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Charles Arlinghaus: NH's heroic economy is no more

June 24. 2014 10:49PM

When did New Hampshire stop being New Hampshire? The latest economic news shows that we are no longer leading any economic charges. Once the envy of our neighbors, we may be stuck as an economic backwater.

A terrific piece from Ben Leubsdorf (a former Granite Stater) in The Wall Street Journal this week speaks of the uneven recovery. The country as a whole has technically recovered: total jobs have come back to where they were prior to the recession. But recoveries are uneven with some winner states and many loser states.

New Hampshire is typically said to lead the region out of the recession. We mean that when jobs return, they return here first and we end up with a growing economy at the expense of more lackluster states. But that’s the old reality.

Today, we are comfortably mediocre. Five years after the recession technically ended, jobs have finally reached their pre-recession level again. But in 17 winner states, jobs are actually much higher, while in 33 mediocre and stagnant states jobs are still down from their peak. New Hampshire is a loser.

States like Texas are scooping up jobs. Texas is up about 900,000 jobs higher than its pre-recession peak. It recovered strongly at the expense of states like Michigan (down 566,000), Ohio (down 155,000), and New Jersey (down 157,000). This represents a long-term transfer of people, energy and economic wealth from loser states to winner states.

This competitive dynamic used to be our friend. Post-recession expansions grew New Hampshire and confirmed our economic strength and power. Now we don’t even outpace our mediocre neighbors. The power has shifted in our region. Massachusetts is up about 80,000 jobs from its pre-recession peak. The other five New England states are all still below their pre-recession peaks by a combined total of about 80,000 jobs.

What a weird and wacky world we live in when Massachusetts thrives at our expense.I think part of the problem is that New Hampshire has become complacent. It is part of the mythology of our state that we are competitive and that businesses will naturally want to come here. If we think that — and most policymakers do — real competition passes us by.

There are two paths to competitiveness. One is to try to buy friends: to use incentives and gimmicks to induce companies to locate here. This strategy is often pursued by the largest states. The theory is that special incentives will lead to so many jobs it is worth the cost and disparity.New Hampshire cannot and should not compete this way. First, we can’t afford it. The largest state economies are 20 and 30 times our size. If we enter a bidding war, we’ll lose. In addition, such special treatment violates a long-standing tradition of fair play. We treat all taxpayers the same regardless of whether the current government is particularly fond of them.

We have to acknowledge that we are a very tiny piece of the American economy. Companies must compete in giant markets like California and Texas. Even Massachusetts is the 12th-largest state economy. Tiny New Hampshire may be twice as large as Vermont (the nation’s tiniest economy), but we are less than one-half of 1 percent of the country’s economy. No one has to be here.

We are increasingly uncompetitive in multiple areas of tax policy (notably three categories of business taxation) with high health, labor and energy costs. No policy is half as important as admitting our failings and trying to again become the growth engine we were in the 1980s and 1990s.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.

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