updated 7/16/2008 5:08:02 PM ET 2008-07-16T21:08:02

New Hampshire, in an odd corner of the country, with 44 one-hundredths of 1% of the nation’s population, with unusual public policies, becomes every four years the epicenter of the political universe, the site where the contest for the presidency of the most powerful nation in the history of the world is temporarily centered, where every vote is avidly sought and where members of the political press vie for access to candidates and for tables at the latest cycle’s most fashionable bars and restaurants. New Hampshire has done much to change the political world—not just the United States, but the entire world: It gave a huge boost to Dwight Eisenhower’s candidacy in 1952, it prompted the retirement of Lyndon Johnson in 1968, it sent on his way to power first Jimmy Carter in 1976, then Ronald Reagan in 1980 and George H. W. Bush in 1988. The lever by which this small state moves the world is New Hampshire’s first-in-the-nation presidential primary, first seriously contested in 1952, then sanctioned as the first-in-the-nation primary by Democratic rules writers in the 1970s, and exploited by Republicans in the 1980s. And New Hampshire did all this when its public policies were atypical of the nation and its political terrain unusual if not eccentric. This is one of the few states that over the last half century has had more registered Republicans than Democrats, and of all the states it was for many years arguably the one with the most antipathy to taxes. Yet in the last dozen years, New Hampshire has changed. The last two presidents have both lost the New Hampshire primary. It gave Patrick Buchanan a surprising 37% of the vote in 1992 and a 27% victory in 1996, but he never did as well elsewhere and left the Republican party in 1999. It gave John McCain a thumping victory over George W. Bush in 2000, but that proved to be a harbinger for the Northeast and not the rest of the country. New Hampshire played a key role in nominating Al Gore in 2000 and John Kerry in 2004, but both lost the general election. That year New Hampshire was the only state that had a big increase in turnout in the Democratic primary—an increase that was a harbinger of its performance in November, when it was the only state that switched from George W. Bush in 2000 to John Kerry in 2004. That year it also elected a Democratic governor, John Lynch, by a narrow margin. In 2006 Lynch was reelected with 74% of the vote and Democrats swept the state, ousting two Republican congressmen and gaining 89 seats in the New Hampshire House. It was a startling result in a state that voted 58%, 69% and 62% for Republican presidents in the 1980s.

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New Hampshire’s distinctiveness started early. In a country that prides itself on its feistiness and freedom from outside direction, it has always been even feistier and lightly fettered by authority. Before the Revolutionary War, New Hampshire was almost an outlaw colony, its great fortunes made by poachers in the king’s forests and smugglers avoiding taxes. It was the first colony with an independent government and was fighting the British before the Minutemen stood at Lexington and Concord. In this environment, 19th century entrepreneurs built textile mills along fast-flowing rivers; the Amoskeag Mills in Manchester, lining the Merrimack River for a mile, were once the largest cotton mills on the globe, employing 17,000 people and producing enough cloth every two months to put a band around the world (there’s a Lego replica of them now at Manchester’s SEE Science Center). Around the mills grew a city of red brick dormitories and three-family frame houses filled with immigrants from Quebec, Ireland, Poland and Greece, set down amid dirt-roaded villages of flinty Yankee farmers and mechanics. New Hampshire held to its traditions of local government and little external control, and for years its refusal to join most other states and enact an income or sales tax, or to provide statewide guidance of schools and social services, seemed to doom it to continued backwardness.

Instead low taxes proved to be New Hampshire’s fortune. From the 1960s to the 1990s, New Hampshire had the fastest growth in the Northeast, attracting businesses from Massachusetts and other high-tax states. It became a location of choice for entrepreneurs and high-tech innovators, attracting an increasing number of people skeptical of government programs. From 1965 to 2000, Massachusetts grew from 5.5 million to 6.3 million, up 15%; New Hampshire grew from 676,000 to 1,236,000, up 83%. The bedraggled New Hampshire of 50 years ago, of poor Yankee farmers and French Canadian mill hands, has largely disappeared, and in its place one of the nation’s most prosperous economic communities has arisen. The low taxes that spurred New Hampshire’s growth would probably have been raised in the late 1960s or early 1970s, as they were in so many states at the time, but for the far from gentle advocacy of Manchester’s Union Leader and its owner William Loeb. The Union Leader insisted that governors and legislators “take the pledge” to vote for no sales or income tax and, from 1970 to 1998, almost all did, and the two who didn’t were defeated. That meant keeping education and welfare as local responsibilities and holding down spending. At the same time, New Hampshire boasted the highest SAT scores in the country and had the brainpower to participate fully in New England’s high-tech boom. The old Amoskeag Mills were converted to offices, and once grimy Manchester is now a high-tech center. Fidelity Investment, BAE Systems, Liberty Mutual and Timberland are big employers here, and New Hampshire has one of the nation’s highest growth rates in information technology jobs.

This “Nouvelle Hampshire,” to use Washington Post writer Henry Allen’s term, has none of the architectural purity of Amoskeag. Its shopping centers and new subdivisions have a slapdash, half-built look, as if there were no time for details in the hurry to build. But it is also a state that claims to have the highest proportion of high-tech jobs, 8% of the total, and the highest percentage of citizens with Internet access. It also is a big center for financial services, with giant mutual fund campuses stuck out in the woods. This New Hampshire has not been without its problems. The booming New Hampshire priced itself out of the growth market: Its giddily high real estate prices in the late 1980s kept out the new workers its businesses needed to continue expanding. The recession of the early 1990s was harsher here than anywhere else. Thousands of jobs disappeared; real estate prices crashed so that ordinary people lost not only short-term income but also long-term wealth. By the mid-1990s growth returned again, and during the national recession of 2001–02 New Hampshire’s unemployment stayed low, real estate prices were rising and incomes ranked seventh in the nation. It also has virtually no racial minorities; its population is 1% black, 2% Hispanic and 2% Asian. But there has been less in-migration in recent years, perhaps because Massachusetts and other states have lowered their taxes; the biggest in-migration since 2000 has been around Concord and the Lake Country, not along the Massachusetts border.

This helps to explain the state’s political gyrations over the last dozen years. In 1992 in-migration had stopped and New Hampshire was reacting angrily to recession and rapidly declining house prices. It held George H.W. Bush to an unimpressive 53%-37% win over Patrick Buchanan in February and then voted for Bill Clinton over Bush in November. This turned out not to be a one-time fluke; like most states dominated by big metropolitan areas (most of New Hampshire gets Boston television) New Hampshire moved toward the Democrats in the 1990s, reassured by economic growth and comfortable with the Democrats’ liberal stands on cultural issues. In 1996 New Hampshire voted 49%-39% for Clinton and elected Democrat Jeanne Shaheen as governor; Republican Senator Bob Smith came so close to losing that he was proclaimed the loser by the networks on election night.

Then New Hampshire’s tax regime came under attack. The state Supreme Court in December 1997 ruled the state’s school financing system unconstitutional because it leaves some districts with less taxable resources than others (the state provides only 10% of funding, far less than in the other 49 states) and gave the state an April 1999 deadline for coming up with a new system. The result was a statewide property tax—not anybody’s first choice, but what the Democratic governor and Senate and the Republican House could agree on—and increases in business, cigarette and property sales taxes and a new tax on rental cars. In November 2002 voters had a clear choice: Republican Craig Benson took the pledge, while Democrat Mark Fernald supported an income tax. The verdict was clear: Benson won 59%-38%. But in 2004 Benson fared less well, after quarreling with the Republican legislature and facing an opponent, businessman John Lynch, who took the anti-tax pledge. Lynch won 51%-49%, as George W. Bush lost the state 50%-49%. Lynch kept his pledge even after the state Supreme Court once again rejected the legislature’s school funding plan in September 2006. Republicans talked about amending the state constitution to bar the courts from reviewing school funding, but didn’t act, and Democrats won a stunning victory across the board. The two incumbent congressmen lost their seats by almost precisely the same margins by which Bush had lost in their districts in 2004; Democrats won a 14–10 majority in the state Senate, a 239–161 majority in the state House and a 3–2 margin on the Executive Council (one of the winning Democrats was in Belgium on vacation on election night). This came despite, or because of, a 9% decline in turnout compared to 2002: New Hampshire has fewer newcomers seeking lower taxes than it used to, and elderly Yankees in the North Country may be dying out. Now, as New Hampshire hosts the two parties’ presidential candidates, the new Democratic majorities must deal with the school funding issue and few seemed inclined to buck Lynch’s opposition to an income or sales tax, despite a group set up by the New Hampshire Council of Churches to oppose the anti-tax pledge. They seem more inclined to ban smoking, raise the minimum wage, raise the school dropout age and join the 180 of 234 localities who voted in their town meetings on whether to call for federal action to address climate change.

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