FC: MarvinRunyon.com -- How canny bureaucrats grab dot com wealth

[Declan McCullagh <declan () well com>]

The Washington Times
op-ed
Marvin Runyon.com
By Grover Norquist

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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