Thursday, 21 June 2012

Brutal Honesty is the Best Policy

A war of words erupted last week in response to an announcement that the federal government's carbon price will add 8.9 per cent to the average household electricity bill in NSW next year.

Greg Combet responded to the news with a certain degree of smug satisfaction, claiming that the finding vindicated his long-running critique of Tony Abbott as an overblown fear-monger.

"The facts are now coming in, demonstrating the dishonest claims of Mr Abbott," Mr Combet said.

"He should apologise to the people of NSW for this deceitful scare campaign."

As heartwarming as it is to witness such an enthusiastic defence of political honesty from a minister of the crown, perhaps it would be prudent to check the government's own facts.

Mr Combet was claiming that an 8.9 per cent rise in electricity prices would be "below the national average impact predicted by Treasury of a 10 per cent price increase".

He rather conveniently failed to mention that, according to Treasury's figures, the 10 per cent increase in prices would occur over the first five years of the scheme.

This means that according to Mr Combet's favoured source, almost all of the predicted rise in prices has been swallowed up with four years still to go.

It is going to be extremely difficult for the government to put a positive spin on the consequences of its new tax.  Mr Combet will undoubtedly be forced to stretch the truth on many more occasions over the coming months.

The minister is boxed in by his government's ongoing refusal to acknowledge that the carbon price will involve significant pain for ordinary Australians.  The consistent refrain has been that only the "big polluters" will pay, while everyone else will be compensated.

Such an idealised situation is simply unworkable, particularly in the long run.  If the tax is successful in driving down carbon emissions and boosting green power, the number of "big polluters" will inevitably dwindle.

That scenario would lead to a reduction in the revenue sourced from the tax.  Revenue which has been earmarked to fund permanent compensation for consumers.

So if the carbon price is proven to be effective, as Mr Combet claims it will be, it will either force the government to decrease its compensation payments or leave a glaring black hole in the budget.

If, on the other hand, the tax fails to reduce emissions, we will be stuck with a colossal money-go-round that serves no conceivable purpose.

Money will be removed from the private economy to line the pockets of government bureaucrats, before being redistributed to some low income families.  Power prices will rise as a result, along with the cost of all goods and services whose production requires power.

All of this for no environmental benefit.

Those families who have been deemed "too rich" to receive compensation would undoubtedly be very impressed.

The simple fact of the matter is that the carbon tax will cause significant financial pain for a lot of people.  By denying this reality, the government is only going to alienate itself further from its constituents, many of whom are already waiting for the next election with baseball bats in hand.

Mr Combet and his colleagues would earn more respect from voters by approaching the issue with a refreshingly up-front attitude.

Yes, this tax will raise the cost of living.  Yes, it will hurt the economy.  Yes, it will cause pain for ordinary Australians.

The government should acknowledge these facts, and then tell us why it is determined to pursue the policy anyway.  There could be any number of plausible reasons.

Perhaps climate change truly is the greatest moral challenge of our time.  Maybe Julia Gillard believes that the development of green energy is crucial to our future economic success.

Then again, it could be that Labor only agreed to go down this path in an effort to woo the Greens and retain power.

Whatever the reasons may be, the Australian people need to understand why they are being asked to bear the pain that comes with carbon pricing.  Perhaps they can be convinced that it is all worth doing, for the greater good.

But this government will never be able to explain itself satisfactorily while it refuses to even acknowledge the pain it is causing.

Wednesday, 16 May 2012


Former Howard Government Minister Amanda Vanstone has written an excellent op-ed piece for the Age on the state of government debt in Australia.

Forget about the Treasurer's pea-and-thimble surplus.  It is a farce and everyone, probably including him, knows it.  With a bit of paper shuffling he is promising to spend a bit less than he receives next year.  The real issue in Swan's budget is net government debt.
In 2009 Labor sought to lift the Commonwealth statutory borrowing limit from $75 billion to $200 billion - a 133 per cent increase.  With the global financial crisis looming, the Australian economy needed a cash injection.  Whether it needed quite as much is a moot point.  That billions of it was wasted in lousy programs and lousy management is undeniable.

One of the practical problems with stimulus spending is the task of retracting the extra funds from the economy when they are no longer required.  Theoretically, there should be a sharp short term boost in government spending to stabilise the situation, followed by a consolidation to pre-stimulus spending levels.

To implement such a strategy in practice requires a combination of political mettle and willpower.  It means prioritising some expenditures over others, and having the mental fortitude to reject many worthy but unaffordable spending initiatives.  On top of this, it requires deep cuts to the very programs that received significant funding increases as a part of the stimulus.

Unsurprisingly, many governments struggle to achieve this - they find it very easy to splash the cash around in response to a crisis, but very difficult to cut back afterwards.  Thus many 'temporary' stimuli are never properly withdrawn.

The Treasurer has often highlighted his two per cent cap on real annual spending growth as a mark of amazing fiscal rectitude.  But he uses as his baseline post-stimulus spending levels.  His idea of fiscal conservatism is to inject a huge stimulus into the economy, then limit further spending increases from those already meteoric levels and hope that revenues will eventually catch up.  True discipline would demand real cuts to nominal spending, returning the budget to something approaching pre-crisis levels.

The year that then-Opposition Leader Kevin Rudd declared "this reckless spending must stop", government expenditures were forecast at $235.6 billion.  Labor was elected just weeks after that famous speech.  In Wayne Swan's latest budget, spending was predicted to reach $376.3 billion. The debt continues to pile up, and the government continues to raise its own borrowing limit.

Last year Swan decided that rather than put our house back in order it would be a good idea to borrow more again.  He went for another $50 billion.  Now, he wants us to borrow more again.  Another $50 billion!  That will take the Commonwealth borrowing limit to $300 billion.  Swan wants to borrow four times what the Howard government was allowed to borrow.
The interest bill is more than $7 billion a year.  Let's put that in perspective.  When Swan was asked just last month why last year's bottom line forecast was out by more than $20 billion, he replied: "Six billion dollars for the reconstruction of Queensland was a pretty big hit."
So there you have it.  Every year we throw down the drain in interest "an unexpected disaster", more than the cost of rebuilding Brisbane after the floods.

Many commentators have argued that the current weakness of certain economic sectors demands continued deficit spending.  They assert that, compared to the rest of the world, our level of debt is relatively small.

By that logic, we will continue to be in fantastic fiscal shape until our debt to GDP ratio hits eighty per cent.  It took the Howard Government a decade to repay the $96 billion of net debt bequeathed to it by Paul Keating.  How long will it take to cancel out Wayne Swan's deficits?  How many billions of dollars will be squandered on interest payments?

The longer the government waits to begin paying down the debt, the more difficult and painful the task will become.  It is far too easy to become complacent about debt, particularly if you are leaving the hard decisions to the next government.

Monday, 7 May 2012

Affirmative Action

The subject of affirmative action is inevitably a touchy one, as any substantive discussion inevitably invites charges of sexism and racism.  The successful racial vilification case against conservative commentator Andrew Bolt has warped the parameters of the debate in Australia, leaving many individuals wondering where exactly the boundaries of acceptable discourse lie.

Just how Mr. Bolt's offending articles qualified as 'racial vilification' is difficult to ascertain.  He was using his public platform to question the appropriateness of so-called 'white' indigenous Australians, who were relatively well off, benefiting from affirmative action which was originally intended to help their more disadvantaged brethren.

The plaintiffs took issue with a number of factual errors in the articles, and fair enough.  There were certainly sufficient grounds for a defamation action.  But racial vilification?  Apparently it is now racist to argue that government benefits for the disadvantaged should actually reach the genuinely disadvantaged.

This issue has recently exploded in the American media, as it has been revealed that the Democrat challenger for Scott Brown's Massachusetts senate seat, Elizabeth Warren, may have benefitted from affirmative action throughout her career.  The blonde, blue-eyed former Harvard professor claims to be 1/32nd Cherokee, though she has been unable to provide much evidence when pressed by the media.

There is currently not enough information available to make a judgement in this case, and Mrs. Warren may not have benefited from her alleged heritage at all.  But the episode does highlight a particular dilemma, the same one that Andrew Bolt was silenced for raising in Australia.

There is an inherent problem with any race-based policy of affirmative action - to put it bluntly, how black must you be?  Should you qualify for benefits if, for instance, you have just one black grandmother?

Or to raise another issue, what if your entire family is black, but is also extremely wealthy?  Should you still qualify for affirmative action based solely upon your race?  Should a privileged indigenous Australian receive preferential treatment over a poor, disadvantaged white man?

James Taranto of the WSJ, considering the question of affirmative action, quotes Ann Althouse:

In the 1960s, she observes, "there was an opportunity, as a culture, to adopt the mental discipline that is colour-blindness."  Everyone agreed "that discriminating against black people was terribly wrong."  But some believed it was necessary to discriminate in favour of blacks in order to overcome the legacy of the past.
"We went down the affirmative action road," Althouse writes.  "We are very far down that road.  To say 'let's start being colour blind now' feels completely different.  Many, many people who think of themselves as good people, certainly decent people, think they've been doing the right thing and worry that those who are pushing for colour blindness are not the good people.  It's at least terribly complex."

This entire conversation is fraught with racial tension, so much so that in Australia one must apparently weigh up the legality of certain arguments.  The status quo is firmly entrenched.

Surely a more sensible policy, however, would be to provide benefits based purely upon need, rather than race.  By all means, develop policy to help the millions of Americans living in poverty - including the tragic number of African Americans.  Do everything humanly possible to boost the chances of those Australians who are fundamentally disadvantaged - particularly Aboriginals living in remote areas.  But base any policy response on need, not race.

Racial divisions will continue to exist until our society becomes completely colour blind, something that demands neither abuse nor preferential treatment based purely upon the colour of one's skin.

Noisy Chickens

Paul Sheehan has an article in the SMH today which ably summarises the series of economic challenges currently facing Australia.

Here's six noisy chickens, each worthy of a column.  General confidence in the federal government is low.  The non-mining economy is slowing.  Retail is flat.  Job creation is contracting, especially full-time jobs.  Industrial and workplace disputation is rising. Small business formation has fallen off a cliff.

All of these problems are interrelated to some extent, and few are being addressed by anyone in Canberra.  The government is preoccupied with the imposition of new taxes and regulations, which will undoubtedly exacerbate these issues.  Meanwhile, the opposition is focused more on winning the next election than on the articulation of a bold agenda.

The Treasurer rather comically responded to the Reserve Bank's recent interest rate cut as though it were a testament to the strength of his economic management.  In actual fact, the RBA's decision was a direct response to the alarming weakness of Australia's economy beyond the mining sector. Mr. Swan has failed to properly address the yawning gap in performance between the different segments of our economy.

The Liberals have been equally disappointing in this regard, limiting their policy proposals in order to provide a small electoral target.  In fact, the Coalition seems to be almost as complacent as the government when it comes to the health of Australia's economy.

Mr. Sheehan berates Labor for attempting to 'take credit for the hard work done before it ever came to power', referring to the remarkable position bequeathed to Mr. Swan by the previous government.  Indeed the strength of Australia's banking sector, a direct consequence of some Costello-era reforms, is often a forgotten reason behind our insulation from the Global Financial Crisis.  Labour market flexibility, an enviably low unemployment rate and the substantial budget surplus also made Labor's job much easier.

But it is no longer good enough for the Liberals to cite the Howard Government's record as sufficient evidence that they are superior economic managers.  Mr. Abbott's front bench needs to develop a policy platform to address all of the issues listed above, before trouble inevitably strikes.

An incoming Coalition government could begin by dismantling the institutionally biased and dysfunctional Fair Work Australia system and reintroducing much needed flexibility to the labour market.

The drop in small business formation is at least partly rooted in government debt, which is making it more difficult to procure startup loans.  A return to surplus and a focus on freeing up the loan market would certainly yield benefits, and a business-friendly tax reform package would further energise the lagging retail sector.

But perhaps the most urgent question confronting us is barely mentioned by the political class. What happens when the mining boom ends?  Mr. Sheehan quotes Albert Edwards, an employee of Societe Generale:

"We see a credit bubble built on a commodity bull market, which is based on a much bigger Chinese credit bubble."

Bubbles always burst.  Demand from China will inevitably slow, leading to a collapse in commodity prices and wiping out the one factor that currently keeps us from flirting with recession.

How would a Liberal government insulate the Australian economy from this eventuality?  The Coalition's economic team needs to seriously consider this specific question.  But any policy response must begin with measures designed to wake the conventional sectors of our economy from their slumber.

Labor's tax policies may actually narrow the gap between mining and non-mining performance by dragging the former back into the field.  A conservative agenda would contrastingly seek to lift the other sectors to a higher standard, improving their ability to compete.

Disappointing Jobs Figures

It was slightly bemusing to witness the American media's rather complacent assumption over recent months that the economy was on a path to permanent recovery.  Over the last several years, the jobs market has warmed noticeably during the Christmas season only to weaken again in the following months.

Unfortunately, the most recent jobs report suggests that history may be about to repeat.  Only 115,000 net jobs were created last month, continuing a downward trend that began in March.  That is an awful number.

The official U-3 unemployment rate has dropped to 8.1% - because 342,000 more people dropped out of the labour force.  The participation rate now stands at 63.6%, down from the 65.7% figure that President Obama inherited.  If those who have simply given up on finding work are counted, the actual unemployment rate reaches a diabolical 11.1%.

Republican challenger Mitt Romney recently claimed that the American economy should be adding 500,000 jobs per month, a number that seems rather outlandish when juxtaposed with the current recovery.  Historically however, his claim is justifiable.  In April of 1984, the corresponding month of the Reagan presidency, 480,000 jobs were created.

The current numbers are simply not good enough, and there is little hope of a renewed policy response emerging prior to election day.  The end of the year, regardless of November's victor, will see the implementation of a series of tax increases that could even threaten to push the economy back into recession.

It matters not what Republicans pass in the Congress.  Democrats still paralyse the Senate, and Mr. Obama will remain in the White House until at least January of next year, with the power to veto any conservative proposals.

America needs a decisive change of course, and the President is the only man who can deliver it. The status quo is not working.

Sunday, 6 May 2012

Money Down the Drain

The Opposition has rather missed the point today with its response to the SchoolKids Bonus policy, set to appear in Tuesday's budget.  Under the means-tested proposal, parents will receive $410 from the government for every primary school student and $820 for every teenager in high school. Shadow Treasurer Joe Hockey sought to link the policy to public dissatisfaction with the carbon tax:

"This has got nothing to do with education and everything to do with a carbon tax and the fact that people are about to be hit with a great big whack on their cost of living expenses," he told ABC TV on Sunday.
"The Labor Party is panicking about the impact of the carbon tax on everyday Australians and they are trying to give people a sugar hit with an upfront payment."

Mr. Hockey is not necessarily incorrect.  This policy is a transparent bribe, designed to pump some life into the government's ailing poll numbers.  But instead of seeking to link this proposal to the carbon tax, the Liberals should have been highlighting the remarkable fiscal irresponsibility of the policy, particularly within the context of an allegedly tough budget.

The SchoolKids Bonus, which will replace a Howard-era tax refund, is nominally designed to assist parents with education costs.  But the money is not targeted, nor is it conditional - the government will essentially just be sending a blank cheque to hundreds of thousands of households.

Consider, as an example, a relatively poor family in Sydney's western suburbs, with two children at high school and one in primary education.  This family would receive $2,050 from the government under Julia Gillard's proposal.  Does the Prime Minister really imagine that every cent will be spent on education costs?

Of course not.  The government has no idea how this money will be spent.  It could pay for the groceries, or new rims for the car, or even a few six packs, and Wayne Swan would be none the wiser.  There are surely many better, more targeted ways to assist parents with the costs of education.

This is yet another example of the sort of egregiously undisciplined fiscal policy that we have come to expect from this government.  The Treasurer will no doubt project a surplus on Tuesday, using all manner of financial trickery.  But if not for schemes such as this one, that surplus could have been real.

Sunday, 22 April 2012

Incentivising Super

A report in the Australian yesterday detailed looming government plans to weaken superannuation related tax breaks in next month's federal budget.  The existing arrangements were designed to incentivise voluntary saving, particularly among higher earners, so as to reduce the pressure on government finances in future decades.

The finance sector has reacted swiftly to the news, with a number of industry leaders warning of potential damage to the budget bottom line in the future.  The measures currently under consideration by the expenditure review committee would aim to increase revenue by several billion dollars in the short term, undoubtedly in an effort to achieve Labor's promised budget surplus for the coming financial year.

Financial Services Council chief executive John Brogden had this to say:

"It would be very short-sighted for the government to try and pull out more tax now," Mr. Brogden said last night.  "All they'd be doing is leaving future governments with a bigger bill for pensions, healthcare and aged care."

Mr. Brogden has hit the nail on the head.  The objective of these tax breaks has always been to increase the number of self-funded retirees, thereby lowering the financial burden on future governments as the population ages.

Without unambiguous incentives to contribute voluntarily to their super, more Australians will elect to keep their wages in full.  This will inevitably mean more retired individuals on the pension, unable to fund their own care and draining money from other government services.

One could even make the argument that existing incentives for super contributions should be boosted, rather than weakened.  For example, the current system includes a cap on annual concessional contributions - the lower tax rate for voluntary super only applies until a certain point.

If you are fifty years or older, the current cap on annual concessional contributions is $50,000 ($25,000 for younger workers).  It had previously been double that, prior to changes enacted by the current government in the 2009-10 financial year.  So once you have invested $50,000 in your super for the year, the tax incentive disappears and any further contributions are taxed at the regular wage rate.

Why is this?  Surely a government with true foresight would implement policy settings with the intention of maximising voluntary superannuation investment.  All politicians seem to enjoy a good whinge about the difficulties of Australia's ageing population - well, here is a chance to do something intelligent about the situation.

This government has previously demonstrated that it does not quite understand the power of tax incentives, particularly as they apply to wealthier individuals - think of the private health insurance rebate.

David Crowe reports:

Shaping the government strategy is the belief that the investment industry will gain greatly from the increase in the super guarantee levy from 9 per cent to 12 per cent by 2020, letting all workers save more for retirement.

The increase in the levy, incidentally, is funded by employers, which means that it will be subtracted from workers' future wage growth.  But leaving that aside, this increase in the guarantee, coupled with decreased tax incentives, can only lead to greater complacency and a reduction in voluntary contributions.

In reality, the compulsory level of super investment is vastly insufficient to fund anyone's retirement, particularly as the average life expectancy continues to increase.  It is of crucial importance that workers take the initiative and save aggressively for their autumn years, even as that means sacrificing some of their take home pay in the present.

This will not happen if they see no clear, unambiguous incentive.  The tax system should therefore prompt individuals to contribute as much to their own retirement as possible.

Governments should remain eternally mindful of the fact that when they tax super contributions, they are effectively taking money from future retirees.  The less they take now, the less they will be required to fork out in the future.

Wednesday, 18 April 2012

Hurting Your Own Cause

Marriage equality protester Ali Hogg caused a scene in Melbourne over the weekend when she confronted Tony Abbott at a cafe as he dined with a journalist.

Ms. Hogg, with the help of several supporters, shouted slogans at the Opposition Leader, accusing him of bigotry and homophobia.  The activists continued to chant outside the cafe's window after being forcibly removed by staff.

It does the gay marriage movement no favours when protesters act in this manner, ambushing targets and disrupting the lives of bystanders (Mr. Abbott was not the only patron present in the cafe).  Far from spreading sympathy for her cause, if anything Ms. Hogg will have hardened the hearts of anyone who was present over the weekend.

This incident betrays the immaturity and closed-mindedness of many gay marriage activists.  Those who speak out with the loudest voices, forming the public image of the movement, often seem to be those who have devoted the least effort to understanding any positions that may differ from their own.  In Ms. Hogg's opinion, anyone who disagrees with her must be a homophobic bigot.

You do not change minds and win hearts by bullying dissenters and rudely disrupting peoples' lives. Ms. Hogg is promoting a good, worthy cause, but her juvenile behaviour over the weekend could only ever have been counterproductive.

Sunday, 15 April 2012

Milne's First Foray

Christine Milne has quickly dipped her toes into the already thriving business of blaming Tony Abbott for everything that ails the Labor government.

New Greens leader Christine Milne says Opposition Leader Tony Abbott is to blame for creating an environment where Labor feels it is locked into delivering a budget surplus in the May budget even though economic circumstances have changed.

Have the Liberals been keen to highlight the government's fiscal excesses over the last four years? Yes. That is the opposition's job, after all.

But the reason that Julia Gillard and Wayne Swan are so politically wedded to the delivery of a budget surplus in May is very simple. They promised it. Over and over again.

When the government's fiscal credibility was thrown into jeopardy by billions of wasted stimulus dollars, Labor told the electorate that it would prove itself.  The budget would be returned to surplus in 2012-13, and that would put the government's economic credentials beyond doubt.

The government will be judged by the measure of performance that Wayne Swan himself has repeatedly laid out. Tony Abbott did not promise the Australian people that Labor would deliver this surplus. Labor did.

Saturday, 14 April 2012

Stale Tactics

Barack Obama, during his acceptance speech at the 2008 Democratic Convention in Denver, Colorado:

"If you don't have any fresh ideas, then you use stale tactics to scare voters.  If you don't have a record to run on, then you paint your opponent as someone people should run from."

You can expect to see this quote again during the general election campaign, and not without good reason. President Obama's own words could become a potent weapon against him.

'Guns For All Mankind'

Politico's James Hohmann is in St. Louis for the National Rifle Association Conference, at which both Rick Santorum and Newt Gingrich spoke yesterday.

Mr. Santorum, who recently suspended his presidential campaign, proudly announced that his sick daughter Bella is now a lifetime member of the gun group.  Bella Santorum is three years old.

Mr. Gingrich, still running, promised that he would submit a treaty to the United Nations seeking to make the right to bear arms, which is enshrined in America's second amendment, a universal human right.

"Far fewer women would be raped.  Far fewer children would be killed... and far fewer dictators would survive if people had the right to bear arms everywhere on the planet."

All of these assertions are simply wrong.  A plethora of studies have shown that higher gun ownership rates lead to higher levels of violent crime, whether one examines the developing world or even the United States itself.

Even were that not the case however, it is interesting to hear a United Nations sceptic such as Mr. Gingrich suggest that a UN decree would have a quantifiable effect on anything.  Are dictators going to start supplying their oppressed populaces with weapons, just because of Mr. Gingrich's petition?

That is of course assuming that his proposal would not be laughed out of the chamber.

The fealty with which conservative Americans in particular defend gun ownership is disappointing. Surely any concerns over the principle of individual liberty are in this case superseded by the moral imperative to limit loss of life due to violent crime.

These same individuals who call themselves 'pro-life' all too often offer enthusiastic support for the death penalty and respond with outrage to any effort to take deadly weapons off the streets.

Mr. Santorum's announcement that he had made his baby daughter a lifetime NRA member earned wild applause from yesterday's enthusiastic pro-gun audience, but for many others it would have been a deeply disturbing moment.

Mitt Romney also spoke at the conference, giving voice to a more moderate pro-gun stance.  His arguments on the issue seem positively mature, juxtaposed with the stubbornly unyielding position of many Republicans - but he is equally wrong.

There will be no lasting gun reform in the United States until conservatives are convinced of the moral imperative.  This argument will have to be made by one of their own - a popular, courageous conservative leader.

We may be waiting for quite some time.

Dr. Brown's Legacy

Dr. Bob Brown's retirement from politics leads one to reflect upon the contribution he has made to the Green movement in Australia.  He can undoubtedly look back upon his career with pride, having successfully created a genuine third force in the parliament.  His commitment to the cause of environmentalism has been unquestionable.

He leaves on a high note, having taken his party to a position of real power in the minority Gillard Government.  The defining policy of Ms. Gillard's tenure thus far, the carbon tax, is a direct result of the Greens' influence.  Bob Brown did, at least in this instance, completely out-negotiate the so-called 'great negotiator'.

But what of the Greens' fate now, in the aftermath of their founder's departure?  Dr. Brown was a savvy and talented politician.  His successor, Christine Milne, is not in the same class, and she struggles to present herself so endearingly to the public.  

Waiting in the wings are two ambitious Senators who represent the next stage in the Greens' evolution.  Sarah Hanson-Young and Lee Rhiannon are a different political breed to Dr. Brown and his former deputy - while environmentalism has been at the heart of the Greens' philosophy thus far, for this next generation of leaders it plays only a complementary role in a wider platform of economic socialism.

There is a real risk that Bob Brown's exit will presage the waning of his party's power, much in the same manner as Cheryl Kernot's departure doomed the Democrats.  

The Greens must now fight internally to remain the unthreatening environmental party that was exemplified by Dr. Brown's public image.  The extremism of Senators Hanson-Young and Rhiannon can only hurt the party's cause in the future.

Thursday, 12 April 2012

Opposition Leader Obama

"We are up against decades of bitter partisanship that cause politicians to demonise their opponents instead of coming together.  It's the kind of partisanship where you're not even allowed to say that a Republican had an idea - even if it's one you never agreed with.  That kind of politics is bad for our party, it's bad for our country."

Candidate Barack Obama said a lot of sensible things.  His rhetoric stressed the importance of a unified America - not red states and blue states, but united states.  His speeches decried the hyper-partisanship that had come to typify American politics.

Four years, it would seem, can make all the difference in the world.

President Barack Obama will soon seek re-election, and the most striking aspect of his second term agenda thus far is that it does not exist.

Mr. Obama, a sitting executive with a full term of experience, is not travelling the length and breadth of the nation spruiking the successes of his tenure thus far.  Nor is he providing an uplifting vision for the future.

No, the President seems to think that his time would be better spent savaging his political opponents.

Most recently, Mr. Obama launched a blistering attack on the House Republican budget, which was crafted in an effort to address the nation's snowballing debt crisis.

The national debt, which has expanded at an unprecedented rate under the current President, is driven in large part by an increasingly steep growth in entitlement spending.  The Congressional Budget Office predicts that by the middle of the century entitlements will consume all tax revenue, leaving aside no funds to provide other essential government services.

Mr. Obama has offered no comprehensive plan to address the national debt.  He has made no contribution to the debate over entitlement spending, beyond excoriating any plan put forward by Republicans.

This is not leadership.  It is not even 'leading from behind'.

Say what you will about Mitt Romney and Paul Ryan, they have at least displayed enough political courage to address the looming debt crisis in a meaningful way.  They are prepared to take potentially unpopular proposals to the American people and argue their case.

Meanwhile, the man who was elected in 2008 to lead the nation through the most troubled of times seems content merely to stand back and criticise.  To engage in the very hyper-partisan attacks that, not so long ago, he decried.

"Over time, our weather forecasts would become less accurate because we would not be able to afford to launch new satellites.  That means governors and mayors would have to wait longer to order evacuations in the event of a hurricane."

Is this really what we want from the President?  For him to travel across the country, spreading the generationally important message that his political opponents threaten the accuracy of weather forecasts?

No, Mr. Obama was elected to lead.  If the President truly believes that Republicans will take America down a path of 'social Darwinism', then he should present us with an alternative vision. Tell us how he will address the national debt without reforming entitlements.  How he will drive economic growth while raising the tax burden on business.

For President Obama to prove that he deserves a second term, he must cast aside the invective of recent weeks and meet Republican policies with his own, better ideas.

He can either claim the mantle of leadership, or he can shrink into a sad caricature of the partisanship he promised to sweep away four years ago.

Saturday, 7 April 2012

Abbott and Homosexuality

A fascinating report in the Australian today reveals that one of Opposition Leader Tony Abbott's sisters, Ms. Christine Forster, declared her homosexuality four years ago.

In 1992, Forster returned with her husband to Australia where they raised four children a stone's throw from her elderly parents on Sydney's north shore.  Her home served as a meeting place for gatherings of the extended family.  To outsiders it seemed a comfortable, conventional suburban existence, but in 2008 Forster made the agonising decision to come out as a gay woman.  She'd met Virginia Edwards when they were parents with sons the same age at the local parish school.  They forged a friendship then fell in love.

Mr. Abbott is of course a strident defender of traditional marriage, and he is a favourite target for ridicule over the issue of homosexuality.  His Q&A appearance during the last election campaign highlighted the awkwardness of this debate for Mr. Abbott in the public arena:

The questioner in this video openly accuses the Opposition Leader of harbouring fear and ignorance of homosexuals, and of denying them proper dignity and respect.  Host Tony Jones rather smugly suggests that if only Mr. Abbott 'got to know' some gay men, he could change his opinion.

We now know that the issue of homosexuality was much closer to home for this man than anyone realised at the time.  Questioned by the Australian's Kate Legge, Mr. Abbott recounts his own personal reaction to his sister's decision:

Abbott says he was "absolutely flabbergasted" by the end of Forster's longstanding marriage because he'd always thought it was "a fantastic partnership".  But his sister felt he understood the turbulent and distressing crisis she was going through.  He listened sympathetically.  He offered counsel when it was sought and he didn't make judgements.
"These things happen," Abbott tells me.  "The marriage ended.  For Chris it was replaced by something else that is marvellous.  She has regrets but she did something brave, authentic, something she felt had to be done.  I can respect that even if I can't in every sense understand it... I've come to the view over the years that the only side you can take is that which tries to maintain relationships.  Getting judgemental in ways which damage relationships does no one any good.

It is impossible to entirely comprehend the ordeal that Ms. Forster would have undergone as a result of her decision to come out, particularly within the context of an intensely Catholic family and community.  Mr. Abbott, his wife Margie and their three daughters were the first members of Christine's extended family to welcome her and her partner as a couple into their home.

The Opposition Leader has also worked hard for four years to keep his sister out of the public spotlight, despite the fact that his relationship with her could have helped to soften his image as an outdated social conservative.

In 2010 he persuaded a newspaper editor to drop a story about Forster's sexuality out of concern for his sister and her family.  Their welfare has dictated his response above any vanity for his own image.  Suffering insinuations that he remains quarantined from the breadth of humanity was a small price to shoulder.

This episode serves to highlight the deeper character of a man who is too broadly caricatured in the arena of public discourse.  It is reminiscent of an earlier controversy in 2005, which has largely been forgotten since Mr. Abbott assumed his party's leadership.

Abbott's girlfriend from university days had got pregnant in 1976 and they'd both assumed he was responsible.  They'd remained friends, stayed in touch and often wondered what would happen if the son they'd put up for adoption ever made contact. When he did, the then Liberal minister did not flinch.  He supported his former lover and welcomed the 'son' into his family.  Abbott's wife Margie was magnificent during the drama.  And when DNA tests later revealed Abbott was not in fact the father, he responded with sensitivity to this twist of fate.

Mr. Abbott to this very day suffers, at least among a significant portion of the public, from a lingering impression that he is a harsh man, lacking in those most basic human values of compassion and tolerance.  He is often caricatured as an unyielding right-wing dogmatist, and is frequently labelled (among other things) xenophobic, racist and homophobic.

Yet an objective appraisal of the evidence leads one to conclude that Tony Abbott is in fact a man of immense character.  Whatever one may think of his policies, or of his rhetorical style, Mr. Abbott is universally acclaimed by those who have known him as a fundamentally decent person.

All of this is not to say that he would necessarily make a good Prime Minister.  Policy, as much as character, would be the determining factor in that regard.  I personally disagree with Mr. Abbott on the issue of gay marriage, and I find it hard to even comprehend the reasoning behind his position on the matter.

But it becomes much more difficult to demonise the man when we are granted such insights into the realm of his personal life.

A Lecture from the Constitutional Law Professor

President Obama, discussing the fate of his trademark health care legislation (currently before the Supreme Court), made these statements several days ago:

"Ultimately, I'm confident that the Supreme Court will not take what would be an unprecedented, extraordinary step of overturning a law that was passed by a strong majority of a democratically elected Congress."
"That an unelected group of people would somehow overturn a duly constituted and passed law." 

It is difficult to believe that the man who uttered those words actually taught constitutional law at a widely respected university.

First of all, it matters not one jot whether the law was passed by a strong majority.  Though, for the record, the President was dead wrong about that as well.  The law scraped through the house by just seven votes, even though the Democrats held a majority of nearly a hundred in that chamber, and it only earned the Senate's approval after weeks of back room dealing.

Aside from such quibbles however, for Mr. Obama to suggest that it would be 'unprecedented' and 'extraordinary' for the Supreme Court to overturn a law passed by Congress is so remarkable as to make one's jaw drop.

I remember learning in middle school, let alone university, that the Supreme Court's role in the American system of checks and balances is to vet laws for constitutionality.  The Court is there for the express purpose of overturning unconstitutional legislation.

Mr. Obama's statements, which he has since tried valiantly to step back from, were nothing short of ridiculous.

The President's remarks have been notably strident and partisan of late.  He should be careful, lest he shed some of his characteristic gravitas.

The Hunger Games

A rigorous debate has broken out as to whether this year's hit film, "The Hunger Games", is appropriate material for the young teenagers who constitute its primary target audience.

Each year, the Panem government forces twelve surrounding districts to surrender a boy and a girl as 'tributes', so that they may compete in a televised fight to the death.  Not only does this ritual serve as entertainment for the ruling wealthy, but it also quells any thought of rebellion among the oppressed workers.

The story's protagonist, Katniss Everdeen, is portrayed as a hero, if an imperfect one.  Having volunteered for the Hunger Games in order to save her sister Primrose from almost certain death, Katniss for the most part does as the ruling class would require:  she appears on their television screens as entertainment, she competes for wealthy sponsors and she eventually does participate in the games themselves, taking several lives in the process.

Is it right to view Katniss as a hero?  Do we want our children to idolise this character?  I would argue that, in fact, Ms. Everdeen can teach the viewer some very valuable lessons.

Firstly, and most obviously, she personifies the principle of self-sacrifice.  In a world where children are randomly taken from their families while their parents stand passively by, Katniss bucks the trend.  When her sister Prim is selected to participate in the games, Katniss steps forward without hesitation to take her place, even knowing that she is in all likelihood signing her own death warrant.

This selfless streak is revealed later in the film as well, when Ms. Everdeen again risks her own life in order to procure medicine for her friend Peeta.

While the movie fails to show it in depth, the book clearly outlines the manner in which Katniss has assumed responsibility for the wellbeing of her family.  With her father dead and her mother paralysed by grief, Katniss takes it upon herself to feed and clothe her sister.  She even places her name in the draw for the Hunger Games many more times than required in return for the food that her family needs.  Responsibility is a quality that all children should be taught to admire.

One could argue that the protagonist's character is nevertheless sullied by the fact that she agrees to participate in the games at all.  She does personally kill three other teenagers.  But it should be noted that she, along with a number of other children, refuse to actively hunt their peers.  The plot is deliberately orchestrated so that any kills by these characters are conducted in the context of defence, rather than attack.  Katniss befriends and protects several of the more vulnerable children, even as they are technically supposed to be fighting to the death.

The competitors are all clearly classed as either 'good' or 'bad' characters.  The 'bad' children are aggressive, and the 'good' kids passive.  Cold-blooded murder is portrayed in a horrific light.  The 'bad' characters focus their energies on combat, while the 'good' children make use of survival skills.

Finally, there is a defining moment towards the end of the film in which Katniss defies the ruling elite, foreshadowing an inevitable rebellion by the districts against the abominable regime.  It is made abundantly clear that the existing state of Katniss' world is reprehensible, and that the Hunger Games themselves are an evil exercise.

Is "The Hunger Games" a dark movie, at least by the standards of its genre?  Yes.  Is Katniss Everdeen a perfect role model?  No.  But this fictional world has a greater story to tell yet, with a sharper underlying tale of morality.  And the hero will inevitably develop further.

It should be said that there is nothing wrong with an imperfect hero.  Katniss has a wide range of truly admirable qualities:  selflessness, courage, determination, humility, responsibility, compassion, love and undoubtedly many more.  She shows the audience that even in a dark, twisted world without much hope to speak of, a mere frightened girl can change the course of history.

But Katniss Everdeen is human.  She has faults, doubts and moments of weakness.  She is a protagonist with whom our children can identify, and her story is all the more potent for it.

Friday, 6 April 2012

The Forgotten Elephant

Percy Allan, president of the Australian Institute of Public Administration and former head of the NSW Treasury, had some choice words to say about the NBN yesterday.  The project seems to have avoided the headlines in recent times, slipping somewhat under the radar.

That is regrettable.  Such a huge investment of taxpayers' money - the biggest single government expenditure in Australian history - should be subject to the most intense of scrutiny.  Mr. Allan would seem to agree:

"That choice might be to spend $36 billion ripping out copper wire and disconnecting Foxtel cables and starting afresh, which is the proposition we are facing.  But had they examined the need, examined options and consulted they might have discovered cheaper ways to fill the need."
"If a lower than expected proportion of people end up subscribing to it because they don't want to pay Rolls-Royce prices for a Rolls-Royce service, this thing is going to be a financial disaster - watch public opinion then."

Mr. Allan suggests that the Labor Party's image is at stake, not just now, but for many years to come.  The party already suffers from the impression that it is profligate - a stigma that has lasted since the Whitlam government of the 1970s.

Mr. Whitlam may be remembered fondly by many people, but his legacy has contributed significantly to the lingering public impression that conservatives are by default better economic managers.  His government continues to haunt the Labor Party even now, four decades after it left office.

Memories fade, and that impression of profligacy will weaken, with time - provided that Labor consistently bucks the stereotype.  The Rudd and Gillard governments have thus far failed in this regard - and if the NBN goes pear shaped, then Labor will struggle for fiscal credibility for decades to come yet.

Sunday, 1 April 2012

Premature Predictions

Many are asking whether Labor's current electoral struggles are a sign that the party is finished as a force that can win government in its own right.  There is undeniably a trend away from Labor across the entire nation at the moment - crushing defeats in Queensland and NSW, further losses in Victoria and WA, and struggling governments in SA and Tasmania are all testament to this fact. Federal Labor is limping along with a primary vote in the twenties.

The party's recent woes - all the more remarkable considering that Labor held power in all states, and federally, just four years ago - have led a number of analysts to assert that it can effectively no longer win power without allying itself to the Greens.  The nation's oldest political party is hamstrung, bleeding votes profusely from both flanks as it struggles to unite its traditional working class base with the more urban, intellectual hard left.

The Labor Party certainly faces a significant challenge to its identity, that much at least is undeniable.  But to suggest that it is finished as a party that can stand on its own two feet is horrendously premature at best.

Experts and commentators have always been drawn to doomsday scenarios, and the field of political punditry is no exception.  Human nature is full of such curiosities.

Look no further than the aftermath of President Barack Obama's sweeping victory in 2008.  There was at that time something of a consensus in the media that the GOP would be forced to undergo a dramatic transformation in order to maintain relevance for modern times.  Otherwise, the conventional wisdom said, Republicans would be swept away by the political zeitgeist.

It took no more than two years for the pendulum of public opinion to swing back the other way. Now Republicans control the House, are threatening to take the Senate, and have President Obama in a vulnerable position as he seeks re-election.

The lesson here is that such sweeping, hyperbolic predictions should be consumed with a fat grain of salt. Yes, the Labor Party is in the doldrums now, but public support has always ebbed and flowed. Given five years to recover, Labor may find itself threatening to reclaim power in a number of states.  The Greens may have receded back into relative irrelevance, and the pundits may have turned their attention to the Liberals' impending doom.

This is not to say that Labor should ignore the fundamental split in its base, far from it.  But the party must remember that elections are won in the centre ground - and swing voters are a fickle bunch.  The pendulum is always swinging.

Friday, 30 March 2012

Obama's Mandate

President Barack Obama has two major domestic policy initiatives to his name after his first three years in office:  the American Recovery and Reinvestment Act of 2009 (the stimulus), and the Patient Protection and Affordable Care Act (Obamacare).

Neither of these policies are particularly popular, and this presents a significant obstacle to Mr. Obama's re-election.  Polls have consistently shown lukewarm support at best for the stimulus package, with a clear minority of Americans believing that Mr. Obama's policies have actually helped the job situation.

Similarly, Americans have consistently favoured the repeal of Obamacare by a significant majority. The individual mandate in particular is dangerously unpopular from a political perspective:

Americans overwhelmingly believe the "individual mandate", as it is often called, is unconstitutional, by a margin of 72% to 20%.
Even a majority of Democrats, and a majority of those who think the healthcare law is a good thing, believe that provision is unconstitutional.

The Supreme Court this week heard oral arguments over the constitutionality of the health care law, with a decision to be handed down by the nine justices prior to the presidential election in November.

Day two of arguments was concerned solely with the individual mandate, and by all accounts proceedings went horribly wrong for the law's defenders.  Solicitor General Donald Verrilli was peppered with questions by the justices, and he often lacked satisfactory answers.

Importantly, Justice Anthony Kennedy, the so called 'swing voter' of the court, seemed to be disposed against the government's arguments.

It is almost certain that Justices Ruth Bader Ginsberg, Stephen G. Breyer, Sonia Sotomayor and Elena Kagan will rule that the mandate is constitutional.

Meanwhile, Justices Samuel Alito, Clarence Thomas, Antonin Scalia and John Roberts are equally likely to side with the challengers.  This leaves Justice Kennedy with the deciding vote.

Thus there does seem to be a tangible risk that the individual mandate, if not the entire law, will be deemed unconstitutional by the Supreme Court.  What would this mean for the President and his chances of re-election?

Wall Street Journal columnist Peggy Noonan captures what the sentiments of the American people would likely be, given a hostile decision by the court:

The constitutional law professor from the University of Chicago didn't notice the centrepiece of his agenda was not constitutional?  How did that happen?
Maybe a stinging decision is coming, maybe not, but in a purely political sense this is how it looks:  We were in crisis in 2009 - we still are - and instead of doing something strong and pertinent about our economic woes, the president wasted history's time.

With Americans largely believing that his stimulus package was ineffective, President Obama needs his healthcare law to be upheld, even if it remains unpopular.  Otherwise he will be left broken, embarrassed, and without any record of significance after a full term in office.

Swan's Surplus

Wayne Swan has been more prominent in the media lately, as he has begun to lay the rhetorical groundwork for his fifth budget, to be delivered on May 8.  The Treasurer is talking a tough game:

Yesterday, Treasurer Wayne Swan told a Sydney business breakfast that Australia should expect a tough budget in the face of lower-than-expected tax revenues and the need to reach a surplus.
"We will need to cut and cancel existing programs if we are to meet our targets and we'll need to redirect some spending to where it is needed most," he said.

This all seems a little too familiar to me.  Every year, Mr. Swan spends the month in the lead-up to his budget emphasising the need to engage in fiscal restraint.  In the past he has inevitably failed to cut spending in any truly significant way - and any cuts at all in recent years have been entirely neutralised by new expenditures.

The 'lower-than-expected tax revenues' to which Mr. Swan referred yesterday are also a recurring theme, and there is a very simple explanation as to why.  The government has staked so much of its economic credibility on a 2012-13 budget surplus that it has been forced, each year, to manipulate Treasury's forecasts in order to make the promise seem attainable.

Thus we saw some ridiculous assumptions in last year's budget.  Mr. Swan then promised that 500,000 new jobs would be created by mid-2013, yet in the last twelve months we have witnessed the Australian economy add just 10,000 net jobs.

Last year's rosy prediction of GDP growth reaching 4% over 2011-12 has been replaced by actual growth of just 2.5%.

The forecast 2011-12 budget deficit of $22.6 billion has already ballooned out to nearly $40 billion.

Mr. Swan last year predicted that the unemployment rate would drop to under 5% during 2012, and fall further in the following year, but it remains above 5% and is assuming an upward trajectory.

And of course, last year's budget predicted that tax revenue would shoot through the roof just in time to deliver a 2012-13 surplus.

The Treasurer can use 'lower-than-expected tax revenues' as an excuse if he likes, but he and his department must have known, even at the time, that last year's assumptions were wholly unrealistic.

Mr. Swan now finds himself facing a monumental task - a required turnaround of roughly $40 billion in the nation's fiscal condition within a twelve month period.

This is a problem of the Treasurer's own creation - he has consistently put off the tough decisions, choosing instead to manipulate the figures and hope for an unrealistically optimistic scenario.

When he hands down his fifth budget, Mr. Swan will undoubtedly again find a way to predict a razor-thin surplus for the coming financial year.  New taxes, with surprisingly high revenue streams, will be implemented to boost the bottom line.  Revenues will be moved into 2012-13, and expenditures shifted into the forward estimates.  Certain spending will remain off the books - the NBN being the most prominent example - and some programs will need to be cut, if belatedly.

Of course, we can also expect to see one or two overly optimistic assumptions.  The final fiscal outcome for 2012-13 may not be revealed until after the next election - so Mr. Swan's true day of reckoning may never come.

Thursday, 29 March 2012

The Queensland Conundrum

Labor's recent annihilation in Queensland has led to much back-and-forth over any potential implications for the federal government.

It would be fair to say that federal issues played a backseat role in the state campaign.  Opposition Leader Campbell Newman did talk about the carbon tax, but it was a peripheral point, lagging behind traditional state problems such as service delivery and general competency in importance.

The wider issue associated with the carbon tax, namely the cost of living, was of course much more prevalent.  But it is worth noting that Queensland Labor was on the path to political annihilation even before Prime Minister Gillard announced that there would be a carbon tax.

We can thus discount the tax as a central source of Queensland Labor's electoral woes.  But this should be of little comfort to the federal party.  The straw that broke Premier Bligh's back is a familiar one in Canberra - the question of trust.

Anna Bligh made no mention of asset sales prior to the 2009 state election, but within months of her success at the polls she had sprung the surprise on her constituents.  She promised that fuel subsidies would remain untouched during the campaign, and then abolished them after the election. These twin betrayals of the voters' trust set her on the path to electoral oblivion long before Campbell Newman came along.

Clearly, Queensland voters do not take kindly to such surprises from their political leaders.  When it comes to her broken pledge on the carbon tax, they will have about as much sympathy for the Prime Minister as they had for Premier Bligh.

Strategically, this is an urgent problem for the federal government.  Labor currently holds eight Queensland seats in the parliament, and seven of them are marginal.  If the state election's vote were to be replicated federally next year, only Kevin Rudd would stand a better-than-even chance of survival.

Remember, in order to reattain majority government, Julia Gillard will be required to gain seats at the next election.  Losing two or three seats in Queensland alone would all but guarantee a Liberal victory.

Labor, if it is to retain power, must resurrect its vote in the sunshine state.  There is no alternative. But Queensland voters have just shown us all how they react to a political leader breaking their trust.  Having witnessed Premier Bligh's demise, how does Julia Gillard now escape Queensland's wrath?

The Shackles of Re-election

The President of the United States participates in many international meetings, and chances are that throughout a term in office he will be caught out by an open mic at least once or twice.  President Obama was in open mic strife once again several days ago, during a meeting with Russian President Dmitry Medvedev:

In comments that were not intended to be broadcast publicly, Mr. Obama candidly assures the Russian President (and by proxy his successor, Vladimir Putin) that he will be able to negotiate over the issue of missile defense with more flexibility following his 'last election' in November.

The President's assurances are certainly correct.  But they are also problematic from a political perspective, because the implications set forth in that statement are unlikely to be well received back in the United States.

Mr. Obama is essentially saying this:  'After the November elections, I will never have to face the American people again.  It will no longer matter whether or not my decisions have popular support. So I will be able to make a deal with you then.'

These implications are clear because the President explicitly mentions that November is his last election.  George W. Bush was phenomenally unpopular throughout much of his second term - but it mattered very little, because he was not anchored by the political accountability that comes with the spectre of re-election.

Republicans will argue that the same applies for President Obama.  They will assert that unfettered by any accountability to the American public, Mr. Obama will be free to do as he likes, no matter how radical or unpopular his policies may be.

You can expect this argument to be completely overblown by Mr. Obama's political opposition, but there is an incontrovertible truth at its heart.

Of course, this would be the case for any two term President - one could argue that it is a glaring flaw in the case for term limits.  But Mr. Obama needs to be more discreet in front of microphones from now on - because that 'flexibility' of which he spoke will apply to much more than missile defence, and Republicans will make sure that every single voter knows it.

Wednesday, 28 March 2012

Rick's Rage

Rick Santorum's early forays in the Republican primary season went largely unnoticed, save for several somewhat petulant moments during the debates.  Mr. Santorum was displeased with a perceived lack of attention - he did not receive as much time to answer questions as the frontrunners.

Now, one could argue that Mr. Santorum had every right to feel aggrieved during the debates, as he really was treated quite peripherally at times.  But his campaign has since been characterised by an almost permanent sense of aggrievement - particularly towards the media.

Here is the latest example:

There are several points to make here.  Firstly, someone like Mr. Santorum, who spends much of his political life talking about family values, should not be caught on camera swearing at reporters.

Secondly, Mr. Santorum has a habit of attacking the media for asking perfectly valid questions.  He makes social issues a central theme of his campaign, and then complains when interviewers focus on social issues.  In this instance, he attacks a NY Times reporter merely for asking him about a comment that he had made earlier.

In a wider sense, the above altercation calls Mr. Santorum's temperament into question.  Can you imagine President Obama reacting to a question in this manner?  How about Mitt Romney?  

A presidential figure maintains his calm, no matter how unreasonable any given line of questioning may be.

Many Republicans appreciate attacks on the 'mainstream' media, and would interpret Mr. Santorum's performance as a display of passion and conviction.  It is, in actual fact, a display of petulance and resentment.  It is unbecoming, and it is certainly not presidential.

Monday, 26 March 2012

Lobbying the Tories

"It's an issue that crosses party lines and has tainted our politics for too long... an issue that exposes the far-too-cosy relationship between politics, government, business and money.  I'm talking about lobbying - and we all know how it works.  The lunches, the hospitality, the quiet word in your ear, the ex-ministers and ex-advisors for hire, helping big business find the right way to get its way.  In this party, we believe in competition, not cronyism.  We believe in market economics, not crony capitalism.  So we must be the party that sorts all this out."

These words were spoken by British Prime Minister David Cameron two years ago.  Let's compare them with the words of (now former) Tory party co-treasurer Peter Cruddas, speaking to undercover journalists who were posing as potential donors:

"Two hundred grand to two hundred and fifty is Premier League... what you would get is, when we talk about your donations the first thing we want to do is get you at the Cameron/Osborne dinners."
"You really do pick up a lot of information and when you see the Prime Minister, you're seeing David Cameron, not the Prime Minister.  But within that room everything is confidential - you can ask him practically any question you want."
"If you're unhappy about something, we will listen to you and put it into the policy committee at No 10 - we feed all feedback to the policy committee."

Aside from the passing football reference, there is not very much to like about Mr. Cruddas' assurances.  Nor, for the Tories, is there much to like about this exchange being aired in the public arena.  If there is one thing that any democratic electorate cannot abide, it is that politically deadly combination of dishonesty and hypocrisy.

The culprit did of course attempt to backtrack as he offered his inevitable resignation:

"Clearly there is no question of donors being able to influence policy or gain undue access to politicians."


Peter Cruddas was not simply making this stuff up on the spot, as many conservatives would apparently have us believe.  He was explicitly offering access to the Prime Minister and to the policy committee at No 10.  Nobody in their right mind would make such extensive promises to potential donors if they could not follow through.

Mr. Cameron had warned mere months before being sworn in that corporate lobbying was the "next big scandal waiting to happen" in Britain.  How very prescient of him.  He should have told his party.

Who do you trust?

Whoever advises our Prime Minister on her daily media lines needs to be fired.  Immediately.

Because today, in yet another display of amazingly weak political judgement, Ms. Gillard through her own rhetoric fed the Liberal Party exactly the lines it will need to manufacture the next election's most potent advertisements:

"Who do you trust to manage the economy in the interests of working people? Who do you trust to understand the needs of the future and the building of that future economy? Who do you trust to spread the benefits of the mining boom to make sure they are shared by all Australians?"

Rest assured, the Liberals will not be playing the entirety of that quote in their election ads.  Just four words will do.  They would even make a good bumper sticker.

"Who do you trust?"

The ad that could propel Tony Abbott's party onto the Treasury Benches will be beautifully simple.  It will open with the Prime Minister asking over and over:  "Who do you trust?"

It will then cut to the following:

The ad will then finish by silently asking the viewer:  "Who do you trust?"

Julia Gillard can hardly complain.  Her political death warrant will be served using her very own words.

Sunday, 25 March 2012

Abbott the Ravager

Prior to the Labor leadership ballot in February, Kevin Rudd said the following:

"And they are the millions of Australians who depend on us to form a Labor government and to prevent Mr. Abbott from inflicting on Australia the ravages of the most extreme right wing government that the country will have ever seen."

It is remarkable how often you hear this sort of thing from Labor frontbenchers - you would think that the government's foremost raison d'ĂȘtre is to prevent Tony Abbott from becoming Prime Minister.  Aside from say, actually governing.

But in any case, for a man who is so often accused of being a rabid right winger, and of secretly harbouring an intense desire to reinstate Work Choices, Tony Abbott really does seem to lack a deeply felt, instinctive sympathy for liberal economics.

Consider the Opposition Leader's pet paid parental leave scheme, which he resolutely clings to despite dissatisfied rumblings from within his party room.

The pure argument, from the perspective of classical liberals, would posit that parents should ensure they are able to support a child financially before deciding to have one.  It would argue that it is unfair on those who make a conscious decision to be childless that they are forced to fund the choices of others.

Is it a nice idea, that a new parent should be granted money without labour, simply by virtue of being a parent?  Certainly.

But is it fair?  Too often the word 'fair' is hijacked so that it may be attached to ideas that are simply 'nice'.

In any case, whether you believe a paid parental leave scheme is necessary or nice, Mr. Abbott has proposed a scheme which is far more generous than the government's.  Which, coming from a leader of the Liberal Party, can only mean one thing - Mr. Abbott is, in this instance, sacrificing liberal economics in order to play politics.

Combine this with the report today by Stephanie Peatling that the Opposition Leader is planning to extend the childcare rebate to cover nannies:

One of Mr. Abbott's first acts in a Coalition government would be to ask the Productivity Commission to examine how much it would cost to extend the childcare rebate for in-home-care, such as nannies, in recognition that existing arrangements do not meet the needs of many families.

The idea that it is the government's job to 'meet the needs' of families does not conform with the spirit of economic liberalism any more than Kevin Rudd's stimulus conformed with the spirit of fiscal conservatism.

Our tax system is already littered with measures which are designed to ease the burden on struggling families - many of which are not even means tested.

It would be easy to accuse Mr. Abbott of using these issues in an attempt to gain political advantage, and such a critique would be fair to a point.  Much has been written about the Liberal leader's supposed problem with female voters - is it any coincidence that his most significant breaks from liberal orthodoxy have been on policies which concern women?

On the other hand however, many of the rebates and credits which are designed to help families are actually relics of the last Coalition government.  Were they proposed largely for the purpose of buying votes?  Perhaps.  But there is more to it than that.

John Howard was a Prime Minister who combined liberal economic views with a broader sense of social conservatism.  His underlying worldview emphasised the family unit as an essential building block of society - everything, in Mr. Howard's view, was rooted in family.

Thus Mr. Howard believed in using the powers of the state to protect and encourage the family unit, and this was reflected in his social spending.  Money was spent not on welfare or social justice, but on childcare rebates and the baby bonus.

Tony Abbott is in the same political family as John Howard - economic liberalism tempered by social conservatism.  The former Prime Minister showed all of us that this can be an electorally potent combination.

But Australia is currently in desperate need of a government with genuine fiscal restraint.  Mr. Abbott, should he one day become Prime Minister himself, needs to assemble a team of economic advisors who will be unafraid to reign in their leader's tendency towards conservative social spending.

Friday, 23 March 2012

Santorum's Lack of Respect

Republican presidential candidate Rick Santorum has made two particularly eye-catching comments in recent days.  It is important not to blow them out of proportion, but they do reveal a little about the man, his focus and his strategy.

The first quote comes from an answer Mr. Santorum gave when challenged as to why he has consistently lost the Catholic vote to Mitt Romney (Mr. Santorum himself is a Catholic):

"The bottom line is that we do well among people who take their faith seriously, and as you know, just like some Protestants are not churchgoing, they are folks who identify with a particular religion but don't necessarily practice that from the standpoint of going to church and the like."

Then, while on the campaign trail yesterday, Mr. Santorum said the following:

"You win by giving people a choice.  You win by giving people the opportunity to see a different vision for our country, not someone who's just going to be a little different than the person in there.  If you're going to be a little different, we might as well stay with what we have instead of taking a risk with what may be the etch a sketch candidate of the future."

Both of these quotes say something about the way in which Mr. Santorum perceives his own candidacy - he is the man for people who 'take their faith seriously' and 'take their conservatism seriously'.  Fair enough.

But the above comments actively portray other candidates, and also the millions of (avidly Republican) individuals who have cast votes for them, as being unserious about both faith and conservatism.  If you vote for Mitt Romney, you must not be serious about your faith.  If you vote for Mitt Romney, you are not a proper conservative.

This is disrespectful.  If Mr. Santorum truly thinks that Mr. Romney is only 'a little different' than the current occupant of the White House, then he had better take a much closer look at the former Governor's policies.  As Republican blogger Jennifer Rubin points out here, Mr. Romney's proposals mirror quite closely those of Rep. Paul Ryan, that unquestionable bastion of fiscal conservatism.

As Politico correspondent Jonathan Martin reports, conservative darling Sen. Jim DeMint yesterday only just stopped short of endorsing the frontrunner, and widely respected former Florida Governor Jeb Bush threw his weight behind Mr. Romney the day before.  If Mr. Romney is truly just 'a little different' than President Obama, it is certainly curious that such a legion of solidly conservative figures is continuing to coalesce in his camp.

It has been said that Mr. Santorum's 'holier-than-thou' attitude would turn off a huge number of voters in the general election, were he to become the nominee.  We have seen several exhibitions of this attitude in recent days.  By even going so far as to suggest that voters would be better off 'staying with what we have' instead of voting for a Republican other than himself, Mr. Santorum has progressed a step too far in his argument.

This merely demonstrates the desperation which now pervades his campaign.

Picking Winners

When we talk about wasteful spending by government, the discussion often focuses on explicit discretionary measures - think school halls and pink batts.  We also talk about the growth of the public sector.  You may recall that even Kevin Rudd, back when he was pretending to be John Howard lite, promised to 'take a meat axe' to the public service:

Kevin Rudd will take "a meat axe" to the bloated public service and end what he calls the Government's culture of secrecy and ministerial unaccountability.

There is another category of wasteful spending, however, which often manages to pass under the radar.  The costs and benefits of government subsidies are difficult to catalogue effectively because, quite simply, there are so very many of them.  In general, each individual subsidy uses a relatively small amount of money, so in the wider scheme of the $350 billion plus federal budget these expenditures get lost.

Government subsidies distort the market, which in itself damages economic performance.  But from a purely fiscal perspective, it is important for governments to ensure that for any given subsidy, the benefits outweigh the costs.

Consider the recent news that Holden will receive $275 million in taxpayer subsidies (combining federal and state initiatives) to keep the company's operations here for another ten years.  The car industry has benefited from subsidies for many years, with the support of both political parties.

There are certainly sentimental arguments in favour of such policies:

Holden is an Australian icon.  It's Adelaide plant produces two of the four biggest-selling cars in the nation.  It would be a very brave Prime Minister who pulled the plug on Holden.

There are perfectly valid economic arguments as well - most of our first world competitors also subsidise their car industries, so withdrawing funds for a company such as Holden would place us at a competitive disadvantage.

Then there is the more classically liberal economic worldview:

They argue that if there is no prospect of Australia's car makers being able to survive without government subsidies, we should cut them off now.  In effect, the government will pay almost 20 percent of the cost of Holden's new models: what other industry receives such support?

Both sides, it must be said, have perfectly valid points to make, and thus this is an example of the sort of government subsidy that needs to be aired extensively in open debate.

But what should be made of this next example?

A year on, The Conversation is attracting 20,000 individual readers a day, reading on average 38,000 articles, putting it just in the top 100 most read websites and on par with Crikey.

Now, The Conversation is a website of reasonably high quality.  While it is notoriously slanted towards one end of the political spectrum, the articles are of a generally high standard and the site is well organised.

The site's founder Andrew Jaspan, who has also been chief editor of The Age, argues that there is clearly a market for The Conversation:

There is an appetite for the unexpurgated views of academia.  He argues that as the fortunes and reputations of the traditional media decline more readers will turn to academics for trusted information.

For the record, I think Mr. Jaspan is quite correct, at least up to a point.  There is an online market for the views of academia, and The Conversation does a good job of appealing to that market.

So do tell me - why is The Conversation, a site which employs 26 people, being funded by $6 million in mostly taxpayers' money?  If the market for this product does so clearly exist, why must the government effectively act as a venture capitalist and subsidise the site's early existence?

When Mr. Jaspan wanted to start up The Conversation a year ago, he had every right and every incentive to do so.  Nobody would have stood in his way.  He could have done exactly what other new businesses do - he could have procured capital, from either his own pocket or through private lending, and invested it in his idea.

But he instead held out his hand to government, and our esteemed public representatives happily obliged.  Why?  Because they liked his idea.  It really was that simple.  Some politicians thought that Mr. Jasper's idea of an academic-centric opinion website was just fantastic, so they decided to give him millions of hard earned tax dollars to give it a go.

This, in my view, is both wasteful and downright improper.  Government is not a venture capitalist firm.  Politicians have no right to invest dollars that they have procured from hard working citizens to fund their own pet projects.

I am not picking on The Conversation - you cannot blame Mr. Jaspan for seeking public funds if they were available.  Most of us would do exactly the same, given similar circumstances.  This is but one example within a widespread culture of subsidy which often goes completely unexamined.

Make no mistake.  There is an argument to be made for subsidies, but no such argument is convincing unless it carries economic (rather than purely sentimental) weight.  Too many governments, of all denominations, use subsidies to pick winners.

Taxes should be used to fund essential services, not to hold up irrationally favoured industries or provide money for politicians' pet projects.