The Duke Talks Tall

The dirty little secret behind the Dukakis "miracle" in Massachusetts

If you are planning to drive to Massachusetts, you'd better bring a checklist with you to the state line.

Immediately after the "Welcome to the Commonwealth of Massachusetts" sign, you will encounter the first evidence of why the state is often referred to as "The People's Republic of Massachusetts." The next sign is a no-nonsense warning that if you are caught with that gun in your glove compartment—even though it may be registered in another state—you are looking at staying about a year longer than you had planned.

The third sign used to read, "Wearing of seatbelts is required. $15 fine for noncompliance." Since that little piece of statism was rejected at the polls last November, however, it now merely reads, "Massachusetts strongly recommends you buckle up."

A little farther on you are given fair warning that you may encounter police roadblocks to make random checks for drunk drivers. In the event you are offended at being pulled over without probable cause and refuse to take a breathalyzer test, you have convicted yourself in the eyes of the state and consequently lose your driving privileges for 120 days. No trial necessary. Very neat.

If your palms are starting to feel a bit clammy at this point, don't relax, because you're not finished yet. Despite the federal repeal of the 55-mph speed limit for most interstates, Massachusetts swiftly rejected the idea and announced that the double-nickel would remain. The last sign warns that this limit is "strictly enforced."

"The spirit of Massachusetts is the spirit of Bulgaria," warbles Boston Herald columnist Don Feder, paraphrasing the state's tourist jingle. All of the above restrictions and regulations demonstrate that the Rev. Jerry Falwell has nothing on Gov. Michael Stanley Dukakis when it comes to enacting social controls into law. All of these signs were made necessary by laws enacted under Dukakis, now widely viewed as the Democratic front-runner since the Gary Hart campaign crashed and burned last May.

Just 53 years old even after 10 years in the state house Corner Office (and a four-year hiatus), Dukakis's dark hair is now edged with gray at the temples. His height is a matter of some dispute, since it seems to vary between 5'8" and 5'9". Some members of the press corps that covers him speculate that he wears lifts on occasion. Nevertheless, he comes across very well on television. For a few years he was moderator of the popular public affairs debate program, "The Advocates."

The Duke, as he is widely known, is a born politician. His father emigrated from Greece and earned a medical degree, eventually becoming a property developer and highly paid "lawyer's doctor" who testified as an expert witness in trials. Treated to Swarthmore and Harvard Law School, the young Dukakis wasted no time. He was elected to the state legislature just two years out of law school. His marriage to Kitty Dickson, daughter of Boston Pops Associate Conductor Harry Ellis Dickson, helped raise him out of the legislative ruck and greatly enhanced his stature in Boston's elite artsy cultural circles.

Dukakis made his first bid for statewide office in 1970, when he was the Democratic nominee for lieutenant governor. He lost but came back four years later to win the governorship in the depths of Watergate and the national recession.

The ice-cool telegenic exterior he projects now is a far cry from the brash and arrogant "reformer" who took office in 1975. In his personal asceticism (he once offered a group of tired campaign workers one chocolate chip cookie each) he was very reminiscent of another governor elected that year, California's Jerry Brown. Dukakis may lack warmth and charisma, but no one should underestimate him: after more than a quarter century in politics, he is a skilled and aggressive politician who has built a formidable political machine.

Though he denies it now, Dukakis was widely perceived as hostile to business growth and development in his first term and did little to dispel the image. Massachusetts businessmen quickly got the idea and began packing for low-tax neighbor New Hampshire. Ordinary people weren't hanging around either. At the end of the decade, the population had grown only eight-tenths of one percent, compared with a national rate of 11.4 percent.

Dukakis either didn't know or didn't care about the obvious signs of seething discontent. In 1976, he supported an initiative that would have made the state's personal income tax a graduated levy. It was defeated by a three-to-one margin.

Dukakis's main selling point in his campaign for the White House is the robust state of the Massachusetts economy. "I bring a message of good jobs and economic opportunity and vibrant, sustained economic growth for every American in every part of the country," he claimed when unveiling his presidential campaign. "It is a message of opportunity for all."

He had said much the same thing to audiences in economically depressed Louisiana a few days earlier, pointing out that in a decade Massachusetts had evolved from a stagnant economy with double-digit unemployment to a high-tech go-go state with the lowest unemployment rate in the nation, a development he will take credit for in front of anyone who will listen. "If he could do it there, why not for the whole country?" asked an impressed Louisianan listener.

The only problem is that he didn't do it. The legendary Massachusetts economic boom was by and large a product of policies and forces unleashed in the four years of Dukakis's hiatus from the Corner Office between 1979 and 1983. Duke has another problem: the state economy has now stalled and is headed for rough water in a year or two.

Two events were primarily responsible for bringing Massachusetts back from the dead, and they both happened on the night of November 4, 1980. First and most important was the passage of Proposition 2½, which cut the state's average property tax rate from 4.8 percent to 2.5 percent (by comparison, it took a rate of just 2.8 percent in California to set off Proposition 13). Second was the election of Ronald Reagan as president, with his program to "rearm America" through big increases in defense spending. Lower energy costs courtesy of OPEC's collapse didn't hurt either.

There is now no dispute between liberals and conservatives that Proposition 2½ (which Dukakis vigorously opposed from his exile at Harvard's Kennedy School of Government) was a lot more than just a tax-cutting measure. By passing it over the objections of every major politician and interest group, the voters sent a powerful message to Beacon Hill that they wanted the state's chaotic fiscal house put in order. Passage of the measure also did a great deal to convince businesspeople and ordinary citizens that the only state in the Union to support George McGovern was not some kind of left-wing oddity and that it was safe to do business there and invest in its future.

Before 2½, the "Taxachusetts" nickname was largely justified. Under the last Republican governor, Frank Sargent in the early 1970s, no expense was too great, no program too dubious to be tried and kept in place more or less indefinitely. At the time of Dukakis's election in 1974, Massachusetts had the second highest tax burden in the country, a whopping 124 percent of the national average.

No one, however, seemed to make the connection between the high tax burden and the lack of economic growth. Dukakis added to the problems during his first term by slapping on a 7½ percent "temporary" income surtax and a sales tax increase—on top of several already hefty tax boosts under Sargent. High-tech companies, led by graduates of Harvard and MIT, were chomping at the bit to expand their operations but demanded tax relief as a prerequisite. Their not-so-veiled threat: Cut taxes or we'll be forced to look for greener pastures.

"A professional engineer thinking of moving to Massachusetts from a Sunbelt state faced an automatic rise in his cost of living of $4,000 or more per year," says economics writer Warren Brookes, whose carefully detailed columns were a spur to Proposition 2½. "While Massachusetts was a nice place to have a headquarters, it was turning out to be a very poor place for companies to build their plants." And without that engineer, the company could not hire the dozen or so other employees it needed to assemble the circuitry the engineer had designed.

But Dukakis wouldn't budge on taxes. It cost him dearly at the polls in 1978 against Ed King, who was emphatically probusiness and favored low taxes. While Dukakis likes to point to the 200,000 new jobs created on his watch between 1976 and 1978, that rate of growth almost precisely matched the national increase at the time. In King's first year the rate of job growth also tracked the national average, but in his second year—after he had imposed a cap on local tax increases and cut capital gains taxes by 60 percent—Massachusetts kicked ahead of the national economy. From 1979 to 1980, the state gained 50,000 new jobs, more than four times the national average. In the 24 months after 2½, the state's private sector created 720,000 new jobs—despite a national recession.

Dogged by scandal. King's administration fell before a Dukakis comeback in 1982. Without Proposition 2½, however, the gains that Dukakis brags about might have been ephemeral. In a major Sunday magazine cover story last year, the liberal Boston Globe, which had strenuously opposed Proposition 2½, was forced to admit that "the single most powerful engine of change in recent Massachusetts political history has been what just a few years ago was seen by most politicians as a cataclysm that would destroy Massachusetts—the tax cut referendum Proposition 2½."

"Massachusetts's success is not based on recent [economic] developments," wrote Frederick S. Breimyer, chief economist of the State Street Bank and a member of the New England Economic Project at the Kennedy School, in an article in the New England Report newsletter. "Rather, the economy continues to enjoy the favorable legacy that dates prior to 1984."

Defense spending is a somewhat less important but still very significant factor in the state's economy. With only 2 percent of the nation's population, Massachusetts garners 6 percent of the federal military procurement budget. This spending has directly or indirectly generated a substantial chunk of recent job growth. Dukakis, of course, is no friend of military spending and would likely attempt to trim it further if he reaches the White House.

What about Dukakis's own policies? While he brags that his Employment and Training program (known as "E.T.") gets people off welfare, his economic policy basically puts corporations on welfare. Whenever business needs a handout, a break, a state-subsidized loan, or a public-private "partnership," the Duke is there to help out.

While Dukakis cannot claim credit for much of the boom, he almost certainly can take the blame for the coming bust. Looked at with a cold eye, 1986 was not a good year for the state economy. Nonfarm personal income increased by 1 percent, the same as the national average. Not bad, you say? It is when you consider that from 1982 to 1985, total personal income was growing as much as 40 percent faster than the national average. In 1985, Massachusetts was 3rd in the nation in personal income growth. Now it is a middling 21st. That's a big drop no matter how you measure it. Nor can the problem be attributed to regional slow growth: the personal incomes of New Hampshire and Connecticut residents are growing much faster than the national average.

For all Dukakis's talk about helping those ignored by the "bicoastal recovery," the nation's blue-collar workers shouldn't look to him to somehow save their jobs. While the Boston and Lowell areas are doing fine, the situation is much grimmer in the cities and towns in the hinterlands, where nondefense manufacturing is still the main source of employment. Last year, while Dukakis was trumpeting the state's economic successes to the National Governor's Conference, General Electric was closing a plant in Pittsfield and laying off 1,000 workers. Another plant recently closed in Lynn, sending 1,800 more manufacturing jobs to the history books.

Nationally, the number of manufacturing jobs dropped by less than 1 percent in 1986 and total employment rose by 11.3 percent. But the indicators point the other way in the Bay State. Altogether, Massachusetts has lost around 60,000 manufacturing jobs—still the heart of its economy—since June 1984. (The state gained manufacturing jobs under King.)

To a large extent, the growth in service jobs has offset the losses on the manufacturing side, which keeps the problem from showing up in the unemployment figures (the fact that the work force didn't grow helped too). Nevertheless, since Dukakis's economic policies have been fully in effect (January 1984 to January 1987), Massachusetts has had one of the worst employment-growth records among the 11 major industrialized states: 4.1 percent, compared with 7.6 percent for the nation and 11.9 percent for "depressed" Michigan. Even Texas, the heart of the oil patch the Duke says he wants to help, was higher at 5.3 percent.

High tech? It's having its share of problems too. Economist Breimyer calls Massachusetts "a slow growth economy whose high-tech sector is losing jobs every month faster than the rest of the nation." Bank of Boston Chief Economist James Howell predicts that "this trend will continue for some years as the high-tech industry, faced with a stagnant workforce base, becomes more and more capital intensive and outsources more and more of production out of state and overseas." Between December 1984 and September 1986, high-tech employment in Massachusetts fell by 7.9 percent, compared with a national fall off of 4.4 percent.

All this has caused government revenues to nosedive. In fiscal year 1986, Massachusetts had a $600-million budget surplus. Yet in his budget for FY 1988, the governor had to ask for $400 million in various revenue raisers. Revenues are now growing only one-third as fast as they were in 1985, and there are even rumblings around the state capital that the current FY 1987 budget may experience a shortfall.

For all the talk of the "new Dukakis," one thing hasn't changed: his hatred of tax cuts. The "temporary" surtax that he enacted when he entered office the first time was not repealed until 1986, and then only when it was clear the voters would repeal it by referendum.

Then there's the much bally-hooed E.T. program. This has the advantage of appealing to economic conservatives because "it gets people off welfare" while not alienating liberals because it promises "real jobs with real wages." Peel back the veneer, however, and the program doesn't look so good.

First, the program is completely voluntary. No welfare recipient who doesn't want to participate has to. Second, about one-third of the 25,000 people E.T. claims to have helped since 1983 hold part-time jobs that pay less than $10,000 a year and are still receiving some welfare. Furthermore, in a state where numerous low-skill jobs (cashier, waiter/ waitress, dishwasher) go begging, many of the people "trained" by E.T. would likely have had little difficulty finding jobs anyway.

According to columnist Brookes, E.T. has not appreciably reduced the welfare caseload. The really major change, he says, took place during the administration of King, whose "find work or else" policy got 40,000 people off welfare in a single year. Dukakis also rarely notes that it was changes instituted by President Reagan in 1981 that permitted governors to experiment with workfare programs. Prior to that, any effort to have welfare recipients earn their pay was howled down as "heartless" by liberals such as, well, Mike Dukakis.

In fact, there are so many questions about E.T. and its effectiveness that workers in the welfare department have been ordered not to speak with reporters. The state has refused to cooperate with either "60 Minutes" or Fortune magazine in doing stories on the program.

In order to buy peace on the home front, Dukakis's recent budget has funded almost everything under the sun, causing state spending to balloon at nearly four times the rate of inflation. The drop in revenues, combined with a tough cap on state taxes the voters imposed last November, will make for a very interesting situation. Dukakis is living on borrowed time. If he is still in the race six months from now, he will likely have some explaining to do.

What are his chances in a presidential contest? With the disappearance of Gary Hart, he has at least as good a shot at the nomination as anyone else in the running. But while he has won overwhelming reelection, Massachusetts voters have frequently rejected his policies in referenda, as witness the tax surcharge and the seatbelt law.

Dukakis's advisors like to point out that New Hampshire, home of the first presidential primary, is already familiar with Dukakis. Yet others believe familiarity breeds contempt. New Hampshire's closeness did nothing to help Sen. Edmund Muskie in 1972 or Sen. Edward Kennedy in 1980. Many New Hampshire residents are New Hampshire residents to begin with because they couldn't stand living in a Dukakis-governed state.

For all his talk of being a "new Democrat," Dukakis is fundamentally an old Democrat in new clothing. His ravenous appetite for ever-greater social spending, backed up by limitless taxation, is there for all who choose to see. The more you look at the new Duke, the more he resembles the old one.

John A. Barnes is chief editorial writer for the Boston Herald.