It’s Only Temporary

State’s economy sees shift; Technology replaces blue-collar industry in quiet revolution

The Sun – Baltimore, Md.
Author: Timothy J. Mullaney
Date: Nov 3, 1996
Start Page: 1.A

Meet the new face of Maryland business.

William M. Gibson doesn’t run a bank, and no smoke belches from his Rockville office. And unlike the stereotype of a suffering Maryland economy, his software company, Manugistics Group Inc., isn’t stuck with a stagnant stock and bleeding jobs.

Instead, the 51-year-old is the accidental leader of a quiet revolution reshaping the economy of the nation’s fifth-richest state in terms of personal income. Manugistics’ stock is up 191 percent this year. More importantly, it is the hottest in a wave of Maryland high-tech firms that are taking over economic leadership from traditional smokestack and locally-oriented service industries. “We have a 33 percent market share,” Gibson said, in a $150 million niche of the software market expected to grow to $1 billion in annual sales by 2000. “That implies if we simply maintain our share, we’ll have $350 million in {software} licensing revenue and another $350 million-plus in service-related revenue.”

The shift has been developing for years, but the last several weeks have been particularly full of signs Maryland may finally live up to predictions that it would come to rival California or Massa chusetts as a technology center.

Digex Inc. of Beltsville became Maryland’s first publicly-traded Internet service provider in an offering that valued the 6-year-old firm at $110 million. Trusted Information Systems Inc. of Glenwood and V-One Corp. of Rockville, which make software to safeguard electronic commerce, went public two weeks apart, bringing the total to 16 Maryland companies that have launched initial public offerings in 20 months. And Inc. magazine’s new tabulation of the 500 fastest-growing private companies in America listed 18 Maryland firms — as many as in both Carolinas and Tennessee combined.

New on list

In mid-October Bloomberg L. P. added 18 new companies to its index of Maryland’s top 100 publicly traded firms, the biggest change since the index began in 1994. Nearly all owe their growth to new technology, the expansion of managed health care or this year’s federal law to boost competition in communications businesses. All but three of the 18 companies have gone public since mid-1995.

The companies that Bloomberg bumped to make room say almost as much. Out went some of Maryland’s most familiar names — Monarch Avalon Corp., the game maker; Environmental Elements Corp., makers of pollution-control equipment; even Jos. A. Bank Clothiers Inc., one of the few clothing companies that still manufactures here.

The news highlights a slow but dramatic shift in where Maryland finds its wealth — and its new jobs.

Maryland’s economy was based on manufacturing through the 1960s, and by the 1980s the state was a haven for defense contractors, federal workers, financial services and a burgeoning construction market that made Maryland more dependent on building than any state but Nevada.

But those five sectors have all struggled to add jobs during the 1990s, holding down Maryland’s overall job growth and leaving rising industries to take up the slack. Forty percent of the state’s net private-sector job growth last year — more than 10,000 jobs — came from business services companies, according to the Regional Economic Studies Institute at Towson State University.

The business services group, which includes many of the emerging industries but not lower-wage personal services and restaurant jobs, added jobs four times faster than the state average in 1995. RESI expects business services to lead the 61 industry groups the state tracks in Maryland job creation through 1998.

“Why we’re different is fairly significant,” said Manugistics’ Gibson. “It’s a clean industry, it’s a very highly educated industry, it’s a very young industry. And these are very fairly compensated individuals.”

The stock market expects the young companies to keep growing, and Manugistics, which makes logistics planning software, is a lesson in why. It had $62.3 million in sales in its fiscal year ended in February, and is up to 550 workers from 150 a few years ago. But the lure of $700 million in sales only four years away shows how fast its financial world is still changing.

That’s why Gibson, who made just over half the salary of the head of Baltimore Gas & Electric Co. last year, has made almost $60 million on his Manugistics stock.

A common stock-market measure, the price-to-earnings ratio, shows how much the market expects Maryland companies to grow.

It’s a simple concept: a company that has 1 million shares of stock outstanding and makes a profit of $1 million a year, or $1 per share, has a P/E of 10 if its stock sells for $10. The higher the P/E, the faster the company is expected to grow.

When P/E ratios reach 20 — the Dow Jones Industrial Average is now at about 18 — it means people are very confident. Tech stocks often get the highest multiples.

Beating Silicon Valley

Friday, the Bloomberg Maryland Index closed at 48 times earnings, leaving even the Silicon Valley Index in the dust. Though not all of Bloomberg’s 54 regional indexes are calculated the same way, Bloomberg says Maryland stocks are the second or third most expensive. Manugistics’ P/E ratio is a whopping 330.

“It says we’re starting to get companies that can command national attention,” said Charles W. Newhall III, a partner at New Enterprise Associates, the Baltimore venture capital firm. “Years ago, Maryland would have been a 10 or a 15 {price-to-earnings ratio} and San Francisco would have been a million. Now they’re even.”

But others say it’s a fluke, driven by high-tech firms with little or no profits that have posted huge stock gains.

“I think it’s statistical,” said George A. Roche, chief financial officer of Baltimore-based mutual fund house T. Rowe Price Associates Inc. “There’s nothing about the state that I know of.”

Buttressing that assessment is the fact that the state economy has grown sluggishly since 1990. Only three states — Maine, Mississippi, Hawaii– added jobs more slowly in the year that ended in August, according to Salomon Inc.

The reason: big traditional industries like defense contracting, banking and construction shed more than 50,000 jobs in the early 1990s that haven’t come back. If they had, Maryland’s 4.9 percent unemployment rate would be almost 2 points lower. Factor in flat employment here by the federal government and in manufacturing, and you have the argument that Maryland’s economy is on its knees.

“Every time Martek {a Columbia biotech firm} or JP Foodservice {a Columbia restaurant-supply company} or Manugistics hires someone, the federal government lays someone off,” said Jeffrey D. Saut, research director at Ferris, Baker Watts Inc. in Baltimore. Debate over strategy In Annapolis, slow job growth has fueled the contention by the state Chamber of Commerce that high state taxes and tough regulation are slowing the economy down. Business groups contend Maryland needs to emulate poorer but faster-growing states in the South, cutting taxes and regulation and resisting unions.

“The way the market values these stocks is a function of so many different things, I’m a little leery of saying I understand why the P/Es are what they are,” state Chamber president Champe McCulloch said. “I have to go back to the sources of information I trust most, and that’s what my members tell me.”

But McCulloch concedes the Chamber’s members include a bigger percentage of companies from manufacturing, banking, and utilities than the state economy as a whole, and fewer representatives of the emerging growth industries.

Gov. Parris N. Glendening has echoed much of the Chamber agenda, contending that Maryland is being left behind by the Carolinas, Virginia and others. And Secretary of Business and Economic Development, James T. Brady, has reportedly hinted he will quit unless the governor backs an income tax cut.

Many high-tech CEOs say they need different things from the state than do prominent, mature industries such as real estate development, law and insurance, each of which has also cut jobs since the last recession. Breaking with traditional business organizations, they argue that much of the governor’s economic agenda misses the point — they worry more about growing than holding down costs.

“Everyone I talk to goes into cardiac arrest because of the income tax rate and the cost of buying homes,” but the overall cost of doing business here is reasonable, said Richard Kozak, chief executive of American Communications Services Inc. of Annapolis Junction. ACSI is building local phone networks in the South and West to compete with Bell company monopolies that are being subjected to new competition by deregulation.

“We see the world in terms of areas where we have a good concentration of an educated work force,” said Kozak, who moved ACSI here from Illinois last year. “They tend to be the customers who are more receptive to leading-edge technology, and those are the people who spawn other jobs.”

State taxes criticized

But Manugistics’ Gibson says Maryland’s taxes put the state at risk because of the proximity of Virginia, where taxes are lower. Especially galling to a company where employees have extremely valuable stock options, he said, is the fact that Maryland taxes capital gains at the same rate as other income.

Manugistics is looking for a new headquarters now. Gibson said scientists might not want to move to a state like West Virginia, but for Manugistics, the key advantage of Maryland is proximity to Washington — and Fairfax, Va., is just as close as Rockville. Some of his employees already live there.

“My response is not a ringing endorsement of how marvelous an environment the state of Maryland is,” Gibson said.

New Enterprise’s Newhall says tax and regulation cuts will help. But he calls corporation-friendly policies “only one of six or eight things that need to be done.”

He says the biggest key to job growth is creative people outside government. “The solution is right in front of our eyes.

Where are the biggest hubs of entrepreneurial activity?” Newhall said, pointing to Silicon Valley and the Boston suburbs.

“Both of these are essentially socialist economies,” he said. “They’re incredibly hostile to business. It helps to have a welcoming environment, but that isn’t what makes areas hotbeds of entrepreneurial activity.”

The creativity Newhall mentions shows in the diversity of the newcomers. Of the top 100 public companies, about 25 are related to information technology.

Not all of these are software companies, however. They include companies such as Tessco Technologies Inc. of Sparks, which distributes parts for wireless phones and the call handling networks that connect them; broadcasters such Sinclair Broadcast Group Inc. boosted by deregulation; and others like HCIA Inc., which crunches data about health care for its customers. HCIA uses computers, but its business is information.

Mysterious attraction

Why most of these companies’stocks are so hot is no mystery. “Last quarter, our sales were up 90 percent,” said Tessco chief executive Robert B. Barnhill, Jr. “We’re in a gold-rush business, selling the picks and shovels.”

Another 15 of the top 100 are biotechnology companies. Virtually none is profitable, but several have won federal approval during the past 18 months to market their first products, sparking expectations several will begin making money by 1998.

Others are doing more preliminary work that nonetheless is so promising that success is considered a nearly sure thing.

“People now are worried about how to sell and market, not about the technology,” said Martek Biosciences Corp. chairman Henry “Pete” Linsert Jr.

Pub Date: 11/03/96

[Illustration]

Letter from Rodgers Forge: Trouble Right Here In Edge City
[FINAL Edition]

The Sun – Baltimore, Md.
Author: KIMBERLY A.T. MULLANEY and TIMOTHY J. MULLANEY
Date: Feb 9, 1992
Section: FEATURES
Text Word Count: 1239

Document Text

Bill Calvin wasn’t a famous leader in 1985, just the mayor of a small town. We talked about him for the first time in years this week, as Rodgers Forge recoiled from the thought of three bulimics living nearby as if Jeffrey Dahmer were in our midst.

Mr. Calvin was mayor of Morris Township, N.J. when the Association of Retarded Citizens bought a house there to use as a group home for retarded adults. ARC had already bought houses in two towns next door, and reaction had been frantic.

Hundreds had taken up the cry as one: Property values will fall. How do we know our children won’t be terrorized? Our quiet residential community will be forever changed. They’re too different, dangerous. Save our community. Keep them out. Get the guns (or the lawyers, today’s really heavy artillery).

So when a reporter called Bill Calvin, he expected the mayor to join the crowd. But the mayor had a surprise.

“They’re moving to my neighborhood,” he said. “And I’m glad they’re here.”

Bill Calvin was more than just a good person willing to improve the lives of a few retarded people by having the guts to tell his neighbors — and his constituents — that their fears were ignorant and morally wrong. He was a smart man who understood what was happening to suburbs like Morris Township — and like Towson. He understood that they’re not the quiet little refuges they may have been once upon a time. They haven’t been for years.

Now a group house for mentally ill people is coming to our neighborhood, a collection of 1,777 brick rowhouses that begins just a good shout at midnight from the city-county line. We’re glad they’re here, even if many of our neighbors and our community association aren’t.

Sheppard and Enoch Pratt Health System Community Housing Program has bought a house at 7112 York Road, which it will rent out to three mentally ill outpatients at a time. The residents won’t be violent druggies; more like people with eating disorders and depressives, and maybe some schizophrenia patients, Sheppard Pratt officials said. Every one of them will be ready for release.

If the patients don’t live in this house, they could freely rent the house next door to ours (except that Mrs. Walters, our seventysomething neighbor, has lived there since the 1940s and would never move). The hospital is a two-minute drive away, with staff on call around the clock and visiting every day.

But when Sheppard Pratt officials tried to explain their plans to a community meeting Wednesday, they had an audience that wasn’t listening.

Instead, our neighbors talked about the same things Bill Calvin stared down in Morris Township. They don’t want a business in their residential neighborhood (perhaps they haven’t noticed the gas station, High’s, Royal Farm or Baskin-Robbins in the same strip of York Road). They talked about property values and how this three-person house would somehow threaten the quiet residential community they chose to move to.

Different people proposed picketing the house or suing to keep it out. The president of the community association said the group hasn’t taken a position (technically true, though another board member said opposition was a foregone conclusion), but admitted to The Evening Sun that it was looking for legal “ammunition” in an attempt to block the plan.

One person wanted the community to have access to the house to verify that residents take their medication. Another told Kim she would help us sell our house because, since we won’t fight this, we don’t fit into Rodgers Forge. Apparently we, too, are too different.

It’s sad that this community of nice people is descending into this thinly disguised prejudice. It’s sadder still that all this hot air is being wasted to defend a vision of Towson — and, more broadly, of suburbia — that has been history for years.

Simply put, Towson isn’t a bedroom suburb any more. It’s not a city like Baltimore either. It’s a whole new beast, and when all is said and done, the flap over the Sheppard Pratt home is going to be one of the landmarks that helps our neighbors get used to that.

In a new book, journalist Joel Garreau calls them “Edge Cities.” In the back, he lists them all, all over the country. Around here, he lists Towson, Hunt Valley and Columbia. He says Owings Mills, White Marsh and the BWI corridor are emerging edge cities.

What’s an Edge City? It has 5 million square feet of office space. More than 600,000 square feet of retail space. Its population gets bigger at 9 a.m. — making Edge City primarily a work place. (If you doubt this applies to Towson, check the Beltway at rush hour). It has a local reputation for offering mixed uses — housing, entertainment, shopping and work places. And 30 years ago, Mr. Garreau says, it was “overwhelmingly residential or rural in character.”

All this is true of Towson. Today, Sheppard Pratt’s new house is on the busiest commercial corridor in Towson. It’s a mile from the 13th biggest city in America. The house is a mile and a half from Towson Town Center, whose new addition alone is 600,000 square feet. Towson Commons opens in April, adding eight movie theaters, restaurants, and another 200,000 square feet of office space. The Edge City is an accomplished fact.

Edge City happened because people wanted it to happen, Mr. Garreau says. They wanted short commutes from the suburbs to work, convenient shopping, and nearby entertainment. What developers built, people bought. Because they liked it. That simple. Rodgers Forge gives you all that.

You can make the argument that if all these things exist in Edge City, we have a duty to make room for people like the people who will live in this house. But even if you don’t, honest people have to admit what Edge City really is, what kind of community we’re really discussing here, and whether this house will really disturb some idyll we’ve all been enjoying.

Edge City has problems that some Ward Cleaver fantasy suburb doesn’t. Our neighbors in Rodgers Forge may not want these problems, but they already have them. Ask any of the victims of the recent flurry of Rodgers Forge purse snatchings reported in the Towson Times. Ask the people who got robbed on York Road near the neighborhood when the shotgun bandits were in the headlines. Ask the guy who raced through our back yard one night last month, right after someone called 911 from a nearby house (the police didn’t tell us which one) but hung up. If you can find him.

Making Sheppard Pratt’s house go away won’t change that. Even Sheppard Pratt’s mental hospital, something Ward never discussed with The Beav, has been at Rodgers Forge’s edge, without a fence, since before the neighborhood was built.

We moved to Rodgers Forge last year from Upperco — which really is a bedroom-only suburb — so we know Towson is full of mixed uses. And we knew Rodgers Forge wasn’t Cleaverland: A realtor we talked to lives two blocks from our house, and someone had tried to steal his car. We knew it was an Edge City, though we hadn’t heard the term yet.

As the saying goes, that’s what we moved here for.

Kimberly Mullaney is a health educator in Baltimore. Timothy Mullaney is a reporter for The Sun.

Clinton’s Democrats Bid Farewell to the Politics of the Industrial Revolution

The Sun – Baltimore, Md.
Author: TIMOTHY J. MULLANEY
Date: Jul 26, 1992

“Ma, where’s my Pa?”
(Republican campaign jingle mocking Grover Cleveland, 1884)

“Get to know Bill Clinton the way Gennifer Flowers did.”
(Come-on for Republican phone hotline, 1992)

McLaughlin Group, — get a history lesson! When the history of Gov. Bill Clinton’s seizure of the Democratic Party is written, no one will care that he pushed the party to the “center,” that he and Sen. Al Gore were baby boomers, or that he made a play for suburban independents and Republicans.
That’s all true, but what the commentators miss is what it all adds up to. In the Democratic Party this year, politically speaking, the Industrial Revolution died. And it’s about time: Economically speaking, the U.S. Industrial Revolution died a long time ago. Long live the Information Age.
Millions complain that political parties have nothing to do with their lives. They’re right. That’s how Ross Perot got his 15 minutes of celebrity. But commentators act as if disillusionment with parties has never happened in America. They’re wrong.
It happened the last time we went through an economic transformation of this magnitude, the Industrial Revolution. Politicians bred on the coalitions established in the party realignment of 1860 had no clue what it meant that agrarian America was giving way to smokestack America. The erosion of parties ended only when to the nation’s conflict over industrialism came to a head in 1896, when Republicans won a realigning majority.
The same disillusionment has happened now because neither of today’s parties has figured out what a program or a coalition for the post-industrial age should be. Instead, Democrats pine for another 1932, the last time they forged a newly realigned majority, and Republicans just wander.
Forget 1932. Consider what historian James Sundquist said about the election of 1896 in his book “Dynamics of the Party System:”
“The 1896 election was the first to be fought out along the new line of cleavage that had been developing in American politics since the 1860s, cutting across the line established {in 1860, when Abraham Lincoln won} on the issues of slavery, war and reconstruction.
“For 20 years the two-party system had been based on dead issues of the past. It had offered the voters no means of expressing a choice on the crucial issues of domestic economic policy around which the country had been polarizing — slowly at first, but beginning in the 1880s at a headlong pace.”
Sound familiar? Today’s parties have been just as confused about what the wane of industrialism and rise of a service-based and high-value-added manufacturing-based economy means. That’s because the voters are confused too.
The kind of dirty-pool politics that has dominated presidential elections for 20 years happens when parties can’t fathom the still-emerging divisions of the time. While we’re figuring it out, we blather. That’s why the nation knew about Grover Cleveland’s love child, why Michael Dukakis thought competence was the only ideology that counted, and why 1992 Republicans want to talk about Gennifer Flowers.
Much has been written about how, as baby boomers, Bill Clinton and Al Gore have been shaped by different experiences than elders like George Bush. We’ve heard about Vietnam and Watergate, feminism and the arms race.
All are important, but none matters nearly as much as the change in the most fundamental experience that shapes everyday lives — how we make a living. Messrs. Clinton and Gore came of age in a different economy than did President Bush or Democrats like Mario Cuomo. It made them different people.
The last realignment of U.S. political parties, in 1932, was about how to divide the spoils of industrialism. The next realignment will be about how — even whether — America will face up to being a largely post-industrial nation, and how we go about making an information economy work for us.
That realignment just happened — before your very eyes — within the Democratic party. Liberals like the Rev. Jesse Jackson, Gov. Mario Cuomo and Sen. Tom Harkin lost for the same reason Democrats have lost the White House for years.
They’re out of touch not — as Republicans charge — because they rely on government as an agent of change, but because of how they want to use government power, and for whose benefit. They want government to help labor unions, prop up old-line manufacturers who use union labor and preserve high-wage manufacturing jobs in America that can be done by low-wage labor elsewhere. Plus, they want to subsidize those whom industrialism leaves behind.
The beneficiaries of these policies no longer add up to a winning coalition. Most Americans haven’t worked on the factory floor for decades. Even General Motors employs more white collars than blue. This year, for the first time, the majority of the electorate lives in the suburbs, home of nearly all the information companies building the new economy.
The rule of winning elections is appealing to the ever-elusive “people like me.” But out here in the nation, the rest of us look at each other and say, “what in hell are they arguing about car factory jobs for? I don’t work for that kind of company, or in that kind of job. I work for a law firm, or a hospital, or a high-tech company that does precision manufacturing, the kind of stuff someone making 25 cents an hour in Mexico can’t do. I live in the suburbs — I work there too. I’m middle class, at least for now. What does any of this have to do with me?”
Arguing over New Deal issues is absurd. Even if we would, it’s not in our power to make lower-cost car factories or clothing go away, no matter what Jerry Brown promises the United Auto Workers or the International Ladies Garment Workers’ Union.
So when you think of Jesse Jackson or Tom Harkin, remember these three little words: William Jennings Bryan.
Bryan was the defender of the farmer in 1896, the railer against Wall Street, the champion of the working (read, agrarian) man against the moneyed interests. Yesterday’s railing about free silver, a monetary policy designed to inflate farmers’ way out of debt, equals today’s railing about the Mexico-U.S. free trade agreement.
Bryan stood for the older, agrarian way as Mr. Jackson and Mr. Harkin stand for the New Deal economic order, for the dignity of the labor that went into the old economy, and for the right of the people who benefited from it to keep doing the same things for the same money or better. Forever.
The contemporary labels for Bryan were “radical,” “liberal” or “progressive,” — the same labels applied to Messrs. Harkin and Jackson. In fact, Bryan was a reactionary — he ended up attacking the theory of evolution as the prosecutor in the Scopes Monkey Trial. Bryan forced the issue of industrialism versus agrarianism on the electorate 20 years after the Industrial Revolution had taken root in the economy — just as we’ve been a post-industrial economy for 20 years or more.
Bryan posed the cutting-edge issue of his time — farms versus factories — so clearly that Republican William McKinley couldn’t avoid him. Instead, he ran over Bryan like a truck. The 1860 coalitions broke once and for all. Parties realigned around the new issue — industrialism.
The majority, by 1896, made their bread from it, so the majority were for it. Even for those who weren’t plutocrat factory owners, the factory filled their pay envelopes — many more pay envelopes than farms filled by 1896. The Republicans were for the factory. The Democrats weren’t. The Republicans held the White House, interrupted only by Woodrow Wilson, until 1932.
Now services and high-value-added manufacturing fill pay envelopes, more than unskilled and semi-skilled jobs on the line. That’s why Mr. Clinton talks about the middle class more than the working man. The middle class is to 1992 what the “working man” was to the 1896 and 1932 realignments — the place where the numbers are and where they’re growing because of economic change.
That’s why Governor Clinton dispatched Tom Harkin in no time, why Paul Tsongas, another advocate of the next economy, was the only serious challenge he ever had, and why he has gotten away with snubbing Jesse Jackson.
Mr. Clinton’s economic vision isn’t about turning back the clock, as Bryan wanted in 1896, and it isn’t fundamentally about distribution, as in 1932. It’s about making the pie bigger through activist government and about seeing different industries bake the pie. It’s about getting the New Deal workers’ kids good jobs in the “dozens of new industries” he talked about in his acceptance speech, not freezing them into car factories hermetically sealed off from competition and subsidized like farms.
The country can’t do without a manufacturing base, any more than in 1896 it could do without food. But in 1896 it didn’t need enough farmers to dominate national politics. And today the manufacturing labor base and its allies aren’t enough to make a winning presidential base. Narrow-profit-margin, labor-intensive manufacturing at American wages can’t compete, so many of those jobs have gone away. The economic interest in them that sought political expression in the New Deal coalition has shrunk. This year, manufacturing constituencies can’t even carry the Democratic party.
Mr. Clinton now sets off with a chance, however remote, to do something extraordinary in the fall. Having finished a long-evolving realignment in his party, sealing it with his choice of Senator Gore as a running mate, he can now set after the Republicans with realignment in the back of his mind.
There the values of the baby boom will serve him well, despite what Dan Quayle thinks. Economic change causes social change. A worker who can perform sophisticated services — practicing law or engineering — isn’t likely to think he or she needs government to decide whom to sleep with or what to do about a pregnancy. Such workers don’t take orders at work nearly as much as their factory-worker forefathers did.
They don’t appreciate taking orders from government at home, either. Many of them are suburban Republicans who have been uneasy with Mr. Bush, and with Republican gubernatorial candidates like Marshall Coleman in Virginia and New Jersey’s Jim Courter, because of abortion. Mr. Clinton will tell them they don’t have to take orders at home. Will George Bush? If he tries, will they cross the remnants of existing party lines to forge an Information Age coalition?
Mr. Clinton is attempting to play up his family roots, and Mr. Gore’s, as proof that he understands what values have not changed. His wife’s career, among other things, shows he thinks he knows which values have changed.
“Suddenly, with the nomination of Bryan in 1896, the party system took on meaning once again,” Mr. Sundquist wrote. “Each major party now had a position, and a program, that was relevant on economic matters. . . . The party became, again, something like a church — a militant, crusading church to whose aims the true believer could give no less than full devotion. Political bonds formed at such a time prove durable.”
Maybe this year is such a time. True, there is no clamor for Democratic solutions (even Mr. Clinton’s new ones) that suggest a historic shift in party allegiance is at hand. But the solutions Democrats propose — and more importantly the vision they imply of who wins, who loses and whose grievances the party system is geared to redress — changed drastically at their Convention.
At the least, Mr. Clinton’s supporters have a shot at giving Republican smutmeister Floyd Brown, he of the Gennifer Flowers hotline, the same answer Cleveland’s backers gave Republicans who demanded to know “Where’s my Pa?”
“He’s in the White House,” the chant went. “Ha, Ha, Ha!”

Timothy J. Mullaney is a financial reporter for The Sun.

A Message to Middle Class: Stop Whining
[FINAL Edition]

The Sun – Baltimore, Md.
Author: TIMOTHY J. MULLANEY
Date: May 17, 1992

I was 14 when New York City had its fiscal crisis and went to Washington, as supplicants do, expecting to be bailed out in 1975. And when Jerry Ford initially said no, the New York Daily News supplied a headline I’ll never forget: “Ford to City: Drop Dead.”
Seventeen years later, the country has sunk to a self-pity worthy of 1975 New York, and it’s time for another president to give us a new headline, one you should see but won’t. How about “Bush (or Clinton) to Middle Class: Drop Dead?”
Exit polls tell us this year’s middle class voter is mad as hell and not going to take it anymore. No one does anything for the middle class, Mr. Middle Class says. The government just bails out S&Ls and gives tax breaks to fat cats. And the spending giveaways to welfare queens! I’m gonna write my congresswoman!
But politicians aren’t the problem. We are. Sure Washington has thrown money around all these years. We in the middle class should know this better than anyone: They’ve thrown the biggest chunk of it at us. And we’ve yelled for more.
It’s really a joke, the thought of Mr. Middle Class crabbing that the government wants too much of his money. He would write his Senator in an educated tone, the result of four years of federal Pell Grants and Perkins Loans that helped send him to college, from a house whose mortgage interest and property taxes he writes off each year, in a suburb that wouldn’t exist in its present form if Washington hadn’t paid most of the bill for its highways and sewers. What a farce.
The punch line, of course, is that this vision is no fantasy. It happens every day. And a look — an honest look — at any of our lives, any of our communities, will prove it.
Consider Mr. Middle Class’ life. The list of entitlements above costs big bucks — $5.4 billion for the Pell Grants, another $5 billion for the student loans. Taxpayers wrote off $131.3 billion in state and local taxes and $193.2 billion in interest in 1989.
This list doesn’t even get into Social Security, the child care tax credit, Federal Housing Administration mortgage insurance, the non-taxation of company-paid benefits, and on and on.
The mortgage interest deduction is probably the biggest freebie of all. It arguably adds up to 28 percent to the value of every house in the country, a handout food stamp scammers never dreamed of.
Better yet, consider my middle-class life in a county where Spiro Agnew — Mr. Silent Majority himself — was once county executive. Then ask yourself how whether the government is putting it to the middle class.
When Robert Young ruled the roost on “Father Knows Best,” making it into the middle class was the measure of success. Like nearly everyone I grew up with, I’ve done that.
So how did I make such a success of myself?
Four years of college — and four years of Pell Grants, along with National Direct Student Loans at 3 to 5 percent — didn’t hurt. Neither did a year of graduate school — aided by a Guaranteed Student Loan, plus I wrote off my tuition on my taxes. Now I go to law school at night; since I go to a state school, tuition is only about 67 percent of the school’s budget. And the law school has it tough. Tuition pays only 21 percent of the University of Maryland system budget.
What my wife and I earn is between the IRS and us, but it’s more than Maryland’s median household income of $45,034, while nowhere near rich. How much of it do we give back? We paid about 12 percent as federal income tax last year.
We didn’t cheat. We simply bought a house, then wrote off the points, the interest payments on our federally-insured mortgage, the property taxes, our state and local income tax and what we gave to the United Way. In other words, we acted as middle-class people act and were rewarded for it.
I pay about $1,200 a year in property tax. For this, I can send as many kids as I want to public school. If, like my parents, I had seven kids, would that be a bad deal? Baltimore County spent $6,007 a pupil in the 1990-91 school year; private schools near my house charge from $2,250 to $9,250 each. I also pay about $1,000 a year in local income tax. For that, I get police protection that arrives lickety-split when called, a park system that should be better and all the usual services. I pay nothing to Baltimore City, where I spend up to 13 hours a day. There are worse deals.
And don’t forget: Maryland has the third highest state and local taxes in the nation, according to Money magazine. In Alaska, I’d pay a lot less.
I’m not saying pro-middle class policies are bad ideas. Promoting home ownership is both wise and humane, as is promoting higher education and quality child care. But as many problems as I have, this middle class guy has a hard time feeling picked on.
You might think that the rest of my middle-class community would be less aggrieved than it is, but consider some of my county’s headlines in the last year. Baltimore County Executive Roger B. Hayden got in hot water because he cut funding for school nurses. Horrors, until you consider that he cut nurses for private schools.
The parents marched, and TV reporters reported their weeping uncritically. But they deserved to be criticized. “Hey, people, it’s a private school,” the criticism should have been. “That means you pay for it, not me.”
Then Mr. Hayden had a long night at a town meeting. The highlight on the newscast I watched was the angry wife of a cop facing unpaid furlough days telling Mr. Hayden that when money is tight in her family, they don’t make excuses — they cut expenses. The TV reporters missed the obvious again.
Here’s what the reporters should have asked, if we were as skeptical as we say we are: Hey lady, what do you think he’s doing? Your husband is the expense that he’s cutting — worth buying, but not affordable right now, like a lot of things during a recession.
But our sense of middle-class grievance is too inflamed to make such truth-telling feasible.
Enough of my life: what about yours? Have you griped about both government services and taxes lately; do you want more of the former, like the cop’s wife, and less of the latter, like the tax protesters? Bet you have. But the local stuff is mostly penny-ante. Let’s talk S&Ls.
For people who moan that the S&L bailout shows how government sticks it to the middle class, here’s a question: What does the bailout pay for? If you thought it pays off stockholders of S&Ls, guess again. Those billions will actually bail out depositors like you up to $100,000. Stockholders’ lost money is their tough luck, as it should be.
The deposit insurance bailout is the best evidence going that when the fuss about politicians and fat cats dies down, the problem is that no politician asks us to look at ourselves. And we won’t do it on our own.
When you were putting your money into Fairfax Savings in Baltimore in 1985, didn’t it dawn on you to ask why Fairfax paid higher interest rates than other banks in town? Maybe you didn’t know Fairfax lent Jim Bakker $12 million, but maybe you should have found out. Or you should have asked yourself what Mom said about things that seem too good to be true.
Want to know where all the money went? To your 11 percent CD, which Fairfax and others covered by charging Bakker and others 15.25 percent, a rate way above the market because people like Bakker were lousy credit risks.
Banks and thrifts made crazy loans to stupid projects to pay for those deposit rates — which Mr. Middle Class accepted gladly, indeed demanded. He also accepted the construction jobs, the orders for building supplies, and the legal and accounting work that went into building projects that weren’t worth what they cost. That’s what the S&L crisis is, aside from a handful of spectacular frauds. Who got the money? You and I did. Years of bad government have put the country in a state as dire as New York City’s in 1975, except the federal government can print enough money to humor us indefinitely. Will they? George Bush wants to throw more money at home buyers. Bill Clinton wants a middle-class tax cut. Jerry Brown wants to make apartment rent tax-deductible. Pat Buchanan says the problem is that blacks and gays have too many rights. You figure it out.
But, remember this: They tell us this tripe because we make them.
Bailouts of New York City and of Chrysler Corp. in the 1970s had strings attached to talk sense into their recipients. When it comes time for us to be bailed out, who will explain the strings to us? When someone tries, will we act like Al Sharpton, quintessential New Yorker and lately quintessential American, all grievance and no sense?
No one is as mad as Al Sharpton, one-time New York child preacher cum civil rights wannabe whose conspiracies-are-everywhere rhetoric helps give New York politics its special tang. (Remember the Tawana Brawley case, where Rev. Sharpton and associates claimed the black teen-ager was raped by white policemen, possibly with some connection to Irish nationalists?)
Then again, maybe not. Maybe the sort of lunatic fringe oppressed-minority mind-set that supposedly alienated the middle class from the Democratic party has afflicted us all. Maybe this year’s middle-class “anger” is just the Al Sharptonization of America.
Jimmy Carter called this malaise. Actually, it’s a temper tantrum of the sort my parents easily recognized in their 14-year old in 1975. Their reaction to my adolescent fits would make a good tabloid headline for the next president. How’s this? “Prez to America: Grow Up.”

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A vote on jobs of future
[FINAL Edition]

By Timothy J. Mullaney

No one needs to tell Robert L. Ehrlich Jr. the world has changed since he grew up in blue-collar Arbutus. No one needs to tell his Dundalk-raised challenger Connie Galiazzo DeJuliis either. . . .America’s shift from a manufacturing economy to the Information Age has been the central historical fact of their lives. Now it is the central historical fact of their faceoff for Ehrlich’s congressional seat. Down deep, theirs is Maryland’s first post-industrial congressional campaign.
Obviously, the Information Revolution didn’t just get started – it has been building for 40 years. But their race in the state’s 2nd District is the first competitive local race in which the parties are presenting contrasting, well-developed visions of what an information-based economy means for Maryland – and what each party would like to do about it.
The Democrat, DeJuliis, has moved beyond the traditional position of the unions that form her political base, many of which implicitly want to use politics to lock the old economy into place. Instead, the candidate talks with a certain wonder about how her younger children will graduate from college and compete for jobs that didn’t exist when they enrolled. The Republican, Ehrlich, acknowledges there’s a role for government to help ordinary people connect themselves to the new economy.
It’s up to us now to decide which vision of post-industrial government we think works better: DeJuliis’ vision of a helping hand that lets people adapt to economic changes government can’t stop, or Ehrlich’s view that most of the solution is smaller government that pushes power to the local level and gets out of the way so people can build the future, whatever it might turn out to be.
“I think government’s responsibility is to reward hard work and create and invest in opportunity,” DeJuliis said, pointing to job-training efforts and student loans – the latter a program, she points out, Ehrlich used himself. “Government has no control over where the economy is going, but we do control whether we help people have the tools.”
Ehrlich puts it this way: “One party stands for ‘Let the government take care of it,’ and one is for individual initiative.” Ask him how government can make a post-industrial world work better, and he mentions cutting regulations and capital gains taxes, trying to boost the savings rate, even tort reform. Only when asked again does he bring up training programs, college grants and community colleges: “We literally can’t afford the government approach.”
If you can’t find any differences in there, you’re not listening.
A good spot for a faceoff
It’s fitting that the Ehrlich-DeJuliis faceoff comes in the 2nd, because the state’s most potent symbol of industrial decline is at the district’s eastern edge: Bethlehem Steel Corp.’s Sparrows Point Plant, once the biggest steel complex in the world. Of the 100,000 manufacturing jobs Maryland has shed since the 1950s, nearly a quarter came from the Point alone. To people from Dundalk and to a lesser extent Arbutus, the Point is a symbol of a time – and a life – gone by. Both candidates have seen it happen.
“Here’s what our future was,” DeJuliis says, thinking back to Sparrows Point High, Class of ‘64. “The guys were going to do their time in the service and work at Bethlehem Steel, or at General Motors or the docks, from high school right into manufacturing. The girls, some were going to secretarial school and some to cosmetology, but always with the goal we were going to get married. … It was laid out for you – you’re going to work at Bethlehem Steel.”
Ehrlich, a child of the 1970s, saw a darker side to the manufacturing-job dream because he came of age as it was fading. He has ridden the new wave skillfully: He went on to Princeton, law school and private practice, then to the state legislature and ultimately to Congress.
“We think about this stuff because I’ve lived it,” he says, and the people he has lived it with have encountered mixed results. “When I think about my friends, many became firemen, police, traditional-type jobs. Some who have had technical training have done very well. … Some of those who didn’t go on to higher education or technical education have had a very tough way in life. “It sounds like a lecture to a high-school class,” he concedes. “They’ve struggled. They’ve changed jobs a lot and basically struggled in life. The environment just changed.”
Given their backgrounds, it’s understandable that DeJuliis and Ehrlich both sound less than happy about the nation’s shift to a service-based economy. Ask them whether Maryland is better off, overall, and DeJuliis says she would rather not answer directly.
Ehrlich, trying to sound optimistic, says “the net/net is somewhat negative” but probably not as bad as most people think.
Truth is, they’re both mostly wrong.

As hard as it is for many people to admit, the information economy has been great for Maryland – better than for almost any other state.
Maryland was the 12th richest state in the nation in 1980 – DeJuliis remembers people in southeastern Baltimore County were terrified in the early 1980s as unemployment rose to about 20 percent in some neighborhoods – and was fifth by 1990, as the change took firm root. Despite all the concern about the state’s slow growth in the 1990s, fifth place is where Maryland remains.

Maryland gets only 8 percent of its jobs from manufacturing now – much less than the already diminished national average – but the numbers have been close to stable for several years and average manufacturing wages here are a healthy $706 weekly, led by Beth Steel and General Motors’ Broening Highway plant. If you look at a list of job creation by industry here, you see why the small size of the manufacturing sector hasn’t hurt the state much.
The “business services” sector, which includes a lot of high-tech industries but is hardly limited to them, boosted its Maryland employment by 6.3 percent last year, 4 times the state average. Other top job adders were health care and private companies that provide social services. And retailers continued to expand here, attracted by customers’ high incomes.
More than 15 Maryland companies have staged initial public offerings since March 1995, almost all of them driven either by new technology or by regulatory changes in existing industries like broadcasting or health care. Maryland stocks trade at prices more than 50 times higher than the past year’s profits of public companies in the state – an extraordinary multiple that shows confidence that companies here will grow explosively. The future is arriving, and Maryland is on board. Firmly.
Yes, Maryland has lost a lot of manufacturing jobs. Some were great jobs. Others were no great loss.
Remaining Maryland jobs in the category that includes Beth Steel paid an average weekly wage of $931 in 1995, the state government reports, well above the statewide average of $560. But remaining jobs in apparel, an industry at the heart of the idea that the new economy has killed American jobs, paid only $416.
“When we were really adding to our manufacturing a couple of years ago, we couldn’t get labor,” Timothy F. Finley, chief executive of Jos. A. Bank Clothiers Inc. of Hampstead, said in March. Bank makes suits and sport coats in Baltimore. “No one wants to go into this trade.”
Despite the political myth that manufacturing provides the only “good” jobs, states that still get the biggest share of their jobs from manufacturing are hardly at the top of the wealth pile. The top four states in personal income are Connecticut, New Jersey, New York and Massachusetts. All have gotten on with adjusting to the new economy – which has a place for manufacturing, especially when it is complicated enough that workers here can do it better than workers in developing nations – and winning a big share of industries that are growing now.
But if Ehrlich and DeJuliis are ambivalent about the way this economic change has treated Maryland, they are right to believe it leaves a significant job for politicians to do. The change has left many people behind, and most economists agree it has contributed to the growing inequality between the incomes of working people and the new class of professionals and entrepreneurs.
“I’m not depressed, but I represent areas that are depressed because of these changes,” Ehrlich said. “I represent those folks as well.”
That’s a large part of what their campaign is all about. DeJuliis and Ehrlich have blurred the point in the last weeks of the campaign. But each warms to the idea that he or she is fighting over which approach really helps people adjust to the new world.
And they’re right. A look at history “Suddenly, with the nomination of {Democratic presidential candidate William Jennings} Bryan in 1896, the party system took on meaning once again. Each major party now had a position, and a program, that was relevant on economic matters. … The party became, again, something like a church – a militant, crusading church to whose aims the true believer could give no less than full devotion. Political bonds formed at such a time prove durable.”
Political scientist James Sundquist wrote that years ago, about how voters faced the last economic change as big as the one we’re seeing now. For decades, political scientists have waited for the parties to build programs “relevant on economic matters,”
believing that was the key to new party coalitions that reflect emerging economic interests. Political thinkers call that process of breaking and remaking coalitions a “realignment.”
It hasn’t yet happened; many think it never will. However, since 1992 we’ve seen realignment within each party. Newt Gingrich transformed his Main Street party with the idea that the information age demands a stripped-down central government that lets entrepreneurs dream and create – whether they are creating new technology or just beach volleyball. Ehrlich basically agrees: He’s simply more likely to credit the ideas to the popular Jack Kemp than the unpopular Speaker of the House.
Bill Clinton has basically crushed the forces in his party that resisted economic change. Instead, he offers the vision DeJuliis has adopted: an activist government, but one that focuses less on passing out fish and more on programs that teach people how to fish, presumably off the side of that bridge to the 21st century. Is that enough to get us to go back to church, as more campaigns come to look like Ehrlich vs. DeJuliis?
The answer is unlikely to be quite so neat. It falls to Frank A. Adams, a Timonium venture capitalist, to remind us that the fate of steel workers’ children lies less in their politics than in themselves.
“What it means to the steel worker is that his children need to stay in school and become computer-literate,” Adams said. “There are all types of spinoff jobs when you have a robust Maryland.”
Timothy J. Mullaney covers telecommunications and new media for The Sun.
Pub Date: 10/27/96
[Illustration]
PHOTO; Caption: Sparrows Point: Some 30,000 workers were employed at the spawling southeast Baltimore County plant during its heyday, but the figure has dropped to about 5,000.; Credit: 1993 : SUN STAFF PHOTO

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