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The
U.S. Senator from Massachusetts, John Kerry, carried the Granite
State this year, defeating President George Bush by approximately
10,000 votes. And while Kerry lost both the popular vote nationally
and the Electoral College to President Bush, his New Hampshire
victory hasn’t gone unnoticed. To be sure, living in
Massachusetts had implicit advantages for Kerry – volunteers
streamed into New Hampshire from the Bay State in the closing
weeks of the campaign. Had Al Gore asked his allies in Massachusetts
to cross over the border in 2000, the nation would have been
spared the spectacle of the hanging chad. The 2004 send-up
in a divisive campaign made New Hampshire a contested battleground
state. But it didn’t live up to the hype. The action
was elsewhere, in Pennsylvania, Florida and Ohio.
And
while New Hampshire didn’t determine the outcome, it
certainly tempts us to change our thinking about our neighbors
to the North.
Once
called the Orange County of the Northeast for its staunch
fiscal and political conservatism, New Hampshire may be transforming
into a Blue State, in no small part because of the in-migration
of Massachusetts residents. If that’s the case then some
might ask how long before the arrival of a state sales and
income taxes? Or how long before limited government gives
way to expanded government, as migrants seek more services
and more anti-sprawl regulations. New Hampshire voters have
turned away such measures in the past, but recent events suggest
that the pressure to be more like Massachusetts is building.
Last
year, 19,048 people moved from Massachusetts into New Hampshire,
more than twice the 8,687 who moved the other way. Over the
last third of the 20th century, New Hampshire’s population
grew by 83 percent, while Massachusetts’s population
only grew by 15 percent.
According
to the U.S. Census, the populations of small towns in southern
New Hampshire are rapidly expanding, thanks to lucrative jobs
and a better quality of life.
Some believe the price of growth will result in higher taxes
with few benefits. “While I think growth is a good thing,
it will put a burden on services,” said state Rep. Corey
Corbin, R-Sandown, who represents Danville. He moved to the
area from Maine in 1995. “Taxes go up, but municipal
services stay the same.”
A
study by the University of New Hampshire Survey Center found
that 67% of the adults who live there were born elsewhere;
27% of current NH residents were born in Massachusetts; and
that at least another 50,000 have shown up since the last
presidential election. High-tech companies that set up shop
in the 1990s are responsible for much of that growth. These
migrants tend to be better paid and better educated than native-born
New Hampshire residents and on the surface culturally similar
to the coastal Blue State archetypes, in that they tend to
be socially liberal.
"The
reason this election is so close is because we’ve been
infiltrated by the liberal Democrats from Massachusetts,”
longtime resident Clifton Pratt told
Slate magazine earlier this year. Another resident Roy
Crossland agreed. “They move in because they like it
the way it is, and then they want it to change.”
Whereas
in the past New Hampshire tax policy served as a deterrent
to the wild spending ways of Massachusetts, influence today
may be going the other direction. While some libertarians,
under the auspices of the Free
State Project, are urging like-minded citizens to move
to New Hampshire to strike a blow for personal freedom and
lower taxes, pressures for expanding government appear to
be taking root.
The
election of Democrat John Lynch to the Governor’s office
in November over scandal-ridden incumbent Republican Craig
Benson could be viewed as a bellweather. Coupled with the
huge flow of Kerry volunteers, there was little chance that
President Bush could see a repeat performance in a head-to-head
match. In 2000,the President carried New Hampshire by 7,000
votes in a three-way fight with then Vice President Albert
Gore and consumer advocate Ralph Nader. Remove Nader from
the mix, and New Hampshire becomes a Blue State four years
ahead of schedule.
In
terms of governance, New Hampshire is still comfortably Republican.
The GOP controls the state legislature, one made up essentially
of volunteer lawmakers. The entire congressional delegation
– two senators and two representatives — is made
up entirely of Republicans. Candidates, including Democrats
like Lynch, are pressured to take the no-tax pledge to preserve
the so-called “New Hampshire advantage.” The mirror
opposite holds true in Massachusetts where Democrats control
the entire Congressional delegation and dominate the state
legislature which, in contrast to New Hampshire is made up
of full time representatives. Candidates for public office
in Massachusetts can safely ignore the no-tax pledge promoted
by the small but vocal tax limitation constituency.
The
Blue States’ claim on New Hampshire isn’t uncontested.
Writing
in the Manchester Union Leader, Bernadette Malone, the
paper’s former editorial chief, noted that southern New
Hampshire, where most Massachusetts refugees settle, went
solidly for Bush, while more urban areas went for Kerry. Unsurprisingly,
the rural part of the state tended to support the President.
Writes Malone: “Could this influx of Massachusetts people
be good news for those who want to keep the New Hampshire
'advantage' alive? It sure looks that way.” She adds:
“Yassir Arafat might finally be dead, but rock-ribbed
conservatism in New Hampshire isn’t even in the hospital.”
Malone
may not have paid close attention to Lynch’s decisive
victory in Southern NH. The same region that went slightly
for Bush went demonstrably for Lynch.
And
what of Massachusetts? It too has some subtle anomalies as
of late. The Bay State shows no inclination of ever going
the traditional kind of Red – save for the humorless
Trotskyites in Cambridge. Kerry carried his native state comfortably
but what went pretty much unrecognized and perhaps underappreciated
was the fact that the ostensibly maligned President garnered
over a million votes and improved upon his 2000 performance.
Moreover,
due to a succession of Republican governors and a mild dose
of tax-cutting in the 1990s, many believe that the home of
the most liberal members of the U.S. Senate can no longer
be assumed to be Taxachusetts. There’s little appetite
to roll back Proposition 2 1/2, a bulwark against runaway
local government. In 2002, voters came close to abolishing
the personal income tax. Legislators read that strong sentiment
as a message not to raise taxes.
There
was a time not long ago where New Hampshire posed an economic
challenge to Massachusetts. New Hampshire’s lack of a
sales tax posed problems for Bay State retailers along the
border. The lack of a corporate and personal income taxes
attracted businesses and individuals who were tiring of Massachusetts’
big government philosophy. And state-run liquor stores (odd
in a state that prides itself on limited government philosophy)
often drew sales from Bay State consumers on Sunday. Massachusetts'
weekend ban has since been removed.
The
nipping-at-the-heels competition was often trivial, given
that Massachusetts was a magnet for high technology, finance,
health care and higher education. The strength of the Bay
State’s economy was able to shoulder the burden of a
more “compassionate” state with fairly generous
social programs through the 1980s. During those heady days,
when mainframe computers ruled the innovation economy, Massachusetts
dominated the growing tech fields, with New Hampshire serving
as a satellite operation for companies such as Digital and
Wang. Then New Hampshire residents continued to work in the
Bay State, paying income taxes here and deriving little tax
advantage. And property taxes in the New Hampshire, among
the highest in the nation, seemingly cancelled out any other
advantages.
Nevertheless,
the belief that New Hampshire is the most business-friendly
state in New England prevails. According to the 2004 Taxpayers
Foundation’s State Business Tax Climate Index, New Hampshire
ranks 5th, which places it high in the business friendly arena,
while Massachusetts brings up the back of the pack at number
33. “New Hampshire is very receptive, and its economic
infrastructure and tax base, lower housing costs, and lifestyle
will continue to push companies out of the Boston area and
up to New Hampshire,” said Shayne
F. Gilbert, president of Future Forward Events LLC and
a member of the New Hampshire High Technology Council.
According
to the Pacific Research Institute’s U.S. Economic Freedom
Index, New Hampshire ranks 7th because of the ability “of
individuals to pursue their interests through voluntary exchange
under a rule or law.” Or, to put it another way, economic
freedom is the ability to set up a business with minimal regulation.
New Hampshire actually lost a bit of ground it was sixth in
1999. Massachusetts is in the bottom ten moving up from 47th
place in 1999 to 41st in 2004.
Is
New Hampshire really ahead of the curve?
Massachusetts,
of course, has advantages that the Taxpayers Foundation and
Pacific Research studies fail to capture. A true measure of
a state’s competitiveness captures whether a state has
the policies and conditions that foster and sustain a high
level of per capita income and its continued growth. To achieve
this, a state needs to be able both to attract and incubate
new businesses and keep existing firms flourishing. The outcome
of competitiveness is greater affluence, higher levels of
real Gross State Product or personal income per capita. According
to The Beacon Hill Institute Metro
Area and State Competitiveness Report 2004. Massachusetts
is better positioned than New Hampshire for meeting those
goals.
On the strength of its business incubation, technology and
human resources, Massachusetts ranked first in the nation.
New Hampshire, with its low crime, and favorable human resources
and business incubation, finished eighth overall. The Bay
State’s major disadvantage lies with its poor showing
in government and fiscal policies (overly generous unemployment
and workers compensation benefits, for example), poor infrastructure,
and heavy-handed environmental regulation. Surprisingly, New
Hampshire’s disadvantages also included government and
fiscal policies (due to high property taxes) and low marks
for infrastructure, second to last in the United States. New
Hampshire lags behind Massachusetts when it comes to openness,
defined as how connected a state is to the rest of the world.
Massachusetts’ exports are a measure of such openness
as well as its ability to attract foreign-born residents.
In addition to drawing migrants from other U.S. states, New
Hampshire might want to focus on attracting foreign-born educators,
scientists and engineers.
Some implications
Numerous
studies provide ample ammunition for partisans who would like
to move each state in the philosophical direction of the other.
Policy makers who think Massachusetts ought to be more like
New Hampshire can point to the array of fiscal policies that
have engendered growth over the last two decades. They
may also learn how better to provide a stable environment
for raising children without spending large sums of public
monies.
Similarly, those who think New Hampshire could learn much
about sustaining growth over the long term can point to the
policies that have improved Massachusetts’s competitiveness
(promoting economic diversity across sectors and encouraging
foreign-born individuals to resettle there). Perhaps New Hampshire’s
tax advantage will diminish over time, as demand for more
public goods from Massachusetts exiles increase in New Hampshire.
In the final analysis both approaches score well in BHI’s
competitiveness reports.
However
one evaluates state economic policy, one consideration ought
to be clear: the ability of states to sustain high measures
of income and economic growth is due in part to virtues of
interstate competition or competitive federalism. Competitive
federalism has long been congenial to economists because such
a system includes features of the market economy into the
organization of the political structures. (1) The ability
of citizens to move between states (guaranteed by a central
government into prosperous ones and out of poor ones) is critical.
Moreover, the ability of states to respond to competition
by changing bad policies is essential in a global economy
where capital is extremely mobile.
With
recent political developments, some policymakers may be tempted
to cast aside "the New Hampshire advantage." Movements
to harmonize tax differences, to embark upon regional “solutions”
and to enforce regulatory uniformity among, for example, all
New England states, would seriously undermine competitive
federalism and its benefits.
The
unintended consequence would be a real case of the blues.
(1)James
M. Buchanan, "Federalism and Individual Sovereignty,"
Cato Journal, 15, no. 3. Internet: http://www.cato.org/pubs/journal/cj15n2-3-8.html,
accessed 19 November 2004.
Posted
on 01-Dec-2004 9:58 AM
Format revised on
30-Jan-2007 1:56 PM
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