The Dukakis Design

...I think [federalism] will be a good change for Democrats—let's look to the states...

...Each has recently accused Massachusetts Governor Michael S. Dukakis of being the rooster taking the credit for the dawn of his state's economic revival...

...At other times he sounds a rather different note: "You don't want some guy in Washington with a green eye shade deciding where the plant goes in Youngstown...

...If I were President," he declares, gesturing toward the local officials eagerly trailing along, "this would be the Governor, this would be a Senator, and these guys would be members of the House...

...The challenges facing the next President might be saving the semiconductor industry, or spurring business to develop new technologies to clean up toxic wastes...

...Lately, following the lead set by Dukakis and former California Governor Jerry Brown, many state governments are acting more as brokers than as builders...

...But they won't...

...Because Dukakis rejects the term "industrial policy," Raine speaks of "aggressive intervention...

...The people at the bargaining table might include Citibank or USX or the AFL-CIO...

...Now it is home to 31 firms...

...Among Myles Standish's new business inhabitants is Kopin Industries...

...Dukakis wants to ensure that his proposed economic federalism will target the regions with the greatest need...

...Overstatement or not, Democrats around the country show signs of wanting to believe it...

...Underlying the moderate growth the United States as a whole has enjoyed since 1982 is a Swiss cheese economy, with some areas prospering while others are foundering...

...When ribbons are cut, there are two executives present—one public, one private—and two pairs of scissors to symbolize "partnership...

...But New England was bouncing back faster than the rest of the country, giving Dukakis the luxury of working to spread the growth more equitably instead of spending all his energy drumming it up...

...And patronage has always allowed governors to make powerful distributional choices...

...Nobody lives in the center strip of Route 128 [Boston's booming high-tech beltw ay]—our concern is for communities...

...Single industry reliance is the problem...

...Are there any applications of your product in agriculture, tourism, the film industry...

...Dukakis recalls his 1974 opponent, incumbent Frank Sargent, remarking in a debate, "I don't think states can do much about unemployment...

...But when it came to economic development, state officials usually succumbed to the "edifice complex," the urge to build office towers and convention centers as concrete monuments to their power...

...It's one thing to tell a local businessman that he has to locate in a county 45 minutes from home to qualify for a state loan...

...On the campaign trail he talks about South Texas and Minnesota's Iron Range, the mill towns of North Carolina and New Hampshire, yet the message always remains the same...

...We'd do it just like we do it here...

...Dukakis resembles a marathon runner who hits his stride early, locks it in, churns through the tough mileage, and constantly convinces himself that the next mile will be as easy at the last...

...Dukakis, for example, can pull the strings to 17 financing programs, 10 tax incentive programs, five training programs, four export assistance programs, and a dozen business promotion programs in order to help an enterprise at any stage of its life cycle...

...Now," Dukakis says, "people expect their governors to be deeply involved in the economic future of their states...

...What appeal he has appears to derive from his ability to carry his hands-on, can-do style to the Federal level...

...Here we were in this beautiful spot with the colors and the trees, and these people had pain and fear etched in their faces...

...Dukakis had the opportunity to turn concepts into policy...

...This idea did not, of course, originate with Dukakis...

...Strategic Investment Block Grants should "only be allocated to those states where the unemployment rate exceeds the national median by 10 per cent," his policy report says...

...State policymakers speak of "leveraging" and "targeting...

...Overseeing this network of banking and brokering agencies is Dukakis' director of economic development, Alden J. Raine...

...He found a constituency and a cause in the mill towns that were given up for dead at the end of the Republican recession in 1982...

...The South Bronx, East Los Angeles and Miami's Liberty City would similarly be deprived of Federal development funds because they happen to be in states with relatively low rates of overall unemployment...

...As he recalls, "the workers and their families I saw as I marched in the fall foliage parade in Adams that year looked as if they could have been right out of the Great Depression...

...To be sure, states have long made economic policy...

...His report proposed Strategic Investment Block Grants to take the place of existing Federal economic development programs...

...His policies did not make the "Massachusetts miracle" happen, they asserted...

...A more serious objection to the Dukakis design is that it leaves the ultimate decisions as to how development funds are to be spent to the states—sharply curtailing any active Federal role in guiding the national economy...

...As one top aide to New York Governor Mario Cuomo told me prior to his boss' decision not to run, "You don't bring people to Buffalo or Binghamton and say, 'this is what I'm going to do for America...

...After the tour Dukakis sits down to talk shop with the firm's executives...

...Lapsing into the cool, concerned speaking style he developed in the 1970s as moderator of thePBS series TheAdvocates, he spews queries and suggestions: "Are you talking to GE at all these days...

...If they aren't, they won't be governor for long...

...The geographical emphasis makes good economic sense...

...Our competition is New Jersey, not Japan, and what we do has nothing to do with exchange rates or the tax and growth policies of other countries...

...provide special help for hardhit states...

...It was launched by John Fan, a Chinese immigrant and MIT graduate who came up with a novel process for developing photovoltaics...

...We need to plan for diversity...

...THE FUNDAMENTAL national issue we need to resolve," says Dukakis, using the puffed-up rhetoric of a Presidential candidate even in a casual, oneon-one interview, "is whether there ought to be a regional strategy...

...Perhaps Japan will be there...

...But whereas the "Reagan revolution" has been illustrated by anecdotes of government waste and ineptitude getting in the way of market magic, Dukakis spreads the "message of Massachusetts" through tales of government activism and accomplishment...

...A study done for the National Governors' Association last year showed that 31 states are still in recession...

...Southeastern Massachusetts was one of his "targets of opportunity...

...Remember, Washington tried to aid the steel industry and U.S...

...No politician was ever hurt by the economy doing too well...

...The Feds must be more than bankers," he insists...

...Turning to the longer view, Raine adds: "We're not France or Japan, but we are trying to institutionalize government activism...

...So, as any good politician would, he promised to help...

...It's the natural Democratic response to supply-side economics: capital formation through government spending, a welfare state for needy businesses...

...Governors never used to talk that way...

...Taunton is Dukakis' answer to critics who accuse him of taking undue credit for the "Massachusetts miracle...

...When host William F. Buckley Jr...

...But everyone is sharing in what we do, and that's just not happening elsewhere...

...Directing business assistance to depressed regions is Dukakis' attempt to blend the new economics with the New Deal...

...Steel just went out and bought Marathon Oil...

...We have good contacts...

...Actually, sometimes the Governor's can-do spirit breaks through the cautiousness underlying this approach...

...Sitting in his statehouse office surrounded by maps of Massachusetts color-coded with "targets of opportunity," Raine tries to describe the rationale behind his daily deals...

...Can we set up a coop program with the local vocational high school...

...Dukakis, however, seems convinced that replication of his state policies will work for the nation...

...Will they...

...Democratic voters will want a candidate with a vision more inspiring than 50 state versions of Al Raine's "targets of opportunity" maps in the West Wing of the White House...

...scoffed at the fiscal demands on a mere governor, Dukakis shot back: "No, we don't have a defense budget, but we spend a lot on social services and human services and job training, and that's why Massachusetts has the lowest unemployment rate of any industrial state...

...A remnant of Dukakis' first term in the mid-'70s, Myles Standish had by 198 3 attracted only two businesses, and one of them soon closed...

...Huey Long built highways and Ronald Reagan built universities...

...While most such industrial blueprints were gathering dust on shelves around the country during the Reagan era...

...The area, tucked under the armpit of Cape Cod, is a cluster of small cities like Taunton, Fall River and New Bedford...

...Instead of setting up vast bureaucracies in Washington, the Feds should work with the states...

...Touring the Stratus Corporation, a computer manufacturing outfit west of Boston, the Governor stops to make his pitch...

...Given that the initiatives under this rubric were among the least memorable of both the Richard M. Nixon and Ronald Reagan Administrations, it is safe to say that it is hardly politically compelling fare...

...Within two days, Raine had arranged for financing, and the company was lured to Taunton...

...When Parker Brothers' decided to close down its plant there, Raine recalls, "a guy who knows someone who knows someone got to the Governor's secretary with news of a company about to open a new plant in Virginia...

...If questioned closely, he claims only to have redistributed the prosperity that others have created...

...In effect, he tells every audience—and himself—"I've done it, I've already done it...

...To come out at the head of the pack of Democratic candidates, he thus has to convince primary voters that the Massachusetts strategy, writ large, will work for the nation...

...There's no magic economic formula...

...May be the world banking system or a new international trading order will be on the agenda...

...If the press or his opponents hit out at him for taking too much credit for his state's economic success, Dukakis can chuckle...

...Five years later, as a Presidential candidate, he says to his critics, "Sure we're part of the general New England recovery...

...He failed to carry it in both 1978 and 1982...

...We'll set up some meetings...

...That was the year Dukakis regained the Governor's office after having lost his re-election bid four years earlier...

...They simply didn't call it that...

...The criticism cuts to the foundation of Dukakis' White House bid, for he is trying to stand out from his party's crowded field by portraying himself as a can-do executive who knows how to get a listless economy going...

...The local economy, in decline during the 1970s, had always been based on fishing, textiles and heavy manufacturing...

...Pentagon spending, property tax cuts and Reaganomics did...

...His line is to promise competitiveness and compassion...

...They must be activists...

...locate national 'centers of excellence' in these technologies in distressed regions...

...He could just as well be back in Massachusetts touring another plant, sitting down with more local leaders, getting ready to forge another deal...

...And a recent inquiry into the American economy by Japan's International Trade Institute pointed to better balanced regional development as the key to sustained improvement...

...Dukakis' more immediate problem, though, may be his present tendency to advocate federalism and restraint in place of the "aggressive intervention" he practices in Massachusetts...

...He is running on his record, boasting that the "message of Massachusetts" can transform America...

...Programming a computer to stop payment on projects because of state unemployment figures is simply too indiscriminate...

...Americans have heard two Presidents in the last 15 years call for a "new federalism...

...While his party rivals grope for themes that blend youthfulness with nostalgia for the Kennedys, Dukakis has gone back to political basics...

...State governments have formidable resources for the role they have taken on...

...He explains that "we had the same problem at the state level, but if there is a clear policy of going to distressed regions people will understand...

...Fan happened to live near Dukakis' father-in-law, and ended up discussing locations with the Governor's office...

...it's quite another to deny aid to a failing factory because it happens to be in Boston, not Baton Rouge...

...take billions of Federal research and development dollars and focus them on 10, 15,20 industries...

...John Siegai, a new contributor to The New Leader, is a lawyer and a former policy analyst in Governor Mario Cuomo's economic development program...

...If this were a no-risk business," he explains, "we'd let the banks do it themselves...

...The Governor first detailed his national design in a paper prepared last summer for the Democratic Policy Commission, the party's policy workshop...

...Taxes, regulation and licensing determined who could do business and how much it would cost...

...At the July 1 debate in Houston among the declared Democratic candidates, Dukakis confidently leaned into the center of the circle and announced, "I've submitted nine budgets in Massachusetts and they've all been balanced...

...Ever since the Chrysler bailout toward the end of Jimmy Carter's Presidency, government involvement in the commercial sector in the form of loans, grants and equity investments has been touted as the Democratic economic agenda for the future...

...creating the future just takes hard work, cooperation and investment...

...Overall, the city's unemployment rate dropped from 13 per cent in 1982 to 4.8 per cent in 1986—and Dukakis carried it by more than 3:1...

...Those programs—Small Cities Community Development Block Grants, Urban Development Action Grants, the Commerce Department's Economic Development Administration, and the Small Business Administration's capital formation schemes— would be combined and handed over to the states...

...And the assistance he is able to provide is the kind businesses like: cash and credit...

...For Dukakis this was tough territory politically...

...From the perspective of the White House, economic strategy involves more than finding a little money and a location for an MIT graduate with a bright idea...

...Dukakis discounts the significance of such allocative anomalies...

...In the particular case of Taunton the strategy focused on the Myles Standish Industrial Park...

...As the mills and factories shut, the region lurched toward depression...

...But despite all his brokering experience, managing national economic policy would be a giant step for Mike Dukakis...

...A $500,000 state-subsidized loan convinced Fan to start his business in Taunton...

...Yet following his formula, there would be no Federally-backed loans to minority-owned businesses in Boston's Roxbury section...

...In Raine's words, "We made people offers they couldn't refuse to do something in Taunton instead of Route 128...

...Indeed, he seems to enjoy paying the sort of deference to private sector innovators and entrepreneurs we have come to expect from political leaders—both Democratic and Republican—during the Reagan years...

...Are they potential hires...

...So we use carrots to lure companies to places they wouldn't want to go otherwise...