Charlie Arlinghaus

January 25, 2014

As originally published in the New Hampshire Union Leader

What you think of New Hampshire is almost certainly wrong. Most of us are living in the past and think of this as a vibrant and competitive state. It isn’t. The truth is that, economically speaking, we are increasingly a mediocre backwater stuck with a stagnant economy and lacking the political will or self-awareness to do anything much to make ourselves more competitive. The future belongs to the bold and we live in the land of the timid.

Too many people in New Hampshire live in the past. Many of us remember the huge economic booms of the 1970s and 1980s and think reality is unchanged from then. For a long time, New Hampshire boomed as Massachusetts stagnated. But that was then, this is now. Our economy is not growing, it’s stagnant. We’re not competitive, we’re mediocre.

As recently as fifteen years ago, economists described New Hampshire as “the envy of its neighbors.” It was a common truism to say that New Hampshire led the region out of the recession. Jobs lost elsewhere were reopened here. But that dynamic is now true in Texas not New Hampshire.

Prof. Mark Perry writes my favorite economic blog, Carpe Diem (doesn’t everyone have a favorite economic blog?). He published a startling chart I now steal for all my presentations. In the last seven years, the state of Texas has seen 13% employment growth or 1.4 million jobs. The rest of the country combined is still 275,000 jobs short of their pre-recession peak.

New Hampshire used to be as vibrant as Texas. Our growth in the 1970s, 1980s, and even 1990s was faster or equal to Texas. But our graph lines have diverged. They’ve grown 1.4 million jobs, we’re still down from pre-recession levels. They’re vibrant, we’re pathetic.

The last fourteen years, the new century, we’ve deteriorated into a flat line – not even a pale imitation of our former selves. In the 1980s jobs grew 27%. In the 1990s they grew 18%. In the decade and a half since 2000, we’ve grown by just 5% — not enough to keep up with the population or to keep people in state.

Even Massachusetts has left us behind. They aren’t exactly thriving but while we have yet to get back to our pre-recession jobs, they’ve grown by almost 4% in the last seven years. That’s better than our zero in the same period but pales by comparison to Texas’s 13% boom.

No wonder 106,000 people commute from New Hampshire every day to their out of state jobs. In a distressing signal, this is a 12% increase from 20 years ago.

The problem is that most politicians live in the past. They speak nonsensically about some vague and ill-defined “New Hampshire Advantage” – a term coined for political campaigns of the 1990s – and apply it to every aspect of political debate.

To be sure, the Tax Foundation still ranks us in the top 10 in overall tax burden but largely on the basis of having neither a sales nor income tax. Those advantages attract and keep some businesses here but by themselves they aren’t enough to keep us from being left behind in the fight for jobs.

The total cost of doing business in New Hampshire is too high. There is not one thing to change but rather everything. Anything that increases costs helps us lose.

To change, we need to do something or resign ourselves to a future where we look like Vermont and Maine and encourage our kids to all move to Texas where they might actually find a job.

Uncompetitive business taxes are something we can start addressing immediately. Massachusetts cut

Its highest marginal rate to 8% while ours languishes at 8.5%. I believe it should be unconstitutional for our tax rate to be higher than Taxachusetts in anything. The median state (Tennessee which also has no income tax) is 6.5. To be in the top 10 we’d need to be at 5. It’s time to start moving in that direction or give up. By the way Texas has no business profits tax.

Similarly as we increasingly fret about building any energy infrastructure anywhere, our electric rates are shockingly high. Our average rate of 18.08 cents is 43% higher than the national average and 74% higher than our no-income-tax friends in Tennessee. We’re also 50% higher than Texas.

None of this is a problem unless we want to attract jobs that use electricity like manufacturers or high tech companies.

It’s time for us to get over ourselves and stop living in the past. There is no question that we are becoming a stagnant backwater. The only question is whether or not we want to do something about it.

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