment that recognizes (or at least believes) they may weather the storm better without the weak links in the EU. I suspect this game ends relatively soon. This will not stretch out for decades as it has in Japan.

Disclosures: None