CONCORD, N.H. -- This state has always defined itself by its relationship to its neighbor to the south.
If Massachusetts had high taxes, then New Hampshire had low ones. If Massachusetts had a bloated state government, then New Hampshire had one that was lean and efficient. If Massachusetts choked its businesses with stifling regulation, then New Hampshire required as little regulation as possible.
Live free or die.
Given all that, the last year has to have been depressing for the Granite State. Like the guy who discovers the loser down the road is really his long-lost twin brother, New Hampshire has come to the realization that, economically at least, it has an awful lot in common with its reviled neighbor.
For 12 months the New Hampshire miracle has crumbled even faster than Massachusetts's famed boom. New Hampshire lost more jobs in percentage terms than Massachusetts -- 3.8 percent vs. 1.7 percent -- in the year ended March 31. Bankruptcies climbed faster in New Hampshire -- up 55 percent between the first quarter of 1989 and the first quarter of 1990. The welfare caseload rose faster, too, albeit from a much smaller base.
The explanation for the bad numbers is pretty much the same in the two states. The sagging defense and computer companies of Massachusett's Route 128 are sagging just as badly in southern New Hampshire. Digital Equipment Corp. is the largest private employer in both states. Thousands of workers at troubled Wang Laboratories lived in New Hampshire. And the construction and real estate recession that has devastated Massachusetts did not stop at the state line.
In another sign of common misfortune, New Hampshire Gov. Judd Gregg was in Washington in May along with Gov. Michael Dukakis, urging Federal Reserve Board Chairman Alan Greenspan to head off the credit crunch that is hurting businesses across the region.
The old folk wisdom -- what was bad for Massachusetts was good for New Hampshire -- no longer holds, according to business people. ''When I hear bad news in Massachusetts, I don't rub my hands together any more,'' said Peter Smith, who leases office space for Codman Associates in southern New Hampshire. ''Now I know that it is coming our way.''
Still there remains one important difference between the two states: the public mood. Cross the border into New Hampshire and the black clouds of despair lift. People in New Hampshire, regardless of their political persuasion, are confident their government can deal with whatever budget deficit arises. In February the General Court, with relative speed, passed a $160 million package of spending cuts and selected tax increases. More cutting and taxing may yet be needed to keep the budget in the black.
And with a kind of frontier spirit, the business community views the recession as a temporary setback, rather than the end of the golden age. ''There is a general feeling that we are going to bounce back,'' said Larry Goss, a planner for Provan & Lorber, an engineering firm just outside of Concord.
The crash of the past year follows almost a decade of remarkable success. New Hampshire boomed in the 1980s, driven by most of the forces that fed Massachusetts's revival, plus two extra ones: strong population growth and a laissez-faire attitude toward development. ''It is easier to develop up there, so they did more development,'' said Peter Kozel, chief economist at Shawmut Bank in Boston.
From 1981 to 1986, housing permits in New Hampshire climbed to 18,000 annually, from 4,000 a year. Construction employment over a comparable period rose more than 80 percent. Everyone now concedes that too much of that building amounted to a speculative bubble. When the defense and high-technology sectors slowed down, say economists, the bubble burst.
''New Hampshire went up faster, so it has farther to drop,'' said Dennis Delay, an economist at Public Service Co. of New Hampshire in Manchester.
Signs of the excess are not hard to find. In Concord, the end of the boom caught McKenna's Purchase, a town house condominium project, right in the middle of construction. More than 60 town houses were completed, but another 82 foundations sit in holes in the ground waiting for walls. The only inhabitants in the unfinished homes last week were pine needles and rain-soaked sticks. According to the Concord Monitor, the city's daily newspaper, neighbors have complained that the open foundations constitute a safety hazard for local children. Defending themselves, city officials noted that the problem of unfinished condo projects was brand new for them.
In Bedford, an affluent suburb of Manchester, a large number of new, low-slung office buildings wait patiently for tenants. The vacancy rate in southern New Hampshire hovers between 15 percent and 20 percent, according to Codman Associates, the real estate brokers.
New Hampshire has its budget problems, as well. Through April, tax collections were running 1 percent below last year's level, about the same as in Massachusetts. But the state budget is not a crisis in New Hampshire. The February budget package included increases in user fees, the rooms and meals tax and a new tax on telephone bills. Falling revenues have opened up another small hole since then, but as Gregg told the press recently: ''I don't like it, but I'm perfectly confident we can manage the situation.''
Economists are somewhat less bullish. They expect New Hampshire to recover more quickly than Massachusetts, but suggest neither state will set any records. DRI/McGraw-Hill, a forecasting firm in Lexington, Mass., predicts employment in New Hampshire will grow by 0.6 percent in 1991 and 1.1 percent in 1992. DRI looks for employment in Massachusetts to stay flat in 1991 and grow by 0.8 percent in 1992.
In New Hampshire, business people still talk about what they consider the state's many advantages over Massachusetts: a more pleasant lifestyle, lower costs and, of course, lower taxes. With a major tax package all but certain to pass in Massachusetts, the tax gap should get wider still.