Dukakis’ State Miracle: Long on Jawboning

John Bullard, the young, patrician-looking mayor of this once-depressed town, is quick to tell why he has become a cheerleader for Gov. Michael S. Dukakis.

“He doesn’t ignore us,” Bullard says.

But has Dukakis done much more than simply pay attention?

The Democratic presidential nominee often points to his efforts to revitalize New Bedford and the rest of southeastern Massachusetts as an example of the kind of “regional economic targeting” that he hopes to bring to Washington. In fact, Dukakis campaign aides say regional targeting would be the most important economic policy that Dukakis would take from the Statehouse to the White House.

Short on Specifics

But, in many ways, Dukakis’ regional targeting policies in Massachusetts have been short on specifics and long on intensive gubernatorial jawboning.

“It’s nebulous,” observed Ronald Ferguson, a policy analyst at Harvard University’s Kennedy School of Government, who has conducted what many specialists consider the most comprehensive study of Massachusetts economic policies under Dukakis. He notes that much of what Dukakis has done revolves around setting a pro-development tone, making it clear to business that he is willing to make one-time deals to encourage industry to consider certain areas.

“It’s more of a process, bringing people together to make deals, rather than any particular program,” Ferguson added. “In fact, I would argue that jawboning may be the most important thing he has done.”

His regional development policy proposals for the federal level would seem to offer more of the same. Although he has proposed a new $500-million regional development fund, his aides acknowledge that his regional policies would rely heavily on existing federal programs.

To be sure, there is no shortage of economic development agencies in Massachusetts. The state has created a rich menu of quasi-public organizations that use a mix of state, federal and private funds to provide aid to businesses and local areas--aid ranging from worker retraining to low-cost financing for start-up companies and troubled firms.

One of the most effective of those financing projects, observers say, has been the use of the state’s tax-exempt industrial revenue bonds to provide direct loans to businesses locating in troubled areas.

Still, there is no over-arching state program that provides the backing for Dukakis’ regional targeting efforts. Instead, state officials point to a wide range of smaller, isolated instances in which the state, using its development agencies as tools, has helped local leaders put together deals with businesses on an ad hoc basis.

But even top Dukakis aides concede that the state’s regional targeting policies have not created many jobs.

“We recognize that growth has to come from the private sector,” says Joseph Alviani, Dukakis’ secretary for economic affairs. “The state mainly acts as a convener of business, labor and local government interests, a leverager of financing, and as a cheerleader for growth in certain regions.”

So, although Dukakis claims much of the credit on the campaign trail for turning around sections of the state that had been left behind by Boston’s boom, economists and political leaders here still debate just how much of an effect Dukakis’ rather vague policies have had.

Lost Jobs, People

There is no doubt today, however, that New Bedford and the surrounding area, filled with old mill towns that steadily lost jobs and people from World War II to the 1980s, have enjoyed a recovery since Dukakis was returned to the governor’s chair in 1982. Today, New Bedford’s jobless rate is 4%, down dramatically from 9.8% in 1983.

But if the Dukakis record in New Bedford is a model for his national targeting policy, then offering traditional government services and acting as a federal cheerleader for growth will be high on the Dukakis agenda.

In southeastern Massachusetts, Ferguson concluded in his study, Dukakis’ most important contribution to growth was a very traditional step. He gave top priority in his first Administration in the mid-1970s to the completion of the final link through the area of an interstate highway that loops around metropolitan Boston. The highway, Interstate 495, dramatically improved transportation access to the region, and made it much easier for business to consider expanding there.

Later, Dukakis also provided surplus state land for an industrial park in Taunton, near New Bedford, and made sure that an exit ramp off the newly completed leg of Interstate 495 gave truck traffic easy access to the park.

“Most of what the state has done that has had an effect on growth there has come from the highway,” Ferguson said.

Held ‘Government Day’

When he returned to office for his second term, four years after his 1978 defeat in his first bid for reelection, Dukakis once again signaled that he wanted business to consider the southeast section of the state by hosting an extraordinary bus tour of the area for top Boston business executives, many of whom had only seen the region while driving through on their way to Cape Cod. At the same time, he held a special state cabinet meeting and “government day” at Southeastern Massachusetts University, right outside New Bedford.

Dukakis also sought early in his second term to spur growth by arguing that the state’s multimillion-dollar “center for excellence,” devoted to hands-on microelectronics training for college students, should be located at the new, but mostly empty, industrial park in Taunton.

Suddenly, Taunton had a one-man chamber of commerce in the governor’s chair. “He was a very, very strong advocate for the Taunton site,” recalled Joseph Stach, then-executive director of the center and now director of a similar project in Tampa. “The lobbying got so intense we had to have a cooling-off period for the site-selection committee. His predominant goal was to use the center for regional development.”

But the high-tech community balked, and in 1984 the site-selection committee chose a suburban Boston location. (In its place, Southeastern Massachusetts University has been awarded a $10-million marine science laboratory, perhaps more appropriate to the coastal region.)

Still, Dukakis’ statewide lobbying for Taunton helped improve the area’s visibility among companies that had never considered expanding there, says Al Raine, Dukakis’ chief aide on economic development matters. He notes that the industrial park is now virtually full.

‘Surprising Growth’

“If you go back and see what happened to Taunton, which supposedly lost the center, they have had surprising growth in business development,” Stach said. “What this did was make those communities in the area aware of how they could go out and make their stories known. They got a lot of exposure through the site-selection process.”

Since then, the state has helped the major cities in southeastern Massachusetts to work together on economic development matters. Earlier this year, the state provided $100,000 of the $150,000 budget for a new five-city development partnership in the region. New Bedford, Taunton and three other cities will jointly recruit industry and have agreed not to compete against each other when businesses look at the region.

Dukakis also encouraged the area’s attempts to lure tourists, who have traditionally bypassed southeastern Massachusetts in favor of Boston and Cape Cod. Dukakis has supported New Bedford’s effort to include the city’s old whaling waterfront in the state’s “heritage park” system, a preservation program that has already revived tourism in historic industrial towns such as Lowell.

But what leaders in New Bedford consider to be the state’s most important action in recent years came in a seemingly modest, ad hoc effort to back up a citywide effort to save one of New Bedford’s largest employers, which had just entered bankruptcy.

A Missouri competitor was threatening to buy Morse Twist Drill out of bankruptcy and then shut it down, eliminating hundreds of jobs in New Bedford. City business, labor and community leaders mounted an intense protest campaign; they led rallies at the bankruptcy court in Boston and even sent a delegation to the competitor’s Missouri headquarters.

Sent in Experts

The state had provided financing to keep Morse afloat. At the urging of local leaders, state officials agreed to provide more favorable terms on the loan so that a Scottish buyer who planned to continue to operate the company in New Bedford could buy it and keep it out of the hands of the firm that wanted to shut it down. The state also sent in experts to help the confused firm straighten out its management systems while it was in bankruptcy proceedings.

But, with no real pattern to such state actions, it is difficult to discern how much of New Bedford’s turnaround can be credited to Dukakis’ policies. Indeed, some observers argue that growth and jobs were bound to spread to New Bedford from Boston on their own, as labor shortages, rising property costs and increasing congestion forced industry to expand outside the metropolitan area. New Bedford, after all, is only 50 miles from Boston.

“I think a lot of the growth in the southeast came because business will go into an area where it can find a work force, and that is one of those areas,” a leading Democratic Massachusetts state legislator said.

Low interest loans and similar incentives from the state, he adds, probably accelerated development, “but even though a lot of it was encouraged by the Administration, a lot of it would have gone in there anyway to get a work force.”

Others, including Ferguson, still give Dukakis high marks for at least attempting to help by providing financing and other assistance in the “gaps” between federal programs and private initiatives.

‘Spillover From Boston’

“Most of the growth in the southeast has been spillover from Boston,” Ferguson said. “State officials couldn’t have helped if they hadn’t had a big economic wave going across the state. But the state has been successful in helping to divert the wave to some areas. Things other than state economic policy deserve most of the credit, but if the question is did the policy help, the answer is yes.”

Even Dukakis critics who don’t believe targeting has had much effect still say Dukakis has at least forced business and political leaders to pay attention to distressed regions for perhaps the first time. A high-level political interest in regional concerns, they note, can send important signals to business.

“He has tried very hard to motivate people to expand in those areas, and I think that is a very laudable effort,” said Frederick van Veen, a Dukakis critic and a vice president of Teradyne, a Boston high-tech firm. “That is an effort that I think the high-tech community should support.”

But New Bedford and the rest of Massachusetts are just now starting to find out how difficult it can be to continue to spread the wealth when there isn’t as much to go around.

In fact, just as Dukakis begins his general election campaign this summer, there are increasing signs here that the “Massachusetts miracle,” the economic engine that helped propel Dukakis to the Democratic nomination, is running out of steam.

Massive Budget Crisis

An economic slowdown has hit Massachusetts in recent months just as the state government has found itself mired in a massive budget crisis, and the double whammy is about to force tough choices on a state unused to sacrifice.

Now, Dukakis’ regional development efforts, although they have never cost much money, are still starting to come under the budgetary gun. And experts warn that the state’s broad array of industrial development agencies may not survive a protracted slowdown.

“In more and more respects, the miracle has passed its prime,” Bennett Harrison, a political economist at the Massachusetts Institute of Technology, wrote recently.

“To the extent this is a long-term problem, and I think it is, then there are going to be real problems in terms of being able to maintain the programs Dukakis has created,” Harrison added in an interview.

The slowdown has apparently been brought on by the state’s severe labor shortage and rapidly rising living costs, which have prompted more and more businesses to move their manufacturing operations out of state.

90,000 Jobs Lost

Coupled with the aftershocks of the computer industry’s severe slump of the mid-1980s, those factors have led to a sharp drop in manufacturing employment. Economists say the state has lost more than 90,000 manufacturing jobs since 1984, the largest loss of any state in the nation.

Economists add that the labor shortage seems to be the most serious obstacle to further growth in the state today. Despite its boom, Massachusetts simply hasn’t been able to attract many immigrants from out of state; it is expected to lose a congressional district after the 1990 Census leads to a reapportionment.

“The dominant theme of our forecast is the labor shortage,” noted Ben Chinitz, an economic forecaster at the Lincoln Institute of Land Policy in Cambridge, Mass.

“You just can’t have faster growth without more warm bodies coming in,” added Lynn Browne, an economist with the Federal Reserve Bank of Boston.

At the same time, Massachusetts is also being hurt by the slump in defense spending. Defense, in fact, has been a crucial ingredient in the Massachusetts miracle. Northwestern University urban affairs specialist Ann Markusen observes that Massachusetts is a key member of what she has nicknamed the nation’s “Gun Belt,” a widely dispersed group of states that are heavily dependent on the Pentagon. Ironically, defense-spending curbs likely to come under Dukakis would further reduce growth in his home state, economists say.

‘Uncomfortable Talk’

“There has been a lot of uncomfortable talk here this summer about Dukakis’ proposals to cut defense and how it is probably going to hurt New England,” Harrison said.

Dukakis supporters insist, however, that this year’s budget shortfall was something of a fluke, caused by one-time problems, and stress that the economy remains vibrant, with unemployment at just 3.5%.

“I don’t think there is another industrial state in the country that wouldn’t trade problems with Massachusetts,” said Lawrence Summers, a Harvard economist and adviser to the Dukakis campaign.

But the state’s growing economic and budgetary worries have started to affect Dukakis’ ability to continue to help targeted areas like New Bedford.

To help balance the budget this summer, state legislators eliminated a plan to provide a special investment tax credit for businesses locating in areas with high unemployment. Then, as he hammered out a budget last month, Dukakis was forced to veto $91 million in aid to cities and towns; poor communities throughout Massachusetts rely heavily on such state funds to offset revenue losses caused by a 1980 referendum limiting property tax growth. New Bedford, which depends on state aid to cover 60% of its $108-million annual budget, will lose $3.4 million as a result.

New Worries

In New Bedford, a city just starting to grow accustomed to economic growth, such budget cuts are leading to new worries about the city’s fiscal health--and to new concerns about the state’s long-term commitment to development in the region.

“The man has been good to southeastern Massachusetts, there is no question, but I’m just very concerned with what he’s doing now,” said Cynthia Kruger, a Democratic member of the New Bedford City Council. “This is hitting us at the wrong time, and we have nowhere else to turn.”