New Hampshire Envy

New Hampshire Envy

May 23, 2011 Posted by J. Scott Moody - No Comments

New Hampshire EnvyIn today’s article in the Portland Press Herald–“New Hampshire Envy” Takes a Seat in Augusta–there are a number of erroneous comments (in the comment section) in regards to New Hampshire’s success.  The stalest argument is that “geography is destiny” and that it is only New Hampshire’s close proximity to Boston which explains New Hampshire’s economic success.

Well, that is an empirical question that can be answered with a short trip to the Bureau of Economic Analysis’s website.  There is a category of personal income called “Adjustment for Residence” that corrects for folks who work in another state.  For 2010, Mainers brought in $850 million from out-of-state jobs while New Hampshire residents brought in $4.4 billion.  Bingo . . . it’s all the “Boston Commuter” effect right?  Well, no.

New Hampshire’s economy is $8.5 billion larger than Maine’s in 2010.  The residence adjustment only accounts for $3.6 billion of that difference.  On a per capita basis, New Hampshire’s total personal income is $44,084 while Maine’s is $37,300–a difference of 18 percent.  Subtracting out the residence adjustment yields a per capita income figure of $40,719 for New Hampshire and $36,660 for Maine–still a sizable difference of 11 percent.

Also, if the “Boston Commuter” effect is so strong, then there should be another big beneficiary as well–Rhode Island.  Yet, as I blogged previously, New Hampshire is also economically outperforming Rhode Island.

Finally, if it’s all about getting “money from away” that matters to economic performance, then Maine is getting its fair share but from a very different source . . . the federal government.  The one area that Maine outperforms New Hampshire is in the area of Personal Current Transfer Receipts (mostly Social Security, Medicaid and Medicare).  In 2010, Maine’s PCTR was $3 billion higher than in New Hampshire ($11.8 billion versus $8.8 billion, respectively).  Why doesn’t Maine get the same economic boost from PCTR?

It’s simple . . . the public sector crowds out the private sector.  New Hampshire has the largest private sector in the country while Maine has one of the smallest (42nd) in the country.  New income and wealth can only be created by the private sector.  Until Maine’s policymakers learn this lesson–yes, even from New Hampshire–Mainers will continue to suffer under poor economic conditions such as the recent “lost decade of private sector job growth.”

Update: New Hampshire’s Union Leader weighs in on the debate . . . “The New Hampshire Advantage is not written in granite upon the side of Cannon Mountain. It was created by Granite Staters who wished to preserve their economic and personal freedom. It can be destroyed if we ever lose our dedication to those principles or forget that it works because it gives us a comparative advantage over our neighbors. Let them catch up, and our Advantage will fade.  Maine politicians are trying to catch up. Their efforts are a warning to New Hampshire that protecting our Advantage requires constant vigilance.”