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Is the Massachusetts Miracle Fading? Despite deficits and a high-tech slowdown, analysts say its economic slide is exaggerated. NEW ENGLAND

By Staff writer of The Christian Science Monitor / April 19, 1989



BOSTON

FOR most of the 1988 election campaign Michael Dukakis ran and ran on the ``Massachusetts miracle.'' Democratic presidential hopeful Albert Gore ridiculed it. Republicans portrayed the miracle as news media hype - and when last summer word got around that Massachusetts faced a $100 million-plus deficit, that's what many voters thought it was. Now New England states face huge deficits (Massachusetts - $600 million; Connecticut - $730 million; New Hampshire - $100 million), and the economic picture is made foggier by a limping computer industry and high living costs.

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So was there a miracle - and what is its future?

The truth is, analysts here say, there was a miracle. A unique cluster of high-powered college cultures feeding private high-tech industry transformed the formerly depressed industrial state. Per capita income jumped 20 percent above the national average between '80 and '86. Unemployment went from 15 to 3.5 percent. Yuppies settled down; real estate values tripled. The rest of New England also prospered. But regional good times were driven by the Route 128 high-tech belt around Greater Boston - an entrepreneur's haven where in one case 39 new businesses spun off of one major electronics firm.

Defense contracts, which went from $3 billion to $8 billion a year during the Reagan era and were supposedly the dirty little secret of the miracle, merely ``put an already hot economy into overdrive,'' a local economist says.

Whether or not Governor Dukakis was responsible is another subject. (The debate is over history vs. leadership: Was the miracle going to happen anyway? Or was it a result of Dukakis's strategic development policies?)

Regardless, a new story is now developing. Along with budget deficits, high-tech has slowed down: Digital Equipment, the largest employer in New England, saw its stock drop 10 percent on a single March trading day. Last week Wang Laboratories in Boston laid off 880 workers, with more to come. Bankruptcies in New England are now the second highest in the nation, at 18 percent. Real estate is soft.

Dukakis, announcing he would not run for governor again in order to pass a tax package, became a lame duck instead. Recently the Boston Globe described his ``political eclipse'' on Page 1.

``What people were really angry about was that Dukakis lied to us - and then lost,'' political economist David Osborne says. ``If he'd won the presidency, he'd have been forgiven.''

But while the Wall Street Journal called it a ``fading miracle,'' economists say that despite New England's problems, reports of its economic death are exaggerated.

``New England is a different place than it was 10 years ago,'' says Federal Reserve Bank economist Lynn Brown. ``The `faded miracle' is a bad rap. Our performance has been truly remarkable.''

Average Bay State salaries are $19,142 while the national average is $15,481, she says.

Other indicators, such as the employment rate, are strong. Three public works megaprojects - the Boston Harbor Cleanup, a third harbor tunnel, and a huge ``central artery'' highway under the city - will bring the area $15 billion over the next 10 years.

``We've got a 7 percent [adjusted] revenue growth rate,'' says Charles Parker of the Pioneer Institute, a think tank here. ``Some states would kill for that.''

It's not surprising that a boom earlier in the decade would one day settle down, economists say.

Still, everyone admits the game has changed. The buoyancy of 1984 has passed. New England states must now adapt to and face a less dramatic and more competitive situation. Expectations may have to be lowered.