To the motorists whizzing by on Route 495, the patch of bulldozed earth where steel frameworks of new buildings rise offers no signal of significance. But in this spot lies the secret of both the continuing economic success of Massachusetts and the dramatically altered politics centering on Gov. Michael S. Dukakis (D).
The Myles Standish Industrial Park in this southeastern Massachusetts city is part of a targeted effort by state government to spread the dazzling growth of Boston and its Route 128 high-tech corridor to lagging corners of the commonwealth. In microcosm, the Taunton-Myles Standish story reveals how Dukakis and other new-breed governors of both parties are using economic development to foster prosperity for constituents and create new political coalitions for themselves.
Similar successes can be found from Republican Gov. Thomas H. Kean's New Jersey to Democratic Gov. Bruce Babbitt's Arizona. But nowhere have the skills of old-fashioned patronage politics been wedded to a complex and sophisticated set of public-private investment tools more effectively than in Massachusetts. Dukakis, in his second term, has built the state-of-the art model of an economic-development, political-entrenchment machine.
If Franklin D. Roosevelt was the father of the New Deal coalition, then Michael Dukakis and his counterparts can be called the parents of the New Deal-Making politics. It could become the national pattern of the 1990s.
Taunton was an industrial town, whose old firms made steel, locomotives, gears and silverware. In the 1960s and 1970s, many struggled, some closed or moved away. The city was in a rut.
When Dukakis was first elected governor in 1974, he was an urban-oriented liberal Democrat in the only state George McGovern had carried. Almost immediately, an economic slump, accentuated in Massachusetts by cutbacks in defense and space spending, forced him to violate a campaign pledge and raise taxes -- creating a serious split with business.
Still, Dukakis was an activist who was eager to use the available federal tools to improve the economic base of his state. When Wang Laboratories moved its computer operations into the abandoned textile mills of Lowell, it became a showcase for effective urban renewal. The governor looked for ways to aid other cities.
One development tool was the interstate highway program. Dukakis managed to clear the right-of-way and arrange for state matching funds to build the "missing link" of I-495, that would connect Taunton and the rest of southeastern Massachusetts (and Cape Cod) with the interstate network.
"I remember coming out here one cold day in 1977 with Fred Salvucci, the transportation secretary, and drawing on a piece of paper exactly the way we wanted the Taunton interchange laid out, so it would serve the industrial park," said Alden Raine, now director of the governor's office of economic development. The site had housed a prisoner-of-war camp during World War II and later a mental hospital. Dukakis turned it over to Taunton early in his first term and in 1976 helped the city get a $380,000 Economic Development Administration grant for new sewer lines and roads. The interchange from 495 opened in 1982. But by then Dukakis was out of office, having lost the 1978 primary to conservative Democrat Edward J. King, who ran with business backing on a promise to cut taxes.
King's four years were marked by economic progress but marred by scandals, and in 1982, Dukakis defeated him in a rerun of their 1978 contest. Dukakis returned to office as the economy began to turn upward after the 1982 recession, but this time he had a new problem. Instead of an array of federal urban programs at his disposal, he faced the austerity of the Reagan administration.
Moreover, the political climate had changed in Massachusetts. The state, which voted for Reagan in 1980, also had enacted a tough property tax limitation, Proposition 2 1/2, the same year. The tax-limit referendum was pushed through by a coalition of populist blue-collar political amateurs, supported by conservative suburbanites and bankrolled by many of the new high-tech millionaires.
To survive in this atmosphere, Dukakis had to find ways to satisfy his liberal impulses and urban constituencies without raising taxes or arousing the ire of the business community. "Operationally," he said recently, "economic development became our number one priority."
Fortunately, Dukakis still had both the legislative framework for economic development and the team of people to make it work. His first term had seen the enactment of a veritable alphabet soup of state agencies, and along with other funding bodies created during the King years, Dukakis had a variety of tools for meeting the infrastructure, capital, financing and training needs of new and expanding businesses.
The style of Dukakis' management team is less bureaucratic than entrepreneurial. "We're simply out there doing deals all the time," Raine said.
Taunton was a prime target for the deal-making. Economically, southeastern Massachusetts was lagging. Politically, in 1978 and 1982, it was King territory. As Mayor Richard Johnson recalled, "The second week of his term, Mike [Dukakis] brought his whole cabinet to SMU [Southeastern Massachusetts University] in Dartmouth and said he wanted to do everything he could to promote the region."
But first there was a setback. General Mills, which owns Parker Bros., decided to move its board-game manufacturing facility from Myles Standish to Mexico, shutting down the park's largest employer and pushing Taunton's unemployment rate to 13 percent.
The chance to replace the Parker Bros. plant came when the governor's office heard that Surrey Industries Inc., a newly formed plastic bag manufacturing company, was about to close a deal to start production in Newport News, Va. "I put Al [Raine] on it and we moved very quickly," Dukakis said.
Surrey was just 72 hours from signing the agreement in Virginia when company officials were shown the vacant Parker Bros. building and decided it was suitable. Dukakis phoned General Mills to urge a compromise on its selling price and, within 24 hours, got expedited approval of a $1.9 million industrial revenue bond to finance the deal.
In Johnson's eyes, at least, Dukakis deserves the credit for this as well as for loans, grants or bonds for seven major projects in and around Taunton that have helped create or retain 2,000 jobs and push the local unemployment rate down 7 percentage points.
With the original 200-acre Standish park filled and 17 more firms waiting for buildings to be completed in the 125-acre addition now under construction, Johnson said, "Mike has done some incredible things for Taunton." And in return, Johnson is helping Dukakis politically. The mayor, who was staunchly in King's corner in the 1978 and 1982 primaries and who helped give King his largest plurality of any city in the state four years ago, has put on a successful fund-raiser for the governor's 1986 reelection campaign.
Some students of economic development question how much any such policy affects growth patterns and they argue that other factors were more significant than the governor's program in giving Massachusetts the lowest unemployment rate in the nation at 3.9 percent. Unlike most prosperous states, Massachusetts has had virtually no population growth in the past decade. Between 1975 and 1984, the number of jobs grew 25.5 percent while population grew less than 1 percent. (Comparable figures for the nation were 22.7 percent and 9.7 percent.)
"We just squeezed more jobs out of the same labor force," said George Masnick, a demographer at the Harvard-MIT joint center for urban studies, "by bringing in more women, more minorities and more people moonlighting at second jobs."
Ronald F. Ferguson of Harvard, who is evaluating Massachusetts' experience for the privately funded Committee for Economic Development, said, "Our conclusion is that the state's policy has affected the geographic distribution of economic activity at least marginally, but not the overall level of economic activity."
Ferguson argued that economic effects are "very slow, certainly well beyond the limits of a single governor's term . . . . Even the things Dukakis did in the first term are probably not the explanation for what's happening now."
But Herman B. (Dutch) Leonard, another Harvard professor, said that people elected "on a geographical basis," such as governors and legislators, "cannot just let economic forces determine where growth occurs." While Leonard is a critic of some financing devices used in economic-development programs, he said the Massachusetts development model is preferable to other states' in two respects: It adapts to and fosters economic change, rather than trying to "lean against the wind"; and it "uses government to foster communication among economic decision-makers, rather than pouring in a lot of dollars."
Those last two points are critical to understanding the broad political payoff for Dukakis' economic-development strategy. It relies very little on the traditional government methods of taxing some people in order to appropriate money for others. It relies much more on government officials being catalysts and communicators.
John Sasso, Dukakis' assistant and political strategist, said the attractiveness of the new-style liberalism is that "it's an approach everybody can rally behind . . . . It is not driven by constituency politics," at least in the old-fashioned sense.
Sasso said the governor's quarterly public opinion polls have shown consistently that "people want government involved in economic decision-making, as long as the goal is increasing opportunity." Unlike programs that appear to be targeted mainly for the benefit of minorities and the needy, he said, "this builds support among middle-income people . . . and the small business people, who left the Democratic Party in droves."
The other attractive feature of the New Deal-Making politics is that so much of it is played with money that is not extracted directly or visibly from taxpayers or appropriated by the legislature. As compared to the noisy legislative and political battles over taxation and appropriations, it relies on what Dutch Leonard calls in a forthcoming book "the quiet side of public spending."
A favorite means of "quiet spending" are Industrial Development Bonds (IDBs), loans to private firms on which the interest escapes federal taxation because they are issued or certified by a state development agency. Since 1978, Raine said, Massachusetts has arranged $3 billion in such financing for 1,800 companies, yielding 70,000 jobs. These bonds are not counted as part of the state debt; the subsidy involved in the below-market, tax-free interest rates is provided by the federal treasury and shared among taxpayers of all 50 states. Between 1975 and 1983, the use of industrial development bonds tripled nationally, but few states were more aggressive or adept in using them than Massachusetts.
Dukakis has also been inventive with devices that marshal private funds for development. In 1978, the governor and the legislature struck a deal with Massachusetts-based life insurance companies, giving them "parity" in tax treatment with their out-of-state rivals in return for a pledge by the companies to invest $100 million in a Massachusetts Capital Resource Corp. The corporation makes loans at preferential rates to companies doing business in the state. In 1984, a similar tax deal with the state's savings banks produced a $100 million capitalization for the Thrift Institution Fund for Economic Development, which assists economic development projects that may be shut out of normal capital markets.
The variety of tools available for business ventures means that it takes expertise to know what can be done. An individual deal may involve revenue bonds from one agency, venture capital from a second, infrastructure assistance from a third, worker training from a fourth and other specialized assistance from the departments of labor, transportation, commerce, environment or community development.
It is no accident that the expertise and the leverage to move these pieces into place are available only in the governor's office. "There's no such thing as taking one cabinet secretary and saying, 'You do all the economic development deals,' " Raine said. "You do it out of the governor's office. That's why you have a governor."
Dukakis and his cabinet members regularly take business operators, bankers, academics and news media people through the targeted regions, showcasing developments and discussing their plans. On a recent swing through southeastern Massachusetts, Dukakis visited Benthos, a young oceanographic research firm in Falmouth that designed and made the cameras used to photograph the Titanic. He also visited United Merchants in Fall River, a 50-year-old textile company where veteran dyemasters have been retrained to use computers instead of their eyes to match fabric colors. Then he joined other tour groups led by cabinet members for a post-lunch discussion at SMU.
Not everything was upbeat, but for every complaint, there were several success stories about how the state government had helped. John Fan, an entrepreneur whose new photovoltaics firm is moving into Myles Standish, said Dukakis "heard about the company . . . and sold me on Taunton," adding that the governor "put together a very nice package for us," with a $500,000 subsidized loan being the key piece.
The political payoff for all this has been unmistakable. Business opposition to Dukakis has not disappeared, but it has been dissipated. Under the headline "Business Warms Up to Gov. Dukakis," The Boston Globe reported in December that Arthur Goldstein, chairman of the High Technology Council, which once fought Dukakis on many issues, said, "I think most of us are upbeat . . . . People are saying there's progress and we're genuinely pleased."
John Gould, senior vice president of the Shawmut Corp., one of Boston's major banks, and chief lobbyist for "the Vault," a coordinating committee for Boston's 24 largest employers, said that from the business viewpoint, the "dogmatic, inflexible" Dukakis of the first term has become a "totally open-minded governor" in this second term. "He's matured," Gould said. "He's recognized that social needs are best met when the economic engine is running well . . . . There's a social contract in effect."
Not everyone is enraptured by the performance. Barbara Anderson, who runs Citizens for Limited Taxation, the conservative populist group that pushed Proposition 2 1/2, said she believes "government entrepreneurship is a contradiction in terms."
"I think government should stay out of the way," she said. "The Dukakis administration thinks they can give favors to business and get them to go where they want them to go. It's the old philosopher-king thing . . . . "
Liberal state Sen. Jack H. Backman (D) said Dukakis has failed to push for the restoration of welfare cutbacks that were forced in the lean years of the 1970s, with the result that "80,000 mothers and 140,000 children on AFDC are living below the poverty line . . . . He Dukakis is trying to be all things to all men."
This year, Dukakis proposed the biggest increase in social services spending of his second term.
Whatever their criticisms, people from Anderson to Backman to Gould said Dukakis has made himself virtually invincible politically. "He will be unchallenged in the Democratic primary," Backman said, "and the Republican Party so far is hard-pressed to find a candidate against him."
Old rival King switched to the Republican Party in 1985, presumably to make another race for governor, but announced in January that he would not run.
The governor has exploited his new acceptability with the business community and his long-standing support from labor to set himself up as the broker on previously controversial issues in the legislature. In the last three years, compromise legislation on "right to know" issues, plant closings and workers' compensation has gone through. Just before Christmas, he signed the repeal of the 10-year-old income surtax, which was the symbol of the political problems he encountered in his first term.
If there is a cloud on Dukakis' horizon, it is the fear that national and international economic forces may cause a slump for which no state policies could provide a remedy. But as long as that can be avoided, he and the other New Deal-Making governors appear to be sitting pretty.
Staff researcher Lee Kennedy contributed to this report.