- The Washington Times - Friday, March 31, 2000

On the Internet, being first to market with a recognizable product name or service or simply an idea can mean instant riches. This creates a unique conflict of interest for regulatory officials who sometimes decide who gets this vital first-mover advantage, or in some instances, go private themselves and move to the head of the line.
Take the case of former Postmaster General Marvin Runyon, who oversaw the regulatory process for online postage. Mr. Runyon decided which companies could bring products to market, and then conveniently dealt himself stock options worth a cool $3.8 million after leaving the U.S. Postal Service to become a director of Stamps.com.
The instant wealth of public officials who become dot-com millionaires should alarm taxpayers. We rejoice in the success of true entrepreneurs who legally and honorably apply skills and name recognition gained in public service to make their fortunes. But the possibility of self-dealing privatizations as the Internet economy forces independent government agencies and public corporations to undertake radical changes could mean that taxpayers who capitalized these agencies and are effectively the shareholders could get the short end of the stick.
In Russia, politically appointed officials have all too often looted formerly state-run corporations denying these enterprises both the capital and the responsible executive leadership they need to remake themselves. Most Americans believe such a thing could never happen here. They are wrong.
The U.S. Postal Service (USPS) is first and foremost among public corporations that must evolve to exist in a world where e-mail and electronic payments are essential tools of business. Under Mr. Runyon, the USPS was cleaned up but was not radically restructured.
The USPS has a labor problem. It cannot survive without ongoing taxpayer subsidies, both direct and indirect, unless it finds some way to reduce the labor subsidies that represent some 75 to 80 percent of its cost structure. It must streamline the antiquated work rules that constrict it. It must realign itself to handle the flood of new delivery tasks that are supplanting, though by no means eliminating, traditional first-class mail. In short, the USPS must become more like a business.
This transition is unlikely to occur while the USPS remains a quasi-governmental enterprise that regulates and competes with private companies offering delivery-related e-commerce services. The case of Mr. Runyon and Stamps.com is an unseemly, even if currently legal, example of the treacherous conflicts of interest inherent in regulating the e-world.
More worrisome, though, are plans the USPS is quietly floating to move into competitive e-commerce and electronic payment services through a private subsidiary, which it would own and could eventually float, on the IPO market. Real privatization of the USPS is a good thing. But a Runyon-style privatization in which managers walk off with valuable properties and the unreformed company becomes a moribund wreck without the means to revive itself would be a disaster. Taxpayers, consumers, and the public have too much at stake to let this happen.
The recently announced postal rate increase is a scandal in itself and one more case of how the USPS wishes to have its cake and eat it, too when market forces are concerned. Calculations by economist Thomas Duesterberg show that the price of a first-class stamp has quadrupled in nominal terms (a-real increase of about 10 percent) since 1970 while the cost of other communications technologies has plummeted.
To the extent technology has improved efficiency at the USPS, a study by Professor Rick Geddes of Fordham University and the Hoover Institution shows that due to lack of competition, economic gains have been retained within the USPS in the form or higher wages and benefits rather than passed on as savings to the consumer.
If the Postal Service is ever to become a dot-com company, exposure to competition without special privileges should be one of the ground rules. Another should be that postal privatization does not mean wealth for managers and political insiders while postal workers performing an essential service remain wards of the state.
Postal reform legislation now in Congress makes good headway on the problem of USPS competition with the private sector. It also explains what a private law corporation owned by the USPS should look like and what protections must be in place for the taxpayer. Taxpayers should give these reforms two cheers but keep close scrutiny on the process. Over the years, taxpayers have invested countless billions in the USPS. They must not permit this investment to be undercut by a dot-com offering that leverages the USPS name but leaves the underlying reality unchanged.

Grover Norquist is president of Americans for Tax Reform and a member of the Advisory Commission on Electronic Commerce.

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