MANCHESTER, N.H., FEB. 9 -- The Democratic battle of New Hampshire began today as a fight to the finish -- for second place.

Rep. Richard A. Gephardt (Mo.) and Sen. Paul Simon (Ill.), the top two finishers in Iowa Monday night, flew here today intent mainly on defeating each other for runner-up honors to favored Massachusetts Gov. Michael S. Dukakis in next Tuesday's primary.

Hobbled as both are by a severe cash crunch, the loser of the Simon-Gephardt shootout could well be forced to the sidelines before the March 8 "Super Tuesday" contests mainly in the South, much as Iowa apparently crippled the hopes of former senator Gary Hart (Colo.) and former Arizona governor Bruce Babbitt.

"It's really a battle for second," said Thomas Donilon, a strategist for Jimmy Carter and Walter F. Mondale in past New Hampshire primaries, "but at the same time, Gephardt and Simon will try to weaken Dukakis before he goes south."

The top three finishers in Iowa arrived here in chartered planes in time for midday rallies, where they began to sharpen the issues of leadership credentials, trade policy, job legislation, "special-interest" money and energy policy that will fuel the next seven days of campaigning. The schedule includes a League of Women Voters debate Saturday afternoon at St. Anselm College outside Manchester.

Dukakis did his best to shed the favorite's label, which has proved a curse to other Democrats, including Mondale four years ago. "It's a very competitive state," he told an early-afternoon news conference. "Other near neighbors have been surprised here. I'm going to campaign as if I were behind." He plainly is not. A Washington Post-ABC News poll completed last Saturday showed Dukakis with 43 percent of the voters, Simon with 13 percent and Gephardt with 12 percent.

Not only does Dukakis have an advantage from his past leadership on such hot local causes as opposition to the Seabrook nuclear power plant, but he is the only one of the top three with money in hand for the week's campaigning.

Gephardt held only one event today so he could spend his time "dialing for dollars," according to campaign manager William Carrick. He will break off campaigning here for a Washington fund-raiser Wednesday night, where he hopes to raise money to buy time for commercials on Boston television. Gephardt has already purchased time worth $100,000 on stations in Manchester and Portsmouth.

Simon also reached New Hampshire essentially broke. He will hold a fund-raiser in New York on Wednesday, hoping to raise $150,000.

In the past, challengers have often gained valuable momentum from their Iowa showings, but the small margins separating Gephardt from Simon and Simon from Dukakis meant that "it {Iowa} doesn't send any signals," said Simon manager Brian Lunde. "The alternative vote could split."

Joseph Trippi, Gephardt's political director, said, "With Simon in the mix and us in the mix, Dukakis is going to win New Hampshire. The only important thing for us is to finish second." On the other side, Simon pollster Paul Maslin said, "We have to beat Gephardt in New Hampshire."

Dukakis has said he will have "no excuses" if beaten in New Hampshire. Given the high stakes for all three, the first blows were rather tentative.

At a news conference in Derry, Simon portrayed Dukakis as "a manager, a technocrat," and questioned the "consistency" of Gephardt's record.

"The people of New Hampshire ought to be examining not just 30-second commercials, not just election speeches, but they ought to be asking about the consistency of the stand," Simon said in reference to Gephardt. "Is this just an election-year conversion, or is this where the person has been for a long time?"

At a noon rally, Gephardt made no direct reference to his rivals but gave a tub-thumping, us-against-them speech that was, if anything, even hotter in tone than those he delivered during his dramatic comeback in Iowa.

Gephardt launched into a list of grievances against the denizens of "their America," including "the trade establishment that traffics in the selloff of American assets and jobs" and the skeptics who say "you can't ask the people of New Hampshire to support an oil import fee to bring stability to our national energy policy."

In a "welcome home" rally and subsequent news conference, Dukakis vowed to avoid attacks on his rivals, saying he wanted no part of the kind of "demeaning spectacle" voters saw in last week's Republican dustup between Vice President Bush and Sen. Robert J. Dole (R-Kan.).

But he implied that Gephardt's trade legislation is a defeatist effort "to build walls around America," said the oil import fee Gephardt supports is "as regressive and protectionist as anything you can do," and repeated his characterization of Simon's public-service jobs program as a "glorified WPA."

Dukakis also criticized both men for accepting contributions from political action committees (PACs), saying it is important that the Democratic nominee be "someone who can take this issue to the Republicans." Dukakis, who has raised more money than any other Democrat, does not accept PAC money.

All three of the campaigns said they had no plans for now to air negative ads, but it was unclear how long the truce will last. Simon -- who aired some anti-Gephardt radio spots in Iowa -- may be under the greatest pressure, but Lunde said he hopes that the trailing candidates, especially Babbitt, will "carry a lot of water" by criticizing the front-runners.

Babbitt, who flew to New Hampshire by commercial airliner, was greeted by a wildly enthusiastic crowd of about 200, and quickly demonstrated that his poor showing in Iowa had not diminished his sense of humor. Who would have imagined a year ago, Babbitt said, that he would arrive here having "decisively beaten Gary Hart by 8 points in Iowa?"

Babbitt said he would go on "fighting for a cause that's a lot larger than any of us -- moving away from the old pandering style of American politics."

While the opening moves were being made in New Hampshire, Democratic Party leaders divided on the question of the campaign's future course.

Donilon and former party chairman Robert S. Strauss both said they see an increased likelihood of no one emerging from the primaries with a mathematical majority of delegates. Donilon said that if New Hampshire sends Dukakis and either Gephardt or Simon south to battle Sen. Albert Gore Jr. (Tenn.) and Jesse L. Jackson on Super Tuesday March 8, there is a "very real" possibility that no one could gain a majority of convention votes from the primaries.

New York Gov. Mario M. Cuomo, on the other hand, told reporters, "The field looks stronger and stronger . . . . What I am looking for is a coalescence as early as possible behind one person . . . so by the time they come back to New York {for the April 19 primary} we can say, 'This is the logical winner. Let's all get behind him.' "

Pollster Peter D. Hart cautioned, however, that "this is a crackerjack election, with a surprise in every {primary} package," and said the voters appeared inclined to go slowly in making their final choices.

Staff writers Paul Taylor and Edward Walsh and researcher Colette T. Rhoney contributed to this report.