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Gubernatorial candidates Hassan, Lamontagne pitch different fixes for state’s economy

  • Republican candidate for governor Ovide Lamontagne talks to the Monitor during an editorial review board. October 26, 2012.  <br/>(ANDREA MORALES / Monitor Staff)
  • <br/>Maggie Hassan ; Wednesday, August 22, 2012. <br/><br/>( Alexander Cohn/ Monitor staff)<br/><br/>
  • Colby Boissy, 5, Hopkinton

Just about every candidate for political office this fall talks a lot about jobs and the economy. The gubernatorial campaign has been no exception.

With the long wake of the national recession still felt in New Hampshire, both Republican Ovide Lamontagne and Democrat Maggie Hassan have put forward detailed plans for reviving the state economy if elected Tuesday to replace retiring Gov. John Lynch.

Hassan’s “Innovate NH” plan includes support for job-training programs and community colleges, an increase in funding for higher education in exchange for a tuition freeze for in-state students, and a doubling of the state’s research-and-development tax credit.

“I want to focus on making sure that our businesses can innovate and create jobs, and that starts with making sure that we have targeted tax credits like the research-and-development tax credit. It starts with making sure that we’re providing technical assistance to our businesses, using, for instance, the expertise of our university system to give that kind of technical assistance. And it starts with investing in education again, and making sure our education system is meeting the needs of the 21st century economy,” Hassan, a former state senator from Exeter, said during the candidates’ first debate, on Sept. 19.

Lamontagne’s “Prosperity Agenda” focuses on simplifying the state’s tax and regulatory system to remove what he describes as roadblocks to business expansion and job creation. Among other proposals, he favors cutting the business profits tax from 8.5 percent to 8 percent, instituting a 90-day moratorium on new state rules and regulations, and creating new tax credits to support manufacturing jobs and encourage companies to help repay workers’ student loans.

“My campaign has been about three things: jobs, jobs and jobs,” said Lamontagne, a Manchester attorney, at an Oct. 21 debate. “And it begins by looking at what we do to hurt and kill business and job creation.”

The Monitor asked a handful of economists and policy analysts to review the candidates’ plans. Most declined to pass judgement on whether one plan or the other would actually work, though one economist said he thinks both plans are too limited in scope to do much for the state economy.

Still, experts noted, the differences between the two plans are telling. The candidates present starkly different approaches to how government can help create jobs – Hassan sees support for education as the way to spur growth by building a skilled workforce, while Lamontagne’s plan assumes high taxes and onerous regulations are hindering economic growth.

And both candidates’ plans, while offering a number of reforms, leave intact New Hampshire’s basic tax structure. That’s no surprise, since both Lamontagne and Hassan have pledged to veto any broad-based sales or income tax.

One question, two answers

With the exception of the state’s research-and-development tax credit – Hassan wants to double it, Lamontagne wants to make it permanent (it’s set to expire in 2015) – there isn’t a lot of common ground in the two candidates’ plans.

That might be because Lamontagne and Hassan are starting from different assumptions when they address the issue of job creation, said Dennis Delay, economist at the New Hampshire Center for Public Policy Studies.

“Just from reading the plans that the two candidates have put on their websites, and what they say in public
. . . there seems to be two different perceptions of what the problem is,” he said.

On one side, Delay said, is a belief that job growth is lagging because demand for labor is low due to uncertainty, high tax rates and regulations, and “assuming these barriers were removed, the supposition seems to be, the business community would then create more jobs.”

On the other side, he said, is a belief that there’s a supply problem, a mismatch between the skills of New Hampshire’s workforce and the needs of companies, and that investments in higher education and job-training programs can lead to job growth.

“They see the same problem. They just see two different aspects of it, and they’re therefore prescribing different solutions to the problem,” Delay said.

The Concord-based center released a report in September that concluded the economic and demographic trends that bolstered New Hampshire’s economy for decades “have largely run their course,” and the state now faces a “strong headwind” of an aging population, out-migration and lower labor productivity.

That report didn’t include specific policy recommendations – Deputy Director Daniel Barrick said the center is working now on assembling a “basket of ideas” for state policymakers to consider.

A comprehensive approach, he said, is more likely to succeed than a limited one.

“You shouldn’t be thinking about these things in isolation. . . . The economy’s a system, and policies interact with each other,” Barrick said.

Big problem,
limited solutions

Neil Niman, chairman of the economics department at the University of New Hampshire’s Whittemore School of Business and Economics, is blunt about the candidates’ plans.

“I don’t think either of them will work, to be honest with you,” he said.

Niman said both plans are limited and they don’t address the state’s tax structure, which relies heavily on property taxes for revenue in lieu of a state income or sales tax.

“People like to talk about the New Hampshire Advantage, and they usually relate that to the tax structure of the state. And for many years, that may have worked to our advantage,” Niman said. “But I think times have changed, and I don’t think that tax structure necessarily works anymore.”

Here’s the problem, as Niman sees it: New Hampshire may have a relatively low unemployment rate, but the mix of jobs is changing over time, with high-paying manufacturing jobs replaced with lower-paying work in the retail and hospitality sectors.

With lower wages, he said, fewer people can afford the state’s pricey property – and high property taxes. New Hampshire could become less attractive both to recent graduates from state colleges and out-of-staters who might consider moving here.

“I think there’s a structural problem that one can’t easily fix by massaging the business profits tax or the business enterprise tax or giving a few tax credits for job training or actually giving more money to the university system – even though I think we should do that, since I work there,” Niman said.

Niman said he applauds goals like Hassan’s call for stronger science and math standards for K-12 students, and wants to encourage creative solutions like Lamontagne’s proposed tax credit for businesses that help repay workers’ student loans.

But, he said, tweaking the current system probably won’t be enough to ensure future prosperity.

“I’m not sitting here saying we should have a sales tax or we should have an income tax. . . . What I am saying is our reliance on property taxes is now working to our disadvantage in the state in terms of economic development,” Niman said.

Look to the long term

New Hampshire is one of just two states with two-year terms for governor (Vermont is the other). But if the state’s economy is going to thrive, the next governor will have to look beyond the 2014 election, said Ross Gittell, chancellor of the Community College System of New Hampshire.

“Whoever is elected governor should really take a long-term approach to economic growth and economic well-being, as opposed to looking at easier short-term fixes,” Gittell said. “What businesses really care about, and what attracts jobs and particularly well-paying jobs, is a focus on the economic fundamentals.”

(Gittell was an economics professor at UNH before becoming chancellor this year. He’s also vice president of the New England Economic Partnership, a nonprofit economic-analysis group.)

One of those fundamentals, he said, is “an appropriately skilled workforce, and a foundation where that workforce is available for a sustained period of time.”

Gittell noted that Lamontagne and Hassan take different approaches to that problem, with Lamontagne offering incentives like tax credits and Hassan focusing on support for institutions like community colleges and public universities.

“One focuses much more on incentivizing the individuals and businesses on investing in higher education,” Gittell said, “and the other focuses on building the infrastructure.”

Despite its challenges, Gittell said, New Hampshire still has a lot of advantages, including a high quality of life and proximity to the regional hub of Boston. And in any case, he said, the global and national economies – not policies set in Concord – will largely drive what happens in the state.

But the governor can implement policies that position New Hampshire to benefit as the broader economy recovers, he said, as well as provide personal leadership in dealing with the business community.

Lynch, Gittell said, has excelled at that latter task during his eight years in office.

“The governor is the economic leader of the state, the spokesperson, the point of contact for major employers,” Gittell said, “and that individual has to gain their confidence.”

(Ben Leubsdorf can be reached at 369-3307 or or on Twitter @BenLeubsdorf.)

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