New Hampshire learns to love the government.

MANCHESTER, NEW HAMPSHIRE — On the Morning of January 14, at the First Congregational Church on Hanover Street, 600 mourners paid their last respects to Nackey Loeb, publisher of the Manchester Union Leader until shortly before her death. Nackey had held the job since 1981, when she took over from her husband, William, who bought the paper in 1946. Together, over the course of more than half a century, they turned the 136-year-old daily into America's most vitriolic conservative newspaper--and, occasionally, one of its most powerful.

The reasons for the paper's power were clear enough. New Hampshire held the nation's first presidential primary, New Hampshire Republicans were rabidly anti-government, and The Union Leader's endorsement was a sort of conservative Good Housekeeping seal of approval. In 1968, The Union Leader championed Richard Nixon, whom it saw as an underdog fighting the Eastern establishment, and it helped ward off a challenge by Michigan Governor George Romney. In 1980, the paper's merciless attacks on George Bush ("the candidate of David Rockefeller and the Trilateral Commission") were instrumental in catapulting Ronald Reagan to victory in New Hampshire. William Loeb invented the "no new taxes" pledge that became a rite of passage for Republican presidential hopefuls—and got President Bush into so much trouble when he ran for reelection in 1992. And, in 1996, the paper's endorsement helped legitimize Pat Buchanan, contributing to his startling upset of Bob Dole.

This year, however, things have been different. The Union Leader has aggressively agitated for another right-wing darling: Steve Forbes. But Forbes's poll numbers barely register in double digits, and his momentum from the Iowa caucuses will likely slow here. Meanwhile, the Republican alternative to the relatively moderate front-runner, George W. Bush, is the even more moderate John McCain, who doesn't appear to have suffered for the many barbs The Union Leader has lobbed his way. When Nackey Loeb died, only Forbes and Buchanan showed up at the memorial service to pledge fealty to the Loeb tradition.

There are lots of reasons for The Union Leader's decline. Some say that the paper's influence stemmed mostly from William Loeb's uniquely aggressive approach to opinion journalism—and that once he faded from the scene, it was only a matter of time before his newspaper did, too. Others cite competition. Half a dozen other in-state papers and The Boston Globe now compete for space on New Hampshire's breakfast tables; plus, there's WMUR, the Manchester-based TV station that now has nearly twice as many viewers as The Union Leader has readers. But there's another reason for The Union Leader's loss of influence, and it has nothing to do with changes in the New Hampshire media and everything to do with changes in New Hampshire politics. Although few people outside New England seem to realize it, a radical notion has started to take hold in the most famously libertarian state in the nation. New Hampshire's curmudgeonly voters are warming to the idea that bigger government may not only be necessary—it may even be worth paying for. This creeping realization has been transforming state politics for some time already, and this year, for the first time, it is starting to transform presidential politics as well.

NEW HAMPSHIRE'S HOSTILITY to central authority dates from colonial times. It was one of the first colonies to set up its own government, and New Hampshire patriots began skirmishing with the British in 1774, even before the shots at Lexington and Concord, Massachusetts. When independence came, New Hampshire drew up a state constitution that severely limited the governor's power. Among other things, it forced the governor to submit all appointments and key decisions to an executive council of officials elected directly by the voters, separately from the governor—and, thus, not beholden to him. Several other states originally enacted similar provisions but junked them because the executive councils kept state government from passing and running new programs. New Hampshire has kept its executive council—for precisely the same reason.

And it has worked as intended. Nestled between the liberal bastions of Maine, Massachusetts, and Vermont, New Hampshire has become an island of "leave me alone" conservatism, with power concentrated in cities and towns that in many cases still govern by town meeting. New Hampshire is one of the stingiest states in the union when it comes to government spending, and it is the only one without either a statewide sales tax or an income tax. Of course, it's not as if New Hampshire's citizens don't pay taxes at all: there are "hidden" taxes—for instance, license fees—and property taxes. But the typical New Hampshire taxpayer's burden remains very light by national standards, and that light tax burden has been central to the state's success since World War II. In the 1970s, the very period when many other states were raising taxes to pay for new government services, New Hampshire's lack of broad-based taxes made it an attractive alternative, particularly for people from Massachusetts and New York. New Hampshire became the fastest-growing state in the Northeast, nearly doubling its population between 1965 and 1998. Not coincidentally, it also boasted one of America's fastest-growing economies, creating more jobs per citizen than any other state in the nation for a period in the late '80s.

The influx of refugees reinforced and even exacerbated the state's antipathy to taxes and to government in general, because nobody wanted to cut off the inflow of people and money—and because the newcomers themselves, almost by definition, resented paying high taxes. People began to speak of the "New Hampshire advantage," and in 1972 Republican Meldrim Thomson ran for governor on a pledge to preserve that advantage, promising never to raise "broad-based" taxes at the state level. With the vocal support of his close ally William Loeb—who made his views known via front-page editorials—Thomson won, routing the Republican moderates who had controlled the state GOP for years. Thomson went on to serve three two-year terms as governor, and Loeb went on to make the anti-tax pledge a centerpiece of his newspaper's election coverage. Almost without exception, those who refused to take the pledge lost. "As long as I can remember, going back to 1972, that was your ticket," says Jeff Woodburn, who served in the state legislature during the '80s and was chairman of the state Democratic Party. "If you wanted to be successful, the formula was, don't let anybody get between you and the extreme right."

THAT CONVENTIONAL WISDOM still holds. The idea that New Hampshire can't abide either taxes or the politicians who support them is as much a part of the state's lore as its famous town meetings. As recently as last week, an article in Time called the state "tax-allergic." But the perception is less and less accurate. And one of the reasons, ironically, is the massive influx of people during the last three decades.The very migrants who came to New Hampshire seeking refuge from taxes also brought certain expectations about what government would provide, expectations that require—you guessed it—more taxes.

In New Hampshire's southern tier, home to two-thirds of the state's residents, the massive population growth has transformed a collection of bucolic villages and mill towns into a chain of strip-mall suburbs. And, like suburbanites everywhere, the citizens of southern New Hampshire worry about their quality of life. In Nashua, whose population has doubled to more than 80,000 since 1960, a Republican alderman recently complained to The Boston Globe that "the growth is more of a negative on the city versus the positive. With all the new homes and the companies that have moved into the city, we have a lot more crime, a lot more traffic, and our roads aren't built to take the traffic." Along the "e-coast," the 18-mile coastal strip that houses New Hampshire's burgeoning high-tech industry, a business group recently released a report warning that sprawl could ruin the area's quality of life if the state doesn't better plan its growth.

As in most suburban areas, the topic of greatest concern has been schools. New Hampshire boosters note that their children are among the nation's highest-average scorers on the SAT. But that's misleading, as a widely cited report from the New Hampshire Center for Public Policy Studies recently showed. Leave out the kids from prep schools like Phillips Exeter Academy, control for the state's higher-than-average per capita income, and New Hampshire's public schools are average, if that. Overcrowding and chronic textbook shortages plague cities like Derry, Merrimack, and Nashua, where the population growth has been most extreme. And there are other deficiencies, too: New Hampshire is the only state with no mandatory kindergarten. Not all the schools are bad, of course; go to an affluent college town like Hanover, home of Dartmouth College, and you'll see schools with state-of-the-art computer labs. But in old industrial towns like Claremont or Allenstown, you'll find schools without after-school activities or advanced-placement courses, to say nothing of computers.

The common feature of all these problems is lack of spending by the state—which, in turn, traces back to lack of money at the state's disposal. By 1996, only seven percent of the money spent on New Hampshire public education came from state government. That was, by far, the smallest percentage of all the states—the Illinois state government, whose contribution ranked forty-ninth, was spending nearly four times as much. As a result, the schools have relied almost exclusively on local government, which raises money through property taxes. This money is rarely sufficient, particularly for a state whose economy increasingly relies on high-tech industries that demand an ever more educated workforce. (New Hampshire has the highest proportion of high-tech workers in America, 84 per 1,000 residents.) "I think huge portions of New Hampshire's populace got fed up that schools couldn't afford what have come to be regarded as basic courses in twenty-first-century education—that is to say, a second language, advanced math, computer sciences, some sports, some art," says Peter Burling, Democratic leader of the New Hampshire House." As New Hampshire had more and more people come in who were educated and born somewhere else, the level of expectations rose while the capacity of the tax base declined."

THE DISSATISFACTION WITH state services didn't immediately register at the ballot box. One reason is the economy. The recession of the early '90s hit New England harder than any other region in the country, and it had a particularly perverse effect on New Hampshire because of the tax system. While thousands were losing their jobs, the strain on government services kept draining public treasuries. So towns had to jack up property taxes—often on taxpayers who were already struggling—just to keep pace.In that environment, the idea of raising even more money to improve the schools, or any other government service, was a nonstarter.

Even after New Hampshire rebounded from the recession, the state's conservative power brokers kept new taxes at bay. In 1992, Democrat Deborah "Arnie" Arnesen ran for governor, proposing an income tax. Republican Stephen Merrill ran against her, took The Union Leader's anti-tax pledge, and won. Eventually, though, a court case forced the issue. Years earlier, five New Hampshire cities had sued the state government over school funding, claiming the disparities in education violated the state's constitution, which obligated New Hampshire to provide every child with an "adequate" education. In 1997, after years of litigation, four justices, three of them appointed by pledge-taking Republican governors, sided with the cities. They ordered the state government to make school funding more equitable, which would mean coughing up $825 million per year.

The Union Leader railed against the decision, calling it "statist" and demanding a constitutional amendment to overturn it. Many Republicans joined the call, as did a few prominent Democrats. But the state legislature couldn't muster the votes to put such a measure on the ballot, so, with a court-imposed deadline looming, legislators began discussing the only alternative: raising the money through a statewide tax.

And then something remarkable happened: The voters didn't rebel. In 1998, several Democrats ran for the state legislature on a different sort of pledge—a pledge to raise taxes to better finance schools.Typical of these candidates was Clifton Below, who ran for the state Senate after sponsoring an income tax proposal in the House the year before. The heart of the Senate district was Lebanon, an old mill town now dominated by retail businesses and the Dartmouth Medical Center. The area hadn't elected a Democrat for more than 100 years, and its previous senator was Jim Rubens, a Republican Union Leader pledge-taker who left the Senate to run (unsuccessfully) for governor. Below called unabashedly for a four percent income tax, distributing flyers with the headline "let's talk about taxes." His opponent attacked him relentlessly for it, and The Union Leader joined in. But Below won by a bigger margin than Rubens ever had.

Emboldened by the presence of Below and other pro-tax upstarts, the state Senate last year did the unthinkable: It passed a bill to create an income tax. The House passed an income tax bill, too, and the measure died only because Democratic Governor Jeanne Shaheen threatened to veto it. In the end, the legislature and Shaheen compromised on a new property-tax scheme. But it has proven so unpopular (in part because it hasn't delivered enough relief to the working-class communities facing high property-tax bills) that many believe it's only a matter of time before the state finally turns to an income tax or sales tax. And some polls show that a majority of New Hampshire voters are willing to go along. "Once upon a time the very mention of a broad-based tax was anathema to the electorate," notes Clark Hubbard, who teaches political science at the University of New Hampshire and has studied the state's politics for years."Now it is being discussed openly."

IF NEW HAMPSHIRE didn't hold the nation's first presidential primary, none of this would matter that much. But it does, and the state's political evolution helps explain why this year's Republican primary has taken such a surprising turn. Last fall, just about everyone assumed that George W. Bush's most serious challenge would come from the right; his advisers were said to be concerned that, if anything, his tax cut would not be perceived as large enough. But Bush, along with most other political prognosticators, misread New Hampshire. Steve Forbes, by far the most adamant tax cutter of the major GOP contenders, has struggled in the Granite State. Meanwhile, McCain may steal the primary by appealing largely to New Hampshire independents, who now outnumber registered Republicans. In his advertisements and speeches, McCain presents his modest tax cut as a prudent alternative to Bush's—one that plows most of the budget surplus into Social Security and Medicare—and that pitch has been winning him applause in town meetings across the state. Polls show that, even among Republican voters, tax cuts are not the most important issue.

In a subtle way, even The Union Leader is coming to grips with New Hampshire's new political realities.Last fall, the newspaper hired a new editorial page editor. Her conservative credentials are impeccable—she was a research assistant to Robert Novak and an occasional contributor to right-wing publications like Policy Review—but she's said to have a lighter touch and has so far avoided the epithet-hurling that made the newspaper so infamous. "That's not my style," she told the Boston Phoenix. This isn't to say that the newspaper William Loeb once edited is about to endorse higher taxes. But, if a paper as notorious as The Union Leader is no longer breathing fire, can the Republican presidential hopefuls be far behind?Looking back, commentators may see the 2000 GOP primary as the end of an era--just as 1988 marked the last race in which candidates invoked the Soviet threat. McCain's New Hampshire success has the potential to forever change the way candidates campaign in the Granite State. And, by the New Hampshire GOP primary of 2004, it's possible that massive presidential tax-cut plans and elaborate no-tax pledges will be a thing of the past. William and Nackey Loeb would not be pleased.

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